Biores

The WTO's highest court ruled on 16 May that the US "dolphin-safe" label violates WTO law by discriminating against Mexican tuna. The judgement, marking a tentative end to the decade-old conflict between Washington and Mexico City, was immediately lambasted by environmentalists and US consumer advocates who saw the judgement as an attack on US dolphin protection. However, a closer look reveals that the Appellate Body largely sided with the arguments of pro-dolphin groups. The point of criticism was not necessarily the high standards used vis-a-vis Mexican products but rather the low standards used vis-a-vis all other products. The judges specifically criticised the low standards for being unable to guarantee that non-Mexican products eligible for the label were, in fact, fished in a "dolphin-safe" manner. In so doing, the judges also provided important indications regarding the application of WTO law for labels and product standards.

Measure not even-handed

With the ruling, the judges confirmed an earlier panel report that classified the measure as a mandatory technical regulation rather than a voluntary standard (see BioRes Review, November 2011). In line with the WTO's Technical Barriers to Trade (TBT) Agreement, regulations must be implemented in a non-discriminatory manner, treating foreign products no less favourably than domestic products.

While the US 1990 Dolphin Protection Consumer Information Act (DPCIA) applies to all domestic and imported products alike, it prevents the use of the label for tuna caught in Eastern Tropical Pacific (ETP) waters with so-called purse seine nets that encircle dolphins. This applies even if independent observers can certify that no dolphins were killed or seriously injured during the specific catch. Most Mexican fisheries use purse seine nets in the ETP and, thus, are unable to get certified. For tuna caught outside the ETP, however, it suffices for the captain of the vessel to certify that no dolphins were intentionally netted or encircled. Importers are not obliged to prove that no mortalities or serious injuries occurred.

Purse seine nets are used exclusively for tuna fishing in the ETP because they are particularly well-suited to the unique behaviour of tuna and dolphins in the region. Pointing to this different treatment, Mexico argued that its tuna products were clearly disadvantaged. In fact, Mexico has long argued that it is not economically feasible to change the fishing methods of Mexico's fleets. Washington, in turn, argued that the distinction is justified by the different fishing realities in the ETP and outside.

Relying heavily on the panel's earlier assessment of marine science, the Appellate Body concluded that there is no regulatory justification to exclusively ban purse seine nets but no other fishing practices and to treat ETP tuna differently. It recognised that purse seine nets can harm dolphins in a serious manner beyond observed mortalities and injuries and that this justifies strict regulation. But the court disagreed with Washington that this also justifies less-strict treatment for other regions and fishing methods that are known to also negatively affect dolphins.

"Certain environmental conditions in the ETP are unique [but] the risks faced by dolphin populations in the ETP are not," the judges noted. In fact, the Appellate Body harshly criticised the fact that the label does not consider mortality from fishing methods outside the ETP. "Tuna caught in this area would be eligible for the US official label, even if dolphins have in fact been killed or seriously injured during the trip," they said.

Thus, while the judges agreed that different treatment was permissible, they found that the degree of difference in treatment was not proportionate to the degree of difference in condition. The judges did not ask for identical treatment, but for treatment that would, to an identical degree, reflect the risk to dolphins in the different areas of the world. In other words, if the US decided to specifically regulate the special circumstances of the ETP, it also must specifically regulate the special circumstances in other regions. The US measure does not calibrate these situations sufficiently, the court found.

Mexico's favoured alternative no option

Taking up this point, Mexico argued that the standard set out in the Agreement on the International Dolphin Conservation Programme (AIDCP) was a non-discriminatory alternative free of the problems identified by the Appellate Body. Unlike the US label, AIDCP does not single out individual fishing methods, instead requiring certification that no dolphins were killed or injured during individual catches. (See BioRes Review April 2011) In Mexico's view, this addresses the different risks and different regulatory burdens. The TBT mandates that, where relevant international standards exist, technical regulations, such as the US dolphin-safe label, must adopt their design. Mexico, however, failed to convince the court that AIDCP was an international standard that should inform the appropriate approach. The Appellate Body further disagreed with the previous panel ruling that AIDCP was a less trade restrictive alternative. In reversing the panel on this point, the Appellate Body also rejected Mexico's argument that the US labelling scheme was indeed more trade restrictive than necessary and thus in violation of the TBT agreement.

While not assessing AIDCP in more detail, the judges also indicated that, as argued by the US, a pure certification scheme would not be appropriate because it would fail to address unobserved harm. It is "undisputed by the participants, that dolphins suffer adverse impact beyond observed mortalities from setting on dolphins, even under the restrictions contained in the AIDCP rules." In the view of the Appellate Body, AIDCP would thus allow more dolphin-harmful products to be labelled dolphin-safe, which would reduce the efficiency of the measure.

Appellate Body suggests real alternatives

In rejecting this alternative, the Appellate Body also quashed Mexico's hope to actually benefit from a victory, because other alternatives consist of strengthening the standards for tuna fished outside the ETP rather than lowering standards for Mexico. By increasing the standard for fishing methods that can pose a particular harm to dolphins, the US could calibrate its measure thus making it discrimination free.

"Risks to dolphins resulting from fishing methods other than setting on dolphins could only be monitored by imposing a different substantive requirement, i.e. that no dolphins were killed or seriously injured in the sets in which the tuna was caught," the judges said.

The Appellate Body specifically emphasised that additional regulation for fishing methods such as the use of fish aggregating devices (FAD) - floating objects that are specially designed and located to attract tuna - was needed. "The use of unassociated purse-seine nets or FADs may result, in certain cases, in substantial dolphin bycatch [unintentionally caught species]," the panel report had stated towards that end.

For these and other methods, the judges noted that non-mortality and injury certification from an independent observer could provide an appropriate response. But imposing such a requirement in general for all products "would not be the only way for the US to calibrate its dolphin-safe labelling provisions to the risks posed by fishing techniques other than setting on dolphins." Instead the court noted that, under certain circumstances, certification from the vessels' captains could be sufficient. The Appellate Body, however, was not as straightforward in its compliance recommendations as many had hoped.

Referring to the current US regulation, for instance, the judges noted that "the measure itself already contemplates the possibility that only a captain provide such a certification under certain circumstances." They seemed to suggest that actually using this possibility could bring the measure into compliance. But DPCIA provides for that option, as well as the option to ask for certification from independent observers, only where a "vessel in a fishery has been identified as having a regular and significant mortality or serious injury of dolphins."

Asking for certification - whether from a captain or an independent observer - only in these circumstances would certainly not help overcome the problem that the label, in theory, could be available to catches where dolphins were killed or otherwise injured. That said, if the US was to interpret "regular and significant mortality and serious injury of dolphins" in a manner that would capture the use of FADs and other techniques that were criticised by the Appellate Body, certification requirements could, in principle, apply to all relevant products.

Too expensive and unnecessary?

Already during the panel proceedings the US argued that such additional certification requirements for non-ETP products are both unnecessary and disproportionately costly. Such an approach, in Washington's view, "would have significant monetary and infrastructure implications for most nations whose vessels fish for tuna outside the ETP." But the Appellate Body saw no scope for such concerns, especially since other widely-used US based dolphin-safe labels already require such additional certificates.

"We fail to see, however, how the cost of demonstrating compliance with the same requirement (i.e., that no dolphin was killed or seriously injured) would justify that no such requirement be imposed with respect to the use of an official label, while it would be imposed for the same tuna caught in the same conditions in the same fisheries, in the case of use of an alternative label," the Appellate Body quoted the panel.

The argument is not off the table though, as a recent letter by the Committee on Natural Resources of the House of Representatives of US Congress shows.

"The implication of the recent WTO ruling is that the US should expend significant regulatory resources around the globe in an untargeted fashion," the Congressmen criticised in the letter. "The WTO decision would require the US to enforce requirements in other tuna fisheries outside the eastern tropical Pacific that are not needed, since Dolphins practically never associate with tuna schools in these other areas."

The representatives further warn that this could warrant new WTO disputes by other nations that would find the new requirements unnecessary and prohibitively costly. "This absurd requirement would push other tuna fishing nations to object in the WTO against the US."

What role for Congress?

Whether the US Department of Commerce will be able to deploy such a broad interpretative approach could make all the difference in the implementation game. If it can redesign current labelling in a manner that complies with the ruling without requiring changes to the underlying legislation, Commerce could act unilaterally. But if new conditions were needed, a Congressional directive would be necessary.

US Congress, however, has a history of not responding well when told to change domestic policies. In fact, it was Congress' refusal to amend its legislation that landed the US at the WTO in the first place. Considering the strong criticism and general lack of support for such a change within the US electorate, passing an amendment through both legislative bodies and obtaining executive approval could be an overwhelming political task.

Guidance on the procedural requirements is difficult to obtain though, as the regulation looks back at a rather unique and eventful past. Following a first GATT-dispute and the negotiated AIDCP, Commerce tried to change the label to implement AIDCP by adopting a non-injury certification approach rather than a fishing-method approach. Environmental groups took Commerce to court, which ruled that it had overstepped its authority and that changes could only be made if specifically mandated by Congress.

The ruling is largely understood as saying that no changes whatsoever may be made to the labelling scheme if not specifically directed by Congress. Then again, the court only looked into lowering the standards for ETP products and not into increasing standards with the aim of heightening the label's impact on dolphin protection outside the ETP.

The judges further ruled that Commerce's motivation to comply with an international agreement - AIDCP - was an inappropriate basis for change. There is no doubt that a WTO ruling would be treated similarly.

In principle, Mexico could request authorisation to retaliate against the US if Washington fails to implement the ruling. However, it would be unlikely for such external pressure to be able to overcome the domestic opposition. Should this remote possibility occur, compliance is unlikely to bring any redress for the Mexican fishing fleet as the ETP specific standard would not be changed but non-ETP standards would be strengthened.

Implications beyond the fishery sector

With the first ever WTO ruling on a product labelling scheme, the Appellate Body also issued a ruling that clarifies important details regarding the relationship of product labels, productions method regulation, and standards.

In particular, the Appellate Body's acceptance of the US' objective to ensure that its domestic market does not encourage fishing methods that harm dolphins has landmark character. The old argument that trade regulation may not have an "extraterritorial effect" and that countries may not "impose certain regulatory approaches upon its trading partners by means of importation or marketing requirements" now seems groundless. The implications for regulations ranging from biofuel sustainability standards to animal transportation rules are immediately apparent.

The same can be said about the Appellate Body's finding that the US legislation - even though it is not a prerequisite for importation - is a mandatory government regulation. With that acknowledgement, other labels, such as those pertaining to organic food, have finally entered the realm of WTO law.

Finally, the judges' examination of the quality of the AIDCP as an international standard, and not only its formal characteristics, makes clear that the Appellate Body is willing to look twice when countries invoke international standards as a justification for trade barriers.

All in all, the different systemic decisions point to a trend that the relationship between labels, production methods, standards and market access will be subject to careful scrutiny in the future. The upcoming Appellate Body decision in the Country of Origin Labelling (COOL) dispute - the third ongoing TBT dispute - will further inform this relationship.

Marie Wilke
International Trade Law Programme Officer, International Centre for Trade and Sustainable Development