13. Consumer information, consumer preferences and ... - SSRN papers

JOBNAME: Epps PAGE: 1 SESS: 5 OUTPUT: Tue Oct 29 15:07:12 2013

13. Consumer information, consumer preferences and product labels under the TBT Agreement Tania Voon, Andrew Mitchell and Catherine Gascoigne*

I. INTRODUCTION The WTO Agreement on Technical Barriers to Trade (‘TBT Agreement’) has a significant impact on the provision of information to consumers on product labels in WTO Members. Earlier chapters in this handbook have explored the relevance of domestic and international standards under the TBT Agreement, as well as the implications of regulatory distinctions based on product-related and non-product-related process and production methods (‘PPMs’). Building on those earlier explorations, in this chapter we discuss the relationship between consumer information, consumer preferences and product labelling requirements imposed by WTO Members. As governments become increasingly vigilant about environmental and health concerns, they rely more frequently on product labels to inform consumers of ‘friendly’ or ‘unfriendly’ product characteristics and modes of production. The use of product labels as vehicles for the provision of information is likely to continue to grow as scientific evidence accumulates and the knowledge of individuals and policymakers becomes more and more nuanced and expert. Product labels have the potential not only to respond to consumer demands but also to shape consumers’ habits and expectations and, in turn, patterns and levels of consumption and international trade. The central challenge for WTO law in regulating product labelling requirements, then, is balancing, on the one hand, Members’ sovereign right to ensure that consumers receive adequate and appropriate information about the products they are purchasing with, on the other hand, the potential for product labels and * We acknowledge the generous funding from the Australian National Preventive Health Agency and the Australian Research Council for independent research conducted in collaboration with the Cancer Council Victoria (2012– 2015). The views expressed here are our own personal views as academics.

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Consumer information 455 labelling requirements to discriminate against or between imported products or otherwise to restrict trade. Part II of this chapter examines how WTO law, through the obligations in Articles 2.1 and 2.2 of the TBT Agreement concerning discriminatory and trade-restrictive technical regulations, distinguishes WTO-consistent from WTO-inconsistent product labelling requirements. This part takes account of recent jurisprudence by the WTO Appellate Body on these provisions in US – Clove Cigarettes, US – Tuna II (Mexico), and US – COOL. Although the Clove Cigarettes case is not a product labelling case and is not about providing consumers with information, it provides important lessons regarding the role of consumer preferences in assessing product likeness and also, like the other two cases, sheds light on the Appellate Body’s approach to discrimination and Members’ sovereignty in connection with technical regulations. These three cases demonstrate the Appellate Body’s willingness to refer to the extensive jurisprudence on the General Agreement on Tariffs and Trade (‘GATT 1994’) in interpreting the TBT Agreement, thus increasing the predictability of outcomes in potential TBT disputes. Product labels and other technical regulations that explicitly or implicitly discriminate against or between imports are particularly problematic (creating a likelihood of a violation of TBT Article 2.1). At the same time, WTO dispute settlement tribunals have the capacity to appreciate non-trade policy objectives and allow for their necessary impact on trade in appropriate circumstances (increasing the threshold for a finding of violation of TBT Article 2.2). Part III of this chapter examines in more detail labelling measures intended to increase consumer information about products being purchased in the pursuit of health objectives: nutritional information labels for food products, and warning labels placed on alcohol and tobacco products. Product labelling in the health context is particularly important given the increasing worldwide recognition of the global burden imposed by non-communicable diseases, particularly through the common risk factors of poor diet and inadequate exercise, alcohol abuse, and tobacco use.1 The analysis in this part of the chapter reveals that even nondiscriminatory health measures with an arguably limited impact on trade may give rise to concerns by WTO Members, as expressed in the WTO 1

See e.g., United Nations General Assembly, Political declaration of the High-level Meeting of the General Assembly on the Prevention and Control of Non-communicable Diseases, UN Doc A/66/L.1 (16 September 2011); World Health Organization, Discussion paper: Development of an updated Action Plan for the Global Strategy for the Prevention and Control of Noncommunicable Diseases covering the period 2013 to 2020 (26 July 2012 draft).



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Research handbook on the WTO and technical barriers to trade

Committee on Technical Barriers to Trade (‘TBT Committee’). Although discussion in the TBT Committee may raise important points of uncertainty and potential difficulty under the TBT Agreement, concerns should not be raised lightly. Just as in launching formal disputes Members take responsibility for their position, so too in the TBT Committee Members need to ensure that any ‘complaints’ made are a true reflection of their views, taking account of interests across ministries. Measures intended to modify consumer behaviour and patterns of consumption are more likely to invite controversy in the TBT Committee than measures that simply provide consumers with information they already want and arguably need to carry out their existing preferences.

II. APPLICATION OF THE TBT AGREEMENT TO PRODUCT LABELLING REQUIREMENTS II.A Product Labelling Requirements as ‘Technical Regulations’ Articles 2.1 and 2.2 of the TBT Agreement apply to ‘technical regulations’. A threshold question, therefore, is whether legislative and regulatory provisions of WTO Members concerning the supply of information to consumers on product labels fall within the meaning of technical regulations under the TBT Agreement. Annex 1.1 of the TBT Agreement defines a technical regulation as a: [d]ocument which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.

The Appellate Body in EC – Asbestos identified three key elements of this definition: first, the products to which the measure applies must be identifiable; second, the measure must lay down certain characteristics for those products; and third, the measure must be mandatory, in the sense of prescribing product characteristics in a positive or negative form.2 The Appellate Body recalled these three elements in US – Tuna 2

Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001 (EC – Asbestos) at paras. 66–70.



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Consumer information 457 II,3 confirming that whether a particular measure constitutes a technical regulation must be determined in the light of the characteristics of the measure and the circumstances of the case.4 As a panel would need to examine the specific details of a measure in order to determine whether it constitutes a technical regulation, it may not be possible to assert conclusively in the abstract that all product labelling measures are technical regulations. However, since the definition of ‘technical regulation’ refers explicitly to ‘terminology, symbols, packaging, marking or labelling requirements as they apply to a product’, a legislative or regulatory provision of a WTO Member specifying that the packages or labels affixed to particular products must or must not include certain language, symbols or marks would in principle satisfy that definition. Such a provision would apply to an identifiable group of products and would prescribe product characteristics in the form of packaging or labelling requirements with which manufacturers, retailers, wholesalers and/or distributors would have to comply. Although a labelling requirement does not affect the nature or quality of a product, it does affect the way in which the product is identified, presented and perceived by consumers.5 Requirements applying not or not solely to particular products but instead, or in addition, to particular PPMs would raise the additional question, discussed earlier in this volume, of the extent to which product-related and non-product-related PPMs are captured within the notion of technical regulations. At a minimum, mandatory product labelling requirements that distinguish between products on the basis of product-related PPMs or that otherwise require reference to such PPMs are likely to constitute technical regulations. This conclusion is based on the explicit reference to ‘product characteristics or their related processes and production methods’ in the first sentence of the definition of ‘technical regulation’ as set out above. Moreover, the omission of the word ‘related’ from the second sentence of that definition may be read as 3 Appellate Body Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, WT/DS381/AB/R, adopted 13 June 2012 (US – Tuna II (Mexico)), at para. 183. 4 Ibid. at para. 188. 5 Appellate Body Report, EC – Asbestos, supra note 2 at paras. 67–70; Appellate Body Report, European Communities – Trade Description of Sardines, WT/DS231/AB/R, adopted 23 October 2002 (EC – Sardines), at para. 191. See also Elizabeth Sheargold and Andrew D. Mitchell, ‘Oils Ain’t Oils: Product Labelling, Palm Oil and the WTO’ (2011) Melbourne Journal of International Law 396 at 402.



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indicating that product labelling requirements concerning non-productrelated PPMs are also covered.6 II.B Overview of TBT Articles 2.1 and 2.2 II.B(i) The text of the provisions: related but independent Article 2 of the TBT Agreement is the first of three provisions under the heading ‘Technical Regulations and Standards’ in the TBT Agreement and imposes obligations on WTO Members with respect to technical regulations, including product labelling requirements that constitute technical regulations. Article 2 is titled ‘Preparation, Adoption and Application of Technical Regulations by Central Government Bodies’. Articles 2.1 and 2.2 of the TBT Agreement state: With respect to their central government bodies: 2.1 Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country. 2.2 Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-uses of products.

Articles 2.1 and 2.2 of the TBT Agreement contain separate obligations that must be independently assessed. Thus, the Panel in US – Clove Cigarettes stated that ‘our finding that the measure is inconsistent with Article 2.1 does not prejudge the answer to the question of whether the 6 Christiane Conrad, Processes and Production Methods (PPMs) in WTO Law: Interfacing Trade and Social Goals (Cambridge University Press, 2011) 386. See also Gabrielle Marceau and Joel Trachtman, ‘The Technical Barriers to Trade Agreement, the Sanitary and Phytosanitary Measures Agreement, and the General Agreement on Tariffs and Trade: A Map of the World Trade Organization Law of Domestic Regulation of Goods’ (2002) 36:5 Journal of World Trade 811 at 861–62.



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Consumer information 459 measure is consistent with Article 2.2.’7 The Panel went on to reject Indonesia’s claim that the measure was inconsistent with Article 2.28 – a finding that was not appealed. Similarly, the Appellate Body in US – Tuna II (Mexico) found the challenged measure inconsistent with Article 2.1 but rejected the claim of inconsistency with Article 2.2.9 The Appellate Body in US – COOL found the United States measure inconsistent with Article 2.1, but after reversing the Panel’s finding of inconsistency with Article 2.2 was unable to complete the legal analysis under that provision.10 For product labelling requirements as with other technical regulations, the separate nature of the two provisions means that Members must ensure compliance with both Article 2.1 and Article 2.2. II.B(ii) Relevant context within the TBT Agreement In interpreting these provisions, the Appellate Body has identified certain relevant ‘context’ in the sense of Articles 31(1) and 31(2) of the Vienna Convention on the Law of Treaties (‘VCLT’). In particular, the Preamble to the TBT Agreement provides relevant context for interpreting TBT Articles 2.111 and 2.2.12 The sixth recital of the Preamble states: Recognizing that no country should be prevented from taking measures necessary … for the protection of human, animal or plant life or health … at the levels it considers appropriate, subject to the requirement that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or 7 Panel Report, United States – Measures Affecting the Production and Sale of Clove Cigarettes, WT/DS406/R, adopted 24 April 2012, as modified by Appellate Body Report WT/DS406/AB/R (US – Clove Cigarettes), at para. 7.332. The Appellate Body in Appellate Body Report, United States – Certain Country of Origin Labelling (COOL) Requirements, WT/DS384/AB/R/ WT/DS386/AB/R, adopted 23 July 2012 (US – COOL), implicitly adopted a similar approach although it was unable to complete the analysis regarding Article 2.2: at paras. 496(a)(iv), 496(b)(vi)–(vii). 8 Panel Report, US – Clove Cigarettes, ibid. at para. 8.1(c). 9 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at paras. 407(b)–407(e). 10 Appellate Body Report, US – COOL supra note 7 at paras. 350, 491. 11 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at paras. 212–213; Appellate Body Report, United States – Measures Affecting the Production and Sale of Clove Cigarettes, WT/DS406/AB/R, adopted 24 April 2012 (US – Clove Cigarettes), at paras. 89, 173; Appellate Body Report, US – COOL, supra note 7 at para. 268. 12 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 316.



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a disguised restriction on international trade, and are otherwise in accordance with the provisions of this Agreement …

According to the Appellate Body, this recital ‘mak[es] clear … that technical regulations may pursue legitimate objectives but must not be applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination’.13 Thus, a product labelling requirement directed towards the objective of preserving the environment or promoting healthy eating may be recognised as having a legitimate objective, but this alone cannot establish its consistency with TBT Articles 2.1 and 2.2. For example, if the requirement is structured or applied so as to discriminate arbitrarily or unjustifiably between like products (a concept elaborated further below), it may violate Article 2.1. The Appellate Body regards the definition of ‘technical regulation’ as indicating that ‘technical regulations … , by their very nature, establish distinctions between products according to their characteristics or their related processes and production methods.’14 Accordingly, ‘Article 2.1 should not be read to mean that any distinction, in particular those that are based exclusively on particular product characteristics or their related processes and production methods, would per se accord less favourable treatment within the meaning of Article 2.1.’15 Product labelling requirements frequently distinguish between particular types of products or the way those products have been made, for example in relation to the products’ impact on the environment or contribution to a healthy lifestyle. Indeed, the very purpose of a product labelling requirement will often be to alert consumers to these distinctions and so encourage particular types of behaviour. The mere existence of such distinctions in a product labelling requirement, based on the Appellate Body’s reasoning, is insufficient to establish its inconsistency with Article 2.1. The Appellate Body has also held that TBT Article 2.2 provides relevant context for the interpretation of TBT Article 2.1,16 indicating that ‘Article 2.1 does not operate to prohibit a priori any restriction of 13 Ibid. citing Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 173. 14 Appellate Body Report, US – Clove Cigarettes, ibid. at para. 169. 15 Ibid. at para. 169 (original emphasis). Cited in Appellate Body Report, US – COOL, supra note 7 at para. 268; Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 211. 16 Appellate Body Report, US – Tuna II (Mexico), ibid. at para. 212; Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 171; Appellate Body Report, US – COOL, supra note 7 at para. 268.



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Consumer information 461 international trade’.17 ‘[I]f any obstacle to international trade would be sufficient to establish a violation of Article 2.1, Article 2.2 would be deprived of its effet utile’,18 contrary to the ‘principle of effectiveness’, whereby WTO provisions ‘should not be interpreted in such a manner that whole clauses or paragraphs of a treaty would be reduced to redundancy or inutility’.19 At the same time, ‘Article 2.2 does not prohibit measures that have any trade-restrictive effect’.20 Thus, the fact that a product labelling requirement restricts trade cannot per se evince a breach of Article 2.1 or Article 2.2. In any case, labelling requirements are generally regarded as one of the least trade-restrictive forms of regulation, although restrictions can arise for example through discriminatory labelling requirements as discussed further below. II.B(iii) Relevance of the GATT 1994 The GATT 1994 and the TBT Agreement may both apply simultaneously to a given measure, but, to the extent of any conflict between the two agreements, the latter will prevail.21 Since the TBT Agreement is the more specific agreement, a WTO Panel would usually examine the measure under the TBT Agreement before examining it under the GATT 1994.22 Broadly speaking, TBT Article 2.1 can be analogised to Articles III:4 and I:1 of the GATT 1994, which impose obligations to accord national treatment and most-favoured-nation (‘MFN’) treatment respectively. Similarly, TBT Article 2.2 contains language similar to that found in 17 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 212, citing Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 171; Appellate Body Report, US – COOL, supra note 7 at para. 268. 18 Appellate Body Report, US – Clove Cigarettes, ibid. at para. 171 (original emphasis). 19 Appellate Body Report, United States – Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January 2003 (US – Offset Act (Byrd Amendment)), at para. 271. 20 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 319 (emphasis added). See also Appellate Body Report, US – COOL, supra note 7 at para. 375. 21 Marrakesh Agreement Establishing the World Trade Organization (‘Marrakesh Agreement Establishing the WTO’), General Interpretative Note to Annex 1A. 22 See e.g., Panel Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, WT/DS381/R, adopted 13 June 2012, as modified by Appellate Body Report WT/DS381/AB/R (US – Tuna II (Mexico)), at paras. 7.43, 7.46.



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Article XX of GATT 1994 (entitled ‘General Exceptions’). In the 2012 TBT cases, the Appellate Body acknowledged these similarities between TBT and GATT provisions. It held that Article III:4 of the GATT 1994 provides relevant ‘context’ in interpreting TBT Article 2.1,23 although the scope, content and obligations of TBT Article 2.1 are not the same as or even ‘substantially the same as’ those of GATT Articles III:4 and I:1.24 The Appellate Body also noted that the TBT Agreement contains no ‘general exceptions’ clause akin to GATT Article XX.25 Nevertheless, the balance between trade liberalisation and Members’ right to regulate is reflected in the Preamble to the TBT Agreement and in TBT Article 2.1, read in light of its context, object and purpose.26 Indeed, the object and purpose of the TBT Agreement is ‘to strike a balance between … the objective of trade liberalization and … Members’ right to regulate’.27 The following sections demonstrate the relevance of WTO jurisprudence on the national treatment and MFN treatment obligations and the general exceptions under the GATT 1994 in interpreting and applying TBT Articles 2.1 and 2.2. In particular, the Appellate Body uses some of the language of the chapeau of GATT Article XX in applying TBT Article 2.1. The Appellate Body also uses, in applying TBT Article 2.2, some of the techniques it uses in applying the word ‘necessary’ in GATT Article XX(a), (b) and (d) and the corresponding provisions in Article XIV of the General Agreement on Trade in Services (‘GATS’). However, the relationship between, and content of, TBT Articles 2.1 and 2.2 does not align precisely with the analytical approach adopted by the Appellate Body with respect to the chapeau and sub-paragraphs respectively of Article XX of the GATT 1994. Careful consideration must be given to the specific context of the provision in question.28

23 Appellate Body Report, US – Clove Cigarettes, supra note 11 at paras. 100, 176. 24 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 405. 25 Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 101. 26 Ibid. at paras. 96, 109. 27 Ibid. at para. 174. 28 See, e.g., Appellate Body Report, US – Clove Cigarettes, ibid. at para. 180; Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 214; Appellate Body Report, EC – Asbestos, supra note 2 at para. 89, as cited in Appellate Body Report, Australia – Measures Affecting the Importation of Apples from New Zealand, WT/DS367/AB/R, adopted 17 December 2010 (Australia – Apples), at para. 285.



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Consumer information 463 II.C TBT Article 2.1: Preventing Discriminatory Product Labels II.C(i) Identifying ‘like products’ In determining whether a product labelling requirement is compatible with TBT Article 2.1, a Panel would need to identify the relevant imported products and the corresponding ‘like products of national origin’ (for the national treatment aspect of Article 2.1) or ‘like products originating in any other country’ (for the MFN aspect of Article 2.1). The Appellate Body considered the concept of ‘like products’ in connection with national treatment under TBT Article 2.1 in US – Clove Cigarettes. The Appellate Body explained that the products to be compared ‘in the market of the regulating Member’29 are ‘all like products imported from the complaining Member’30 and ‘the universe of domestic products that are like the products imported from the complaining Member’.31 Thus, the Appellate Body has made clear that the comparison to be undertaken involves, using the language of commentators Ehring and Diebold respectively, an ‘asymmetric impact test’32 or a ‘disproportionate disadvantage test’.33 This approach is significant; it means that ‘the national treatment obligation of Article 2.1 does not require Members to accord no less favourable treatment to each and every imported product as compared to each and every domestic like product.’34 A different approach would undermine the Appellate Body’s conclusion outlined above that TBT Article 2.1 does not preclude regulatory distinctions per se, because any distinction would be likely to favour at least one domestic product and disfavour at least one imported product. Taking into account the concept of ‘treatment no less favourable’ in GATT Article III:4 and TBT Article 2.1, the Appellate Body stated that ‘likeness’ is to be determined ‘based on the competitive relationship between and among the products’ rather than ‘the regulatory objectives of the measure’.35 The Appellate Body’s refusal to focus on regulatory 29

Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 192. Ibid. at para. 194. See also para. 190. 31 Ibid. at para. 192. 32 Lothar Ehring, ‘De Facto Discrimination in World Trade Law: National Treatment and Most-Favoured-Nation Treatment – or Equal Treatment?’ (2002) 36:5 Journal of World Trade 921 at 924. 33 Nicolas Diebold, ‘Standards of Non-Discrimination in International Economic Law’ (2011) 60 International and Comparative Law Quarterly 831, 842. 34 Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 193. 35 Ibid. at paras. 111–113 (emphasis added). 30



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purpose in determining likeness, as the Panel had,36 may be lamented as a lost opportunity to revive the so-called ‘aim-and-effects’ test,37 although this ruling is not surprising given the Appellate Body’s long rejection of that test.38 Nevertheless, according to the Appellate Body, ‘regulatory concerns’ may play a role to the extent they ‘have an impact on the competitive relationship between and among the products concerned’39 or are otherwise reflected in traditional criteria for assessing likeness such as ‘physical characteristics and consumer preferences’.40 As regards the degree of competition required to establish that products are like, the Appellate Body stated: [I]t is not necessary to demonstrate that the products are substitutable for all consumers or that they actually compete in the entire market. Rather, if the products are highly substitutable for some consumers but not for others, this may also support a finding that the products are like.41

In that dispute, Indonesia challenged a technical regulation in the form of a United States prohibition on cigarettes containing flavours other than tobacco, including clove but excluding menthol.42 According to the Panel and Appellate Body, both clove and menthol cigarettes appeal to young people by masking the harshness of the tobacco.43 The Appellate Body concluded that the degree of competition and substitutability found by the Panel among young smokers in the United States between clove cigarettes and menthol cigarettes was ‘sufficiently high to support a finding of likeness’,44 even though the Panel should have examined the 36

Panel Report, US – Clove Cigarettes, supra note 7 at paras. 7.113, 7.119. See e.g., Robert Hudec, ‘GATT/WTO Constraints on National Regulation: Requiem for an “Aims and Effects” Test’ (1998) 32 International Lawyer 619. 38 See e.g., Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997 (EC – Bananas III), at paras. 216, 241. 39 Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 119. See also para. 120. 40 Ibid. at para. 117. The other traditional criteria are (i) end-use; and (ii) tariff classification. See, e.g., Appellate Body Report, EC – Asbestos, supra note 2 at para. 101. 41 Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 142. 42 United States Federal Food, Drug and Cosmetic Act, § 907(a)(1)(A), inserted by the Family Smoking Prevention and Tobacco Control Act: § 101(b), Pub L No 111–31, 123 Stat 1776 (21 June 2009). 43 Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 225. 44 Ibid. at para. 145. 37



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Consumer information 465 ‘consumer tastes and habits’ of adult consumers as well.45 (The fact that clove cigarettes are predominantly imported from Indonesia, while menthol cigarettes are predominantly produced in the United States, led in turn to the Appellate Body’s finding of less favourable treatment and thus a violation of TBT Article 2.1.)46 Although the regulatory purpose of a product labelling requirement may not in itself be an element for consideration in determining likeness (as concluded by the Appellate Body in US – Clove Cigarettes), that purpose is likely to influence the measure’s distinctions between products. The raison d’être of mandated product labels is typically to inform consumers of a product’s content, PPM or other desirable or undesirable characteristics. A product labelling requirement focusing, for example, on ingredients may draw distinctions based on the physical characteristics of the covered product. If the physical characteristics of products affected by the labelling requirement are themselves very different, this factor may lean towards a finding that the products are not like. A labelling requirement focusing on a product’s impact on the environment or health may also respond to consumer concerns, providing consumers with the information they need in order to satisfy their preference for environmentally-friendly or healthy products. In that context, distinctions drawn by consumers between the relevant products would weigh in favour of finding the products not like. However, product labels – and therefore product labelling requirements – may also influence consumer preferences rather than simply responding to them, thereby affecting the competitive relationship between the products. For example, a mandated label might provoke a concern about a particular PPM or ingredient that would otherwise not exist. To the extent that a challenged product labelling requirement has disturbed or distorted consumer preferences regarding, or the market for, the relevant products, alternative evidence of competition or consumer preferences may be required, for example ‘evidence of latent, or suppressed, consumer demand in that market, or … evidence of substitutability from some relevant third market’.47 In addition, the Appellate Body explained in US – Clove Cigarettes that, ‘in determining likeness based on the competitive relationship between and among the products, a panel should discount any distortive effects that the measure at issue may itself have 45 46 47

Ibid. at para. 137. Ibid. at para. 224. Appellate Body Report, EC – Asbestos, supra note 2 at para. 123.



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on the competitive relationship, and reserve the consideration of such effects for the analysis of less favourable treatment’.48 II.C(ii) Ensuring ‘treatment no less favourable’ In the three recent TBT cases, the Appellate Body indicated that the existing WTO case law on GATT Article III:4 may be ‘instructive’49 or provide ‘relevant guidance’50 in interpreting the term ‘treatment no less favourable’ in TBT Article 2.1, ‘provided that the specific context in which the term appears in Article 2.1 … is taken into account’.51 Taking that case law into account, a measure accords less favourable treatment to like imported products, contrary to TBT Article 2.1, where: (i)

(ii)

the measure ‘modif[ies] the conditions of competition in the relevant market to the detriment of imported products’,52 that is, ‘to the detriment of the group of imported products vis-à-vis the group of like domestic products or like products originating in any other country’;53 and the detrimental impact ‘reflects discrimination’54 in that it does not ‘ste[m] exclusively from a legitimate regulatory distinction’.55 In other words, the measure ‘is not designed and applied in an even-handed manner’, for example because ‘it is designed or applied in a manner that constitutes a means of arbitrary or

48

Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 111. Appellate Body Report, US – Clove Cigarettes, ibid. at para. 180; Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 214. 50 Appellate Body Report, US – COOL, supra note 7 at para. 269. 51 Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 180; Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 214. 52 Appellate Body Report, US – COOL, supra note 7 at para. 270, referring to Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001, para. 145 (discussing in the context of GATT Article III:4). 53 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 215. See also Appellate Body Report, US – Clove Cigarettes, supra note 11 at paras. 180, 193–194 (referring to Appellate Body Report, EC – Asbestos, supra note 2 at para. 100 (discussing in the context of GATT Article III:4)). 54 Appellate Body Report, US – Tuna II (Mexico), ibid. at para. 231. See also Appellate Body Report, US – Clove Cigarettes, ibid. at paras. 182, 226. 55 Appellate Body Report, US – COOL, supra note 7 at para. 271. See also Appellate Body Report, US – Clove Cigarettes, ibid. at para. 181. 49



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Consumer information 467 unjustifiable discrimination’,56 as evidenced by its ‘design, architecture, revealing structure, operation, and application’.57 The reference in this part of the test to arbitrary or unjustifiable discrimination calls to mind the chapeau to GATT Article XX.58 The Appellate Body drew on the inclusion of these words in the Preamble to the TBT Agreement, as discussed above,59 in elaborating the concept of discrimination (that is, less favourable treatment) in Article 2.1. Importantly, Article 2.1 prohibits both de jure and de facto discrimination between domestic and like imported products.60 De jure discrimination may arise in product labelling requirements that distinguish explicitly on the basis of origin. De facto discrimination may arise in product labelling 56 Appellate Body Report, US – COOL, ibid. at para. 271. Cf. Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, at p. 21; GATT Art XX. 57 Appellate Body Report, US – COOL, ibid. at para. 271 and Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 225, both quoting Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 182. See also Appellate Body Report, US – Clove Cigarettes, at para. 215. Cf. Appellate Body Report, Philippines – Taxes on Distilled Spirits, WT/DS396/AB/R, WT/DS403/AB/R, adopted 20 January 2012, at paras. 252, 257; Appellate Body Report, Chile – Taxes on Alcoholic Beverages, WT/DS87/AB/R, WT/DS110/ AB/R, adopted 12 January 2000, at para. 71; Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/ AB/R, adopted 1 November 1996, at p. 29 (referring to the ‘design, the architecture, and the revealing structure’ of the challenged measure in the context of the words ‘so as to afford protection’ in GATT Article III:1 as cross-referenced in GATT Article III:2, second sentence). See also Appellate Body Report, Australia – Apples, supra note 28 at para. 173 (adopting a similar approach in the context of Annex A(1)(a) of the Agreement on the Application of Sanitary and Phytosanitary Measures (‘SPS Agreement’)); Appellate Body Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted 1 June 2011, at para. 1051 (adopting a similar approach in the context of Article 3.1(a) of the Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’)). 58 The chapeau states: ‘Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures …’. 59 See above part II.B(ii). 60 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 286.



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requirements that draw distinctions that, in fact, impose a greater burden on imports or on imports from particular countries. The recent cases of US – COOL and US – Tuna II (Mexico) offer examples of explicit and implicit discrimination respectively in the context of product labels. In US – COOL, the Appellate Body assessed a complex set of United States requirements for labelling certain meat products according to their country of origin. The Appellate Body agreed that these requirements were intended to pursue the legitimate objective of ‘provid[ing] consumers with information on the countries in which the livestock from which the meat they purchase is produced were born, raised, and slaughtered’.61 However, the Appellate Body found that the ‘least costly way of complying with the … measure is to rely exclusively on domestic livestock’,62 such that the measure ‘creates an incentive for US producers to use exclusively domestic livestock and thus has a detrimental impact on the competitive opportunities of imported livestock’.63 The Appellate Body went on to hold that the detrimental impact ‘does not stem exclusively from a legitimate regulatory distinction but, instead, reflects discrimination in violation of Article 2.1 of the TBT Agreement’ because it ‘can … not be explained by the need to provide origin information to consumers’.64 The Appellate Body explained that a meat producer processing livestock from different origins would incur additional costs in recordkeeping, verification, and segregation of livestock in order to comply with the labelling requirements. However, these additional costs do not correspond with additional information being provided to consumers. Rather, the more origins involved, the less accurate and more confusing the information consumers receive. The label ‘Product of the United States’ provides ‘meaningful information’, but a label such as ‘Product of the US, Mexico’ does not, even for a ‘fully informed’ consumer, because of the interchangeability of certain labels and other flexibilities in the measure itself.65 This case provides an example of how the ostensible goal of providing consumers with information may not be borne out by a measure that fails to provide consumers with clear and accurate information. In those circumstances, the goal of increasing consumer information is unlikely to justify discrimination in the measure. 61 62 63 64 65

Appellate Body Report, US – COOL, supra note 7 at para. 453. Ibid. at para. 345. Ibid. at para. 349. Ibid. Ibid. at paras. 338, 343, 345.



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Consumer information 469 In US – Tuna II (Mexico), neither party appealed the Panel’s finding that the ‘dolphin-safe’ label has ‘significant commercial value on the US market for tuna products’, with retailers and consumers showing a preference for tuna products displaying a ‘dolphin-safe’ label, such that access to the label constitutes an advantage.66 The United States labelling provisions challenged in that dispute preclude access to the ‘dolphinsafe’ label for most Mexican tuna products because they tend to be caught in the Eastern Tropical Pacific Ocean (‘ETP’) by ‘setting on dolphins’.67 The Appellate Body found that this ‘detrimental impact on the competitive opportunities of Mexican tuna products in the US market’68 reflects discrimination contrary to TBT Article 2.1 because: the United States has not demonstrated that the difference in labelling conditions for tuna products containing tuna caught by setting on dolphins in the ETP, on the one hand, and for tuna products containing tuna caught by other fishing methods outside the ETP, on the other hand, is ‘calibrated’ to the risks to dolphins arising from different fishing methods in different areas of the ocean.69

Put simply, the Appellate Body found that the measure imposes greater burdens on tuna caught inside the ETP by setting on dolphins, even though tuna caught outside the ETP using other methods also ‘has produced significant levels of dolphin bycatch’.70 Thus, even though the labelling measure responds to a consumer preference for tuna products caught without endangering dolphins, it fails to satisfy that preference because it draws distinctions that are not explained by the impact on dolphins. II.D TBT Article 2.2: Preventing Trade-restrictive Product Labels The Appellate Body recently addressed TBT Article 2.2 in US – Tuna II (Mexico) and US – COOL and, unsurprisingly, as noted above, adopted terminology and concepts in interpreting and applying that provision similar to those applicable under GATT Article XX. The Appellate Body 66 Panel Report, US – Tuna II (Mexico), supra note 22 at paras. 7.289–7.291; Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 233. 67 Appellate Body Report, US – Tuna II (Mexico), ibid. at para. 234. 68 Ibid. at para. 235. 69 Ibid. at para. 297. 70 Ibid. at para. 298 (quoting Panel Report, US – Tuna II (Mexico), supra note 22 at para. 7.531).



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470


explained that, in assessing whether a given technical regulation constitutes an unnecessary obstacle to international trade (that is, the technical regulation is ‘more trade-restrictive than necessary to fulfil a legitimate objective’) within the meaning of Article 2.2, a Panel must consider:71 (i) (ii)

‘the trade-restrictiveness of the technical regulation’;72 ‘the degree of contribution that the technical regulation makes toward the achievement of the legitimate objective’,73 as evidenced by ‘the design, structure, and operation of the technical regulation, as well as … its application’;74 and (iii) ‘the risks non-fulfilment would create’,75 that is, ‘the nature of the risks at issue as well as the gravity of the consequences that would arise from non-fulfilment of the objective pursued by the Member through the measure’.76 In ‘most cases’,77 the analysis will also involve a comparison with alternative measures. Specifically, the ‘complainant may also seek to identify a possible alternative measure that is less trade restrictive, makes an equivalent contribution to the relevant objective, and is reasonably available’.78 According to the Appellate Body, ‘a comparison with reasonably available alternative measures is a conceptual tool for the 71

Ibid. at para. 320. Appellate Body Report, US – COOL, supra note 7 at para. 374. See also Appellate Body Report, US – Tuna II (Mexico), note 3 (referring to the approach to necessity in GATT Article XX and GATS Article XIV adopted in Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R, adopted 17 December 2007, at para. 178 and Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April 2005, at paras. 306–308). 72 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 318; see also Appellate Body Report, US – COOL, supra note 7 at para. 471. 73 Appellate Body Report, US – Tuna II (Mexico), ibid. at para. 315; see also para. 317, referring to Appellate Body Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/DS363/AB/R, adopted 19 January 2010, at para. 252 (discussing in the context of GATT Article XX(a)). 74 Appellate Body Report, US – COOL, supra note 7 at para. 373. 75 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 318. 76 Appellate Body Report, US – COOL, supra note 7 at para. 471. 77 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 320; Appellate Body Report, US – COOL, supra note 7 at para. 376. 78 Appellate Body Report, US – Tuna II (Mexico), ibid. at para. 323. See also Appellate Body Report, US – COOL, ibid. at para. 379.



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Consumer information 471 purpose of ascertaining whether a challenged measure is more trade restrictive than necessary’.79 This comparison ‘should be made in the light of the nature of the risks at issue and the gravity of the consequences that would arise from non-fulfilment of the legitimate objective’.80 In US – Tuna II (Mexico), the Panel found that the objectives of the United States’ requirements for tuna products to attain the ‘dolphin-safe’ label were to protect dolphins and to provide consumers with information.81 The Appellate Body found the United States measure consistent with Article 2.2, reversing the Panel’s finding of inconsistency because of the way the Panel analysed the alternative measure proposed by Mexico. The alternative proposed was to permit the use in the United States of the ‘dolphin safe’ label of the Agreement on the International Dolphin Conservation Program (‘AIDCP’), in addition to the United States’ official dolphin safe label.82 The Appellate Body explained that ‘the geographic scope of the AIDCP rules is limited to the ETP’, such that for fishing outside the ETP the alternative proposed would contribute no more or less to the United States’ objectives than the existing measure.83 As for fishing inside the ETP, under the alternative proposed tuna caught by setting on dolphins would have access to the AIDCP dolphin-safe label, whereas this method of catching tuna precludes eligibility for the United States’ dolphin-safe label. Accordingly: the alternative measure proposed by Mexico would contribute to both the consumer information objective and the dolphin protection objective to a lesser degree than the measure at issue, because, overall, it would allow more tuna harvested in conditions that adversely affect dolphins to be labelled ‘dolphin-safe’. We disagree therefore with the Panel’s findings that the

79 Appellate Body Report, US – Tuna II (Mexico), ibid. at para. 320 (referring to Appellate Body Report, Korea – Various Measures on Beef, supra note 52 at para. 166 (discussing in the context of GATT Article XX(d))). See also Appellate Body Report, US – COOL, supra note 7 at para. 461. 80 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 321 (referring to Appellate Body Report, US – Gambling, supra note 71 at para. 307 (discussing in the context of GATS Article XIV(a))). 81 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at para. 325 (referring to Panel Report, US – Tuna II (Mexico), supra note 22 at paras. 7.401, 7.413, 7.425). 82 Appellate Body Report, US – Tuna II (Mexico), supra note 3 at paras. 324–325. 83 Ibid. at para. 329.



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proposed alternative measure would achieve the United States’ objectives ‘to the same extent’ as the existing US ‘dolphin-safe’ labelling provisions … 84

This reasoning highlights how seriously the Appellate Body takes proposed alternative measures. A complainant will not succeed in establishing a violation of Article 2.2 of the TBT Agreement simply by raising a hypothetical measure that the respondent could have chosen. Panels and the Appellate Body will carefully scrutinise the complainant’s assertion that the alternative is reasonably available and less trade-restrictive than the challenged measure, as well as assessing in detail the extent to which the alternative would contribute to the respondent’s objectives (in comparison to the contribution of the challenged measure), taking account of the risks of not fulfilling those objectives.85 The other two recent TBT cases are slightly less instructive regarding Article 2.2. In US – Clove Cigarettes, the Panel found the United States ban on flavours in cigarettes consistent with Article 2.2, because reducing youth smoking is a legitimate objective and, inter alia, Indonesia had not identified reasonably available less trade-restrictive alternatives that would make an equivalent contribution to that objective.86 The Panel’s finding of consistency with Article 2.2 was subject to a conditional appeal by the United States, but as the condition was not met (that is, Indonesia did not appeal the Article 2.2 finding) the Panel’s ruling stands.87 In US – COOL, the Appellate Body reversed the Panel’s finding that the United States country of origin labelling measure breaches Article 2.2 because the Panel incorrectly focused on whether the measure completely fulfilled its objective or ‘satisfied some minimum level of fulfilment’ rather than focusing on the ‘degree of contribution achieved by the measure’, and also because the Panel ‘ignored its own findings, which demonstrate that the labels … did contribute towards the objective of providing consumer information on origin’.88 The Appellate Body was, however, unable to complete the analysis under Article 2.2 due to a lack of factual findings by the Panel or uncontested facts on the Panel record regarding the precise degree of contribution made by the measure to its objective and the availability of less trade-restrictive alternative measures.89 84 85 86 87 88 89

Ibid. at para. 330. Ibid. at para. 321. Panel Report, US – Clove Cigarettes, supra note 7 at paras. 7.428–7.432. Appellate Body Report, US – Clove Cigarettes, supra note 11 at para. 9. Appellate Body Report, US – COOL, supra note 7 at para. 468. Ibid. at paras. 479, 481, 491.



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Consumer information 473 In summary, as indicated in Table 13.1, while all three measures examined in these recent TBT disputes were ultimately found to discriminate against imported products and therefore in breach of TBT Article 2.1, none of them led to an Appellate Body finding of inconsistency with TBT Article 2.2. In a general sense, one might conclude that the Appellate Body is likely to adopt a stringent approach under Article 2.1 to technical regulations including product labels that are de facto or de jure discriminatory, while granting more leeway to Members under Article 2.2 in determining what is necessary to achieve a legitimate policy goal. Moreover, it is clear from the outcomes in these three cases that these two provisions impose independent obligations that must be separately assessed, although they raise some common issues. Table 13.1 Outcomes of recent disputes Dispute

Article 2.1

Article 2.2

US – Tuna II (Mexico)

Panel AB Panel AB

Inconsistent Inconsistent Consistent Inconsistent

US – COOL

Panel AB

Inconsistent Inconsistent

Consistent Not addressed (condition of appeal not met) Inconsistent Consistent (reversed Panel finding of inconsistency) Inconsistent Reversed Panel finding of inconsistency but unable to complete legal analysis

US – Clove Cigarettes

III. PRODUCT LABELLING FOR HEALTH III.A Nutritional Labels on Food The World Health Assembly has endorsed, in 2004, the Global Strategy on Diet, Physical Activity and Health,90 and, more recently, a set of recommendations on the marketing of foods and non-alcoholic beverages to children.91 The Global Strategy recognises that ‘elevated consumption

90 WHO World Health Assembly, Global Strategy on Diet, Physical Activity and Health, WHA57.17 (22 May 2004). 91 WHO World Health Assembly, Marketing of Food and Non-Alcoholic Beverages to Children, WHA63.14 (21 May 2010).



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474


of energy-dense, nutrient-poor foods that are high in fat, sugar and salt’ are among the factors that increase the risks of non-communicable diseases such as ‘cardiovascular disease, type 2 diabetes and certain types of cancer’, ‘contribut[ing] substantially to the global burden of disease, death and disability’.92 As obesity increases, particularly in low- and middle-income countries,93 more countries are seeking to provide greater information to their consumers to allow them to make more responsible food consumption decisions.94 The previous section examined product labels and other technical regulations that have led to disputes and adverse findings in the WTO. In this section we consider a technical regulation that appears consistent with the TBT Agreement: the ‘nutrition labelling’ requirements under the United States’ federal Food, Drug and Cosmetic Act 1938 (‘Act’) as amended by the Nutrition Labeling and Education Act of 1990.95 The amendments to the Act had a number of purposes,96 the most important of which were arguably: (i) to provide consumers with information about the nutritional content and total number of calories of certain foodstuffs; and (ii) to prevent the use of labels or claims that mislead consumers about the nutritional content of foodstuffs.97 Both these aims are essentially directed towards enhancing consumer information in connection with their choice of food products. Regulations concerning food could potentially be challenged under the Agreement on the Application of Sanitary and Phytosanitary Measures (‘SPS Agreement’) rather than the TBT Agreement. SPS measures as defined under the SPS Agreement form a sub-set of all potential technical regulations as defined under the TBT Agreement, but the two are 92

WHO World Health Assembly, Global Strategy on Diet, Physical Activity and Health, WHA57.17 (22 May 2004) at paras. 5, 9. 93 Anoop Misra and Lokesh Khurana, ‘Obesity and the Metabolic Syndrome in Developing Countries’ (2008) 93 Journal of Clinical Endocrinology and Metabolism 509, 510. 94 WHO World Health Assembly, Global Strategy on Diet, Physical Activity and Health, WHA57.17 (22 May 2004) at para. 8. 95 Federal Food, Drug and Cosmetic Act 1938, § 343(q), inserted by the Nutrition Labeling and Education Act of 1990, section 2, Pub L No 101 – 535, H.R. 3562 (8 November 1990). 96 See Congressional Research Service Summary, Nutrition Labeling and Education Act of 1990 (Passed Senate amended), Congressional Research Service Summary, 24 October 1990. 97 See Roseann Termini, ‘The Prevention of Misbranded Food Labeling: The Nutrition Labeling and Education Act of 1990’, Ohio Northern University Law Review 77, 80.



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Consumer information 475 mutually exclusive. Article 1.5 of the TBT Agreement specifies that its provisions do not apply to SPS measures, which are defined to include measures applied ‘to protect human or animal life or health within the territory of the Member from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs’,98 including ‘packaging and labelling requirements directly related to food safety’.99 Although some parts of the Act do concern food safety and may engage the SPS Agreement, the nutrition labelling requirements examined here arguably mandate the provision of general information to consumers rather than concerning food safety (although the implications of the information may include safety, for example for consumers with food allergies). For this reason, the measure is likely to be subject to the TBT Agreement rather than the SPS Agreement. The relevant parts of the Act would constitute a technical regulation because they apply to an identifiable group of products (foodstuffs – that is, ‘food intended for human consumption and … offered for sale’),100 and they set out mandatory characteristics for such products, namely that the products display a nutritional label unless a prescribed exemption applies. Specifically, the label must state, amongst other things, the ‘total number of calories’ of the product as well as the ‘total fat, saturated fat, cholesterol, sodium, total carbohydrates, complex carbohydrates, sugars, dietary fiber, and total protein’.101 A covered product lacking a label with the required nutritional information is deemed to be ‘misbranded’, engaging the Act’s enforcement provisions.102 Similar requirements apply in other jurisdictions around the world, such as Australia and New Zealand103 and the European Union.104 These provisions, mandating the provision of information to consumers on nutritional content of food stuffs, are unlikely to raise any concerns of inconsistency with Article 2.1 of the TBT Agreement because they apply 98

SPS Agreement Annex A, para. 1(b). Ibid. at para. 1. 100 Act, § 343(q)(1). 101 Ibid. § 343(q)(1)(D). 102 Ibid. § 343. 103 Food Standards Australia New Zealand Act 1991 (Cth) and Australia New Zealand Food Standards Code – Standard 1.2.8 – Nutrition Information Requirements. 104 The labelling requirements of the European Union are optional unless a representation is being made about the nutritional quality of the foodstuff, in which case labelling becomes compulsory: European Union, Council Directive of 24 September 1990 on nutrition labelling for foodstuffs (90/496/EEC), Official Journal of the European Communities. 99



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equally to domestically produced and imported products and would not appear to discriminate in practice against products from any particular source. While the achievements of the Act’s objectives of increasing consumer information might ultimately have health benefits, the labelling requirements themselves are not necessarily designed to alter consumer preferences in any particular way. Rather, they may simply help ensure that consumers receive detailed and accurate information on which to base their consumption decisions, reducing their potential to create controversy from a WTO perspective. Moreover, even if the measure had a greater detrimental impact on imported products (for example because higher fat products tended to be imported rather than domestically produced), this discrepancy could be justified if based exclusively on a legitimate regulatory distinction.105 The nutritional labelling requirements in the Act are also unlikely to be found to constitute an ‘unnecessary obstacl[e] to international trade’ contrary to Article 2.2 of the TBT Agreement. The Act may restrict trade to a minimal degree in that imports would need to be relabelled to comply with the US requirements, but the same applies to any product labelling measure. At the same time, studies regarding the degree to which consumers use information on nutrition labels suggest that such information is an important (but not decisive) factor in food purchasing decisions.106 If the objectives of the Act were not achieved, consumers would not have as much information in deciding what food products to buy and therefore might not be able to express their preferences for particular types of food (for example, low fat, low salt, or high fibre). These preferences may be significant not merely for reasons of individual taste but as a matter of health, particularly for consumers suffering from food allergies or diseases such as diabetes.107 These are significant risks. In the absence of adequate and accurate nutritional information, consumers would also be unprotected against potentially misleading claims made by food manufacturers and distributors, for example, regarding the 105

See above at note 55 and corresponding text. Jesús Barreiro-Hurlé, Azucena Gracia and Tiziana de-Magistris, ‘Does Nutrition Information on Food Products Lead to Healthier Food Choices?’ (2010) 35:3 Food Policy 221, 228; Joshua Berning et al., ‘Identifying Consumer Preferences for Nutrition Information on Grocery Store Shelf Labels’ (2010) 35 Food Policy 429 at 435. 107 J. Voordouw et al., ‘Optimising the Delivery of Food Allergy Information: An Assessment of Food Allergic Consumer Preferences for Different Information Delivery Formats’ (2012) 23 Food Quality and Preference 71 at 76. 106



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Consumer information 477 health benefits of particular products.108 Moreover, it is difficult to imagine a reasonably available less trade-restrictive alternative measure that would as effectively inform consumers about the nutritional content of individual food products. III.B Alcohol Warning Labels In January 2010, Thailand notified the TBT Committee of its intention to introduce pictorial and textual health warnings on labels for alcoholic beverages.109 In that notice, Thailand explained that six specific pictures110 with attached textual warnings, occupying at least 30 to 50 per cent of the package depending on the shape of the package, would be rotated at one thousand-package intervals. The warnings relate to negative health and broader social effects of both short- and long-term alcohol consumption in the following terms: ‘Drinking alcohol causes the hypertension liver cirrhosis’; ‘Drunk driving causes disability or death’; ‘Drinking alcohol leads to unconsciousness and even death’; ‘Drinking alcohol leads to sexual impotency’; ‘Drinking alcohol leads to adverse health effect and family problems’; ‘Drinking alcohol is a bad role model for children and young people’. In addition, the proposal would prohibit words or statements suggesting that a particular alcoholic beverage can improve health or is less toxic than other alcoholic beverages. All these requirements would apply to both domestic and imported products, but not to products ‘manufactured or imported for distribution out of the Kingdom of Thailand’, or for the purpose of ‘samples for testing, analysis or research; or for non-commercial benefits in the Kingdom’.111 These are mandatory requirements regarding product labels to be applied to an identifiable group of products (alcoholic beverages) and are therefore likely to meet the definition of a technical regulation under the TBT Agreement (although it is also possible that they might instead be addressed under the SPS Agreement, to the extent that alcohol is 108

The food labelling requirements of EU Directive 90/496/EEC are optional except where a nutrition claim is made in the advertising and marketing of a foodstuff, in which case it becomes mandatory to use nutrition labels. 109 Alcohol Beverage Control Act B.E. 2551 (2008); WTO TBT Committee, Notification, WTO Doc G/TBT/N/THA/332 (21 January 2010). 110 The pictures appear together with an unofficial translation of the relevant measure in United States Department of Agriculture, Foreign Agricultural Service, Global Agricultural Information Network Report TH0015 (28 January 2010) at pp. 5–6. 111 WTO TBT Committee, Notification, WTO Doc G/TBT/N/THA/332 (21 January 2010) at para. 6.



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478


regarded as a ‘toxin’).112 If implemented, Thailand’s measure might therefore be subject to Articles 2.1 and 2.2 of the TBT Agreement. In relation to Article 2.1, the measure does not appear discriminatory on its face in that it applies equally to domestic and imported alcoholic beverages. The express exclusion for products to be used ‘for noncommercial benefits in the Kingdom’, according to the English wording provided by Thailand in its notice to the TBT Committee, also appears to apply to both domestic and imported products. However, depending on what is meant by this phrase, it could conceivably entail discrimination if, for example, the products that benefit from the exclusion in practice are predominantly domestic rather than imported products or predominantly imports from particular countries. Numerous WTO Members have raised concerns about the measure, focusing on its potential trade-restrictiveness. The measure’s consistency with TBT Article 2.2 may therefore be of greater concern than its consistency with TBT Article 2.1. That Thailand is pursuing a ‘legitimate objective’ within the meaning of TBT Article 2.2 is unlikely to be seriously contested. In TBT Committee meetings, Thailand has explained the rapid increase in alcohol-attributable disease in Thailand, in 2004 reaching ‘10.4 per cent of the total health burden, which was twice the global average’.113 Thailand has also emphasised the significance of cultural differences between countries in tackling alcohol abuse: [a]lcohol is a non-ordinary commodity in Thailand, where drinking is not part of the culture. The two religions practiced by 99 per cent of Thais discourag[e] alcohol consumption among followers. Although increasing significantly, only 30 per cent of Thai adults could be classified as current drinkers. However, the average consumption volume per Thai drinker [is] double the figure from Western countries.114

Against this background, Thailand proposes to ‘educate the general population about risks associated’ with alcohol consumption, given that ‘Thai drinkers exhibi[t] low levels of awareness of the text-only warnings … currently employed’.115 The proposed measure thus provides a clear example of a product labelling requirement being used not to provide 112

See above at note 98 and corresponding text. WTO TBT Committee, Note by the Secretariat: Minutes of the meeting of 23–24 June 2010, WTO Doc G/TBT/M/51 (1 October 2010) at para. 248. 114 WTO TBT Committee, Note by the Secretariat: Minutes of the meeting of 3–4 November 2010, WTO Doc G/TBT/M/52 (10 March 2011) at para. 245. 115 WTO TBT Committee, Note by the Secretariat: Minutes of the meeting of 23–24 June 2010, WTO Doc G/TBT/M/51 (1 October 2010) at para. 249. 113



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Consumer information 479 information to respond to existing consumer preferences and thus enable consumers to better exercise those preferences, but to modify consumer preferences to promote broader policy goals. Evidence that Thailand might present about the health and social costs associated with excessive alcohol consumption among its population would go towards establishing the risks of not fulfilling its health objective of reducing such consumption, a relevant factor under TBT Article 2.2 as noted above. Such evidence would be supported by identification by the World Health Organization of the ‘harmful use of alcohol [as] a significant contributor to the global burden of disease and … the third leading risk factor for premature deaths and disabilities in the world’.116 However, the burden of alcohol on Thailand and the legitimacy of the objective of improving public health through reducing alcohol consumption are insufficient on their own to justify the measure under TBT Article 2.2. The other primary considerations are the traderestrictiveness of the measure and its contribution to its objective. As regards trade-restrictiveness, New Zealand has suggested that ‘the new requirements would impose significant additional costs and administrative burden on exporters, which could result in a reluctance for exporters to service the Thai market and, therefore, for trade to be reduced.’117 In this regard, the United States has contended that ‘the requirement to rotate the warning labels every thousand bottles would require a stop and a change in the production line every three to four minutes’.118 Assuming that the measure did impose additional costs, they would be borne by both domestic and foreign producers. In that sense, although the measure might reduce profits or incentives of suppliers, while at the same time reducing demand through the impact of the labels on consumers, this would involve not so much a restriction on trade as a more general reduction in sales. In relation to the contribution of health warnings on alcohol to health objectives, several Members have maintained that the measure fails to distinguish between moderate and excessive alcohol consumption. For example, Chile has expressed the view that ‘alcohol consumption in itself 116

WHO, Global Strategy to Reduce the Harmful Use of Alcohol at para. 2 (annexed to WHO, Strategies to Reduce the Harmful Use of Alcohol: Draft Global Strategy – Report by the Secretariat, WHO Doc A63/13 (25 March 2010) and endorsed in World Health Assembly, Global Strategy to Reduce the Harmful Use of Alcohol, WHA63.13 (21 May 2010)). 117 WTO TBT Committee, Note by the Secretariat: Minutes of the Meeting of 23–24 June 2010, WTO Doc G/TBT/M/51 (1 October 2010) at para. 245. 118 Ibid. at para. 241.



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480


[is] not harmful, and while excessive alcohol consumption [is] dangerous, moderate alcohol consumption could even have beneficial effects for human health’.119 Similarly, Mexico has suggested that: The draft labelling requirements could imply that any level of alcohol consumption [is] dangerous, thus ignoring the fact that risks arise exclusively in the context of an excessive and irresponsible use of alcohol. These requirements also appea[r] to ignore sound scientific evidence, which show[s] that moderate consumption of alcohol [is] compatible with a healthy lifestyle.120

Other Members calling on Thailand for scientific evidence regarding the harms targeted by the labels include the European Union and the United States.121 Thailand has responded in a TBT Committee meeting by acknowledging the existence of: studies indicating that moderate drinking might have health benefits for people with specific characteristics. However, … epidemiological evidence showed that no health benefits could be measured at the aggregate level in countries with low prevalence of coronary heart diseases, especially in low and middle-income countries like Thailand.122

Members continue to express concerns about the proposed measure, which Thailand has indicated remains in draft form and will be the subject of a study by a sub-committee of the Department of Disease Control of the Ministry of Public Health.123 At the same time, a Kenyan law requiring health warning messages comprising at least 30 per cent of the packaging of alcoholic beverages has also been notified124 and is the subject of debate in the TBT Committee.125 119

Ibid. at para. 243. WTO TBT Committee, Minutes of the Meeting of 24–25 March 2010: Note by the Secretariat, WTO Doc G/TBT/M/50 (28 May 2010) at para. 4. 121 Ibid at paras. 5, 11. 122 WTO TBT Committee, Minutes of the Meeting of 23–24 June 2010: Note by the Secretariat, WTO Doc G/TBT/M/51 (1 October 2010) at para. 248. 123 WTO TBT Committee, Minutes of the Meeting of 20–21 March 2012: Note by the Secretariat, WTO Doc G/TBT/M/56 (16 May 2012) at para. 79. 124 The Alcoholic Drinks Control Act 2010 (Kenya) § 32; WTO TBT Committee, Notification, G/TBT/N/KEN/282 (1 March 2011). 125 See, e.g., WTO TBT Committee, Minutes of the Meeting of 15–16 June 2011: Note by the Secretariat, WTO Doc G/TBT/M/54 (20 September 2011) paras. 89–94; WTO TBT Committee, Minutes of the Meeting of 10–11 November 2011: Note by the Secretariat, G/TBT/M/55 (9 February 2012) at paras. 246–251. 120



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Consumer information 481 This example highlights the crucial importance of empirical evidence and scientific studies in assessing or defending a product labelling requirement intended to promote health. Such evidence will be especially vital where a Member is at the vanguard of regulation in a particular field, such as Thailand proposing pictorial warnings for alcoholic beverages (which may provide effective messages to children and ‘parts of the population with low literacy rates’),126 or Australia implementing plain packaging of tobacco products, which we now consider. III.C Tobacco Warning Labels While Thailand’s proposed extensive use of pictorial warnings on alcohol labels is novel, graphic warnings have existed on tobacco products for several years in some jurisdictions. In Australia, graphic warnings were introduced in 2006.127 More recently, Australia has enacted world-first legislation mandating the ‘plain packaging’ of tobacco products (more accurately described as standardised packaging), to be fully implemented on 1 December 2012.128 Under that legislation and associated regulations, cigarettes must be sold in packets of a specified colour (‘drab dark brown’), without graphic logos, and with graphic health warnings covering 75 per cent of the front of the pack (increased from the previous specification of 30 per cent) and 90 per cent of the back. Brand and variant names are to be presented in a standard font, size and colour.129 Australia’s legislation aims to improve public health and to implement certain of Australia’s obligations as a party to the World Health Organization (‘WHO’) Framework Convention on Tobacco Control (‘FCTC’). The Australian government relied on a number of empirical studies in concluding that the legislation would contribute to its health objectives.130 Like the proposed Thai alcohol labelling measure, Australia’s 126 WTO TBT Committee, Minutes of the Meeting of 23–24 June 2010: Note by the Secretariat, WTO Doc G/TBT/M/51 (1 October 2010) at para. 249. 127 Trade Practices (Consumer Product Information Standards) (Tobacco) Regulations 2004 (Cth) sch 2, part 2.2 (now repealed). 128 Tobacco Plain Packaging Act 2011 (Cth) § 2. 129 Competition and Consumer (Tobacco) Information Standard 2011 (Cth) §§ 9.13.1, 9.19.1; Tobacco Plain Packaging Regulations 2011 (Cth) regs 2.2.1(2), 2.3.4(1). 130 See the references in Australian Government, Consultation Paper: Tobacco Plain Packaging Bill 2011 – Exposure Draft (7 April 2011) 6. See also Cancer Council Victoria, Plain Packaging of Tobacco Products: A Review of the Evidence (2011); US Department of Health & Human Services, Preventing Tobacco Use Among Youth and Young Adults: A Report of the Surgeon General



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482


plain packaging scheme seeks not merely to inform consumers of certain dangers (which were already apparent from the previous labelling and packaging requirements) but also to affect consumer preferences and purchasing decisions in pursuance of health objectives. The legislation has been subject to several legal challenges:131 an unsuccessful constitutional challenge by certain tobacco companies in the High Court of Australia;132 an ongoing investment arbitration launched by Philip Morris Asia Limited133 under Australia’s bilateral investment treaty with Hong Kong;134 and, of course, ongoing WTO disputes brought by Ukraine,135 Honduras136 and the Dominican Republic.137 A significant part of the WTO disputes focuses on the Agreement on Trade-Related Aspects of Intellectual Property (‘TRIPS’). However, the (2012) at pp. 530–535; Public Health Research Consortium, UK, Plain Tobacco Packaging: A Systematic Review (2012). 131 See generally Tania Voon and Andrew Mitchell, ‘Implications of WTO Law for Plain Packaging of Tobacco Products’. In Tania Voon, Andrew Mitchell and Jonathan Liberman with Glyn Ayres, eds., Public Health and Plain Packaging of Cigarettes: Legal Issues (Cheltenham, UK and Northampton, MA, USA: Edward Elgar, 2012) 109. 132 JT International SA v Commonwealth of Australia; British American Tobacco Australasia Limited v Commonwealth of Australia [2012] HCA 30 (15 August 2012); JT International SA v Commonwealth of Australia; British American Tobacco Australasia Limited v Commonwealth of Australia [2012] HCA 43 (5 October 2012). 133 Written Notification of Claim by Philip Morris Asia Limited to the Commonwealth of Australia pursuant to Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments (27 June 2011); Notice of Arbitration from Philip Morris Asia Limited to The Commonwealth of Australia (21 November 2011). 134 Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments, signed 15 September 1993, 1748 UNTS 385 (entered into force 15 October 1993). 135 Australia – Certain Measures Concerning Trademarks and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging: Request for the Establishment of a Panel by Ukraine, WT/DS434, 11 (17 August 2012) (‘Ukraine Panel Request’). 136 Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging: Request for the Establishment of a Panel by Honduras, WT/ DS435/16 (17 October 2012) (‘Honduras Panel Request’). 137 Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging: Request for the Establishment of a Panel by the Dominican Republic, WT/ DS441/15 (14 November 2012) (‘DR Panel Request’).



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Consumer information 483 complainants also allege breaches of Articles 2.1 and 2.2 of the TBT Agreement. The considerations under Article 2.2 of the TBT Agreement would be similar to those arising in relation to the Thai alcohol labelling proposal. In particular, relevant considerations as outlined above would include the trade-restrictiveness of the measure (limited, in our view, as we have explained elsewhere),138 the risks of non-fulfilment of the underlying health objective (significant), the extent to which the measure contributes to that objective (significant), and reasonably available less trade-restrictive alternative measures that are not already implemented in Australia and that would make an equal contribution to Australia’s health objective (none, in view of its stringent suite of tobacco control regulations). As regards Article 2.1 of the TBT Agreement, Ukraine alleges that the Australian measure discriminates against imported products and against products imported from some WTO Members, contrary to the national treatment and MFN treatment obligations in that provision.139 Honduras and the Dominican Republic claim only a national treatment violation of Article 2.1.140 These discrimination claims are difficult to understand, as the relevant requests for the establishment of panels include no details of the alleged discrimination, and the discussion in the TBT Committee has generally concerned Article 2.2 rather than Article 2.1. On its face, the Australian measure appears non-discriminatory because it applies to all tobacco products from all sources and is unlikely to have a disproportionate impact on either imports in general or on imports from particular WTO Members. Additional information on the complainant’s claims regarding national treatment and (in the case of Ukraine) MFN treatment may come to light as these disputes proceed in the WTO.

IV. CONCLUSION Product labelling requirements of WTO Members represent a significant challenge for WTO law, demanding a judicious balancing of the sovereign right to require producers to provide consumers with accurate and 138

Tania Voon and Andrew Mitchell, ‘Face Off: Assessing WTO Challenges to Australia’s Scheme for Plain Tobacco Packaging’ (2011) 22:3 Public Law Review 218, 226, 228. 139 Ukraine Panel Request, supra note 135 at p. 4. 140 Honduras Panel Request, supra note 136 at p. 3; DR Panel Request, supra note 137 at p. 3.



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relevant information with the WTO’s role of preventing trade discrimination and unnecessary obstacles to trade. Labelling measures will be assessed differently under TBT Articles 2.1 and 2.2 depending to a large extent on the type of information the Member seeks to convey. A labelling measure that merely informs consumers of the intrinsic qualities of a product for a legitimate objective is unlikely to be problematic, particularly where the measure draws distinctions corresponding to physical differences or existing consumer preferences. However, a labelling measure that differentiates between domestic and imported products, either expressly or implicitly, is more likely to be regarded as both discriminatory and trade-restrictive, potentially conflicting with TBT Articles 2.1 and 2.2. Whether or not a measure is discriminatory or trade-restrictive, its chances of surviving a WTO challenge will be greatly enhanced by the amassing of evidence identifying the reality of the risk it is intended to address (for example, the detrimental health effects of tobacco consumption, alcohol abuse or unhealthy eating) and the contribution of the particular labelling measure to reducing or eliminating that risk (for example, the connection between introducing textual or pictorial warnings and reducing consumption of unhealthy products). Such evidence may be sufficient to justify a labelling requirement that is designed not just to provide consumers with information but to attempt to promote or prevent the purchase and use or consumption of particular products for a ‘legitimate objective’. Notwithstanding the purpose of the WTO to reduce trade barriers in order to pursue broader welfare goals such as raising standards of living,141 through recent TBT caselaw, the WTO dispute settlement system has demonstrated its ability to give credence to Members’ genuine non-trade objectives when pursued through nondiscriminatory product labelling requirements and other technical regulations.

141

Marrakesh Agreement Establishing the WTO, Preamble, supra note 21.



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