Panel established pursuant to Article 6 of the Understanding on Rules and Procedures Governing the Settlement of Disputes

Australia – Measures Affecting the Importation of Apples from New Zealand (DS367)

Panel’s First Substantive Meeting with the Parties: Closing Statement of Australia

Geneva, 3 September 2008

Introduction

1. Thank you Mr Chairman and members of the Panel. Australia thanks the Panel for its questions during this hearing.

2. In Australia’s view, the statements of the parties and their answers to questions over the last two days have evidenced the complexity of the legal, scientific and technical issues involved in this dispute. Australia has sought to respond directly and substantively to the Panel’s questions to assist the Panel in dealing with this complexity. In particular, Dr Roberts has provided a direct account of key aspects of the IRA Team’s work.

3. Contrary to New Zealand’s assertions, Australia is not seeking to avoid scrutiny of its comprehensive and transparent Final IRA Report and the reasonable risk reduction measures required for New Zealand apples. Nor is Australia seeking to rewrite the SPS Agreement or indeed the DSU. Rather, drawing on Appellate Body guidance, Australia has advanced reasoned interpretations of its obligations under the SPS Agreement that can be applied practically by the Panel to the circumstances of this dispute.

4. During this hearing, New Zealand made a number of legal and factual assertions, many of which Australia has not previously heard or had the opportunity to address. Accordingly, Australia will take this opportunity to touch on some of those assertions. Australia will, of course, comprehensively address all of the arguments presented in New Zealand’s opening statement in its rebuttal submission.

The product at issue is clear

5. As has been further reinforced this afternoon, New Zealand seeks to run a dual-track argument on product at issue. On the one hand, New Zealand asserts that the product at issue is apples imported from New Zealand into Australia. On the other hand, New Zealand asserts that, “in practice”, it would only export mature symptomless apples. Clearly, despite New Zealand’s equivocation on the matter, there can only be one product at issue in this dispute.

6. In principle, Australia agrees with New Zealand’s assertion in paragraph 23 of its opening statement that the “product at issue is determined by the terms of reference of the Panel”. These terms of reference are defined by New Zealand’s panel request. The first paragraph of that panel request clearly indicates that the importation of apples from New Zealand can be permitted subject to the application of measures as specified in the Final IRA Report. Page 9 of the Final IRA Report defines its scope as “mature apple fruit free of trash, either packed or sorted and graded bulk fruit from New Zealand.” Logic therefore dictates that this definition establishes the product at issue in this dispute. It also follows that any variation to the product at issue would require the IRA Team to conduct a new risk assessment.

There is a sound basis for the distinction between principal and ancillary measures

7. Australia has noted the Panel’s interest in the distinction between principal and ancillary measures. We have undertaken to provide further elaboration in writing. The distinction is based on the definition of “SPS measure” in Annex A(1) of the SPS Agreement, and the reasoning of the panel in the US – Export Restraints dispute. Contrary to New Zealand’s assertions in its opening statement, the issue of whether a measure can individually give rise to a violation of WTO obligations was discussed at a general level in US – Export Restraints. The relevance of that panel’s reasoning in that dispute is accordingly not limited to the SCM Agreement.

8. According to Annex A(1), an “SPS” measure is defined as “any measure applied to protect against” certain categories of risk. In Australia’s view, a measure that aims to protect against risks must aim to reduce those risks in some concrete way. If a measure does not protect against risks, or reduce those risks by itself, then it cannot fall within the definition of “SPS measure”.

9. Australia’s contention is supported by the relevant international standards for phytosanitary measures. Ancillary verification measures are broadly used in international quarantine arrangements to ensure that primary risk reductions measures are properly applied. Australia understands that New Zealand itself requires that ancillary measures be met as part of its own quarantine risk reduction measures.

The appropriate standard of review in this dispute

10. Australia recalls that the Panel asked a number of questions in relation to the standard of review under the SPS Agreement. While we will elaborate on this subject further in writing, we would take this opportunity to remind the Panel of the critical point made in Australia’s own opening statement.

11. In this dispute, the standard of review reflects the balance of jurisdictional competences between Members and the WTO established in the SPS Agreement. As Australia explained in response to questions from the Panel, the standard of review must be considered in light of the specific obligations at issue, a notion explicitly recognised by the Appellate Body.[1]

12. In its questions, the Panel asked parties whether they considered that a specific standard of review applied to disputes under the SPS Agreement, given the lack of an explicit standard of review set out in that Agreement. The Panel contrasted this to the existence of the specific standard of review set out in Article 17.6 of the Anti-Dumping Agreement.

13. Australia notes that the lack of an explicit standard of review under other covered agreements has not prevented panels and the Appellate Body from applying a specific standard of review in disputes relating to covered agreements other than the Anti-Dumping Agreement. For example, the standard of review has been a significant issue in both safeguards disputes and under the SCM Agreement. More particularly, in EC – Hormones, the Appellate Body clearly recognised that panels must “adopt a standard of review…clearly rooted in the text of the SPS Agreement itself”.[2]

14. Accordingly, in Australia’s view, the absence of an express provision in the SPS Agreement addressing standard of review does not mean that there is not a carefully delimited division of competences between Members and the WTO which must be reflected in the standard of review applied by the Panel.

15. For example, in relation to Article 5.1, unless New Zealand can demonstrate flaws so serious that the Panel cannot have reasonable confidence in the assessment of risk in the Final IRA Report, the Panel must not substitute its own assessment for that of the IRA Team.

Australia may rely on divergent scientific opinion

16. New Zealand’s opening statement illustrates its continued discomfort with the Appellate Body’s express recognition that Members are entitled to rely on “divergent” scientific opinion from qualified and respected sources. In understanding the Appellate Body’s guidance, it is important to recognise that scientific evidence does not exist in a vacuum; it does not have an autonomous reality. In the context of the quarantine regulatory system, scientific evidence needs to be interpreted by experts and applied to the specific circumstances of the importing Member. This is the role that was undertaken by the IRA Team.

17. By way of example, New Zealand claims that divergent scientific opinion on fire blight does not exist. However, it is illustrative to examine one of the technical issues raised by New Zealand – that of the number of bacteria needed to start an infection. The scientific opinion on this issue reflects diverging scientific papers that showed variously that the number of bacteria needed to start infection varies from 1 bacterium to around 10,000 bacteria. This is just one small example of the divergent scientific opinion that was considered in great detail in the Final IRA Report.

New Zealand’s continued reliance on Japan – Apples is misguided

18. Australia recognises that the Panel has heard Australia’s views on the applicability of Japan – Apples to the present dispute. Australia will not repeat its views, except to note that the United States, the complainant in that dispute, takes a more moderate approach than New Zealand to this issue. In fact, Australia notes that the United States did not mention the Japan – Apples dispute in its statement today.

Likelihood combined with consequences equals risk

19. New Zealand alleges that Australia is trying to shift the emphasis of risk assessment from likelihood to consequences. This is simply untrue. As explained today, Australia’s risk estimation matrix takes full account of both elements of risk: likelihood and consequences. Australia’s matrix is firmly grounded on the definition of risk assessment in Annex A(4) of the SPS Agreement.

Articles 5.1 and 2.2 exist in a special legal relationship

20. Turning to the relationship between Article 2.2 and Article 5.1, Australia wishes to correct some significant errors in New Zealand’s attempted critique of Australia’s arguments.

21. New Zealand has misrepresented and mischaracterised Australia’s interpretation of Article 2.2 and Article 5.1. Contrary to “inverting” the relationship between the two provisions, or interpreting those provisions in a way that deprives Article 2.2 of substance, Australia has sought to provide the Panel with a workable, good faith interpretation of those closely connected provisions, consistent with the established guidance of the Appellate Body. Article 2.2 is not an invitation for the Panel to assess the validity of the scientific basis of Australia’s measures on a basis other than the Final IRA Report.

22. As indicated in Australia’s first written submission, Australia’s interpretation in relation to Articles 5.1 and 2.2 is the one that it considers to be applicable in this case. It makes no submissions about the “correct” approach in all cases.

23. Australia’s position is simply this. In the present case, where the Final IRA Report is both a current and comprehensive risk assessment, the question of whether Australia’s measures are maintained without sufficient scientific evidence should be answered by considering whether the Final IRA Report is a valid risk assessment.

Australia has comprehensively rebutted New Zealand’s Article 2.2 arguments

24. Australia firmly rejects any suggestion that it has not made a serious attempt to rebut New Zealand’s arguments in relation to Article 2.2. In paragraph 344 of Australia’s first written submission, Australia notes that there is a substantial overlap in New Zealand’s technical and scientific arguments under Articles 5.1 and 2.2, and that it would therefore address them together. Australia then proceeds with a 150 page comprehensive rebuttal of New Zealand’s scientific and technical arguments. In addition, Australia’s first written submission also contains a substantive alternative argument in relation to Article2.2. Accordingly, there is no doubt whatsoever that Australia has responded very directly to New Zealand’s arguments in relation to Article 2.2.

25. New Zealand has attempted to reverse the burden of proof in relation to Article 2.2. Australia’s position on the burden of proof applicable to Article 2.2 is based on a straightforward application of the customary rules of interpretation of public international law to that provision. Put simply, the third requirement of Article 2.2 is couched in negative terms. Namely, Members must ensure that their measures are “not maintained without sufficient scientific evidence”. The provision does not say that Members must ensure that their measures are “maintained with sufficient scientific evidence”.

26. In Australia’s view, the drafters of the SPS Agreement very deliberately chose this formulation of words to emphasise that complainants bear a heavy evidentiary burden in establishing a breach of the third requirement of Article 2.2. It requires the complainant to positively prove insufficiency of the scientific evidence in relation to the measures at issue. In the context of this dispute, this means that New Zealand must positively demonstrate that the IRA Team’s evaluation of the scientific evidence was not objective and credible.

Scientific and technical arguments

27. During this hearing, New Zealand has introduced a few new scientific and technical arguments in relation to European canker and apple leafcurling midge. Nothing new has been introduced in relation fire blight.

European canker

28. Australia firmly rejects New Zealand’s assertion that it is attempting to re-write the Final IRA Report in relation to European canker, or any other pest at issue. As the respondent in this dispute, Australia is clearly entitled to rebut New Zealand’s claims and arguments in order to defend the consistency of its measures. This is not equivalent to re-writing the Final IRA Report; it is simply usual practice under the WTO dispute settlement system.

29. New Zealand criticises Australia for introducing an “alternative climate analysis”, suggesting that this somehow acknowledges the inadequacy of the “original climatic risk assessment” in the Final IRA Report. However, New Zealand fundamentally misunderstands Australia’s position. Environmental conditions, including climate, are only one of the three key criteria which determine disease development. New Zealand’s fixation with climate analysis ignores the other two key criteria, the pathogen and the host. In contrast, the IRA Team took into account all three criteria in its assessment of European canker as demonstrated by the Final IRA Report. Moreover, contrary to what New Zealand alleges, the climate analysis contained in Annex 2 of Australia’s first written submission is not directed at patching up the Final IRA Report. Rather, it was merely introduced to rebut New Zealand’s climate analysis - in doing so it confirms the credible and objective analysis set out in the Final IRA Report.

30. New Zealand continues to erroneously equate the significant apples trade from Tasmania with insignificant apples trade from the four diseased orchards in Spreyton. Australia notes New Zealand’s assertions as to the volume of trade moving out of the Spreyton area during the period of the outbreak, and looks forward to receiving the evidence referred to by New Zealand.

Apple leafcurling midge

31. New Zealand claims in its opening statement at paragraph 105 that Australia included AQIS inspections at the border as a component of Australia’s unrestricted risk analysis in relation to apple leafcurling midge. This is simply not true. In this regard, Australia refers the Panel to page 23 of the Final IRA Report, which states that “possible AQIS on-arrival inspection for quarantine pests associated with apples is not considered in the assessment of unrestricted risk”.

32. Australia notes that New Zealand has introduced a purported clarification of the Rogers et al 2006 paper on apple leafcurling midge. Australia does not consider that it clarifies how New Zealand derives an overall viability rate of 15% from that study. Australia will further address the content of the Rogers et al 2006 study, together with Exhibit NZ-102, at a later stage of the proceedings. Suffice to say, New Zealand’s assertion with respect to this paper does not impugn the IRA Team’s assessment of the probability of importation of apple leafcurling midge.

The AQIS audit requirement has been misunderstood by New Zealand

33. The AQIS auditing requirement continues to be a contentious issue for New Zealand but, in Australia’s view, needlessly so. Despite repeated clarifications from Australia, both before and during these proceedings, New Zealand continues to misquote and misunderstand the AQIS audit requirements. In practice, Australia expects that the audit requirements would not be onerous as, following normal practice, New Zealand and Australia would negotiate arrangements for minimising duplication and maximising efficiency. We will provide further elaboration on this point in writing as part of the question and answer process.

34. Australia also points out that its import requirements for apples from New Zealand, including the AQIS audit requirements, are subject to review after the first year of trade.[3] Australia applies such a review mechanism in relation to all import risk assessments. Australia highlights US table grapes as an example where Australia has adjusted the relevant import requirements a number of times.

New Zealand’s secondary claims continue to lack merit

35. In addition to its primary claims under Article 5.1 & 2.2, New Zealand’s oral statement recycles the arguments made in its first written submission regarding its secondary claims under Articles 5.2, 5.5, & 5.6 of the SPS Agreement. Australia has already comprehensively rebutted these arguments in its first written submission. Moreover, a number of the third parties have also called into question the validity of New Zealand’s secondary claims.

36. Australia continues to be of the view that New Zealand has failed to discharge its burden of proof by establishing a prima facie case. Mr Chair and members of the Panel, in all legal proceedings, including this one, the burden of proof is a critical issue, contrary to what New Zealand has asserted in its closing statement. Australia reiterates its position that New Zealand cannot be permitted to introduce new evidence to make a prima facie case by way of its rebuttal submission.

37. In its opening statement, New Zealand appears to query whether Australia has acted in good faith by reserving its position in relation to New Zealand’s claim of undue delay under Article 8 and Annex C(1)(a). New Zealand goes on to allege that, as a consequence, the Panel is entitled to accept New Zealand’s claim as it has not been challenged by “reasoned argument”.

38. This argument is completely devoid of merit. New Zealand’s claim on undue delay has been challenged by Australia as being outside the scope of the Panel’s terms of reference. Australia has done so by “reasoned” and compelling argument, in stark to contrast to New Zealand’s acrobatics on the issue. Australia has acted in good faith in doing so and reserves further argument until the Panel delivers its ruling. On that point, Australia would appreciate an indication from the Panel as to when it is likely to rule on this issue.

Timing of the second hearing

39. Mr Chairman and members of the Panel, before concluding, Australia would like to flag with the Panel a potential logistical issue with respect to the timing of the second panel hearing. We have repeatedly tried to secure accommodation for our delegation since we became aware of the timetable. Unfortunately, our efforts to date have been unsuccessful due to the fact that the Geneva motor show coincides with the dates of the second hearing. We will continue with our search, but foreshadow that if we are unsuccessful within the next few weeks, we will write to the Panel to request that the second hearing be rescheduled to the nearest available dates. It is obviously not possible for the Australian delegation to travel to Geneva for the second hearing if we are unable to secure accommodation.

Conclusion

40. Australia also notes New Zealand’s reference in its closing statement to Australia’s IRA process being “intermingled” with a political process. Australia absolutely rejects any inference that its science-based IRA process was intermingled with any political process. As noted in Australia’s written submission, New Zealand has provided no evidence to back up such inferences and Australia has asked the Panel to disregard them completely.

41. In conclusion, Mr Chairman and Members of the Panel, there is no question that New Zealand and Australia enjoy a harmonious relationship based on shared values, partnership and mutual interest. Our bilateral trade agreement is one of the most comprehensive and successful worldwide. There is no better basis on which to found a mutually agreeable resolution to this dispute. Australia welcomes the comments you have offered in this regard, Mr Chairman, and would like to assure the Panel that we will continue to work closely with our neighbour and close friend, New Zealand, towards this end.

42. Australia would like to thank the delegation of New Zealand, the third parties, the Panel and the Secretariat for the opportunity to present its case at this hearing.


[1] Appellate Body Report, US – Softwood Lumber VI (Article 21.5), para. 92.

[2] Appellate Body Report, EC – Hormones, para. 115.

[3] Final IRA Report, p. 325.

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