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: Opening Statement of Australia – Executive Summary
10 September 2008
1. This case is about the basic right of all WTO Members to protect plant life and health within their territory. It is about the level of risk that Australia is prepared to tolerate and Australia’s particular quarantine circumstances. It is about serious plant pests not present in Australia but endemic in New Zealand – fire blight, European canker and apple leafcurling midge. It is about the comprehensive and transparent science-based risk assessment undertaken by the IRA Team and set out in the Final Import Risk Analysis Report for apples from New Zealand. It is about Australia’s reasonable quarantine measures, necessary to mitigate the risk of serious plant pests entering Australia. It is about the application of scientific and technical judgment by the qualified and respected experts who inform Australia’s quarantine regulatory decisions. It is about the extent to which a WTO panel is permitted to intervene in such decisions. It is about the trade liberalising reality of Australia having opened its market to New Zealand apples in March 2007.
2. Australia is free of many of the world’s major plant pests. Australia’s unique biodiversity and distinctive native flora and fauna are of world renown. In addition, Australia’s favourable plant-health status is vital to its multi-billion dollar agricultural sector. In order to protect these significant assets, Australia invests heavily in quarantine. As a result, Australia has one of the most comprehensive and effective quarantine systems in the world.
3. As recognised in the SPS Agreement, Australia has the right to maintain its favourable plant health status. In this regard, Australia is not asking to be treated differently to other WTO Members when it urges the Panel to pay close attention to Australia’s particular quarantine circumstances. In order to maintain its favourable plant-health status, Australia must be able to rely on the WTO bargain that it signed up for – including the delicate and carefully negotiated balance of rights and obligations set out in the SPS Agreement. In undertaking its role in this dispute, the Panel should respect this delicate balance.
Australia’s appropriate level of protection in action
4. The SPS Agreement does not require international harmonisation of Members’ quarantine measures. In fact, the determination of a Member’s acceptable level of risk, also known as the appropriate level of protection, is the Member’s sole prerogative. No-one may impinge on that prerogative – not trading partners, not WTO panels, not the Appellate Body. This position has been clearly articulated by the Appellate Body, and is widely accepted by the WTO membership. To deny a Member’s sovereign right to determine its own appropriate level of protection would disregard the balance of rights and obligations set out in the SPS Agreement.
5. Whether other Members may be content to tolerate the risk of an event occurring once in every five years or five thousand years, is irrelevant. The SPS Agreement does not require Members to accept the same level of risk or a certain minimum level of risk. It is entirely up to each Member to judge whether its national interest is best served by a higher or lower appropriate level of protection. What matters in the present case is the risk that Australia is prepared to tolerate, not the risk that New Zealand or any other Member is prepared to tolerate.
6. The Australian community demands that its Government takes responsible action to protect Australia’s agricultural sector and biodiversity from exotic pests, and Australia’s appropriate level of protection is set to reflect this. It explicitly and transparently expressed as requiring quarantine risks to be managed to a very low level, although not to zero.
7. The concept of appropriate level of protection cannot be seen in isolation. The appropriate level of protection is integral to each Member’s quarantine system. In order to implement their appropriate level of protection, Members have a basic right under the SPS Agreement to take SPS measures for the protection of human, animal and plant life or health. The appropriate level of protection is the benchmark, and the SPS measures are the instrument used to achieve that benchmark.
8. A Member’s appropriate level of protection fundamentally shapes its decision on SPS measures. The first step is to determine the level of unrestricted risk posed by the product at issue. If that risk is higher than the Member’s acceptable level of risk, then the Member may adopt measures to achieve its appropriate level of protection.
The Final IRA Report provides the basis for Australia’s measures
9. The relevant level of risk posed to Australia by the importation of apples from New Zealand was rigorously examined in the Final IRA Report. This document provides the basis for the SPS measures central to this dispute and cannot be ignored. The risk assessment conducted by the IRA Team, as set out in the Final IRA Report, is fully consistent with the SPS Agreement and with internationally recognised scientific method.
10. New Zealand is critical of the Final IRA Report and the measures applied by Australia to New Zealand’s apple exports. This flows from a broad argument that there is a single correct view of science; that for there to be two opposing views in any scientific disagreement means that one of those views must necessarily be wrong. This is simply not the case.
11. In this dispute, New Zealand relies on the superficially attractive notion of scientific “certainty” around the transfer and spread of the pests at issue. The reality is that there are different views on many scientific issues based on the same set of facts, often held by equally qualified and respected scientists. Moreover, the state of scientific knowledge is limited and constantly evolving.
12. In this dispute, the Panel is faced with competing scientific opinion and evidence, and Australia asks that the Panel bear in mind the Appellate Body’s statement that responsible and representative governments may act in good faith on the basis of so-called “divergent” scientific opinion, coming from qualified and respected sources. In other words, there is no need for the Panel to try to choose what it considers the “correct” view to be. To do so would constitute an error of law.
13. The Final IRA Report takes into account some thousand scientific references, including scientific references cited by New Zealand in its written submission. This literature needs to be interpreted in light of Australia’s particular circumstances. The IRA Team, a group of highly qualified and respected scientists and technical experts, performed this role.
14. The IRA Team applied its expert judgment and elaborated its reasoning at every step in the Final IRA Report. On the basis of its detailed analysis of the level of risk associated with the importation of New Zealand apples, the IRA Team concluded that certain risk mitigation measures were required in order to achieve Australia’s appropriate level of protection. New Zealand can export apples to Australia, provided that it observes the reasonable measures recommended in the Final IRA Report.
This dispute is not a re-run of Japan – Apples
15. It is clear that New Zealand believes that this dispute is simply a re-run of Japan – Apples. New Zealand continues to treat Japan – Apples as some form of scientific process, not a legal process. This is a major error by New Zealand, a fact that third parties in this dispute have recognised. Japan – Apples is not a risk assessment and is not scientific evidence. Moreover, there are significant differences between the two sets of circumstances, including the pests at issue, appropriate level of protection, climatic conditions, potential host plants, and the volume and mode of trade.
The product and measures at issue must be identified clearly
16. The product at issue in this dispute, as set out in the Final IRA Report, is “mature apple fruit free of trash, either packed or sorted and graded bulk fruit from New Zealand.” Any attempt by New Zealand to characterise the product at issue as “mature symptomless apples” must be dismissed. “Symptomless” apples are not necessarily hazard-free.
17. The measures at issue also define the scope of this dispute and warrant careful consideration by the Panel. In the Panel’s preliminary ruling of 6 June 2008, the Panel clearly limited its terms of reference to the 17 measures specifically identified in New Zealand’s panel request. The onus is on New Zealand to establish that each measure meets the definition of an “SPS measure”, as set out in Annex A(1) of the SPS Agreement. In any event, as explained in Australia’s written submission, two of these 17 measures are not live issues in this dispute.
18. Not all of the measures can be challenged individually, as several are ancillary measures which support, verify and operationalise the principal risk reduction measures. In Australia’s view, the Panel should only examine such ancillary measures when “taken as a whole” with the principal risk reduction measures to which they relate.
19. On this, Australia notes that New Zealand’s challenge does not cover the whole of the Final IRA Report. The Final IRA Report covers pests and diseases which are not at issue in this dispute, and this needs to be borne in mind, particularly when examining the ancillary measures.
New Zealand has not backed up its claims with evidence and legal argument
20. New Zealand bears the burden of raising a prima facie case of inconsistency in relation to each of the provisions it is challenging under the SPS Agreement. To do this, New Zealand must present sufficient evidence and legal argument to support that prima facie case. Only if New Zealand succeeds in doing so must Australia rebut the alleged inconsistencies. Until that point, Australia is entitled to the presumption of WTO-consistency. Australia emphasises this point because it believes that the assertions made by New Zealand in its first written submission are simply not supported by legal argument or evidence. Neither the Panel, nor the third parties, are permitted to “make the case” for New Zealand.
21. New Zealand is required to discharge its burden of proof in relation to each of the measures at issue under each of the challenged provisions of the SPS Agreement. Australia is firmly of the view that New Zealand’s case is fatally flawed as it has failed to meet its burden of proof. Australia nonetheless demonstrates, through solid scientific evidence and legal argument, that the measures at issue are fully consistent with the SPS Agreement.
The Panel’s role in this dispute is not unfettered
22. Another critical threshold issue relates to the role that the Panel is required to perform in this dispute. The Panel’s role is not unfettered. Rather, there are parameters within which the Panel must operate, which are imposed in the standard of review to be applied by the Panel. The Appellate Body has stated that a failure to apply the proper standard of review constitutes a legal error. Australia therefore considers it essential that the Panel apply the appropriate standard of review throughout this dispute.
23. Contrary to what New Zealand has suggested, the final word on standard of review is not Article 11 of the Dispute Settlement Understanding. While the “objective assessment” standard under Article 11 is certainly the starting point for the Panel’s standard of review, it nevertheless provides limited guidance on the precise nature and intensity of the review required by panels in their fact-finding role. Accordingly, as indicated by the Appellate Body, the appropriate standard of review must also be informed by the particular covered agreement and, within that agreement, the particular obligation at issue.
24. Upon signing up to the WTO bargain, Members consciously conceded their jurisdiction on certain issues to the WTO, effectively nominating the WTO as arbiter of those issues. However, on other issues, Members’ jurisdictional competences were deliberately retained. The effect of this delicate and carefully negotiated balance is that there is a line that traces its way through the SPS Agreement – on one side lies the areas of jurisdictional competence that Members conceded, on the other side, the areas they did not.
25. The Panel should observe that line. In the context of the SPS Agreement, the Appellate Body has explicitly stated that the standard of review must “reflect the balance established in that Agreement between the jurisdictional competences conceded by the Members to the WTO and the jurisdictional competences retained by the Members for themselves.”
26. The standard of review has important implications for this dispute. It means that the Panel should not conduct its own risk assessment for Australia. A WTO panel should not attempt to choose its preferred view of the science and thereby substitute its judgment for that of the risk assessor – in this case, the IRA Team.
27. Australia is not suggesting that the Panel’s role in this dispute is marginal. Rather, the Panel has the centrally important role of determining whether Australia’s measures are based on a valid risk assessment in accordance with the relevant provisions of the SPS Agreement; of determining whether that risk assessment is objective and credible.
28. Australia submits that the Panel should be guided by the compliance panel’s approach in Australia – Salmon (Article 21.5 – Canada). The Panel must be satisfied that it has reasonable confidence in the risk assessment, and only if New Zealand establishes flaws in the Final IRA Report which are so serious that they would prevent the Panel from having that confidence, should the Panel be required to intervene in the findings or conclusions of the Final IRA Report.
29. Australia notes that the European Communities “largely agrees” with Australia’s position on standard of review.
New Zealand disregards the special relationship between Articles 5.1 & 2.2
30. A further important issue in this dispute is the nature of the relationship between Articles5.1 & 2.2 of the SPS Agreement. Australia believes that New Zealand’s approach to these provisions is confused and incorrect.
31. According to the Appellate Body, Articles 5.1 & 2.2 should “constantly be read together”, as the elements of each provision inform and impart meaning to the other. In fact, the Appellate Body has indicated that Article 5.1 is a specific application of Article 2.2, meaning that Article 5.1, and its associated provisions, elaborate specific conditions which, if met, will establish the consistency of the relevant measures with Article 2.2.
32. Australia’s view of the relationship between Articles 5.1 & 2.2 is firmly grounded in the text of the SPS Agreement. Both Articles concern whether the available evidence demonstrates the existence of risk. That risk provides the basis for the adoption of SPS measures.
33. New Zealand has effectively ignored the clear and consistent guidance of the Appellate Body by treating Articles 5.1 & 2.2 in virtual isolation from each other. New Zealand has neglected to illuminate how it considers the two provisions relate to each other.
34. Risk assessments involve the expert evaluation of scientific evidence and technical and economic factors, in accordance with an appropriate methodology. They must also be appropriate to the circumstances. Accordingly, if measures are based on a valid risk assessment under Article5.1, the Article 2.2 requirement that measures not be maintained without sufficient scientific evidence is satisfied. As acknowledged by the Appellate Body, Article 5.1 marks out and elaborates a particular route leading to the same destination set out in Article2.2.
35. Australia notes that the European Communities agrees that the question of whether Australia has maintained measures “without sufficient scientific evidence” under Article 2.2 can only be answered by considering whether Australia’s measures are based on a valid risk assessment under Article 5.1.
36. In light of the special legal relationship between Articles 5.1 & 2.2, and the fact that the Final IRA Report provides the basis for the measures at issue, Australia urges the Panel in this dispute to commence its assessment of New Zealand’s technical and scientific arguments under Article5.1 in this dispute.
Consequences are an integral part of risk assessment
37. New Zealand wrongly implies that the notion of “risk” should be confined to the likelihood of entry, establishment or spread. However, pursuant to the relevant provisions of the SPS Agreement, a valid assessment of phytosanitary risk must evaluate both likelihood, as well as the associated potential biological and economic consequences. New Zealand cannot paper over the inconvenient truth that the pests at issue in this dispute – fire blight, European canker and apple leafcurling midge – all have serious biological and economic consequences.
Australia’s measures address real probabilities
38. New Zealand also confuses the notion of mere “possibility” or “theoretical risk” with events that have a very small or “negligible” probability of occurring. This effectively amounts to an assertion that risk assessments are required to identify a minimum magnitude of risk – a proposition which has been expressly rejected by the Appellate Body.
39. The careful use of statistical distributions by the IRA Team in estimating probability reflects the range and variability of available scientific evidence, accommodating small but significant probabilities as well as uncertainties, consistent with the relevant international standard for pest risk analysis, the ISPM No. 11.
New Zealand’s and the United States’ scientific and technical arguments lack merit
40. Australia’s first written submission comprehensively rebuts New Zealand’s scientific and technical arguments and clearly demonstrates that the Final IRA Report is a valid risk assessment under Article 5.1. As such, Australia’s measures are consistent with Article 5.1, and, accordingly with Article 2.2 of the SPS Agreement.
41. Australia notes that the United States has lodged a lengthy submission with a heavy focus on scientific and technical evidence in relation to fire blight and European canker. Australia will vigorously and comprehensively rebut the serious flaws in the arguments raised by the United States in its rebuttal submission.
New Zealand’s secondary claims are flawed
42. In addition to its primary claims under Articles 5.1 & 2.2, New Zealand’s first written submission sets out a number of secondary claims relating to Articles 2.3, 5.2, 5.5 and 5.6 of the SPS Agreement. Australia has already comprehensively addressed these claims in its written submission and notes that a number of the third parties also question the validity of New Zealand’s claims.
New Zealand’s undue delay claim is outside the scope of this dispute
43. The Panel has asked the parties to address Australia’s request for a ruling in relation to New Zealand’s claim of undue delay under Article 8 and Annex C(1)(a) of the SPS Agreement. Australia’s position is clear. The Panel issued a preliminary ruling on 6 June 2008, in which it made it very clear that New Zealand’s panel request is limited to the items specified by bullet point in that panel request. All other matters are therefore outside the scope of this dispute.
44. Despite the Panel’s preliminary ruling, New Zealand has proceeded with a claim that the IRA process was subject to undue delay. Australia considers that this is legally untenable. It is clear from New Zealand’s panel request, and the Panel’s preliminary ruling, that the IRA process is not a measure at issue in this dispute; the IRA process is not one of the items specified by bullet point in New Zealand’s panel request.
45. Australia therefore wrote to the Panel on 22August 2008 asking it to apply its preliminary ruling of 6 June by making a further ruling explicitly stating that New Zealand’s undue delay claim is outside the scope of these proceedings.
46. Australia notes that paragraph 16 of the Panel’s Working Procedures clearly allows for a jurisdictional ruling at any stage of the proceedings upon the showing of good cause. Australia believes that there is very good cause for a ruling at this stage of proceedings, as the respondent should not be required to defend claims which the Panel has indicated are not within its jurisdiction. In any event, Australia is not seeking a ruling on a new issue; Australia is merely asking the Panel to apply its preliminary ruling of 6 June.
47. This is a complex dispute involving detailed legal argument and voluminous scientific and technical evidence. It concerns three pests - bacterial, fungal and insect – each with quite different biology. The Panel, the Parties and the Secretariat all have limited resources, and there is no need to expend those limited resources on a moot point. Australia believes that a ruling at this stage would help secure a positive solution to the dispute.
The Panel may take into account amicus curiae submissions as necessary
48. Australia does not see amicus curiae submissions as having the same status as party or third party submissions. However, they may provide a useful perspective on issues under consideration in this dispute. Accordingly, the Panel should accept amicus curiae submissions into the record. Beyond that, it is up to the Panel whether or not to take such submissions into account in resolving the issues raised in this dispute.
Australia is ready to provide its views on the role of experts
49. Australia notes that the Panel may decide to consult experts in relation to scientific and technical issues in this dispute. If the Panel chooses to do so, Australia emphasises that, in its view, the selection of such experts requires careful deliberation, and their role requires demarcation from the outset.
50. Australia is an active Member which takes its WTO obligations seriously. Australia is not seeking to resile from the disciplines contained in the SPS Agreement. On the contrary, Australia has opened its market to New Zealand apples subject to reasonable risk mitigation measures set out in the science-based Final IRA Report. These measures are directed at protecting plant life and health within Australia from serious pests not present in Australia but endemic in New Zealand. The measures are fully WTO-consistent and are required to achieve Australia’s appropriate level of protection.
 Australia – Salmon, para. 199.
 See for example: TPKM’s Third Party Submission, para. 20; Chile’s Third Party Submission, para. 8; EC’s Third Party Submission, paras. 31 & 61; and US’ Third Party Submission, paras. 78-79.
 EC – Hormones, para. 194.
 Chile’s Third Party Submission, paras. 11-13; Japan’s Third Party Submission para. 2; EC’s Third Party Submission para. 47; US’ Third Party Submission para. 11.
 Final IRA Report, Part B, p. 9.
 WT/DS367/7, para. 13(b).
 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, para. 187.
 Appellate Body Report, US – Softwood Lumber VI (Article 21.5 Canada), para. 92.
 Appellate Body Report, EC – Hormones para. 115.
 Panel Report, Australia – Salmon (Article 21.5 – Canada), para. 7.57.
 EC’s Third Party Submission, para. 28-30, 84.
 Appellate Body Report, EC – Hormones, para. 180; Appellate Body Report, Australia – Salmon, para. 130; Appellate Body Report, Japan – Agricultural Products II, para. 82.
 Appellate Body Report, EC – Hormones, para. 180.
 Appellate Body Report, Australia – Salmon, paras 137-138.
 EC’s Third Party Submission para. 13.
 WT/DS367/7, para. 13(b).
 Article 11.2 of the SPS Agreement and Article 13.2 of the DSU.