Commentary

Lessons from the WTO Seal Products Case for the World Trading System

In a decision circulated in late November, a WTO panel ruled that an EU regulation banning the sale of most seal products violated WTO rules. Despite the findings of violation, some news reports have declared that this ruling “upheld” the EU seal products ban. The uncertainty over what exactly happened in the case merits further explanation, and helps illustrate the scope of modern trade rules. In this short piece, I explain the basics of the case, and discuss its implications for the rules of the world trading system. The nature of particular WTO rules, which can have a broad scope, means that they may intrude deeply into domestic affairs, and has led to much controversy in recent years. The seal products case shows how different rules can have very different implications for domestic policy-making, and perhaps can guide us to an appropriate balance.

The EU Regulation

The EU regulation at issue in this case was made up of two components: a ban on the sale of products made from seals (such as oils, furs, or seal meat), and several exceptions from this ban. The key exceptions related to products made by indigenous communities (such as the Inuit) and for marine resource management (the culling of seal herds). According to the EU, the main purpose of the ban was to protect EU citizens from being exposed to products made in a way that involved the cruel practices used to kill some seals. The EU presented this justification as one of “public morality,” that is, it wanted to protect people’s morals by shielding them from the products, and also to help discourage the cruel practices themselves. At the same time, the exceptions had a different purpose, as they carved out room for seal products in the EU market, based on other considerations.

The Claims

Canada and Norway, two of the world’s leading producers of seal products, claimed that the EU regulation violated a number of WTO rules. The key claims were as follows. First, the complainants argued that the regulation as a whole was more trade restrictive than necessary to satisfy the objective of promoting public morals. Alternative measures, such as labeling seal products based on whether animal welfare standards had been met, would accomplish the same goal without burdening trade as much. (A ban stops trade completely; labeling would still allow it, albeit with some restrictions).

Second, they claimed that the way the exceptions were implemented resulted in discrimination against their products. The indigenous communities exception led, in practice, to better treatment for Greenland’s products than for the complainants’ products; and the marine resource management exception led to better treatment for Finnish and Swedish products than for the complainants’ products.

The Ruling

In response to these claims, the WTO panel found as follows. It agreed with the complainants that the regulation discriminates, due to how the exceptions were applied. But it rejected the more general claim that the ban was inappropriate and labeling should have been used instead.

Some media reports have portrayed this result as the panel “upholding” a ban on seal products. In a sense this is true, and it is noteworthy that, according to this panel, such a ban does not inherently violate trade rules. It should be noted, however, that measures can take many forms, and this ruling should not be taken as meaning that any future measure which bans seal products automatically complies with the rules.

At the same time, it should be kept in mind that the panel did find a violation, and the EU will have to take action to comply, as discussed further below.

Perhaps the most important point to take from this ruling, though, is what it says about the scope of trade rules. If a regulation discriminates, it will almost certainly violate trade rules. This is a core WTO obligation. If it does not discriminate, by contrast, there is a good chance it will be found consistent with the rules, even if it affects trade in some way. Countries ban products all the time. This may be silly in many instances, but as long as the ban is implemented in a non-discriminatory way, it is likely that it will be permitted under the trading system. There is one caveat to this, however. While such a ban may be likely to comply with the rules, there are no guarantees. The provisions invoked by Canada and Norway seem to go beyond non-discrimination. But just how far beyond is not clear, and there is the potential for a non-discriminatory regulation to violate the rules where a less trade-restrictive measure exists. This issue is discussed further below.

Implementation and Appeal

Under the panel’s ruling, the problem with the ban, as noted, was its discriminatory nature. Due to the exceptions, it did not apply equally to Canadian and Norwegian products. Presumably, then, the EU could modify its regulation to make it more equal.

One way to do this would be to remove the exceptions completely. This could bring the regulation into compliance without actually helping exports from Canada or Norway, which would constitute a hollow victory for the complainants.

Another way would be to make the exceptions more easily accessible to Canadian and Norwegian products. This may not be easy to accomplish, though, and could have only limited impact.

As a result, anything short of removing the ban entirely may not hold much interest for the complainants.

It should also be noted that there is an opportunity for appeal, and Canada has alreadypublicly suggested that it might take this route. This means that the final ruling could look different from what stands now.

The Scope of the Trade Regime

Outside of the narrow impact on the parties in this dispute, this case also offers a good case study of how broad the scope of the trade regime might be, and what the options are in terms of setting this scope. Should trade rules focus narrowly on non-discrimination as a principle? Or should they take a broader approach and address all measures that affect trade in some way?

Not surprisingly, the seal products case has been very controversial. PETA and many well-known celebrities have weighed in publicly. Their criticism reflects a view that this ban is important and its impact on trade should not take precedence over its moral goals. But they would probably be happy to extend the ban by removing the exceptions, so for these groups non-discrimination would likely be a satisfactory principle to rely on. The main problem for these critics is rules that get in the way of general regulations, not rules that prohibit discrimination.

At the same time, there are certainly arguments to be made that this regulation does not make much sense and is hypocritical. If the Europeans are really that concerned about animal welfare, perhaps they should look at the process for making foie gras. But even if you think the purported goals of the regulation are not justified, and that killing seals is no worse than, say, slaughtering cows, there is still the question of whether WTO obligations should prevent such regulations. If trade rules prohibited all silly regulations, their role would be elevated considerably, and would intrude greatly into domestic affairs. Coming up with the right balance in this regard is important. If the trade regime becomes a kind of constitutional court to ensure that only appropriate regulations are adopted, its legitimacy may be called into question, and its role of providing a check on protectionist regulations may be undermined.

Simon Lester is a trade policy analyst at the Herbert A. Stiefel Center for Trade Policy Studies at Cato Institute