International Trade Law: Examining the EC Seals Products Case

This essay critically examines the WTO Appellate Body's decision in the EC Seals Products case (WT/DS400/AB/R and WT/DS401/AB/R) concerning the national treatment obligation under GATT Article III:4. It explores the interpretation of 'treatment no less favorable,' analyzing the Appellate Body's approach and its implications for future WTO dispute settlements. The essay argues that the decision clarifies key issues, particularly the balance between trade liberalization and sovereign rights to regulate, including public morals and animal welfare. The analysis considers the EU's ban on seal products, the exceptions for indigenous communities, and the challenges to this ban by Canada and Norway, ultimately concluding that the Appellate Body's decision provides a more defined framework for assessing national treatment obligations in international trade law.

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Whether the Appellate Body’s decision in EC Seals Products WT/DS400/AB/R and
WT/DS401/AB/R (2014) unduly widens the boundary of the national treatment obligation
enshrined in General Agreement on Tariffs and Trade 1994 (GATT) Article III:4.
The national treatment (NT) obligation stipulated under the Article III: 4 of the GATT
1994 has been subjected to statutory indeterminacy and the WTO Appellate Body has
highlighted the procedure to interpret the NT obligation in the EC-Seal Products. Although NT
obligation as stipulated in GATT under Article III: 4 is recognized as an essential discipline in
the international economic law, it has been fluctuating between laxity and severity. In the middle
of this interpretive phase, there is a fundamental tension between the right of the sovereign to
tax, legislate and the liberal devotion to free trade and regulating according to domestically
determined policy. This essay shall critically review the recent WTO case law on GATT Article
III: 4 in EC Seal Product regarding the interpretation of the NT obligation. It shall review the
interpretation of ‘treatment no less favorable’ and shall critically analyze the new approach of the
WTO Appellate Body to such interpretation in the EC Seal Products. Lastly, the essay shall
conclude by suggesting that the Appellate body’s decision in EC Seals Products has not
disproportionately widened the NT obligation, instead it has clarified three significant issues in
future WTO dispute settlements (Shaffer and Pabian 2014).
According to the Article III: 4 of the GATT 1994, the products of any contracting party
imported into any other contracting party shall be granted no less favorable treatment than that
which is granted to similar products of national origin in respect of all laws, requirements and
regulations. The article includes national treatment obligation and is concerned with measures
that affects the internal sale, offering for sale, distribution, transportation or use of imported
product. The Article III: 4 should be read along with Article III: 1 of GATT 1994 as this article

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serves as a guiding principle for the entire Article III. Article III.1 states that the members are
required to recognize that regulations, internal laws and requirements must not be applied to
domestic or imported products to be able to safeguard the domestic production. It can be inferred
that the article III:4 central to three essential terms such as ‘like products’, ‘to be able to afford
protection’ and ‘treatment no less favorable’. There have been recent developments and analysis
with respect to Philippines-Distilled Spirits and US-Clove Cigarettes. This essay critically
analyzes the WTO Appellate Body’s evolving interpretation of the ‘treatment no less favorable’
in Article III: 4 with respect to the EC Seals product.
On 22 May 2014, the World Trade Organization (WTO) Appellate Body issued a report
about the EC-Seal Products Dispute. The decision was given against the complaints made by
Norway and Canada against a legislative scheme that European Union (EU) adopted in 2009
for preventing marketing and importation of seal products (EU Seal Regime) (Howse, Langille
and Sykes 2014). The decision made by the Appellate Body had provided a doctrine on de facto
discrimination under the General Agreement on Tariffs and Trade 1994 (GATT), Article I:1
(Most Favored Nation) and III:4 (National Treatment). The decision also included a concern
about the animal welfare where it has been considered as an aspect of public morals under the
Article XX (a) of the GATT.
While the EU seal products ban was ultimately held as discriminatory, failing to meet the
requirements of GATT under Article XX’s chapeau, the reason provided by the Appellate Body.
The WTO panel would have permitted the ban on the marketing and importation of seal products
as justified on the grounds of the right to safeguard public morals (Levy and Regan 2014).
However, the reasoning provided by the Appellate Body failed to analyze the importance
between the challenging moral considerations about welfare of animals (seal) against

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safeguarding the cultural and traditional practices (sea hunting) of the indigenous communities
that have been affected by such ban with less consideration paid to the interest of the indigenous
communities. Consequently, the recent rulings ‘WTO’ on public morals effectively legalize the
impositions of moral standards that are inherent in the ban on EU Seal products.
The issues related to public morality concerns are competent to be taken into
consideration in trade disputes before the WTO. The ban on EC Seal Products 2009 was raised
before the leading international trader arbiter for granting the ban on the marketing and
importation of seal products (EU Seal Regime). The ban was implemented to deal with the moral
concerns of EU with respect to welfare of seals but Canada and Norway subjected this ban to
severe criticisms, as sealing was part of their cultural practice of their indigenous Inuit
communities (Regan 2014). The primary issue in this case was a debate on pitting animal rights
activists that are seeking for prohibiting certain seal hunting practices against the interests and
cultural practices of indigenous communities or their respective state governments.
The EU Seal Regime is demarcated between two legislations – the Implementation
Regulation and the Framework Regulation. This measure aims at prohibiting sale of seal
products in the EU market if such products complies with the threes essential conditions. Firstly,
the products must be obtained from hunts carried out by the indigenous communities (IC
Exception). Secondly, the products must derive from hunts that are conducted for sustainable
management of marine resources. Thirdly, the travellers personally import such products into the
EU. This measure safeguards seal products into the EU for re-export and processing, thus
safeguarding the commercial interests within the EU.

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Both Canada and Norway had initiated WTO dispute Settlement proceedings against the
EU’s Seal regime. The initial claims were that the Seal regime was discriminatory and posed an
unnecessary obstruction to trade as opposed to the Agreement on technical Barriers to Trade
(TBT Agreement) and the General Agreement on Tariffs and Trade (GATT). According to
Lang (2016), both the WTO Panel and the Appellate Body determined that the EU Seal Regime
is justified on the ground of the right to safeguard the public morals, on the ground of
safeguarding animal welfare, in particular. However, both the authorities also held that the
purported Inuit and the exception to the ban on the indigenous communities was subjected to
discrimination in its application and is required to be modified to comply with the international
trade obligations.
Further, Canada and Norway claimed that aboriginal sealers comprise a small proportion
of the seal industry in Canada that is carried out primarily by non-indigenous anglers on the East
Coast of Canada and in Newfoundland whereas in Greenland Inuit controlled the sealing
industry. Canada and Norway contended that the EU Seal Regime includes de facto
discrimination as the seal products obtained by the hunters in Greenland have easy access to the
EU market owing to an increased percentage of indigenous hunters compared to Norway or
Canada.
In the words of Roessler (2015), the EU Seal Regime does not include de jure
discrimination as the rules are applicable to every seal products whether such products are
deriving from the EU or some other place. However, the impact of such measure is significant.
The Appellate Body rule previously in US v Clove cigarettes stated that under the TBT
Agreement, a measure having adverse impact on imported products in the form of diminished
cutthroat opportunities cannot be held as discriminatory as long as such effects exclusively

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derives from a legitimate regulatory distinction. The Appellate Body decisively held that under
both Article 1:1 and Article III: 4 of GATT what matters the most is whether the measure has a
detrimental impact on the competitive opportunities.
In regards to the interpretation of the ‘less favorable treatment’ and the NT obligation
embodied under Article III: 4, it must have an impact upon the group of imported products in
comparison to collection of domestic products. Chen (2015) states that the NT obligation can be
infringed only if the imported products of the party complaining are treated less favorably as
compared to domestic like products. It is not sufficient that some similar imported products that
is receiving worse treatment than some like domesticate goods as complained cannot be said to
have breach the NT obligation. Roessler (2015) states that this is justified as there is always a
probability of infringement of Article III: 4 as long as the disfavored type of product is imported
and the favored type of products exists domestically.
As per Marceau (2014.), the Appellate Body report on the US-Clove Cigarettes provides
the most appropriate example of the accurate approach to recognize the scope of ‘similar
products’ for ‘treatment no less favorable’ in the context of NT obligation. The decision
included reference of this case where the WTO panel determined that the ‘treatment no less
favorable’ requirement was needed to compare between the treatment granted to imported clove
cigarettes and the treatment granted to cigarettes that are domestically produced were initially
found to be menthol cigarettes and similar products.
The Appellate Body quashed the panel and held that to determine whether a product has
received ‘treatment no less favorable’ after conducting evaluation between the treatment
provided to all the similar products that are imported from the complaining member country

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from the treatment provided to all the domestic products. This is because on order to determine
the scope of like domesticated an imported products, the panel shall not be restricted to those
products that the complaining member country shall particularly mention about before the panel.
In other words, the Appellate body asserted that the ‘treatment no less favorable’ standard shall
not restrict regulatory distinctions between the products that are similar unless the group of
similar products are imported from the complaining member is actually treated no less favorably
than the group of similar domestic products.
The interpretation of ‘treatment no less favorable’ in the EC Seal Products has the
benefit of an apparent division of labor between Article III:4 and Article XX. Although the
GATT 1994 and the TBT Agreement have common objective to maintain a subtle balance
between the search of rights of the member states to regulate and the pursuit of trade
liberalization, this balance is often expressed in various manners. In the GATT 1994, this balance
is expressed under Article III:4 in the form of NT obligation that is qualified by the genera
exception clause in Article XX. According to Qin (2014), in the EC-Seal Products, the WTO
Appellate Body has clarified that only the impact of trade of the contested measure shall be taken
into consideration under Article III: 4 of GATT 1994. In case any possible policy justifications
for the harmful trade impact is to be made that is weakening the scope of the right of the member
to regulate, the same shall be considered in the light of Article XX only.
In order to assess a justification claims under Article XX, it includes two level of analysis
procedure. Firstly, a measure must be provisionally justified fewer than one of the subparagraphs
of Article XX. Secondly, the measure should be appraised under its chapeau. In the EC Seal
Products, the Appellate Body explained that the objectives of the EU Regime did not consider
the addressing of the public concerns related to seal welfare as its sole or principal rationale. The

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Appellate Body stated that the main reason for the introduction of the EU Regime was to resolve
the issues arising related t the welfare of the seals. It further stated that although the WTO Panel
rejected the contention that the interest of the indigenous communities and other relevant
interests did demonstrate an independent objectives of the EU Seal Regime. However, it did not
appear to the Appellate body that the Panel had excluded the role played by the indigenous
communities and the other related interests in the implementation and design of the measure.
However, it can be inferred from the above discussion that, the interpretation of the
Appellate Body of the ‘treatment no less favorable’ in the case of EC Seal Product has its own
concerns and doubts. This is because, Ma and Li (2015) states that the interpretation suffers from
four issues regarding its interpretive approach. Firstly, the interpretation of the Appellate Body
almost deprives of any meaning under Article III: 1. It is a well established rule that NT
obligation is to avert protectionism. The Negotiating record of the NT obligation further
suggests that the purpose of including Article III: 1 was to authorize purpose inquiries while
dealing with neutral measures under Articles III:2 and III:4.
In other words, Article III:4 of the GATT 1994 provides some policy space for the WTO
members to regulates non-protectionist policy goals. The negotiating background of the role of
Article III:1 while interpreting Article III:4 cannot be sad to be completely unambiguous. If all
the negotiating parties have a common understanding on this issue, there would not have been
fluctuation in aims and the outcomes.
Secondly, Gowa (2015.) states that the interpretation of the Appellate Body’s regarding
‘treatment no less favorable’ in the EC Seal Products may result in contradictory rulings
between the Article III:2 (seconds sentence which specifies NT obligation for internal taxation

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on substitute or directly viable products. However, the Appellate Body justified it stating that it
has adopted a strict textualist approach to Article III:4 which has been adopted to interpret
Article III:2 (first sentence) since its establishment. ‘
Thirdly, Bown and Reynolds (2017) states that the interpretation of the Appellate Body
of ‘treatment no less favorable’ may develop inconsistent rulings between the TBT Agreement
and the GATT 1994 in future. Article XX sets out a closed list of legal objectives for
governmental intervention, which is questionable whether such list that was developed 60 years
ago shall be adequate to safeguard legitimate government regulations in the present century.
However, the Appellate Body stated in the EC Seals Product’s case, that in case of any
imbalance in the obligations under the GATT 1994 and the TBT Agreement and the existing
rights, the authority should rest with the WTO Members who will address the imbalance.
Lastly, the Appellate body’s interpretation of ‘treatment no less favorable’ was not
sufficient to elude the exception rule division embodied in the GATT 1994. Marceau (2014)
states that the normative hierarchy where default standard is open trade and non-economic
opposing values which includes safety human health and protection of the environment must be
justified, is absolutely unacceptable to several people. However, the Appellate Body cannot be
blamed for the rule–exception, as the role played by the body to respond to such sensitivity is
difficult. The Appellate body is required to construe the text of the WTO as drafted by the
delegates. The institutional restraints of the WTO also hinder the ability of the Appellate Body to
play a developing role.
Thus, the detrimental impact on imported products with less favorable treatment is
questionable but the approach of the Appellate Body is beneficial due to the apparent vision of

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labor between Article XX and Article III:4. It further states the awareness of the textual
distinction between Article III of the GATT 1994 and Article 2.1 of the TBT Agreement. In the
EC Seal Products, the Appellate Body has clarified that Article III:4 shall be determined based
on three essential factors. Firstly, ‘genuine relationship’ prerequisite between the disputed
measure and its unfavorable impact on viable prospects for imported products similar to the
domestic products. Secondly, the position of design or structure and expected operations of the
measure in terms of ‘treatment no less favorable’ analysis is another essential factor to be
considered. Lastly, the inclination of consumers in the context of ‘similar products’ is the third
factor to be taken into consideration.

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