WHAT THE US HASS TO DO IN THE CASE OF COSTA RICA DS524 PDF

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WHAT THE US HASS TO DO IN THE CASE OF COSTA RICA DS524 : l a ra l r “Under a Trump presidency, the American worker will finally have a president who will protect them and fight for them…We will stand up to trade cheating anywhere and everywhere…on trade we are going to put America first again.”1 – D...

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WHAT THE US HASS TO DO IN THE CASE OF COSTA RICA DS524 :

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“Under a Trump presidency, the American worker will finally have a president who will protect them and fight for them…We will stand up to trade cheating anywhere and everywhere…on trade we are going to put America first again.”1 – Donald Trump On May 5, 2015, Costa Rica notified the WTO of emergency measures suspending avocado importation from 9

countries, including Florida1, due to alleged Avocado Sunblotch Viroid (ASVB) in the importing nations and its own “pestfree” status declaration.2 Two years later with minimal changes, Mexico3 requested WTO consultations (DS524), asserting that Costa Rica’s measures violate its SPS obligations, particularly regarding scientific evidence and risk assessment.4,5 Now in 2015, the US expressed concerns that the, “suspension on issuing import permits for avocados from 8 countries and Florida was part of a larger attempt to use SPS measures to protect sensitive domestic industries…and was not consistent

with international standards and guidelines, nor scientifically justified”6,7 With this and the ban’s harm to Floridian avocado farmers in mind, DS524 presents a unique opportunity for the US to assert its America First trade policy in Central America. Thus, Ambassador Lighthizer should side with Mexico, assert US third-party rights, and submit systemic issue findings8 in Panel adjudication to establish US-favorable SPS precedent for Articles 2, 3, 5, and 7 with Annex B,9,10 prevent a potential $535 million agricultural trade loss, and prove that the Trump administration is resolute in its trade promises. Costa Rica claims that it is in accordance with SPS Art. 5 as it acted initially under Art. 5.7, proceeded to conduct

risk assessments in its Análisis de Riesgo de Plagas (ARP), and adjusted its regulations to allow ASBV-free regions in Mexico to trade.11 Now Costa Rica’s risk analysis is not publicly distributed,12 but third party instruments question its

validity. US pest risk analyses of Mexican avocados, find that pest prevalence in the commodity is low and that spread is unlikely if it were introduced as it requires infected avocado seeds to germinate, survive, and be near other avocado plants.13,14 Most avocado imports into Costa Rica are used for consumption purposes, so such seed transmission should be rare.15 This was confirmed in practice as Costa Rica actively imported Mexican avocados for the past 21 years without any known import ASBV cases and even though Mexico had its first occurrence in Michoacán in 2006.16 Now even if ASBVspread risk in Costa Rica were significant, less trade-restrictive methods exist than even Costa Rica’s regionalization allowances. In fact, the US has established an effective ASBV risk management system through tree and seed certification programs and strict symptomatic-tree sanitation.17, 18 Thus Costa Rica violates Art. 5.1, 5.2, 5.3 and 5.6.

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Beyond Article 5, the United States takes issue on Art. 2. Costa Rica claims its measures are based on sufficient

scientific evidence from the Cellular and Molecular Biology Research Centre of the University of Costa Rica and State Phytosanitary Service (SFE), which reported that the country is ASBV-free and thus justifies import suspension.19 Costa Rica’s assessment, though, is inaccurate.20 Costa Rica admitted that it did not have the capability to test avocado seeds

for ASBV presence, and rather relied only upon symptoms in leaf appearance, which studies have shown to be uncommon in the field.21 Such limited testing indicates that Costa Rica cannot adequately test its own plantations for symptomless ASBV-infected trees nor prove that the actual imported seeds are infected and can transfer ASBV.22 Furthermore, expert

plant pathologists have verified ASBV presence in Costa Rican avocado plantations.23 Thus Costa Rica is in violation of Art. 2.1 and 2.2 given that the US could prove Costa Rican scientific evidence deficient and dubious.24 The US has

previously expressed that Costa Rica’s import suspension is not scientifically based, particularly in its justification, and thus should still voice in Panel that such abuses will not be tolerated.25 Overall, Costa Rica will likely be in violation of Art. 2.1, 2.2, 2.326, 5.1, 5.2, 5.3, 5.6 and thus Art. 3.3;2728 however, Costa Rica makes a seemingly good case that it follows risk assessment procedures and uses sufficient scientific evidence

in testing. To avoid WTO ruling in favor of Costa Rica, the US must add its resources and demonstrate systemic issues that a failure to rule against Costa Rica would be akin to allowing SPS measures not “based on” risk assessments and scientific principles.29 A ruling in favor of Costa Rica would create negative precedent, allowing countries to implement similar SPS trade restrictions to protect domestic industries under the guise of questionable “risk assessment,” inaccurate scientific evidence, and regionalization when there are less trade-restrictive policies. The US has expressed that it will not tolerate such non-scientific, non-risk-based measures, 30 and thus it must press the Panel for more stringent interpretations of SPS Articles 2, 3 and 5. With regards to violations in Articles 2, 3, and 5, the US will join Panel adjudication to present systemic issues

that may arise from negative precedent if Costa Rica were to win; however, the US must also join to establish positive WTO precedent regarding Articles 5.7 and 7 within Annex B provisions. Though the US argues that Costa Rica violates SPS Articles 2, 3, and 5, Costa Rica will likely assert that it has acted in accordance with Art. 5.7 and 7 with Annex B:6,

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thus bringing these into discussion.31 In respect to Article 5.7, the appellate body has not ruled on interactions between 5.5 and 5.6 with 5.7,32 giving countries carte blanche to approve any restrictive measure they desire, regardless of arbitrary distinctions or trade-restrictiveness levels if it satisfies 5.7. Costa Rica’s import suspension included arbitrary measures like excluding ASBV-infected Peru.33 Additionally, Art 5.7 allowed Costa Rica to outright suspend trade when there could be less trade-restrictive methods like a quarantine inspection at importation. The US must join to press for positive case law regarding interactions between Articles 5.5 and 5.6 with 5.7 and set precedent that if a country were to apply Art 5.7, it must still use available evidence34 and risk management35 to minimize trade-restrictiveness when applying objective and justifiable SPS regulations in accordance with 5.5 and 5.6. Now regarding Art. 7, the US takes issue with Costa Rica’s notification of emergency measures due to the sole fact that it found itself ASBV-free. Now Art. 7 in conjunction with Annex B:6 allows a country to initiate emergency measures and omit steps enumerated in Annex B:5, “where urgent problems of health protection arise or threaten to arise for a Member.”36 The IPPC under ISPM 20-15 also defines that emergency action may be allowed, “in a new or unexpected phytosanitary situation, such as the detection of quarantine pests;” however, nowhere does ISPM 20-15 list a country’s pest-free status as justification. Moreover, Costa Rica had actively traded with Mexico, knowing full well that Mexico had ASBV.37 Since there is no WTO case law

regarding Annex B:6, the US should use this case to set precedent regarding what constitutes a qualification under Annex B:6 and, more specifically, that emergency measures cannot be justified by a country’s pest-free status.

If Costa Rica were to win a panel ruling legitimating its emergency trade suspension due to its pest-free status, similar actions would be authorized by the WTO as other countries now just have to find a single pest only in the export origin country and conduct “risk” assessments to stop trade. This creates a potential torrent of agricultural SPS-related trade restrictions beyond avocados for the US, the world’s top agricultural exporter.38 In the case of Costa Rica, such a ruling would mean suspension of import permits for potatoes, onions, rice, and potentially beans and corn.39,40 Similar actions would be expected in the Dominican Republic, Guatemala, and Nicaragua as the USTR points out issues with nonscience-based agricultural import licenses.41 Trade suspension in avocados to Costa Rica results in an insignificant loss of less than $1000 to the point where the USDA does not even include it in its data, but WTO ruling sanctioning this form

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of emergency measures could reasonably result in threats to $535 million worth of agricultural goods a year. (Appendix) The US has already spent countless resources lifting similar Costa Rican import permit restrictions on potatoes and onions, but a negative panel ruling could bring that all for naught and increase potential agricultural export losses. Most importantly, the US asserting third-party rights at the Panel stage would demonstrate that the Trump

administration will do everything in its power to fight against all trade policies that harm Americans. In his campaign, Trump promised to reduce the trade deficit in goods42 and, “identify every violation of trade agreements a foreign country is currently using…then use every tool under American and international law to end these abuses.”43,44 Now in 2009, Costa Rica joined the Dominican Republic-Central America-US Free Trade Agreement (CAFTA), which states that all parties

must adhere to the SPS Agreement, but, as has been shown, Costa Rica has not, proving CAFTA violation as well.45 By joining the WTO Panel litigation, the Trump Administration publicly demonstrates that it will adhere to its promise and fight all trade abuses, since this dispute is economically-trivial.46 Such action postures Trump as hardliner on trade for the American public and sends our Central American counterparts a message that the US will not tolerate non-scientific, non-risk-based measures nor CAFTA violations. The US must express its third-party rights in condemnation of Costa Rica’s trade restrictions only if the dispute escalates to Panel. Now why shouldn’t the US join consultations to put more pressure on Costa Rica in an earlier timeline and minimize costs? The short answer is because the only US agricultural good currently affected by Costa Rica’s import permit suspension47 is avocados, and its export value is trivial. (Appendix) If the US were to join consultations it would waste resources on an insignificant export with no major ramifications for other agricultural areas since there will be no negative WTO precedent. Mexico will likely not stop until the restriction is lifted,48 and thus there is no point in joining if Mexico will do the work in consultation anyways. 49 Even if Costa Rica were to get the better consultation resolution deal,

the US would not “lose” as no negative WTO case law would be established. Overall, in a cost-benefit analysis, joining consultations is not worth the resources nor potential negative reputation from siding with Mexico as the only benefit in a win is restoring an insignificant export flow. Thus, the US should only act if the case proceeds to panel.

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Now the argument for the United States to join panel adjudication is that it will be able to add resources to

achieve positive rulings and prevent negative precedent; however, if panel ruling was to favor Costa Rica, the US does not entirely lose. For one, it has shown face that it will not tolerate unfair trade practices anywhere in the world, even small ones. Additionally, it shows Central American countries that the US will not condone import permit suspension due to pest-free areas, potentially deterring them from enacting similar regulations even if they become WTO-justified. Even if similar regulations are enacted globally, the US can also use this tool to create a game of tit-for-tat, which would encourage trade cooperation. Moreover, Trump has stated that he may defy WTO rulings that are perceived to interfere with American sovereignty, and could do just that. Even if Costa Rica were to win, the US through joining Panel would still gain as it substantiates Trump’s claims that if the US, “cannot get the WTO to enforce the rules that everybody agreed to when they joined up, then…we [the US] will reevaluate whether we even belong to the WTO or not.”50 If DS524 were to escalate to Panel, it presents large cost-benefit magnitudes as it can establish precedent in other agricultural areas and present a more public forum to highlight America’s strong trade stance. Thus, the US must join Mexico in Panel. The US must voice its opinion that: 1) Costa Rica has not conducted an objective and justifiable riskassessment nor used its finding to establish the least trade-restrictive SPS regulation, 2) its scientific evidence does not take into account pertinent, available data and thus its measure is not scientifically-based, 3) a Panel ruling in Costa Rica’s favor would lead to negative precedent and systemic issues regarding Articles 2, 3 and 5, and 4) the Panel must

clarify relationships between Articles 5.5 and 5.6 with 5.7 and emergency measures with Art.7 and Annex B:6. Doing so will protect the American trade offense as it pressures the WTO to provide case law prohibiting similar SPS regulations, mitigating potential threats to rice, potato, onion, and corn exports. Defensively, such actions, even with new precedent, will not harm domestic producers. The US and domestic producers have long been trying to reinforce science and riskbased SPS measures, which this case does.51 Moreover, Trump’s hard line trade stance over a “seemingly” small issue will show both defensive and offensive that the administration is serious in its promise to “protect them and defend them.”52 Overall this strategy reveals that even in minor trade-impact disputes, nations should pay attention to potential precedent and its far-reaching implications as they may make it worth the fight.

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APPENDIX: Agricultural Trade Impact Calculations (Note: these only include Central American countries, and such SPS measures could be expanded globally, drastically increasing the US cost with negative DS524 precedent) COSTA RICA

(in most recent year) Avocado53

Volumes (Metric Tons)

Value...