11 December 2020
Season’s Greetings
2020 has been a difficult year the world over and our thoughts go to all those that have suffered personal or professional losses due to the Covid-19 pandemic. All of us in the International Trade and Food Law practice of FratiniVergano would like to wish you, your colleagues and families all the best for a peaceful holiday season and for healthy and prosperous 2021.
We hope that you have enjoyed Trade Perspectives© throughout this year and that you have always found it stimulating and timely. Once again, we have published a total of 23 issues and invested considerable time and energy in this undertaking. We have done it with our usual passion and drive, eager to play a small but constant role in protecting the multilateral trading system and the rule of law from the temptations of unilateralism and protectionism.
In the new year, we will continue with our editorial efforts, beginning with the publication of the next issue of Trade Perspectives© on 15 January 2021. Trade Perspectives© is circulated to thousands of recipients worldwide this fills us with pride, but also with a deep sense of commitment and discipline towards our readers’ expectations.
Thank you for your interest in Trade Perspectives© and for helping us to make it a better and more useful tool of discussion. We look forward to hearing from you regularly and to another year of international trade and food law developments. You can follow us on Twitter @FratiniVergano and find all previous issues of Trade Perspectives© on our website at /en/trade-perspectives.
Towards more global action on trade and environmental sustainability? 50 WTO Members commit to structured discussions
On 17 November 2020, in the context of the World Trade Organization’s (hereinafter, WTO) Trade and Environment Week 2020, 50 WTO Members authored a Communication on Trade and Environmental Sustainability, launching a new initiative aimed at organising structured discussions among interested WTO Members and a dialogue with other stakeholders. Said discussions are supposed to aim at promoting multilateral environmental agreements, together with more focussed actions in the area of trade and environmental sustainability. On 30 October 2020, the EU had already set out its position on this issue, publishing the European Commission non-paper on possible trade and climate initiative in WTO (hereinafter, Non-Paper), underlining, inter alia, the necessity “to ensure that multilateral trade rules support the global transition towards a climate neutral, and resilient economy”. The linkage between trade and the environment has steadily gained a place in the debate on sustainability, which is also having a growing impact on trade and businesses around the world.
The EU’s position
A few weeks prior to the announcement of the Communication by WTO Members, the European Commission (hereinafter, Commission) published a Non-paper on possible trade and climate initiative in WTO, laying the foundation for the broader initiative by 50 WTO Members. The EU aims at promoting a so-called “green agenda” within the WTO, which includes supporting environmental stability and integrating the United Nations Sustainable Development Goals (hereinafter, SDGs) into the WTO (see Trade Perspectives, Issue No. 15 of 27 July 2018).
According to the Commission’s Non-Paper, there are certain building blocks that need to be considered for achieving the global transition towards climate neutrality and economic resilience, which should be included in multilateral initiatives. Firstly, the Commission suggests resuming negotiations for an Agreement on Environmental Goods and Services. Negotiations on an Environmental Goods Agreement (EGA) among a group of WTO Members, including the EU, had started in July 2014, but came to halt in December 2016 when negotiating parties intended to concluded negotiations, but failed to reach agreement on the outstanding issues. The Commission considers that it is necessary to update the scope of such an agreement to include more targeted goods, including “climate-mitigation “clean” technology goods that directly contribute to the reduction of greenhouse gas emissions, such as equipment used in the production of renewable energy”. Tariff reductions for certain goods are supposed to provide an incentive for companies to produce more sustainable goods. Most notably, the Commission intends to enlarge the scope to also include environmental services, referring to services that have a connection with climate mitigation measures.
The Non-Paper also discusses the issue of transparency. More specifically, the Commission suggests that, given the existing WTO Environmental Database and the almost 20,000 environment-related measures contained therein, a discussion forum on the various domestic environmental measures taken by WTO Members could be established. Finally, the Commission refers to Goal No. 12 of the SDGs, which calls on countries to “rationalise inefficient fossil-fuel subsidies by removing market distortions that encourage wasteful consumption, to reflect their environmental impacts” and calls for discussions to be held among WTO Members to determine ways for the WTO to act upon the achievement of this goal.
The Communication on Trade and Environmental Sustainability by WTO Members
On 17 November 2020, 50 WTO Members (i.e., Australia, Canada, Chad, Chile, Costa Rica, the EU and its Member States, the Gambia, Fiji, Iceland, Japan, Republic of Korea, Liechtenstein, Maldives, Mexico, Republic of Moldova, Montenegro, New Zealand, North Macedonia, Norway, Senegal, Switzerland, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and the United Kingdom) circulated the Communication on Trade and Environmental Sustainability (hereinafter, Communication). While the Communication invites other interested WTO Members to join the initiative in the future, it is worth noting that, for instance, Chile is the only country in Latin America to participate. Additionally, the US, China, and Russia, as well as most African WTO Members are currently not part of this initiative, despite the global relevance of the various issues.
The Communication provides for several key elements that illustrate the relationship between trade and environmental sustainability and details certain steps that could be taken to improve it. WTO Members stress the need to think of trade and environmental policies as complementary in order to achieve climate neutrality, to which many countries have by now committed, and in view of the work towards the achievement of the SDGs. WTO Members underline that “that environmental sustainability should be one of the guiding principles of the wider reform of the WTO”.
The Communication then focusses on the need for structured discussions to develop the actions that the signatories of the Communication intend to pursue, highlighting the importance of collaboration between WTO Members, international organisations, and other stakeholders.
The 50 WTO Members commit to “prioritize and advance discussions on trade and environmental sustainability”, notably by: 1) “intensifying our work to share experiences and best practices; promote transparency, dialogue and information sharing along the full value chain of products and materials”; 2) “strengthening coherence at the national and international level with a view to identifying areas of common interest and for future work within the WTO, in order for WTO to address more effectively sustainable development issues”; 3) “working in cooperation with relevant international organizations and relevant actors, including the private sector, to identify and support technical assistance and capacity building needs of Members, and in particular least-developed countries (LDCs)”; and 4) “working on possible actions and deliverables of environmental sustainability in the various areas of the WTO”.
The structured discussions are to be held through regular meetings that will be open to all WTO Members, with the first meeting supposed to take place in early 2021. Those discussions are supposed to complement the work of the WTO Committee on Trade and Environment (hereinafter, CTE) and of other WTO bodies. The structured discussions are supposed to report to Trade Ministers by no later than the 12th WTO Ministerial Conference, which is to be held in June 2021 and, “where appropriate, propose concrete deliverables, initiatives and next steps”.
Further developments at the multilateral level
In addition to this broader initiative, there have been a number of other initiatives related to environmental aspects within the WTO and at WTO Members’ level. For instance, on 17 November 2020, an informal dialogue on plastics pollution and environmentally sustainable plastics trade was sponsored by WTO Members Australia, Barbados, Canada, China, Fiji, Jamaica, and Morocco in the context of the WTO Trade and Environment Week 2020. The dialogue’s objective was to promote coordination among WTO Members to address the environmental and health impacts attributed to plastics pollution and how trade could positively contribute to solving the important problem. During the dialogue, WTO Deputy Director-General Wolff stated that WTO Members could consider “defining principles for effective and coherent trade-related measures that seek to tackle plastic pollution and waste in a WTO compatible manner”.
Towards specific actions?
The impact of the Communication and of the structured discussions that are to take place from early 2021 remains to be seen. At the launch of this initiative, WTO Deputy Director-General Wolff noted that such actions “could contribute to eliminating tariff and non-tariff barriers in environmental goods and services, (…) reforming inefficient fossil fuel subsidies, and promoting a global circular economy by facilitating trade along supply chains”. WTO Deputy Director-General Wolff added that the initiative could “contribute to strengthening links between trade and climate action, including by collaborating on schemes addressing the carbon content of trade products, and helping the smallest and poorest countries secure green financing”. It is likely that this initiative will gather pace as the international community recovers from the Covid-19 pandemic and sustainable development, environmental protection, and ‘green trade’ become the main drivers of economic policies.
Despite the pandemic, the EU continues to move its trade agenda forward
Despite the ongoing Covid-19 pandemic, the European Commission (hereinafter, Commission) continues to make progress in its trade negotiations with important trading partners, namely Australia, Chile, and New Zealand. The Commission remains committed to move forward with the EU-Mercosur Free Trade Agreement (hereinafter, FTA), which was concluded in 2019, while the outcome of the EU-UK trade negotiations remains uncertain. Additionally, on 2 December 2020 and in view of the incoming US Administration under President-elect Joseph R. Biden, the Commission and the EU’s High Representative of the Union for Foreign Affairs and Security Policy issued a Joint Communication: A new EU-US agenda for global change to the European Parliament, the European Council, and the Council of the EU. The Joint Communication sets out to pursue a new transatlantic agenda for global cooperation between the EU and the US and includes a number of specific proposals on trade policy.
EU trade policy in a turbulent 2020
Due to the Covid-19 pandemic, the EU’s various ongoing trade negotiations were suspended in the Spring of this year. While negotiations largely resumed in May 2020 through virtual formats, they have been progressing at a slower pace than usual. Only the EU-UK trade negotiations are still being held in person. Additionally, in August, Phil Hogan resigned as European Commissioner for Trade and, in October 2020, the Commission’s Executive Vice-President Valdis Dombrovskis took over the trade portfolio.
The EU’s new Commissioner for Trade Valdis Dombrovskis noted that trade law is essential for a sustainable recovery from the Covid-19 pandemic and that he would, as Commissioner for Trade, focus on more sustainable and fair trade policies. In June 2020, the Commission launched a comprehensive review of EU trade policy, which aims at setting a “fresh medium-term direction for EU trade policy, responding to a variety of new global challenges and taking into account the lessons learned from the coronavirus crisis”.
Progress despite the pandemic
Despite the challenging circumstances this year, the EU has made progress in its trade negotiations with Australia, Chile, Indonesia, New Zealand, and the UK.
The 9th round of the EU-Australia trade negotiations was held from 30 November to 11 December 2020. Both sides stated that there was “good progress” in the ongoing negotiations and that a timely conclusion of the agreement would create “growth, opportunities and deepen economic integrations”. In November 2020, Helena König, Deputy Director-General in the Commission’s Directorate General for Trade and EU Chief Negotiator for the envisaged trade agreement with Australia stated that during the first exchange of market access offers, sensitive areas such as agriculture, rules of origin, geographical indications (GIs), intellectual property and professional services were not included. Deputy Director-General König also pointed out that an offer including sensitive products would only take place next year.
Trade negotiations for the modernisation of the trade part of the EU-Chile Association Agreement also continue, albeit at a relatively slow pace. Trade negotiations between the EU and Chile were delayed not only by the Covid-19 pandemic, but also due to the political situation in Chile. The 8th round of negotiations was held from 28 September to 9 October 2020. The Commission has published the report of this round, which states that there was “good progress in a significant number of chapters”, such as Technical Barriers to Trade (TBT) and Trade and Sustainable Development. The report also notes that good progress has been made on rules of origin. The dispute resolution mechanism under the Investment chapter remains a sensitive issue in the negotiations, and Chile is currently consulting stakeholders and Government institutions on the EU’s Investment Court System model. The Government of Chile noted its intention to conclude negotiations during the course of 2021, prior to its presidential elections, which are set to take place in November 2021. The 9th round of trade negotiations between the EU and Chile is scheduled to take place from 11 to 22 January 2021.
The most recent round of trade negotiations between the EU and New Zealand was held from 23 to 30 November 2020. The pace of the negotiations had slowed down a bit since June 2020 due to New Zealand’s general elections, which were held in October 2020. The 9th round of negotiations covered the majority of the areas of the future agreement and, more specifically, resulted in a provisional agreement on two additional chapters, namely the chapters on ‘Small and Medium Enterprises (SMEs)’ and ‘Capital Movements’. Both parties have already provisionally agreed on two further chapters, namely ‘Transparency’ and ‘Customs and Trade Facilitation’, as well as on the text of the ‘Anti-Fraud clause’.
While the provisional agreement reached on some chapters is a positive development, more contentious issues, such as agriculture, have not been fully discussed yet. The EU and New Zealand already exchanged a first market access offer before the 8th round of negotiations, but New Zealand was reportedly not pleased with the tariff-rate quotas (TRQs) offered by the EU for meat and dairy products, which are important export products for New Zealand. Negotiations on certain issues remain complex, notably on trade and sustainable development. A number of EU Member States, including France, Germany, and the Netherlands, called on the Commission to use trade agreements as a lever to incentivise other countries to act on their climate commitments agreed under the Paris Agreement. New Zealand appears to pursue even more significant commitments than the EU, as it is part of the plurilateral alliance to liberalise ‘green’ goods and services (i.e., goods and services that pursue the protection of the environment and the management of natural resources) and to eliminate subsidies on fossil fuels. New Zealand aims at reflecting the same level of ambition in its trade agreement with the EU, notably through provisions on fossil fuel and ‘environmentally harmful’ subsidies. While the EU has underlined its commitment to strengthen the chapters on trade and sustainable development in its trade agreements, it remains unclear whether such far-reaching commitments would be acceptable.
From 15 to 26 June 2020, the 10th round of trade negotiations between the EU and Indonesia took place via video conferences. Deputy Director-General König stated that some chapters were well advanced, but that many issues remained, for instance related to public procurement and to trade and sustainable development. Deputy Director-General König noted that certain trade issues, particularly Indonesia’s discriminatory import ban on spirits and wine and the WTO dispute on renewable energy and palm oil, were slowing down the trade negotiations and that, for the moment, there was no date scheduled for the 11th round of negotiations. It now seems that some movement has not occurred vis-à-vis selected stumbling blocks and a round will likely happen in the first quarter of 2021.
A new approach to EU-US trade relations on the horizon?
Over the past four years, during the term of the current US Administration, tensions affecting EU-US trade relations have increased, notably due to unilateral tendencies and protectionist approaches. The incoming US Administration under President-elect Joseph R. Biden might bring new momentum to EU-US bilateral relations. The recent Joint Communication from the Commission and the EU’s High Representative of the Union for Foreign Affairs and Security Policy on A new EU-US agenda for global change intends to set the stage for the renewal of EU-US relations, including on trade policy. The Communication bases the future transatlantic agenda on three guiding principles: 1) “Providing a solid base for stronger multilateral action and institutions”; 2) Pursuing common interests and leverage EU-US collective strength; and 3) Solutions that respect EU-US common values of “fairness, openness and competition”. The proposed agenda is divided into four areas: 1) “Working together for a healthier world – COVID-19 and beyond”; 2) “Working together to protect our planet and prosperity”; 3) “Working together on technology, trade and standards”; and 4) “Working together towards a safer, more prosperous and more democratic world”. The EU proposes to establish a new EU-US Trade and Technology Council to “facilitate trade, develop compatible standards and promote innovation”. The EU further proposes a “shared transatlantic commitment to a net-zero emissions pathway by 2050”, which would make climate neutrality a new global benchmark. In this context, the proposed agenda notes that the EU and the US should work closely together on emissions trading, carbon pricing, and taxation. In view of the EU’s envisaged Carbon Border Adjustment Mechanism (see Trade Perspectives, Issue No. 17 of 18 September 2020), the EU proposes that such mechanism could be an opportunity for the EU and the US “to work together and set a global template for such measures”.
Absent from the proposed agenda is the relaunch of discussions on a broader EU-US trade agreement. At its summit on 10 and 11 December 2020, members of the European Council entertained discussions on EU-US relations and, in their conclusions, highlighted the importance “of a strong strategic transatlantic partnership” and stated that the Council stood ready “to discuss shared priorities with the new President of the United States”. The agenda is supposed to be the first step towards a roadmap for renewed transatlantic relations and in view of an EU-US summit, which is supposed to take place during the first half of 2021.
The EU and the UK
A few weeks before the end of the transition period, on 9 December 2020, UK Prime Minister Boris Johnson and the President of the European Commission Ursula von der Leyen discussed the status of the trade negotiations. The meeting remained inconclusive and negotiating teams were instructed to resume negotiations until Sunday, 13 December 2020. At that time, Prime Minister Johnson and President von der Leyen would reassess the situation. It is possible that no agreement will be reached, given the remaining divergences, notably with respect to the level playing field and fisheries. In anticipation of the possibility that no agreement may be reached, on 10 December 2020, the European Commission published relevant contingency legislation, notably in the areas of transport and fisheries.
Time to take action
Businesses around the world should closely monitor the ongoing trade negotiations, seeking where necessary adequate legal advice and ensuring that their commercial interests are properly voiced and represented within all relevant fora.
The Court of Justice of the European Union clarifies that ‘whole insects’ fall outside of the scope of the previous Novel Foods Regulation
In a preliminary ruling of 1 October 2020, in case C 526/19 Entoma vs. France, the Court of Justice of the European Union (hereinafter, CJEU) held that “foods consisting of whole animals intended to be consumed as such, including whole insects, do not fall within the scope of Regulation (EC) No 258/97 on novel food”. The judgment is important in the sense that, if whole insects as food do not fall within the scope of Regulation (EC) No 258/97, a transitional rule applies, which permits those products to stay on the market before actually being authorised as novel foods under the EU’s new Novel Food Regulation, Regulation (EU) 2015/2283 of 25 November 2015 on novel foods, (hereinafter, the NFR). This is an important development for the booming edible insects sector.
Insects as novel foods
Novel foods are foods that were not used for human consumption to a significant degree within the EU before 15 May 1997, irrespective of the dates of accession of EU Member States. This includes newly developed, innovative food, or food produced using new technologies and production processes, as well as food traditionally consumed outside of the EU. The first EU rules on the authorisation procedure for novel foods were established by Regulation (EC) No 258/97 of the European Parliament and of the Council on novel foods.
In 2015, the rules set out in Regulation (EC) No 258/97 were updated to simplify the authorisation procedures for novel foods and to take account of recent developments in EU law and technological progress. The aim of the revised NFR, which repealed and replaced Regulation (EC) No 258/97, is to improve regulatory conditions so that food businesses can easily bring new and innovative foods to the EU market, while a high level of food safety for consumers is maintained (see Trade Perspectives, Issue No. 1 of 12 January 2018). A specific aim of the NFR is the facilitation to market insect food in the EU and, to that end, its Recital 8 states that “it is appropriate to review, clarify and update the categories of food which constitute novel foods. Those categories should cover whole insects and their parts” (for the history of the adoption of the NFR and the debate on whole insects, see Trade Perspectives, Issue No. 11 of 29 May 2015 and Issue No 18 of 9 November 2015).
While the NFR, which applies since 1 January 2018, clarifies that whole insects are subject to EU authorisation since 2018, Regulation (EC) No 258/97 did not impose such obligation, providing in its Article 2(1)(e) that it applied to the category of “foods and food ingredients consisting of or isolated from plants and food ingredients isolated from animals”, and not to “whole” animals.
Important transitional measures
Transitional measures established in Article 35 of the NFR are of relevance in Case C-526/19 Entoma vs. France. Article 35(2) of the NFR provides that “Foods not falling within the scope of Regulation [No 258/97], which are lawfully placed on the market by 1 January 2018 and which fall within the scope of this Regulation may continue to be placed on the market until a decision is taken […] following an application for authorisation of a novel food or a notification of a traditional food from a third country submitted by the date specified in the implementing rules adopted in accordance with Article 13 or 20 of this Regulation respectively, but no later than 2 January 2020”. Therefore, operators that commercialised such products falling under the NFR, but not falling within the scope of Regulation (EC) No 258/97, were allowed to continue with their activity until the first novel food authorisations under the NFR enter into force.
However, in certain EU Member States, operators marketing whole insects as food were denied this transitional possibility. The CJEU’s preliminary ruling now clarifies this uncertainty for insect manufacturers that were placing their products on the EU market before 1 January 2018.
Case C-526/19 Entoma vs. France
The request for a preliminary ruling was made by the French Conseil d’État (i.e., the Council of State, an institution of the French Government that acts as the supreme court for administrative justice) and concerned the interpretation of Article 1(2)(e) of Regulation (EC) No 258/97. The request was made in the final instance of proceedings between Entoma SAS and the French Ministry for the Economy and Finance, as well as the French Ministry for Agriculture and Food. Entoma marketed products consisting of mealworms, locusts, and crickets, which were prepared and intended for human consumption in the form of whole insects. By order of 27 January 2016, the Paris Police Prefecture ordered, first, the suspension of the placing on the market by Entoma of whole insects intended for human consumption on the ground that, inter alia, Entoma did not have the authorisation to place such products on the market, as required by Regulation (EC) No 258/97. Second, the Paris Police Prefecture ordered the withdrawal of those insect products from the market until the obtention of an authorisation to place them on the market, issued following an assessment demonstrating that they do not present any danger to consumers’ health.
The arguments of the Court
The CJEU referred to the observations of the Advocate General in his Opinion in Case C-526/19, according to which the expression ‘isolated from’ animals “refers to a process of extraction from the animal. Therefore, interpretation of that expression may not result in a reference to a whole animal, unless one were to create a tautology, in which whole animals are ‘isolated from’ whole animals”.
The French Government, supported by the Italian Government, submitted in its observations that it may appear illogical, from a health point of view, to seek to subject food ingredients isolated from insects to the rules, while excluding whole insects. France and Italy argued that, since a whole insect is composed of all its parts and the whole insect, like its parts, is intended to be ingested by the consumer, the same risks may exist from the point of view of public health. In this regard, the CJEU held that such a line of argument does not suffice to justify a broad interpretation of the unambiguous terms ‘isolated from animals’, which has the effect of including ‘whole animals’ within the scope of that regulation.
The CJEU emphasised that, in any event, an interpretation that leads to the exclusion of whole animals, such as insects, from the scope of Regulation (EC) No 258/97 does not in itself prejudice the objective of protecting human health. The fact that whole insects do not fall within the scope of that regulation implies only a lack of harmonisation of the conditions for placing them on the market at EU level and, therefore, no notification or authorisation is necessary under Regulation (EC) No 258/97. The Court held that, “according to settled case-law, it is for the Member States, in the absence of harmonisation and to the extent that uncertainties continue to exist, to decide on their intended level of protection of human health and life and on whether to require prior authorisation for the placing on the market of foods, taking into account the requirements of the free movement of goods within the European Union”. Therefore, the fact that whole insects are exempt from the safety assessment provided for by Regulation (EC) No 258/97 does not exclude the possibility for EU Member States to provide for such an assessment of the possible danger that whole insects may present for public health in their national legislation.
Therefore, the CJEU concluded that “Article 1(2)(e) of Regulation (EC) No 258/97 […] must be interpreted as meaning that foods consisting of whole animals intended to be consumed as such, including whole insects, do not fall within the scope of that regulation”.
Reactions by the edible insects sector and pending novel foods applications
The judgment has been welcomed by the International Platform of Insects for Food and Feed (hereinafter, IPIFF), which underlines the importance of the ruling, as it may put an end to the uncertainty that insect producers that commercialised products before 1 January 2018 have been facing. Operators, who have commercialised such products in accordance with EU food safety rules, may continue with their activity under the transitional measure of the NFR until the first novel food authorisations enter into force. In certain EU Member States, where producers were denied this possibility, “this ruling, therefore, now clarifies that these measures were not justified”, the IPIFF added.
A number of novel food applications concerning edible insects have been submitted to the European Commission (hereinafter, Commission) for a safety assessment since the scope of the EU novel foods framework has been clarified by the NFR. The Commission’s website lists the submitted summaries of novel food applications and includes applications concerning insects, such as crickets, grasshoppers, locusts, and mealworms. These applications are currently evaluated by the European Food Safety Authority (EFSA). According to the IPIFF, the first opinions will hopefully be adopted and published in the following weeks and “should pave the way to the first ‘novel food’ authorisations expected in mid-2021”.
The growing European edible insect sector
The CJEU’s judgement is important for the development of the growing European edible insect sector. For example, in related developments, the ValuSect (“Valuable Insects”) project is funding the sustainable production and processing techniques of insect-based products in North-West Europe. The ValuSect project is a project funded by the Interreg North-West Europe program, a European Territorial Cooperation Programme funded by the European Commission. The project is investing EUR 370 million of European Regional Development Fund (ERDF) in activities based on the cooperation of organisations from eight countries, namely Belgium, France, Germany, Ireland, Luxembourg, The Netherlands, Switzerland, and the United Kingdom.
Still, the pending novel food authorisations remain the most crucial step towards providing EU-wide market access for edible insect products and interested stakeholders should closely monitor the related developments.
Recently Adopted EU Legislation
Food and Agricultural Law
Trade Remedies
Maria Esperanza Alconcel, Ignacio Carreño, Fabrizio De Angelis, Simone Dioguardi, Tobias Dolle, Michelle Limenta, Alya Mahira, Lourdes Medina Perez and Paolo R. Vergano contributed to this issue.
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