The Clove Cigarettes WTO panel report was circulated today. The report is here: http://www.worldtradelaw.net/reports/wtopanels/us-clovecigarettes(panel).pdf Here's a quick summary: Panel found a violation of TBT 2.1, but no violation of TBT 2.2; it made no findings on GATT III:4, and hence no findings on GATT XX(b).
Here are some excerpts of the TBT 2.1 violation:
Whether the products at issue are treated differently
7.279 ... Clove cigarettes are banned while menthol cigarettes are excluded from the ban.
7.280 We therefore conclude that the products at issue are treated in a fundamentally different manner.
Whether the different treatment is to the detriment of imported products
7.281 ... In this case, there is an obvious conclusion: imported clove cigarettes are banned while the like domestic menthol cigarettes are allowed to remain in the market.
Whether that less favourable treatment is related to the national origin of the import
7.289 The TBT Agreement allows Members to regulate products for the purpose of attaining a legitimate objective, in this case, a public health objective of reducing youth smoking. The United States has told this Panel that it was not including menthol cigarettes, which we have found to be like to clove cigarettes for the purpose of Article 2.1 of the TBT Agreement, because doing so without further assessment would not be appropriate for the public health, because of issues including the potential impact on the health care system and the potential development of a black market and smuggling of menthol cigarettes. These reasons which the United States has presented as constituting a legitimate objective by themselves, appear to us as relating in one way or another to the costs that might be incurred by the United States were it to ban menthol cigarettes. Indeed, the United States is not banning menthol cigarettes because it is not a type of cigarette with a characterizing flavour that appeals to youth, but rather because of the costs that might be incurred as a result of such a ban. We recall that at the time of the ban, there were no domestic cigarettes with characterizing flavours other than menthol cigarettes which accounted for approximately 25 per cent of the market and for a very significant proportion of the cigarettes smoked by youth in the United States. It seems to us that the effect of banning cigarettes with characterizing flavours other than menthol is to impose costs on producers in other Members, notably producers in Indonesia, while at the same time imposing no costs on any U.S. entity.
7.291 The object and purpose of Article 2.1 of the TBT Agreement is to prohibit discrimination between imported products and like domestic products in respect of technical regulations. In our view, this purpose would be defeated if Members were allowed to remove their domestic products from the application of those same regulations to avoid potential costs that it might otherwise incur.
7.292 We therefore conclude that, by banning clove cigarettes while exempting menthol cigarettes from the ban, Section 907(a)(1)(A) does accord imported clove cigarettes less favourable treatment than that it accords to domestic menthol cigarettes, for the purpose of Article 2.1 of the TBT Agreement.