Reuters

Environmental groups welcomed the decision by three arbitrators who upheld a landmark verdict issued last July.

The dispute settlement panel found France's ban, in effect since 1997, conform with WTO rules which permit trade bans if products pose threats to human, animal or plant health.

Four scientific experts consulted by the original panel concurred that handling white, or chrysotile, asbestos fibers and chrysotile-cement products constitute a risk as they are highly toxic and cause cancer and other diseases.

France was defended in the case by the European Union, which represents the trade interests of its 15 member states.

"If follows from our findings that Canada has not succeeded in establishing that the measure at issue is inconsistent with the obligations of the European Communities under the covered agreements...," the 71-page report by the appellate body said.

The appeal body went further, reversing part of the original ruling which had found chrysotile asbestos fibers and PCG fibers (PVA, cellulose and glass fibers) to be "like products".

The European Union welcomed what it called a landmark ruling.

"This ruling shows that the WTO is responsive to our citizens' concerns.

Legitimate health issues can be put above pure trade concerns. The ruling confirms that regulators can set the desired level of protection of health,"

EU Trade Commissioner Pascal Lamy said in a statement.

France has banned all types of asbestos and products containing it since the start of 1997.

The measure is in line with overall policy in the European Union which accepts the results of scientific studies finding all asbestos dangerous and aims to totally eliminate use of the fiber in its 15 member countries by 2005.

Canada, the main exporter of white asbestos to France, argued that the ban was a violation of open trading accords and an abuse of the 1994 Technical Barriers to Trade pact under which WTO member states agreed not to use health and safety and similar rules as a pretext to keep out imports.

Putting a brave face on the ruling, Canadian Trade Minister Pierre Pettigrew said it clarified that general prohibitions are subject to WTO rules on technical trade barriers. "We are disappointed with the appellate body report," he added.

The appeals judges said the panel's conclusions - the first time a trade ban justified had been justified under a clause in WTO rules allowing health concerns to override free trading principles - were well-grounded.

The case had a strong political dimension in Canada, the world's third largest producer of asbestos, because the troubled industry is centered in Quebec where separatist sentiment remains strong - a fact that some analysts say had led the government in Ottawa to take a high-profile stance in the asbestos manufacturers defense.

Environmentalists, some of whom are strongly critical of the WTO which they argue puts commercial considerations above other interests, had been following the dispute closely.

"It is good news that it has turned out this way," said a spokesman for the Greenpeace branch in Switzerland.

REUTERS NEWS SERVICE

See WTO Appelate Report