Showdown Over Genetically Modified Crops

By Guy de Jonquières , Edward Alden and Tobias Buck

Published: Financial Times; May 13 2003 20:37

After years of sabre-rattling and diplomatic entreaties, US patience with the European Union's opposition to genetically modified foods has snapped. On Tuesday, Washington threw down the gauntlet by launching a challenge in the World Trade Organisation to the four- year-old de facto EU moratorium on authorising GM crops.

The move, which follows months of internal wrangling in President George W. Bush's administration, sets the scene for potentially the most contentious in a long line of US-EU trade confrontations. Even more seriously, it comes as both sides struggle to prevent severe tensions over the Iraq war infecting bilateral economic relations. As well as making that task harder, Tuesday's decision is a calculated gamble that is not assured of success. It may even backfire. Although the US is confident of victory in the WTO, experts on international trade law are divided over its chances. Even if it won, it is far from sure that the EU would respond by opening its market.

Scientists disagree, but farmers' harvests grow The European Union moratorium on genetically modified crops has frustrated US farmers and the country's biotechnology industry. Exports totalling an estimated $300m are being lost each year. Read Brussels has warned US officials repeatedly that escalating the dispute could frustrate that objective by creating an even stronger European political and consumer backlash against GM foods. That could halt in its tracks current EU moves aimed at lifting the moratorium by the end of the year.

David Byrne, EU health and safety commissioner, expressed surprise at the timing of the US move, calling it "eccentric". He pointed out that, if all went to plan, the moratorium would have ended before the WTO had decided on a US case.

Nonetheless, the prospect of being called on to adjudicate in such a politically sensitive conflict between the world's two economic superpowers is sending shivers through the WTO. The organisation is already under fire because of past decisions in trade disputes that critics, including members of the US Congress and activist groups, say trample on national sovereignty.

Trade officials fear that trying to lay down the law - in an area where global rules are far from clear - would expose the organisation to still fiercer attacks that could undermine its authority. "Whichever way a case on GMOs went, the WTO would lose," says one.

Despite those risks, Mr Bush's administration has decided to press ahead. It has threatened since October to bring a WTO case; but the White House blocked action in January, fearing it would complicate efforts to win European support for the war in Iraq.

Now, after having mobilised support from powerful US farm lobbies, which had not pressed it at the outset to launch a WTO challenge, it faces growing pressure from their representatives in Congress to act.

The economic stakes for the US are huge. Its biotechnology companies have invested heavily to develop genetically modified strains, which are now used to grow 75 per cent of the soyabean crops, 71 per cent of the cotton and almost 34 per cent of the maize that the country produces.

But in US eyes, the dispute is about more than just GM food exports to the EU. Officials say that even if the European market stays closed, they aim to send a clear signal to other countries not to impose similar restrictions. Similar thinking inspired a successful US WTO challenge in the late 1990s to the EU's long-standing ban on sales of hormone-treated beef. Even though the EU has not removed its ban, no other WTO member has imposed one.

US fears rose last October when several drought-stricken African countries rejected American food aid shipments containing GM crops. They said they were worried that seeds from the shipments would contaminate their own crops, making it harder to export them to the EU. Robert Zoellick, US trade representative, who has denounced the EU moratorium as "immoral" and "Luddite", said yesterday it had "sent a devastating signal to developing countries that stand to benefit most" from the new technologies.

Washington aims to head off accusations that it is using WTO rules to foist GM crops on reluctant countries by lining up 12 other governments in support of its case. As well as exporters of GM foods, such as Argentina, Australia and Canada, they include developing nations such as Colombia, Egypt, Honduras, El Salvador and Mexico.

The US also wants to send another, more wide-ranging, message to Brussels. It views the GM moratorium not as an isolated case but as symptomatic of a growing EU tendency to use health and safety as a pretext for regulations that create trade barriers. Another example is the European Commission's plan for testing and registration of as many as 30,000 chemicals that it says could pose safety risks. The proposal has been attacked by US companies - and many European ones - as prohibitively costly and trade- restrictive.

"If we don't draw the line here, it gives the impression that we are going to allow Europe to regulate its market to our disadvantage," says Nao Matsukata, until recently a top adviser to Mr Zoellick.

In US eyes, the same flawed approach underlies the chemicals plan and the moratorium on GM crops. In both cases, Washington says, the EU has acted on the assumption that products may pose risks, without producing any evidence that they do. That "precautionary" approach contrasts with regulation by agencies such as the US Food and Drug Administration, which claim to base their decisions on "sound science". Washington cites as proof of their wisdom that most American consumers, unlike their European counterparts, have few qualms about GM food.

European officials respond that regulatory models are as much about popular values and political cultures as about regulators' methods. They point out that in Europe, unlike the US, public confidence has been badly dented by a succession of food scares and vigorous campaigning by environmental and consumer groups against GM foods.

Those developments led a group of EU member governments in October 1998 to block further GM product authorisations until the EU tightened up its existing regulations. The upshot was two new legislative proposals: one requiring the labelling and traceability of GM foods; the other setting the threshold above which the presence of GM products in food and animal feed must be advertised on packaging.

The proposals are now in their second reading by the European parliament. If all goes well, Brussels hopes EU members will give them final approval and lift by autumn their moratorium on new GM products, 19 of which are already awaiting authorisation. An adviser to Mr Byrne yesterday put at 70-30 the odds on the legislation's being passed.

The US has not set out its precise legal arguments and may not do so for another two months. Until it does, legal experts say it is hard to assess the strength of its case. But some believe Washington is far from assured of a clear-cut victory.

"The US has a plausible case but it involves a lot of uncertainties. From what I know now, it is impossible to say what will come out," says John Jackson, a professor at Washington's Georgetown University and a leading authority on international trade law, who helped design the WTO's disputes procedures.

Predicting the outcome is all the harder because WTO rules on food safety are sketchy and largely untested. They require trade restrictions to be backed by a scientific risk assessment but allow governments to decide what level of risk is acceptable. They also permit temporary precautionary bans, though the US says the 4¸-year moratorium is much too long to qualify.

The US may also decide to challenge the EU's two proposed regulations on GM products, once they become law. It objects that they will adversely affect trade because they are costly, unworkably bureaucratic and restrictive.

However, Prof Jackson says that, to mount an effective challenge, the US would need to show that GM foods are "like products", comparable with other foods. Past experience has shown that to be a task of almost theological complexity that has often divided trade experts.

Prof Jackson says it is unreasonable to expect the WTO's disputes mechanisms to settle a dispute that should really be tackled by negotiating new rules. "The problem is that the lawmaking side of the WTO is paralysed, so governments resort to litigation. But that is risky," he says.

Washington may, of course, believe that by threatening legal action, it will eventually force the EU to seek a resolution at the bargaining table. But that could take years and would further tax already stretched US patience.

The more likely outcome is that this US-EU dispute will end up being fought over by lawyers at the WTO's Geneva headquarters, further testing their already strained relations and creating political reverberations on both sides of the Atlantic.

Whether either side will be able to claim decisive and clear-cut victory is quite another matter.

FAIR USE NOTICE: This document contains copyrighted material whose use has not been specifically authorized by the copyright owner. The International Forum on Globalization is making this article available in our efforts to advance the understanding of environmental, corporate accountability, human rights, labor rights, social justice issues, etc. We believe that this constitutes a 'fair use' of the copyrighted material as provided for in section 107 of the US Copyright Law. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use this copyrighted material for purposes of your own that go beyond 'fair use,' you must obtain permission from the copyright owner.