U.S.-EU Trade Dispute over Genetically Modified Crops

1. U.S.-EU Trade Dispute over Genetically Modified Crops Presenters: Julia Perez Melendez David Nelson David Olave-Delgado Dr. Malawer ITRN 630

2. Key Points • The Issue 2. U.S. Perspective 3. E.U Perspective 4. Panel findings and challenges ahead

3. The Issue • In May 2003, the United States (US), Canada and Argentina initiated a WTO dispute settlement process against the European Union (EU), citing an alleged de facto moratorium on approvals of biotechnology products, as well as the existence of individual Member State (Austria, Luxembourg and Italy) marketing and import prohibitions on previously approved biotechnology products. According to these countries these prohibitions were not scientifically justified and thus contrary to WTO rules.

4. US Perspective Outline of U.S. legal argument-3 parts: The EC instituted a: • General Moratorium-violates the SPS Agreement-Core of the dispute • Product-Specific Moratoria-violates the SPS Agreement • EC Member State Measures- violate the SPS Agreement • U.S. claims the same violations of the SPS Agreement in each of the three parts. US only challenges the provisions in the SPS The Institute for Agriculture and Trade Policy

5. US Perspective • The European Community (EC) has a moratorium on the import of genetically modified organisms (GMO’s) which is inconsistent with the EC’s obligations under the WTO Agreement • US believes the objective of the EC measures is the protection of human health, not environmental protection, and therefore they violate the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS).

6. US PerspectiveSanitary and Phytosanitary Agreement (SPS) • Must have a scientific justification. When existing scientific evidence is insufficient, members may adopt measures on the basis of available information, but must obtain additional information to objectively ground their assessment of risk within a reasonable period of time. • The SPS Agreement permits countries to protect public health within their borders so long as they do so in a manner that restricts trade as little as possible. • The US does not object to the EC maintaining an approval system for biotech products –but the procedures under that system must be undertaken and completed “without undue delay.” Source: Center for International Development, HarvardUniversity

7. US Perspective—Economic Impact • Why Important?-- Impact on American Agriculture • 68 percent of total global acreage planted are biotechnology crops. • 167 million acres world-wide • US-world's largest producer of biotechnology crops-accounts for nearly 2/3’s of all biotechnology crops • European Union is the fourth largest market for U.S. agricultural products Heritage Foundation Pew Initiative on Food and Biotechnology

8. US Perspective—Economic Impact • US soybean and soy meal exports have steadily declined over the last ten years because of a decline of competitiveness of US agriculture on the global market. • The trends in EU maize imports show that US farmers are no longer low-cost producers and are less and less able to compete with emerging countries such as Brazil or Argentina on global commodity markets.

9. Legal Issues-Overview • The existence of a moratorium is a violation of the SPS rules against “undue delay” in SPS agreement approval procedures. • Failure to notify the moratorium as an SPS “measure” is a violation of SPS agreement rules on transparency of rule-making and notification of domestic SPS measures to the WTO SPS committee. • The EC failed to publish risk assessments on the likelihood of harm resulting from biotech products, as required by article 5.1. • The alleged moratoria are maintained without “sufficient scientific evidence” in violation of article 2.2. • By regulating biotech products, such as genetically engineered seeds, more strictly than biotech processing agents, such as enzymes used in food manufacturing, the EC violates article 5.5, which seeks to ensure that WTO members apply SPS measures indiscriminately to domestic and imported products “in comparable situations.” The Institute for Agriculture and Trade Policy

10. Violations of SPS • Products effected by the EC moratorium have been positively assessed by the EC’s own scientific committees-No scientific basis for its moratorium on approvals • If the EC has scientific questions about biotechnology, those questions should be addressed within the context of the EC’s own approval system, and in a manner consistent with its WTO obligations, just like they did before prior to October 1998. USTR Oral Statement to WTO DSU Panel

11. Evidence of a Moratorium • Up to October 1998, the EC approved more than ten biotech products. • After October 1998, the EC suspended approval procedures. In particular, the EC suspended consideration of applications for, or granting of, approval of biotech products under the EC approval system. • No biotech product moved to final approval stage from October 1998 through August 2003. USTR Oral Statement to WTO DSU Panel

12. Evidence of a Moratorium • Moratorium was not in a transparent manner. Not published in any official journal or otherwise officially documented. • Nonetheless, the moratorium is widely-recognized, including numerous references to it by leading EC officials. USTR Oral Statement to WTO DSU Panel

13. Evidence of a Moratorium-Casual Statements? • High-Level, EC Officials referencing moratorium: • 06/99,Council Meeting of EC- Environment Ministers of Denmark, Greece, France, Italy and Luxembourg issued a Declaration stating: “regarding the growing and placing on the market of genetically modified organisms… they will take steps to have any new authorisations for growing and placing on the market suspended.” • 07/00, European Environment Commissioner Margot Wallström- publicly admitted the existence of a “moratorium,” calling it “illegal and not justified.” • 06/00 European Commissioner for Health and Consumer Protection, David Byrne stated that the reluctance of member States to approve GMO products “has resulted in a complete standstill in the current authorisations and a de facto moratorium on the commercial release of GMOs.” USTR Oral Statement to WTO DSU Panel

14. Evidence of a Moratorium-Casual Statements? • High-Level, EC Officials referencing moratorium: • 11/00- A EC Commission Working Document states “the current authorization procedure for commercial release of GMOs…has ground to a standstill.” • 07/01- EC Commission Press Release states that the adoption of new legislative proposals “will contribute towards the lifting of the de facto moratorium on the commercial release of GMOs.” • 10/01- EC Commission internal working paper states that“[t]his reluctance to go forward with authorizations of GMOs has resulted in a de facto moratorium on the marketing of new GMOs” • 02/03 David Byrne “we must lift the moratorium.” USTR Oral Statement to WTO DSU Panel

15. US Perspective • Even if there is a moratorium, it is not a “measure” under the SPS Agreement • Paragraph 1 of Annex A states: • Measures includeall relevant laws, decrees, regulations, requirements and procedures. The use of the word “include” indicates that the Agreement covers more than just the identified types of measures, and should be read to include other measures that may not fit squarely within the illustrative list. USTR Oral Statement to WTO DSU Panel

16. US’s Concerns w/ EU Process • The US appears not to like the EU authorization process, which feels is too rigid, because it takes longer to approve a GMO in Europe than in the US. • The US believes that GMOs that are considered to be safe in the US should be de facto deemed to be safe for the rest of the world. • US opposes GMO traceability rules because it considers that they constitute an obstacle to US commodity exports, despite the fact that US traders can in fact meet those requirements without difficulties. • US is opposed to labeling rules for food products produced from GMOs, even though these rules are designed to help ensure that customers are well-informed about what they are buying.

17. European Community Defense • Precautionary Principle- A ‘better-safe-than-sorry’ philosophy of regulation that has assumed the status of regional law within the EC. • Cartagena Protocol- to protect biological diversity from the potential risks posed by GMO’s. EC contends should be applicable because it has a more ‘specific’ scope. EC wants to use the Cartagena Protocol to interpret WTO provisions. • US-Not a party to Protocol-Only WTO regulations apply. • EC duties under other international treaties do not negate EC obligations to the WTO. *Washington Legal Foundation

18. European Community Defense • The European Union stands by their belief that delays are not “undue,” but provisional, and are the result of incomplete information pertaining to risk assessments. • They claim that no moratorium exists, citing that no official communication to this effect has ever been made.

19. European Community Defense • The European Union stands by their belief that delays are not “undue,” but provisional, and are the result of incomplete information pertaining to risk assessments. • They claim that no moratorium exists, citing that no official communication to this effect has ever been made.

20. European Community Defense • The EU believes that every country has the sovereign right to make its own decisions on GMOs in accordance with the values of its society. • It is the legitimate right of developing countries’ governments to fix their own level of protection and to take the decisions they deem appropriate to prevent unintentional dissemination of GM seeds. • This right is fully recognized in international agreements such as the Cartagena Protocol on Biosafety which the EU considers to be the key international agreement governing the transboundary movements of GMOs. • The Cartagena Protocol on Biosafety provides an international forum for the international governance of GMOs. • Over 130 countries actively participate in the Cartagena Protocol on Biosafety. The US, Canada and Argentina have refused to ratify it. • The EU considers that major GMO producers such as the US should adopt a co-operative approach to the development of a sound international legal framework for these products.

21. European Community Defense--Regulatory Framework • Provides strict monitoring of GM products after their initial release to market through the implementation of mandatory labeling and traceability rules. • EU feels this form of regulatory oversight is crucial in addressing any potential failure of the regulatory system, such as those that have been experienced in the US in the recent past when non-approved GMOs such as Starlink GM maize, or Bt 10 GM maize entered the US food chain.

22. EU & GMOs • The EU has no ban on safe GMOs. • GMOs can only be placed on the market after having undergone a stringent science-based risk assessment on a case by case basis. • This procedure is in compliance with international standards, especially with the Cartagena Protocol on Biosafety as well as with the relevant Guidelines adopted by the Codex Alimentarius Commission in 2003 and by the International Conventional on Plant Protection.

23. EU & GMOs • Over 30 GMOs or derived food and feed products have been approved for marketing in the EU. • In January 2006, the EU granted approvals to three new GM maize products after a rigorous safety assessment. • The EU is one of the largest importers of GMOs and derived food and feed. • The EU is the largest soybean and soy meal importer and the fact is that soy imports consist largely of Monsanto “Round-Up Ready” soybean, which is cultivated in all the main soybean global producers, i.e. the US, Brazil and Argentina. • The claim that the there is a moratorium on approval of GM products in Europe is self-evidently untrue.

24. EU Approval Process • EU approval process may appear to be lengthy for some countries which adopt a more relaxed attitude towards food and environmental safety issues. • The longer times to assess the safety of GMOs in the EU are due to the complexity of the science involved as well as to delays incurred by biotech companies to provide suitable data demonstrating the safety of the products.

25. Need for Regulatory Oversight of GM Technology • Scientists around the world are in general agreement that GMOs are not entirely unsafe, but that they need to be tested/assessed on a case by case basis before marketing to ensure the safety of the environment, & human/animal health needs. • This methodology is supported by World Health Organization, the Codex Alimentarius, the FAO or the OECD.

26. DISPUTE SETTLEMENT BODY FINDINGS AND CHALLENGES AHEAD • Request for Consultations: 13 May 2003 • Request for the establishment of a Panel: 7 August 2003 • DSB establishes single panel: 29 August 2003 • Director General composes Panel: March 4, 2004 • Chairman of the Panel informs the DSB that it would not be able to complete its work in six months • Chairman of the Panel informs the DSB that its final report would come by the end of March, 2005. Delay wasdue to the parties’ common request for additional time to prepare rebuttals and Panel’s decision to seek scientific and technical advise. • Panel delays its final report to June 2005, October 2005, December 2005 and March 2006 • Panel Report: 29 September 2006* • DSB adopts panel reports: 21 November 2006 *= Interim report announced to the media in February, 2006

27. DSB—The Case • Some of the issues which the panel DID NOT examine: • Whether biotech products are safe or not • Whether biotech products in the dispute are “like” their conventional counterparts • The conclusions of the relevant EC scientific committees regarding the safety evaluation of specific biotech products…the panel sought advice from a number of scientific experts

28. DSB—The Case • Issues which the panel DID examine • Whether the EC approval legislation under which the EC allegedly did not reach final decision is properly assessed under the SPS Agreement • FOUND: • EC procedures set out for the approval of GMOs are SPS measures withinthe meaning of the SPS Agreement. • The potential risks to be examined are the types of risks covered by the SPS agreement. • The procedures for the approval are, in part, SPS measures within the Agreement

29. DSB—The Case • However… • Many of the identified concerns are highly unlikely to occur in practice…(We) reiterate, the right to use the measure is NOT in question • Moratorium between Oct. 1998 and Aug. 2003 • The Panel determined that the moratorium was not itself an SPS measure within the meaning of the SPS Agreement, but rather affected the operation and application of the EC approval procedures, which are set out in the relevant EC approval legislation and which we had found to be SPS measures. (This) resulted in a failure to complete individual procedures without undue delay and hence gave rise to an inconsistency with Article 8 and Annex C of the SPS Agreement

30. DSB—The Case • The panel found that there was undue delay in the completion of the approval procedure with respect to 24 of the 27 relevant products…the European Communities has breached its obligations under Article 8 and Annex C of the SPS Agreement. • EC Member States: • the Panel has concluded that each of the safeguard measures taken by the relevant member States (Austria, Belgium, France, Germany, Italy and Luxembourg) fails to meet the obligations of the European Communities under the SPS Agreement.

31. DSB—The Settlement • At the DSB meeting on 19 December 2006, the European Communities announced its intention to implement the recommendations and rulings of the DSB in a manner consistent with its WTO obligations. However, due to the complexity and sensitivity of the issues involved, the European Communities would need a reasonable period of time for implementation. • On 21 June 2007, the (parts) notified the DSB that they had agreed that the reasonable period of time for the European Communities to implement the recommendations and rulings of the DSB shall be twelve months from the date of the adoption of the panel reports. Accordingly, the reasonable period of time expires on 21 November 2007.

32. GMOs in the EU—Challenges ahead • EU states block 'safe' GM crops • “Resistance to genetically modified crops in Europe was underlined yesterday when European Union governments rejected an attempt to force Hungary to lift a ban on them. Last year, ministers permitted Austria to maintain a ban on the same product, MON810…The EU claims it has ended the moratorium that was deemed illegal by Geneva, but in practice no new crops have been approved for cultivation since. Only a handful can be grown and not many more imported for animal feed and processing, amid continuing suspicion among the public. (February 21, 2007—Financial Times)

33. GMOs in the EUChallenges ahead • You say 'potato,' but I say 'no way‘ • (AMFLORA) ''You would think that this approval would have been easy since this potato has no seeds, no wild relatives to cross with in Europe, and only industrial use,'' said Ralf-Michael Schmidt, vice president of BASF. ''But it didn't turn out that way.'‘…If the approval process for industrial Amflora has proved a challenge…the road will certainly be far more arduous for other planned genetically modified crops, since they do involve plants intended for food or animal feed. ''That will be a much tougher sell” • Polls by the European Commission have shown that 80 percent to 90 percent of Europeans distrust genetically modified plants. ''We can authorize as many crops as we want but the bigger problem is to convince people they are safe,'' spokeswoman for the European Commission's Environment Directorate. (July 21, 2007--The International Herald Tribune)

34. GMOs in the EUChallenges ahead • In EU, front lines in a global war over food • ''All political parties are opposed to GMOs, which is odd because we disagree on everything else,'' said Theodore Koliopanos, a legislator and former deputy environment minister (of Greece). • ''We think we have a good policy, but we have discovered extreme reluctance among consumers and many member states to move forward with GMOs,'' said Barbara Helfferich, spokeswoman for the EU's Environment Directorate. (The International Herald Tribune, May 25, 2006)

35. GMOs in the EUChallenges ahead • EU warned GM ban could hit food costs • "Concerning soya beans and soya meal, the EU imports vast volumes of these feed products, which could be difficult to replace by alternative protein-rich feed. Only 10-20 per cent of imports could be replaced by substitutes.” • "My view is that sooner or later the whole issue of GM will have to be considered, hopefully in a non-hysterical atmosphere. Erecting more regulatory hurdles is the last thing we need." Kevin Hawkins, the director of the British Retail Consortium (The Scotsman--July 10, 2007 )

36. GMOs in the EUChallenges ahead NGOs • Greenpeace • “"Ministers took a bold decision today in defence of the environ-ment and in line with European public opinion," (refering to Hungary Ban) • “approving Amflora would make ''a mockery of EU law,'' • Friends of the Earth • ''The EU policy of just pushing forward with the technology is utter blindness…Genetic contamination is unavoidable and irreversible and will only increase over time.” "The World Trade Organisation with its secretive decision-making processes is unfit to decide what we should eat or what farmers should grow...a new global trading system is needed that protects people and the environment from the worst excesses of industry.”

37. GMOs in the EUChallenges ahead • BIOTECH COMPANIES: • Europabio • ''The EU has put systems in place to deal with GMOs and now the market has to be allowed to operate…If member states are breaking EU law, we expect the commission to take action.'‘ • Industry groups argue that products should not even be labeled as GMO or GMO-free, as the EU proposes, because such labels are an unfair trade barrier

38. GMOs in the EUChallenges ahead • CONSUMERS • 54 percent of people in the 25-nation EU see food biotechnology as a safety concern. A series of high-profile food scares has spooked Europeans, and they don't particularly trust their relatively new Europe-wide food safety authority. (Consumer choice and 'Frankenstein foods‘, Christian Science Monitor, February 13, 2006)

39. SUMMARY • In May 2003, the US, supported by Canada and Argentina, launched a WTO case against the EU concerning the EU authorization process for GMOs. • Three complainants publicly argue that the WTO case is straightforward and clear, the panel spent a number of years to reach final conclusions on the dispute. • Against the arguments of all three complainants, the WTO panel agreed with the EU that it would be unwise to rule on such a complex topic without hearing the views of scientists. • The panel eventually decided to gather the views of independent and highly reputable scientists from different parts of the world, including Europe and America. • That consultation process confirmed the legitimacy of the health and environmental issues addressed in EU regulations and procedures. • It also acknowledge the illegitimacy of the “moratorium” and ruled for it to be lifted.

40. CONCLUSIONS • GMOs approval in the EU will take many more years to develop, despite of the WTO ruling • As time passes and studies on biotech food become more available, it is likely that the perceptions of the consumers in the EU will change. Economics will also play an important role in helping shape the opinion of EU consumers • Both NGOs and Biotech industries need to develop responsible approaches to find workable solutions • There is room for modernization in the WTO DSB

41. References • Center For International Development, Harvard University. Global Trade Negotiations Home Page. Sanitary and Phytosanitary Measures and Technical Barriers to Trade Summary. Accessed at http://www.cid.harvard.edu/cidtrade/issues/spstbt.html. Accessed on 10/3/2007. • Fitzgerald, Sara. Putting the EU in Its Place: Why Filing a GMO Case with the WTO Is Crucial. 1/21/2003. The Heritage Foundation. • IATP. U.S. vs. EC Biotech Products Case, WTO Dispute Backgrounder. 2005. Institute for Agriculture and Trade Policy, Trade and Global Governance Program. • Kogan, Lawrence. WTO Ruling on Biotech Foods Addresses Precautionary Principle. 12/08/2006. Washington Legal Foundation. • Oral Statement of the United States to the WTO DSU Panel, First Panel Meeting. 6/02/2004. • Sindico, Francesco. The GMO Dispute before the WTO: Legal Implications for the Trade and Environment Debate. 11/2005. Social Science Research Network Electronic Paper Collection: http://ssrn.com/abstract=655061