U.S.-European Agricultural Trade:
Food Safety and Biotechnology Issues

Charles E. Hanrahan
Senior Specialist in Agricultural Policy
Environment and Natural Resources Policy

October 21, 1998

98-861 ENR

Summary The European Union (EU) is the second largest market for U.S. agricultural exports. The EU's ban on meat produced using growth-promoting hormones is a food safety issue that has been particularly contentious in U.S.-EU agricultural trade relations. EU policy on bio-engineered products has also been an issue. A World Trade Organization dispute settlement panel has ruled that the ban contravenes the EU's international obligations under the WTO, but left open the option to the EU to conduct a risk assessment of hormone-treated meat. Rules governing trade in bio-engineered products may become an issue in WTO agricultural trade negotiations scheduled to begin in 1999. This report will be updated as events warrant.

 

The European Union, whose food and agricultural imports from the United States were $8.8 billion in 1997, is the United States' second largest market for U.S. farm products. Soybeans, which benefit from a zero-tariff binding that dates from the Kennedy Round of multilateral trade negotiations in the 1960s and from an EU-wide ban on the use of meat-and-bone meal in livestock feeding, are the leading export. The United States maintains an agricultural trade surplus with the EU; 1997 U.S. agricultural exports to the EU exceeded imports from the EU by almost $2 billion Although the EU is a key market for U.S. farm products, its relative importance has declined. In 1982, the share of total U.S. farm exports going to the EU was just over 30%; for the past 3 years, it has held steady at 15%. The EU's decline reflects rapid growth of farm exports to other markets, notably Canada, Mexico, and East Asia. The EU is the leading U.S. export market for soybeans, corn by-products (corn gluten feed), almonds, dried fruit, wine and tobacco.

U.S.- EU agricultural trade has been affected by differences in measures adopted to protect human, animal and plant health. Such food safety measures are ostensibly adopted to protect the health or safety of domestic consumers or of domestic livestock, fish, and crops, but they can also be used as trade barriers. The Uruguay Round/world Trade Organization Agreement (WTO) on Sanitary and Phytosanitary (SPS) Measures establishes rules for the application of such measures in agricultural trade. The SPS Agreement requires that measures be applied only to the extent necessary to protect health and that they be based on scientific principles and on assessment of risk. The Agreement encourages countries to base their SPS measures on international standards and to recognize each others' standards (equivalency) as long as they achieve the same degree of protection. Disputes between WTO members over the requirements of the SPS agreement fall under WTO dispute settlement procedures, which were strengthened as part of the Uruguay Round to make procedures more expeditious and decisions more binding.

The EU's ban on meat produced using growth-promoting hormones is an SPS issue that has been particularly contentious in U.S.-EU agricultural trade relations. EU policy on bio-engineered products (products made from genetically modified organisms or GMOs) has also been an issue in U.S.- EU agricultural trade. If restrictions on bioengineered products are justified on the basis of food safety concerns, then the provisions of the WTO's SPS Agreement would apply. There is, however, no specific WTO agreement on rules and disciplines for bioengineered products in international trade. The issue of establishing new rules and disciplines for such products appears likely to be on the agenda of forthcoming multilateral agricultural trade negotiations expected to begin in 1999.

 

Meat Hormones

Background

Since 1989, the EU has banned imports of meats produced with growth-promoting hormones. The import ban is the international counterpart of internal EU regulations that ban use of hormones in meat production. The U.S. Department of Agriculture (USDA) estimates that the ban costs the United States around $200 million annually in lost exports, mainly of beef The EU justifies the ban as needed to ensure food safety and consumer health. Although entirely unrelated to hormone use, concern about "mad cow disease" or BSE (bovine spongiform encephalopathy), a disease of cattle shown to be transmissible to humans, has created a climate in Europe that is unfavorable to resolving the meat hormone issue. The United States challenged the ban in World Trade Organization dispute settlement, arguing that it violated the Uruguay Round Sanitary and Phytosanitary Agreement. The WTO panel deliberating the U.S. challenge ruled in August of 1997 that the ban violated provisions of the SPS agreement in that it was not based on scientific evidence nor was it based on an assessment of the risk to health posed by meat treated with hormones. The EU appealed the ruling and on January 16, 1998, the Appellate Body of the WTO found that the EU ban contravened the EU's obligations under the SPS agreement, but the panel decision left open the option to the EU to conduct a risk assessment of hormone-treated meat. A WTO arbitration panel has ruled that the EU has 15 months from the date of the appellate decision to implement the panel decision.

 

U.S. Perspectives

The United States wants the ban lifted immediately while the EU conducts its new risk assessment and has proposed a time limit often months for completing it. U.S. meat producers and exporters are concerned about the continuing loss of the EU as an export market for meat, especially beef Scientific studies of the hormones approved for use in the United States have found that they pose no risk to human health. Studies carried out under the auspices of the EU Commission reach the same conclusion. U.S. meat producers and exporters see the hormone ban as a disguised barrier to market access rather than a measure to protect human health. They see it as an effort by EU policymakers to protect a livestock sector that produces unmarketable surpluses from competition from more efficient U.S. producers. U.S. trade negotiators are concerned that other countries' night adopt policies and legislation with respect to meat imports that are similar to those of the EU.

 

EU Perspectives

The EU plans to keep the ban in place while it conducts its risk assessment. EU member governments are under considerable political pressure from consumer and environmental groups to maintain the ban. Many livestock producers in EU member countries support the ban as well. Following completion of its newest risk assessment, the EU will have to decide whether to implement the WTO panel decision by withdrawing or modifying the ban or to negotiate compensation to the U.S. for its lost export sales. Vocal opposition in the EU to ending the ban may increase the likelihood of the latter response.

 

Bio-engineered Products

Background

Crops produced from genetically modified organisms (GMOs) are rapidly being introduced into U.S. agriculture. More than 20 bio-engineered crops are now sold commercially and others are being developed. Among those introduced are herbicide-, insect-, and disease-resistant hybrids and varieties, mainly of soybeans and corn. Europe has been slower to accept and introduce genetically modified crops, although the European Union has approved genetically modified varieties of soybeans and corn--Monsanto's Roundup Ready soybeans and Novartis's BT corn. (Monsanto's soybean variety is resistant to the herbicide Roundup. BT corn contains a gene that gives the plant resistance to the corn borer.) Although the EU Council of Ministers has approved three new bioengineered corn varieties that were cultivated in the United States in 1997, France has blocked the use, including importation, of these corn varieties.

 

EU Perspectives

The biotechnology issue is affected by the widespread concern among consumers in the EU about the quality and safety of the foods they consume. Some observers believe that official handling of the BSE (bovine spongiform encephalopathy) or "mad cow disease" crisis has undermined the public's confidence in scientific assurances and exacerbated consumer concerns about food safety. The environmental group, Greenpeace, has been particulary vocal in protesting the use of products made from GMOs. It argues that the long-term effects of GMOs on health and the environment are unknown and that products made from GMOs should bear cautionary labels to inform consumers about their contents. Views espoused by Greenpeace are widely shared by organized consumer groups throughout the EU.

 

U.S. Perspectives

U.S. officials and scientists counter that the effects of GMOs are neither unknown nor deleterious because of the rigorous approval process these products must undergo before being released. Furthermore, they hold, products made from GMO crops approved in the United States are as healthy and safe for consumers as like products containing no GMOs. Three main issues have dominated U.S.- EU discussions of GMOs --segregating GMO crops, the approval process for GMOs, and labeling food products as to their GMO content.

Segregation. The EU's Commissioner for Agriculture, Franz Fischler, argued initially that products processed using GMOs not only be so identified, but also that genetically altered crops should be segregated from other, non-GMO crops in order to maintain their identity from field to the consumer. The United States opposed this idea vigorously, threatening to take the EU into WTO dispute settlement if it were to require segregation of GMO crops. It would be impractical, according to the U.S. view, for U.S. farmers to distinguish bio-engineered crops from others at harvest time and the costs of doing so would be high. European food manufacturers also generally opposed the idea of segregating GMO from non-GMO crops because, they argued, it would raise their processing costs. Last summer, the Commission decided not to require segregation and that aspect of the GMO issue appears to have been laid to rest for the time being.

 

Approval. U.S. concerns about the approval process for introducing GMO crops into EU agriculture are that it is both slow and unclear. The Commission of the EU has been working on an approval and regulatory framework for GMOs for at least 2 years. The Commission's role is not only to decide on the introduction of GMOs into EU agriculture, but also to regulate their use both in cultivation and in food processing as well. Roundup Ready soybeans and BT corn were approved in 1996. Even after the approvals there were delays in actually introducing the crops into EU agriculture. For example, France, which had earlier requested the approval for BT corn, prohibited its sale until November 1997. Austria and Luxembourg continue to prohibit the use of GMO crops. Most recently the approval by the EU Council of Ministers of three new varieties of GMO corn after months of delay has been blocked by France, threatening the loss, according to the U.S. Department of Agriculture (USDA), of an estimated $220 million of corn exports to Spain and Portugal this year. while accepting the EU's position that scientific review of GMOs is a necessary part of the approval process, U.S. officials express the view that the roles of the various scientific committees established to advise the Commission on GMOs and other food safety or biotechnology matters are unclear. Rather than speed up the approval process and make it more comprehensible, U.S. officials say, the committees have contributed to delay and appear to operate in an ad hoc manner.

 

Labeling. The EU argues that labeling of GMOs is needed to respond to consumer desires for information about the food products they consume. The United States, on the other hand, has opposed mandatory labeling on grounds similar to its opposition to segregation: based on available scientific evidence, food products made from GMOs approved for cultivation pose no threat to human, animal or plant health, and therefore should not need special labels.

The EU has approved a plan that requires labeling of food products determined through testing to contain genetically modified organisms. Food processors in the EU will be required to perform mandatory DNA or other laboratory tests to determine the GMO content of products. The Council of Ministers dropped a proposed mandatory label saying that a product "may contain" GMOs. The labeling requirements apply only to products processed from genetically modified corn or soybeans. The approved plan calls also for drawing up a list of products that are made from GMO corn or soybeans whose DNA is lost during processing. The Council approved the labeling plan despite arguments by U.S. food manufacturers as well as small European food processors that the testing requirements will be too costly. The new regulations do not include any proposals to segregate GMO from non-GMO crops.

The labeling plan is likely to affect most food products sold in Europe. The European Commission estimates that up to 60% of food products manufactured in Europe contain soybeans. About 15% of the U.S. soybean crop goes to the EU. U.S. officials have noted possible technical difficulties in implementing a labeling scheme based on DNA testing: the absence of standardized tests for detecting DNA or protein derived from genetic modification; the cost and time involved in DNA testing; and the difficulty of adapting tests as more crops are developed through genetic modification.

GMOs in Future Trade Negotiations. Once the next round of multilateral trade negotiations on agriculture (expected to begin in 1999) gets underway, rules for trade in biotechnology products are likely to be on the agenda. Work on such rules is already under way in several international venues. The Organization for Economic Cooperation and Development (OECD) has been working on a project for the harmonization of technical rules for trade in biotechnology products. In the Asia Pacific Economic Cooperation (APEC) forum, the United States is conducting risk assessment workshops for developing Asian countries, and promoting a science-based approach to biotechnology trade in the APEC region. The Codex Mimentarius, the international organization that develops and recommends standards for food products, is preparing draft standards for labeling biotechnology products. U.S. trade policy officials indicate that in the next WTO round, they will also be seeking greater clarity and transparency in the rules that govern biotechnology trade.