Compensation seen as key to deal on beef

Date: 25/03/1999

By Simon Taylor

THE European Commission is likely to seek member states' approval for a compensation deal aimed at averting a second trade war with the US over the Union's ban on imports of hormone-treated beef.

Commission officials are discussing a possible compensation package with Wash-ington. Hopes of a deal have been boosted by US top farm trade negotiator Peter Scher's remarks this week that this would be acceptable to his administration, although he stressed that it would have to be coupled with a commitment from Union governments to lift the ban later this year.

The Commission believes that compensating US firms for lost sales would be the best way to placate Washington, but fierce arguments have already erupted over precisely how much would be offered. EU governments have also made it clear that they will not consider easing the ban until they have firm evidence that hormone-treated beef is safe.

Washington's decision to publish a list of €825-million worth of European exports which could face sanctions in the row over beef has fuelled concern about the increasingly aggressive tactics being used by the US in its trade disputes with the Union. It comes hot on the heels of steps to implement sanctions on €490-million worth of EU goods in the battle over bananas.

However, officials acknowledge that there is a key difference between the two disputes. In the banana row, the Union insists its import regime complies with world trade rules and US moves towards imposing sanctions are illegal. But in the battle over beef the EU has already admitted that it will not be ready to comply with the World Trade Organisation's ruling on the issue by the 13 May deadline.

However, there has been a notably mixed reaction to the US government's latest move. While the Commission's trade spokesman said it was "a procedural step which the US is entitled to take", his agriculture counterpart warned that Washington's action would make negotiating a deal more difficult. "Threats of excessive retaliation do not help to create a climate which is conducive to finding a mutually acceptable solution," he said.

The EU acknowledges that it will have to find some way of satisfying the US demands. Given that governments are unlikely to let American beef into the Union, amid increasing consumer fears about food safety in the wake of the BSE crisis, compensation would seem the most likely option.

The WTO ruled last year that the EU must provide scientific evidence to justify claims about health risks from hormone-treated beef by 13 May. But scientists will not produce findings until the end of this year.

The US list published this week consists mainly of agricultural products including beef, pigmeat and poultry, processed tomatoes, fruit and vegetables, but also includes a number of industrial products such as motorcycles, hair clippers, yarn and chocolate.