Trade: The GM gamble

Date: 17/05/03

The United States challenges Europe's block on genetically modified food

AMERICA has made no secret of its growing annoyance with the European Union's attitude to genetically modified (GM) crops. With many European consumers revolted by the thought of “Frankenstein foods”, the EU has refused to approve any GM products since 1998. The Americans consider this moratorium illegal under the rules of the World Trade Organisation (WTO); for months they have been threatening to bring a formal WTO complaint. Even so, the launch of such a complaint on May 13th came as a surprise, not least because of the risks it creates for already fragile world trade talks.

The WTO's rules allow countries to regulate imports of crops and foods on health or environmental grounds. However, any restraints must be based on “sufficient scientific evidence”, and there must be no “undue delay”. America contends that Europe's go-slow does not meet these conditions. Indeed, its trade wallahs point out that EU officials have themselves called the moratorium “illegal and unjustified”.

The EU's inaction is costing American farmers, the world's biggest planters of GM crops, several hundred million dollars' worth of potential exports to Europe a year. The Americans also worry that the anti-GM stance is contagious. Last year, despite widespread starvation, several southern African countries refused American food aid for fear that GM crops would infiltrate their own crops and jeopardise exports to Europe. China also invokes Europe's attitude to justify its go-slow on commercialising new GM crops.

Nor is America alone. Canada, Argentina and Egypt have joined the WTO complaint, and nine other countries have registered their support. Some of these countries, probably not coincidentally, are keen to negotiate bilateral trade agreements with the United States.

The timing of the complaint is still curious. There are signs that Europe is at last shifting. New rules on how to label and trace GM products are making their way through the European Parliament. Once they are in force, European officials claim, the moratorium will be lifted. The Americans, having heard such promises before, are sceptical. But the WTO case may make the politics of lifting the ban harder.

More surprising still, the Americans have launched their complaint only a month before big decisions are due on the reform of the EU's common agricultural Policy (CAP). The European Commission is pushing for far-reaching changes, including a separation of the financial support farmers receive from the amount they produce. This is essential to Europe's ability to liberalise its farm trade, which in turn is a prerequisite for keeping the Doha round of trade talks alive. Yet reform is being fiercely resisted by some EU countries, notably France, a staunch opponent of GM food. Infuriating the French over GM food will hardly help CAP reform. Given America's oft-proclaimed commitment to the Doha round, what has prompted it to launch its complaint now?

Domestic political pressure, for one thing. Farm-belt politicians have been shouting that the administration must take the EU to task. For some in the administration, a post-Iraq desire to annoy the French may also play a role. On top of this, there may be a desire to hit back at Europe's behaviour in other trade disputes. Last week, the Europeans upped the ante in a row over America's foreign-sales corporation tax, in which the WTO has already ruled in Europe's favour. The EU announced a list of products on which it might slap tariffs if the Americans do not fix their WTO-illegal practices. The Europeans set a deadline of January 1st 2004, by when they want America's tax code to be put right.

The Americans may also be gambling that the complaint will strengthen their hand in the Doha talks. According to Gary Hufbauer, of the Institute for International Economics, a Washington think-tank, the Bush administration may be keen to get a WTO ruling in its favour on GM food, so that the issue can be taken into the Doha negotiations. Against that, there is a more alarming possibility: that America has given up hope of CAP reform this year, and hence (at least for now) of any progress in the Doha round. Had the Americans thought there was a serious chance of meaningful farm reform in Europe, thinks Mr Hufbauer, they would have delayed their GM complaint.

The risks stretch further than the Doha round. The GM case threatens to overload the WTO's legal framework. Although the Americans are convinced that they have a clear-cut case, European officials are adamant that the EU has acted within the rules. Independent experts say that the case could go either way. The WTO's rules are too woolly and subject to competing interpretations to deal with scientifically complicated and politically explosive issues. Even if America wins, the EU might ignore the ruling if ordinary Europeans maintain their rejection of GM food. If America loses, domestic opponents of the country's WTO membership may gain in strength. The WTO's credibility, and its rules-based system, would lose either way. That, more than anything else, is why America's decision to launch the case is a high-stakes gamble.

The US challenges Europe's block on genetically modified food.

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