Genetically Modified Organisms (GMOs):  
A Transatlantic Trade Dispute

 Lisa Oladotter Sandblom
May 18, 2000

CD 690/691
MACD PROJECT
Monterey Institute of International Studies

Advisor:
Professor Brian Russell 

This paper was researched and written to fulfill the M.A. project requirement for completing the Monterey Institute of International Studies’ Master of Arts in Commercial Diplomacy. It was not commissioned by any government or other organization. The views and analysis presented are those of the student alone.  

For more information about the Commercial Diplomacy program and the M.A. project requirement, please visit www.commercialdiplomacy.org.

Senario 
Executive Summary
Introduction  
Background
Analytical Section:    
                       Commercial Analysis
                       Political Analysis (EU)
                       Political Analysis (U.S.)          
                       Legal Analysis                                                                 

Strategy Section:
                        Recommendation
                        EU Strategy   
                        U.S. Strategy

Bibliography

Appendix I:     Directive 90/220/EEC on the deliberate release into the environment of genetically modified organisms and Commission implementing measures   
 
Appendix II:   Regulation (EC) No. 258/97 (Novel Foods Regulation
 
Appendix III:  Regulation (EC) No. 1139/98 concerning the compulsory indication of the labelling of certain foodstuffs produced from genetically modified organisms
  
Appendix IV:  24^th Session Codex Alimentarius Commission: Report of the First Codex Ad Hoc Intergovernmental Task Force on Foods Derived from Biotechnology
 
Appendix V:   Bill H.R. 3377 - Genetically Engineered Food Right to Know Act summary and list of co–sponsors

For the purpose of this project, I fictitiously assume the role of policy advisor to Mr. David Byrne, EU Commissioner for Health and Consumer Protection (Directorate-General 24). 

The first portion of the project includes a background section and several short analytical papers that examine the political, commercial, and legal aspects of the U.S.-EU dispute over GM products.  The second half of the project provides a recommendation and strategy for addressing the U.S.-EU dispute over trade in GMOs.

Issue 

In June 1999, the EU Council of Ministers decided to impose tougher, highly burdensome risk assessment requirements on all products that contain genetically modified organisms (GMOs)—requirements such as comprehensive labelling, thorough monitoring of products once they have been put on the market, and renewed approvals for all products after they have been on the market for 10 years. The practical effect of the regulations is that of a moratorium on the import of GMOs. 

As the world’s largest producer and exporter of GMOs, the U.S. is very concerned about the long-term effects of this de facto moratorium.  The U.S. agricultural industry has argued that the EU’s restrictive policy on biotechnology products is nothing but an attempt to protect its own agricultural industry.  Already, the EU’s ban on GMOs is said to be costing U.S. corn farmers some $200 million annually in lost sales, and the U.S. has threatened to take the EU before the WTO dispute settlement body if the issue is not soon resolved.  

Background 

A “genetically modified organism, " or GMO, is a living organism, the genetic material of which has been permanently altered through gene technology (i.e., altered in a way that does not occur naturally by multiplication and/or natural recombination). 

Since its introduction to the market in 1992, genetically engineered material has become a common ingredient in many foods sold and produced in the U.S.  However, because growing and marketing GM food products are largely unregulated activities in the U.S., most Americans have not, until recently, been aware of GMOs and, until recently, there has been little or no U.S. opposition to the sale of such products without special labels. 

In the EU, on the other hand, public protests against GMOs have been loud, powerful, and sometimes even violent, and EU officials have responded by imposing strict risk assessment requirements on GM products. However, because not enough scientific tests have been conducted to prove that GMOs are indeed harmful to human, animal and/or environmental health, the EU has relied heavily on the "precautionary principle " to defend these regulations. It is this "safety first " approach to GMO regulation, as well as the EU’s failure to establish a transparent and timely regulatory system, that the U.S. has threatened to challenge within the WTO.

Recommendation & Strategy 

Thanks to the Biosafety Protocol to the Convention on Biological Diversity (which was finalized in Montreal earlier this year), issues surrounding the release of GMOs into the environment (e.g., seed plantings) have already found a forum.   

In order to ensure that European consumers retain their choice as to whether or not to consume GM food products, however, the European Commission should seek an agreement with the U.S. concerning mandatory labelling requirements and use of the precautionary principle.

High-tech electronic data protection, beef, bananas"the EU and the U.S. have been caught up in a near-record number of trade disputes in recent months. These disputes, however, would likely all fade into triviality if a transatlantic trade war were to erupt over the issue of agricultural products that are derived from or contain genetically modified organisms (GMOs). 

Indeed, European consumers have vehemently opposed the unregulated release of GMOs into EU markets, and in response, EU legislators have taken actions that effectively ban the import of goods made with genetically modified ingredients. The result has been a major disruption in U.S.-EU agricultural trade flows that, in June last year, prompted the U.S. government to threaten to challenge the current EU regulations within the WTO. The specific areas of contention include the EU’s: 

• mandatory labelling requirement for products that contain more than 1% genetically altered ingredients,

• time-limited product authorizations, and

• non-transparent regulations for GM product approvals.

The U.S. biotechnology industry, as well as the U.S. government, has charged that the EU’s product approval process for GM products is subjected to delays due to political considerations rather than only legitimate health or safety concerns. In the words of U.S. Trade Representative Charlene Barshefsky, the EU’s procedures for approving GMOs involve a "highly politicized, opaque regulatory process " that has fostered "consumer fear about food safety. "[1]

EU Concerns Over Food Safety 

While the American public’s response to GMOs has been relatively subdued, the European response has been extremely emotional. Many Europeans are strongly opposed to any kind of genetic tampering, and a recent survey revealed that only half of all Europeans find it morally acceptable to apply biotechnology to food.[2] Europe’s recent string of health scares due to food contaminants (e.g. mad cow disease and dioxin contamination) has only helped further heighten concerns over food safety. And widespread, even violent protests against "Frankenstein Foods " have ensured that the GMO issue gets media and public attention.

The EU’s Regulatory Regime for GM Products 

Under current EU legislation, a genetically modified food can only be placed on the market after it has been scientifically evaluated in accordance with the latest scientific knowledge and found to be safe for human health and the environment.  In cases where the scientific evidence is insufficient, inconclusive, or uncertain, protective measures are adopted on the basis of the "precautionary principle, " which is found in Article 5.7 of the WTO Agreement on Sanitary and Phytosanitary Measures.   

The EU has also imposed labeling requirements on GM foods—a position that EU Commissioner for Health and Consumer Protection David Byrne recently reaffirmed stating that the right to information is "key" to the development of a civil responsibility. "[3] Europeans have consistently called for clear, unambiguous labeling—not so much for safety reasons, but in order to enable consumers to make informed choices.  

The EU has also taken action to ensure that international trade rules support their position on GMOs. The European Commission recently issued a communication that seeks to better define the precautionary principle and to clarify the conditions for its use by answering when and how it should be applied to protect the public[4]—a move the U.S. industry fears would reopen and possibly weaken the SPS Agreement. In negotiating the Biosafety Protocol, the EU succeeded in establishing 1) mandatory labelling requirements for all living modified organisms meant for release into the environment and 2) the precautionary principle as a legitimate basis for a country’s decision to refuse to accept imports of such organisms.[5]

The Importance of GMO’s within the U.S. Economy 

With an export value of more than $50 billion yearly, agricultural products represent a crucially important sector of the U.S. economy, and GM crops play a large role within the sector—they currently make up almost 40% of all corn, 45% of all soybeans, and 50% of all cotton produced in the U.S. It has been estimated that U.S. corn producers alone are losing some $200 million/year in corn exports due to the EU’s refusal to permit imports of genetically modified corn.[6]

Genetic modification entails the permanent alteration of a species’ genetic code (DNA) through laboratory methods that cannot be duplicated by way of natural reproductive means.  So far, this process has been applied, primarily, to agricultural crops to improve their resistance to disease, pesticides, and herbicides, to enhance nutritional content, and to increase yields.  Corn, soybeans, cotton, and potatoes are among the bio-engineered products that are already on the market. More extreme examples of current transgenic research include the transfer of certain fish genes into strawberries and tomatoes to make them frost-resistant, and the development of fruits and vegetables that are able to produce their own pesticides at the appropriate time of the growing cycle. 

So far, more than 4,500 genetically modified plants have been tested, and the U.S. Department of Agriculture (USDA) has approved 50 varieties of crops that have been engineered to resist insects, herbicides, or plant viruses, including 13 kinds of corn, 11 types of tomatoes, and 4 varieties of soybeans.[7]  Genetically modified crops account for almost 40% of all corn currently produced in the U.S., 45% of all soybeans, and 50% of all cotton. Together these represent more than three-fourths of all genetically modified crops in the world.   

Most biotechnology researchers see genetic engineering technologies as a major scientific advancement.  They, along with many agricultural producers, point to the potential of GMOs to revolutionize current methods of food production and to help preserve the world’s natural resources.  Officials at the United Nations World Food Program have estimated that up to 40% of the world’s crops are destroyed by pests or other environmental circumstances prior to harvest.[8]  GMOs offer the promise of substantially improving crop yields. 

For large biotechnology companies such as the U.S.-based companies Monsanto and Dupont, and the Swiss-based company Novartis, the rapid increase in the development of GM technology has signaled the beginning of a new and tremendously profitable era.  Sales of GM seeds have risen in value from $75 million in 1995 to $1.5 billion in 1998, and the crops they produce are by now commonly found in a variety of different foods ranging from chips, beer, and milkshakes to breakfast cereals, muffin mixes, and infant soy formulas.[9]  

Nonetheless, because few scientific studies have been conducted, there is not yet proof that genetically engineered foods are either safe or harmful for human consumption, and this has left many consumer groups highly concerned about GM foods’ potential to cause harm"either to the environment or to those who consume the foods. There is concern that GM foods could produce unknown allergens, increased levels of naturally occurring toxic substances, or decreased levels of nutrition. Certain religious groups are further worried about the possibility that genes from foods they are forbidden to eat might be spliced into fruits and vegetables. There is also great concern over the ethical ramifications of large-scale bio-engineering, particularly in Europe where the memory of Nazi abuse of science during World War II has left many people terrified of any kind of genetic manipulation—even in plants.[10] 

U.S. Policy & Opinion on GM Foods 

In the United States, growing and marketing GM foods are largely unregulated activities. A company that wants to grow a bio-engineered product need only 1) report its intent to raise a GM crop to the USDA; 2) provide an assurance that the product is safe; and 3) report any problems or negative research results in connection with the product in question.  Since the U.S. government considers GM components in foods as mere additives, the Food and Drug Administration is not required to approve them prior to sale to consumers. Moreover, labels are not required to indicate whether a food contains GM materials because U.S. policy only requires labels to indicate ingredients that change the nutritional content of a food or could cause allergies.  

Several large biotechnology companies have argued that any change in U.S. policy would be extremely costly and harmful to the profitability of U.S. grain growers. Under current production methods, they assert, segregation of genetically modified and conventional, identity-preserved, crops is almost impossible. Accordingly, many within the U.S. agricultural industry have insisted on promptly resolving the U.S.-EU dispute based on scientific principles as stipulated by the WTO Agreement on Sanitary and Phytosanitary Measures (SPS Agreement).  This would mean taking the EU before the WTO dispute settlement body rather than attempting to resolve the problem through bilateral negotiations. 

Other U.S. companies, however, have become concerned that customers may be switching away from products that may contain GMOs (such as corn and soybeans) to products that have not been genetically altered (e.g. peas and tapioca), and these companies have voluntarily changed their policies on GMOs. Archer Daniels Midland Company, for example, has recommended that its suppliers develop ways to segregate conventional from modified grains in order to meet increased foreign demand for non-GM products.[11]   

While the National Corn Growers Association and other producer groups have strongly criticized ADM’s position (and ADM has subsequently softened its stance), recent comments by U.S. Secretary of Agriculture Dan Glickman indicate that U.S. policy towards GM foods could be following ADM’s lead and bending to consumer pressure. In July 1999, Glickman told U.S. producers that they may have to consider labeling in order to ensure access to foreign markets that require complete disclosure of GM content.[12] 

As for Congress, some senators and representatives have actively lobbied the U.S. Administration to push the EU to, at the very least, complete the regulatory process for corn and soy products that have already passed the EU’s scientific review process and are due for approval.[13]  Other members, however, has introduced mandatory labelling legislation.

EU Policy & Opinion on GM Foods 

Establishing a common EU position concerning the cultivation and use of GMOs has been difficult, largely because food safety is an area in which individual nation-states continue to fiercely guard their right to regulate. Nonetheless, public opposition to “Frankenstein foods " has been mounting for more than two years, especially in France and Britain. Farmers who have agreed to participate in government-run test plantings of GM seeds have seen their fields invaded and destroyed, and on August 12, 1999, a McDonald’s restaurant in Millau, France, was ransacked.  Several major political parties and prominent citizens, including Paul McCartney and Prince Charles, have aligned themselves with environmental advocacy groups that strongly oppose GMOs.   

In short, national governments in the EU have come under tremendous pressure to impose tight restrictions on GM products, and accordingly, the EU began in 1998 to require foods to be labelled if they contain protein or DNA as a result of genetic modification.[14] EU member states are also required to regulate the release of GMOs into the environment in order to minimize their potentially harmful effects. (So far, only 18 GMOs have been authorized for experimental growth in the EU since 1990, and in the past two years, each of the four new applications were rejected.[15)  Moreover, in response to demands by France, Greece, Austria, Denmark, and Luxembourg, the EU recently established what amounts to a de facto moratorium on new GMO approvals until 2002;[16] the EU has imposed regulations that involve tougher risk assessments, more comprehensive labelling and monitoring of products once they are on the market, and re-approval of GM foods after they have been on the market for 10 years.[17]  

Individual EU countries have also taken action to contain GMOs. In Britain, Prime Minister Tony Blair, a strong proponent of GM foods himself, has yielded to public pressure, and food

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