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6-Regulation: A trade battle that will cost US dear

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TITLE:  A Trade Battle That Will Cost US Dear
SOURCE: Financial Times, UK, by David Victor and Ford Runge
DATE:   May 15, 2003

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A Trade Battle That Will Cost US Dear

America's farm lobbyists have long been pressing their government to
launch a formal trade dispute against the European Union's ban on
genetically modified crops. This week they got their way, as the US and
more than a dozen allies started proceedings within the World Trade

For US farmers - the world's top planters of GM crops - the case is a
welcome chance to crack open a lucrative market. But the case may
ultimately do their country more harm than good.

Now is a particularly bad time to embark on a dispute that will inflame
anti-Americanism in Europe. In the broader, already deteriorating
relationship with continental Europe, the US has much more important
issues at stake, notably reviving the Doha round on trade and mending
diplomatic relationships strained by the Iraq war. Moreover, a close look
at the options reveals that each of the plausible outcomes from a dispute
would leave the US worse off than before.

First, the US could pay the political costs of launching an inflammatory
dispute and then lose. Most press accounts compare this case with one of
the first disputes ever handled by the WTO: the EU's ban on beef that had
been produced using hormones. The EU lost because its ban had no basis in
science and in "comparable" areas of food policy it had adopted much less
strict rules - a telltale sign that the ban was a protectionist gambit.

On the surface, the cases appear similar. Although the science on the
health risks of GM food is contested, essentially all the credible
evidence shows that these foods are safe, which would seem to indict the
EU ban. But in critical ways the cases differ. Across the board, the EU
is tightening food safety regulations in ways that seem irrational by
standard cost/benefit tests but, crucially, are broadly non-
discriminatory and consistent - the key tests for whether a trade ban is
legitimate. Moreover, the GM ban is a temporary measure - unlike the
permanent ban on beef hormones - and trade rules allow more flexibility
for countries that implement temporary measures when they can claim the
science is uncertain.

Second, the EU could change its rules in the middle of the dispute. For
several years, EU bureaucrats have been designing a new set of standards
that would "reopen" Europe's markets to GM foods if traders complied with
onerous tracing and labelling requirements. This shift would make it
harder for the US to win because trade laws are tolerant of labels that
allow consumers to make the final choice. While the US might respond by
dropping the suit, it would be more likely to redirect the dispute
against the tracing and labelling rules. In the past, hotly contested
trade disputes have usually taken on a myopic life of their own. Each
side digs in and the political damage spreads.

Third is the most likely (and worst) outcome: the US could win. The
victory would be Pyrrhic because the issues are fundamentally ones of
morality and technology - they must be settled in the courts of consumer
opinion. On this score, the beef hormones case is instructive. Even
today, hormone-treated beef is no more able to find European consumers
than it was before the US won its case; and the years of legal wrangling
have led to counter-sanctions that have harmed a wide variety of
unrelated products and industries. The antagonism over GM foods appears
to be unfolding in much the same way.

A better strategy would have been to stay the course that US policy has
followed ever since the controversy over GM crops broke out in the late
1990s. Time is on America's side because the technology is already
proving itself in the marketplace and European opponents will find
themselves increasingly isolated.

But now that Washington has pulled the trigger, what can be done? The
greatest danger is that both sides of the Atlantic slide into a tit-for-
tat retaliation. But a trade war will cause untold harm to an alliance
already in stress and make it harder to rejuvenate the soggy world
economy. Cooler heads must prevail.

In Europe, the critical need is to reform the moratorium on GM foods.
Frustration over its inability to get the import ban lifted is what
pushed Washington to this desperate act. In the US, serious movement in
Europe must be seized as pretence to rescind the WTO case before the
antagonisms of hearings, judgment, appeal and retaliation unfold. --
David Victor is director of the programme on energy and sustainable
development at Stanford University and a senior fellow at the Council on
Foreign Relations. Ford Runge is a professor of applied economics and law
at the University of Minnesota

                                  PART II
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TITLE:  Faith in the food - America jumps the gun on GM
SOURCE: The Guardian, UK, Leader,3604,955423,00.html
DATE:   May 14, 2003

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Faith in the food
America jumps the gun on GM

The US government's decision to file a complaint with the World Trade
Organisation over the European Union's moratorium on genetically modified
food leaves a bad taste in the mouth. This long-running dispute over the
right of American firms like Monsanto to sell GM grain and seed in Europe
is slowly but surely becoming a trade war. It did not have to come to
this. Europeans are wary of the benefits of GM food. Many are yet to be
convinced the environment will be unharmed. And recent food scares have
made the public rightly sensitive to new, apparently untested technologies.

In responding to these concerns, European member states have come up with
varying responses - but they boil down to the same thing: no commercial
GM crop growing and a moratorium on licensing new GM foodstuffs. These
can be lifted when new laws to label GM food, now wending their way
through Brussels, are passed. There are still issues to be sorted there
but, rather than wait for the European legislation to be passed, American
farmers, who claim to be losing $300m in lost sales every year, have
stirred the White House into action. This at a time when relations
between Washington and Brussels are tense over trade thanks to a series
of punch-ups.

Europe is an economic power. The rules governing its continent-sized
market mean its actions have global implications. Zambia refused GM food
aid during a drought because its president worried about its future corn
exports to the EU. China has halted licensing new GM crops. The US sees
lucrative markets in the developing world disappearing. This is America's
problem rather than Europe's, but the continent's consumers must have
faith in the food they buy and eat. Governments need to respond to
voters' legitimate worries. It is George Bush's right to take his
concerns to the WTO. But America could lose even if it wins - because
getting GM food into Europe does not mean people will buy it.