A review of WTO rules and GMO trade

13 April 2015

Genetically modified organisms (GMOs) continue to be hot button topic on both sides of the Atlantic and beyond. What rules govern international trade in GM food? 

Which WTO rules govern international trade in agricultural and food products containing genetically modified (GM) materials? This question is of growing interest to a number of countries facing decisions as to whether to allow GM ingredients in food supplies and to permit the cultivation of GM crops within their territory.

This article attempts to clarify the issue by discussing the variety of international trade rules that may be relevant in the case of an importing country concerned about GM foods. It is not, however, intended to provide a legal interpretation of the WTO obligations themselves.

The negotiation of the Transatlantic Trade and Investment Partnership (TTIP) could defuse some of the regulatory tensions between the EU and the US although the topic currently remains inflammatory among some consumers on both sides of the Atlantic.

Several WTO Agreements apply to GM products

The widespread commercialisation of GM products dates back only to 1996, two years after the establishment of the WTO. Accordingly the trade rules agreed in the Uruguay Round (1986-1994) did not specifically refer to such products. Nevertheless, the question of government action restricting imports of products that could harm the health of humans, animals, and plants – and by extension the environment – played a major role in the Uruguay Round negotiations.

The Sanitary and Phytosanitary (SPS) Agreement was seen as a significant step forward in this area as it defined more closely the conditions under which governments can restrict imports for health reasons, while and the Technical Barriers to Trade (TBT) Agreement dealt with technical regulations, standards, including labelling requirements, and conformity assessment. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) could also be relevant in cases where the issue of the patentability of GM products comes into question. And the basic articles of the General Agreement on Tariffs and Trade (GATT), incorporated into the WTO as the GATT-1994, that apply to all trade in goods can have fundamental implications for national GM policies.

The “like” products dilemma

The general GATT obligations provide a useful starting point for considering GM issues. A distinction needs to be made between the cultivation of GM crops in a country and the importation for sale on the domestic market of products based on those crops. Nothing in the GATT would oblige a WTO member to allow GM crops to be grown in that country.

Such cultivation bans have been in the news recently as the EU has adopted new regulations to allow individual members states to ban GM crop cultivation within their territory even when EU authorities have satisfied themselves about the safety of the crop in question. If farmers in these countries wanted to be able to grow GM crops the most they could do would be to lobby their own government. Such bans are unlikely ever to result in trade disputes; competing producers in other countries would scarcely object to such restraints even were there to be legal grounds under the WTO to do so.

The WTO rules become more directly relevant when there is trade in GM products or ingredients between countries. In the EU legislation, mentioned above, the responsibility for allowing a GM product to enter the marketing chain is with the EU institutions and not the member states. However, the EU is now reportedly reviewing its biotechnology approval process, and considering giving member states the option to ban the import of GM food within their territory.

Most trade rules are by their nature constraints on importing governments while exporting countries by contrast have fewer restrictions on their policies. So the basic rules of the GATT would apply to imports of GM products. These rules are, inter alia, that the importing country cannot give to a product of a particular supplier, if from a WTO member country, less favourable treatment than it affords to the “like” product from other suppliers. The imported product should also not be treated, once on the market, in a way that is more onerous than a domestic “like” product. Discrimination against products, say, soybeans, of some overseas suppliers could be a violation of the “most-favoured nation” clause and any extra testing or labelling of imported foods could contravene the principle of “national treatment.” Both of the fundamental tenets of the WTO present hurdles for countries banning imports of GM products or applying special conditions on the marketing of such products.   

However, though the principles are clear, the practice may be more complex. Suppose that two soybean exporting countries are competing for the same market, and that one of these sells biotech soybeans. The issue here is whether the importing country can ban those imports but still import from the non-GM supplier. Are the two types of soybeans “like products”?

The WTO, and the GATT before it, have had difficulty defining a “like product” though the phrase is found several times in GATT articles. Should the focus be on the physical nature of the product; on the extent to which products are capable of performing the same, or similar, functions in the market concerned (end-uses); on the extent to which consumers are willing to use the products to perform these functions (consumers’ tastes and habits); or of differences in tariff classification of the products? If the similarity of the nature of the product is the key then soybean oil from GM crops, for instance, may indeed be “like” – and indistinguishable from – the same product from non-GMO beans. But if the test was whether the consumers in the importing country consider the two products sufficiently different then it may be more difficult to conclude that they were indeed “like products” even if they fall under the same tariff line. A situation could also arise where the treatment of imported GM crops was materially more restrictive than of domestic non-GM competing products. In that case there remains a possibility that a panel might consider the action as a violation of the principle of national treatment.

SPS Agreement

If one gets over the hurdles of non-discrimination and national treatment the WTO also addresses the national regulations governing health and safety consequences of the importation and internal distribution of GM products. These regulations are subject to the disciplines of the WTO SPS Agreement. The agreement specifically applies to regulations designed “to protect human or animal life and health … from risks arising from additives, contaminants, toxins or disease-causing organisms in imports of food, beverages and feed stuffs” as well as “to prevent or limit other damage … from the entry, establishment or spread of pests,” (SPS Agreement, Annex A, paragraph 1). A regulation banning or limiting imports of GM corn or soybeans, for example, could be covered by this agreement if it were enacted to protect human health or limit damage from the establishment of pests. [1]

This would, however, still then have to comply with the other conditions of the SPS Agreement. The most important of these is the requirement that the measure be “based on scientific principles and is not maintained without sufficient scientific evidence” (SPS Agreement, Article 2). There is also provision in Article 5, paragraph 7 that allows provisional restrictions in cases where scientific evidence is “insufficient.” In these cases the country issuing the regulation has an obligation to “seek to obtain the additional information” necessary to apply the objective assessment of risk.

One way that such a condition can be satisfied is to base import regulations on multilateral standards. The SPS Agreement specifically encourages the use of standards set by the Codex Alimentarius Commission (CODEX), a body jointly managed by the UN Food and Agriculture Organization (FAO) and the World Health Organization (WHO), geared towards setting international food standards, guidelines, and codes of practice related to the safety of international food trade. CODEX has established a task force to consider the problems associated with risk assessment in the case of GM foods. [2]

The CODEX task force, however, has yet to come up with a set of standards for GM products that is acceptable to the major governments involved. And even if it were to do so it is not clear how many countries would choose to follow proposed CODEX standards. Therefore, in the absence of an international GM risk assessment standard, restrictions on imports of GM products or material if not based on risk assessment and backed up by scientific evidence would be vulnerable to challenge at the global trade arbiter.

Labelling GMO products

Once a product is imported into a country its distribution will be subject to local regulations. In particular, sellers of GM products may be required to attach a label to inform consumers. The WTO oversight of labelling regulations largely falls within the scope of the TBT Agreement. [3] Each country can decide whether to require voluntary or mandatory labelling of GM food but the labels must then comply with the provisions of the TBT Agreement. In particular, a measure requiring mandatory labelling should have a legitimate objective, and not be more trade-restrictive than necessary to fulfil that objective.

The labelling of GM products in the EU has caused some consternation in the US and Canada, who see this as a way of giving credibility to those who are opponents of biotechnology, but no WTO case has yet focused on this issue. And the situation is made more complicated by movements in several US states that have considered their own GM labelling requirements.

CODEX has also been grappling with the question of whether to adopt international standards for the labelling of GM foods through its Committee on Food Labelling. To date there has been a fundamental disagreement within CODEX as to whether voluntary or mandatory labelling is the appropriate response by governments in this area.

WTO dispute on biotech products

There has been one trade dispute within the WTO where several of these issues were adjudicated. The US complained in 2003 that the EU system of approval of biotech products was so slow that it amounted to a moratorium. In addition the US complained about “safeguard measures” taken by several member states to prohibit the importation and marketing of these products. It was joined in the case against the EU by Argentina and Canada.

At that time some member states had introduced national GM cultivation bans on grounds of assessed risks to human health or the environment. These temporary bans, which had to be periodically extended, nevertheless ran against the views of the European Food Safety Agency (EFSA). Moreover, although these national bans targeted cultivation rather than importation, bitter divisions between member states on the subject allegedly contributed to the slow approval process for biotech products to be placed on the EU’s single market.

The complaint listed several provisions of the SPS Agreement that were seen to be relevant. A WTO panel found that the EU had indeed imposed a de facto moratorium on most of the biotech product applications pending at the time of the complaint. The panel found that the moratorium was not covered under the SPS as an action taken on the basis of a risk assessment and that the approval process itself had not been completed without “undue delay” as required.

In addition, the member state safeguards were not justified as a temporary restriction necessitated by the lack of sufficient evidence, and had not been implemented on the basis of a risk assessment as required by Article 5 of the SPS Agreement. [4] The panel report was adopted in November 2006. The EU subsequently moved several products through the approval process but the US still considers the backlog unacceptable.

However, although the panel clarified the obligation of governments to move applications at a reasonable pace through approval processes, it did not settle some of the more fundamental GM-related issues. The panel report does not address the question as to whether GM and non-GM products are considered “like” in WTO rules. Nor did the panel report clarify whether existing EU GMO regulations themselves were consistent with the obligations under the SPS Agreement. And the panel avoided any statements that might indicate whether GM products were safe. Moreover, other trade-related biotech issues that have now emerged since the ruling have to do with the requirements for segregation of GM and non-GM crops, the tolerance levels for “adventitious presence” of GM materials, and the costs of testing for traces of GM products, all may be an open question where WTO judges are concerned.

Choice of two paths?

In practical terms, importers of GM ingredients are left with a choice between two competing paths. One path is predicated on the fact that scientific evidence has yet to show any deleterious effect on human health from consumption of GM foods. The accidental release of GM material may pose some problems for the environment or                                                                                                                 for other types of farming, such as organic production, but a ban on imports may not be deemed the least trade-disruptive response. Labelling on a voluntary basis allows consumers to be aware of the method of production if they are indeed interested.

The other path is that of “precaution” based on the notion that scientific evidence is as yet inadequate to be certain of the long run impacts of GM products. This view considers that strict regulation of imports and mandatory labelling is needed and that restrictions on domestic production are warranted until the safety and environmental issues become clear. This latter strategy could survive WTO challenges if carefully designed but the regulations themselves would need to be consistent with the SPS and TBT Agreements.

Hopefully some rapprochement between these two different approaches will become possible in the near future. The negotiation of the Transatlantic Trade and Investment Partnership (TTIP) could defuse some of the regulatory tensions between the EU and the US although the topic currently remains inflammatory among some consumers on both sides of the Atlantic. Any such regulatory progress, however, would be to the significant benefit of countries still in the process of developing their own regulatory framework in this area.

Tim Josling, Senior Fellow at the Freeman Spogli Institute for International Studies, Stanford University. Josling is also a member of the E15Initiative Expert Group on Agriculture and Food Security, as well as the Task Force on Subsidies.

[1] One might have to establish that the potential risks associated with the GM product came under the heading of “additives, contaminants, toxins or disease-causing organisms.” Presumably the exporting country would have to make the case that the SPS Agreement was the relevant yardstick in this case. Thus the issue of whether GM import regulations come under the purview of the SPS or the TBT Agreement is still a matter of contention in the WTO.  

[2] The other two international standard-setting bodies, the World Organisation for Animal Health (OIE) and the International Plant Protection Convention (IPPC) have both established working groups on GM issues, but have not emerged with specific standards.

[3] A health label regulation, however, would be covered by the SPS Agreement.

[4] The EU argument that scientific evidence was unavailable was somewhat undermined by the fact that the European Food Safety Authority had found that GM products did not pose a significant risk to human or plant health.  

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