France, the United States, and the Biotechnology Dispute

The United States has on several occasions voiced serious concern over the European Union’s restrictive regime for the marketing of Genetically Modified Organisms (GMO). These expressions of concern have met a cold reception in Europe, where food safety is, after repeated outbreaks of BSE (“mad-cow disease”), a politically sensitive issue. Although the US has so far refrained from lodging a formal complaint at the WTO, the potential for a nasty transatlantic trade dispute is clear.

At the heart of the dispute is an issue of market access. American and Swiss companies, which have gotten a head start in the application of biotechnology to agriculture, have seen their access to the EU’s market severely restricted by a regulatory regime that has failed to clear any new GMO for more than two years. Although EU measures have so far had only a limited impact on US corn and soybean exports, growth opportunities might be significantly affected in the future.

Seen from the US perspective, the EU’s failure to approve the marketing of GMOs that are considered harmless in the United States tops a long list of European restrictive trade practices in agriculture. Indeed, a similar conflict was sparked a little more than a decade ago when the EU decided to ban the use of growth-promoting hormones in beef cattle and to prohibit the import of hormone-treated animals or meat. The US took the case to the WTO’s dispute-settlement procedure in 1995, arguing that the EU’s decision was in violation of the newly signed agreement on Sanitary and Phytosanitary Standards (SPS). A WTO panel ruled against the EU in August 1997, and the ruling, which the EU appealed, was confirmed by the Appellate Body in 1998. The EU then refused to comply, prompting the US to retaliate in May 1999 with punitive tariffs on $116 million worth of EU exports, including foie gras, Roquefort cheese, and other delicacies. The choice of target products reflected American suspicions that France, which had taken an intransigent position during the Uruguay Round’s agricultural negotiations, had played an instrumental role in the EU’s decision on beef. In Europe, by contrast, the WTO ruling and subsequent US sanctions were resented as attempts to force the extra-territorial adoption of American regulatory norms.

Regulatory differences

How wide are transatlantic regulatory differences? The EU has failed to document major health or environmental risks associated with the use of either growth-promoting hormones or genetically-modified seeds, but has defended its position by reference to the so-called “precautionary principle”. In the wording of the 1990 Bergen declaration (its first official pronouncement) the precautionary principle states that

“Where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation.”

The precautionary principle was restated in the Rio Declaration (which the United States did not ratify) and in the recent Montreal Biosafety Protocol (which the United States signed). According to the EU, it allows national authorities to restrict the marketing of potentially dangerous products even when scientific evidence is inconclusive. But the WTO’s Dispute-Settlement Body (DSB) has made it clear in a number of recent rulings that restrictive measures ought to be based on a risk assessment. In other words, the precautionary principle does not mean that public concerns about health or environmental risks are, by themselves, sufficient to justify restrictive measures.

Another source of misunderstanding and friction lies in the different views that Europeans and Americans hold of what ought to be regulated. US regulation of biotechnology is based on the premise that if, as a product, a GMO is not fundamentally different from its conventional relative, it does not require specific regulatory treatment. By contrast, the EU’s regulatory process, dubbed “90/220” after a 1990 Directive, is based on the premise that even if the final products (genetically modified or conventional) are very similar in their physical attributes, different production processes require distinct regulatory treatment. This choice of process-based regulation again raises potential WTO-consistency questions, as one of the overarching principles of the multilateral trading system is that “like” products should be treated alike, irrespective of how they were produced.

Yet the gap between regulatory approaches across the Atlantic is arguably not as wide as it looks. First, a large part of the United States’ own environmental regulation is based on the precautionary principle; for instance, the US Congress stated in 1977 that the EPA’s duty was to “assess risks rather than wait for proof of actual harm”.

Second, if the EU did choose, unlike the US, to subject biotechnology products to specific regulation, the methods and principles of risk assessment underlying its clearance process were not fundamentally different from those used in the US. Nor was its regime meant to be, at the outset, more stringent than the American one. Rather, it evolved that way, for reasons that were primarily political.

The French Position on GMOs

How political is the EU’s biotechnology regulatory process? In 1999, James Murphy, Assistant USTR, charged that

“in practice, the 90/220 process has proven to be susceptible to political interference, non-transparent and virtually endless in duration. Scientific reviews that take months in the US are measured in years under 90/220. Member states have increasingly acted outside of the 90/220 procedures, most recently just last month when the original sponsoring member state for two GMO varieties of cotton failed to vote in favor of final EU approval because of concerns outside the 90/220 process.”

The “original sponsoring member state” alluded to is France, whose role is important to assess given its traditional sensitivity to agricultural issues. As it turns out, the government of Prime Minister Juppé was in the early 1990s one of the strongest supporters of agricultural biotechnology in the EU. It saw France, with its strong agri-food industry, as a potential beneficiary of the new technology. Backed by the seed industry and the main farmers’ union, the Agriculture ministry decided in 1996 to approve the sale of insect-resistant (bt) maize, but Environment ministry concerns led the prime minister to ban its cultivation. Paris’ cautiously positive stand found no echo in other European capitals, however, and at the June 1997 European Council meeting, France found itself alone voting in favor of the marketing of bt maize.

Meanwhile, the Juppé government had been topped by a Socialist-Green coalition which announced its GMO policy in a November 1997 press conference. In a delicate balancing act, the new government, stressing its adherence to the precautionary principle, pledged to promote the adoption of labeling schemes at the EU level. At the same time, it dismissed the environmental risks motivating the previous government’s decision to ban the cultivation of bt maize and announced its intention to clear it. This decision was bitterly attacked by the Greens who claimed that it violated a January 1997 campaign agreement to freeze all new GMO approvals, and a wave of protests followed, in which militants of José Bové’s radical farmers’ union destroyed stocks of transgenic seeds. In spite of growing protests, the government maintained its position, issuing formal clearance for Novartis’ bt maize in February 1998 and announcing in July that it would also clear Agrevo’s and Monsanto’s competing products.

A key turning point occurred when the Conseil d’Etat (France’s highest administrative court), petitioned by Greenpeace in March 1998, decided in September to open a case, arguing that there had been insufficient scientific review of health risks. On December 4, it referred the case to the European Court of Justice, which ruled in November 1999 that the approval of GMOs was a matter of “joint competence” with the European Union, potentially invalidating all the decisions taken unilaterally by the French government (including the clearance of bt maize). Meanwhile, making good its earlier pledge, the French government represented by its Environment Minister Dominique Voynet sided at the European Council’s June 1999 meeting with Denmark, Greece, Italy and Luxembourg to demand mandatory labeling of GMOs. It also asked for a moratorium on new GMO approval pending agreement on the labeling scheme, which was finally adopted eighteen months later.

Two features stand out of this brief account of France’s shifting position on the GMO question. First, the initial approach was more favorable to the sale than to the cultivation of GM products, whereas the contrary would be expected if the policy’s objective was protectionist. Second, the seed industry’s association and FNSEA, the main farmers’ union, who would have been the putative beneficiaries of a policy designed to keep out US-made seeds and foodstuffs, were fairly passive; as a matter of fact, both maintained, throughout the debate, a cautiously positive stand on GMOs. Most of the anti-GMO pressure came from environmentalists, consumer groups and, following their lead, food retailers. (This also applied to Britain, where agricultural and industrial interests sided with the government in favor of GMOs.)

Thus, the fault line between pro- and anti-GMO sectors of French public opinion and policy-making spheres was not the one that would be expected if the policy’s trade aspects were central. In addition, as US soybean is a largely non-competing import (soybean production is marginal in the EU), there was little desire in Paris or elsewhere to keep it out for protectionist purposes. If there was an economic rationale behind the EU’s reluctance to clear GMOs, it had to do rather with a widespread feeling that, given the Common Agricultural Policy’s reliance on output controls to contain budget costs, productivity-enhancing innovations were the last thing Europe’s agriculture needed. In sum, although the fact that the companies which stood to suffer most from stringent regulations were non-EU ones undoubtedly made it easier to ignore the cost of forgone business opportunities, it is fair to say that the evidence in support of a protectionist “conspiracy theory” is less than compelling.

Instead, the cautious approach of European politicians on GMOs is the legacy of two major public-health scandals, both of which broke out in the mid-1990s: the contaminated-blood affair in France and BSE in England and later in the rest of Europe. In both cases, government officials were seen issuing hollow reassurances and postponing action in the face of mounting evidence of health risks. This resulted in a violent public-opinion backlash and, in France, in an unprecedented series of high-level criminal prosecutions, some of which led to jail sentences. Both events have contributed to make European politicians and regulators extremely risk-averse–in a way, more like their American counterparts. Paradoxically, it is precisely this behavioral convergence that is portent of friction, as risk-averse systems on both sides of the Atlantic over-react, with increasing frequency, to idiosyncratic events like BSE (or the Three-Mile Island accident in America). Preventing these regulatory crises, which often have trade implications, from spinning out of control will require mutual trust and cooperation, both of which were conspicuously absent in the disputes over hormone treated beef and GMOs.

Olivier Cadot is Professor of Economics and International Business at the University of Lausanne, Switzerland, and a Senior Research Fellow at INSEAD.

David Vogel is a professor in the Haas School of Business and the Department of Political Science at the University of California at Berkeley. During the academic year 2000-2001, he holds the the Novartis Professorship of Management and the Environment at INSEAD.