Source: http://worldcityweb.com/home/MIA/publications/magazine/12/15/

Food fight

by Jeffrey Sparshott

You may not realize it, but almost 90 percent of all soybeans, 80 percent of corn and more than half of all cotton planted in the United States last year were genetically modified, often to resist pesticides or pests. The health and environment implications are somewhat uncertain – and largely ignored in the United States – but the international trade ramifications are not.

Corn and soybeans are the top two U.S. crops, and exports of the commodities are vital sources of income for farmers who produce more than the country can consume. Corn exports in 2005 were worth $5 billion and soybeans $6.3 billion, according to WORLDCITY analysis of U.S. Census Bureau trade data for the year.

But the largest single market in the world, the European Union, has been partially closed to genetically modified crops. Europeans coined the derisive term “Frankenfoods” to underscore their distrust. Consumers are worried about the health and environmental implications of introducing such crops into the food chain, and politicians are perhaps aware that regulatory barriers are an effective way to protect their farmers.

Thus, Eurocrats in 1998 imposed a moratorium on biotech foods, keeping new crops from being planted or imported, and consumer products from incorporating genetically modified ingredients. Because most grains are not segregated – biotech is usually mixed with non-biotech – the moratorium has affected entire commodities. The ban also had a chilling effect on some countries worried that they would be shut out of the European market if they imported U.S. crops or seed stocks.

The United States, the world’s biggest producer of biotech crops since they were commercially introduced in 1996, has chafed at the moratorium. The Bush administration, joined by Argentina and Canada, in 2003 went to the World Trade Organization charging that the de facto ban on new biotech products was not scientifically based and therefore violated WTO rules.

Victory – of sorts

In February, following the most protracted hearings ever at the WTO, the Bush administration won a preliminary ruling, according to U.S. government sources. The decision, not made public but described by officials, is likely to hold when the final ruling is issued – probably in April.

But the ruling, if it holds up through an appeals process, may not represent a clearcut victory for U.S. farmers. The European Union introduced new rules on biotech crops and lifted the moratorium after the United States filed its case. Last year and this, the 25-nation bloc approved a handful of genetically modified products for its market. The new E.U. rules were not considered in the preliminary ruling by the World Trade Organization.

Europe says it now complies with WTO guidelines on all fronts.

“In the E.U., GMOs [genetically modified organisms] can only be placed on the market after having undergone a stringent sciencebased risk assessment on a case-by-case basis. This approach is fully in line with international standards,” said a European memo dated Feb. 7.

If that line of argument fails, the European Union may simply refuse to change its system and pay the consequences. That is the strategy adopted after the WTO ruled in 1997 that E.U. regulations on hormone-fed beef violated global trade rules. The United States has since imposed about $116 million a year in punitive duties on European products.

Still, the latest WTO ruling may send a signal to other countries that biotech crops are internationally acceptable. That would be a win for U.S. companies like Monsanto and Dow Chemical Co., which engineer and sell the seeds. And it would ease the way for U.S. growers to export their products to countries that had hesitated to buy biotech crops.

It may also set the stage for a second case. Europe’s new rules mandate that genetically modified ingredients in food and feed must be labeled as such, and they must be traced through the food chain. An estimated 75 percent of processed food sold in the United States contains ingredients derived from genetically modified crops, according to the Pew Initiative on Food and Biotechnology. Those products would fall under the burdensome E.U. regulations and face highly skeptical European consumers.

“We’re not at the end of this road yet but the report is a significant milestone,” said a U.S. trade official, who asked not to be named.