Canada: Will WTO Decision On European Biotech Crop Regulatory Approval Open Up European Market?

Last Updated: March 23 2006

Article by Cliff Sosnow, ©2006, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on International Trade, March 2006

When the lens used by many to view this WTO dispute is shorn of the dark emotions of fear and hostility to biotech crops, the actual issues examined by the panel are relatively straightforward.

Over the last decade, the accumulated global biotech crop area has grown in size to an amount that is 20 times the total land area of the United Kingdom or, to put it another way, to almost half the total land area in China.

The recognized mega-producers – the leaders – of biotech crop production in the world are the United States, followed by Argentina, Brazil, Canada and China. While farmers in these countries and in other countries have consistently increased their plantings of biotech crops by double-digit growth rates every year since biotech crops were first commercialized in 1996, farmers in the leading producer countries have looked at the European Union (EU) as a walled fortress with very few and, for all intents and purposes, closed or heavily-guarded gates preventing biotech crop access to, or production in, countries in the EU. For example, in 1998, what was once an average CAD 185 million a year in trade for Canola in the EU had dwindled by 2003 to a mere CAD 1.5 million.

The key to growing a currently estimated USD 44 billion biotech crop industry to a projected USD 210 billion behemoth in the coming years is developing country approval to permit their farmers to grow biotech crops currently in use and in development. And the key to that approval may reside deep in the bowels of a just-released, confidential, interim-WTO panel report on the EU’s biotech crops approval process and whether that process complies with the WTO’s Sanitary and Phytosanitary (SPS) Agreement.

The WTO Issues A Ruling

In a 1,000 plus page decision of dense legal reasoning, a WTO panel looked at the failure of the EU, as alleged by the United States, Canada and Argentina, to make final decisions on the approval of biotech products from October 1998 to the time of the establishment of the WTO panel in August 2003; and the WTO-consistency of prohibitions imposed by certain EU member states regarding specific biotech products even after these products had been approved by the EU for European-wide marketing. The EU has had legislation since 1990 on the regulatory approval of biotech products (commonly referred to as genetically modified organisms or GMOs) and up until about 1998 had authorized the commercial release of nine biotech crops. That changed in the late 1990s when Austria, France, Germany, Greece, Italy and Luxembourg banned imports of biotech crops into, and the marketing of the products in, these countries even though the EU had given previous regulatory approval for such products. When coupled with allegations by the complaining countries that the EU regulatory authorities have been effectively “sitting on” applications for regulatory approval of 27 new biotech crops, it is not difficult to appreciate the complexity of the dispute and why it has taken almost three years for a panel to issue its interim ruling. Understandable, too, are the enormous political pressures impinging on this dispute.

The Ruling Has Been A Source Of Deep Anxiety

After all, it wasn’t that long ago that Europeans suffered one shock after another to their food safety regulatory systems. Everything from mad cow disease to the outbreak of foot and mouth disease to scientific musings about the carcinogenic effects of consuming beef from cows treated with growth hormones and antibiotics have left Europeans extremely concerned about their food safety and mistrustful of government regulatory systems. And politicians in Europe, like politicians elsewhere, have tried to be responsive to those concerns. Yet when the lens used by many to view this WTO dispute is shorn of the dark emotions of fear and hostility to biotech crops, the actual issues examined by the panel are relatively straightforward.

In its ruling, the panel did not examine whether biotech products in general are safe or not (although the panel noted that both the evidence provided by the EU and the advice provided by a panel of scientific experts advising the panel indicates that many of the identified concerns “are highly unlikely to occur in practice”). The panel did not examine whether the EU has a right to demand the pre-marketing approval of biotech products. The EU approval procedures that provide for a product-by-product scientific assessment of various potential risks were not raised by any of the complaining parties. Nor, in fact, were the conclusions of the relevant European scientific committees regarding the safety evaluation of specific biotech products; although they did challenge the scientific basis for some of the objections made by the various European member states that have refused to give marketing approval of biotech products in their market.

What The WTO Panel Found

Two fundamental questions have girded this entire dispute. First, did EU officials apply a general moratorium in practice on approval of biotech products between October 1998, when European officials no longer gave authorizations or approvals on biotech products, and August 2003, the date of the establishment of the WTO panel? And, as a corollary to that, did EU officials fail to consider applications for final approval concerning 27 biotech products for which the EU had already commenced approval procedures? Second, were the prohibitions (called “safeguard measures”) by Austria, France, Germany, Greece, Italy and Luxembourg applied without regard to the legal obligation under the SPS Agreement to conduct a science-based risk assessment of the risks to human health or the environment of the biotech products sought to be introduced into these markets by the complaining parties?

The panel found that indeed EU officials operated as if there was no regulatory system for the approval of biotech products. The panel concluded that EU officials, in practice, ignored their own legal system of biotech product approvals between 1999 and 2003, not only as a general means of operation but also respecting 24 of 27 products for which EU officials had already commenced approval procedures. In so doing, the panel concluded that the EU violated its SPS obligation to the complaining parties to complete individual approval procedures “without undue delay” as required by Article 8, Annex C of the SPS Agreement. The panel also concluded that the member states that prohibited the marketing of biotech products did not perform a proper, science-based risk assessment to support the prohibition, although some of the member states did conduct scientific studies. The panel examined whether risk assessments undertaken by EU scientific committees could provide “reasonable support” for the prohibitions but concluded that this, too, was not the case. In light of these assessments, the panel had no choice but to conclude that each of the safeguard measures violated Articles 5.1 and 2.2 of the SPS Agreement that require a risk assessment of the health and environmental risks of biotech products based on sufficient scientific evidence.

The Ruling May Not Yield Better Market Access

The long term implications of the interim panel report are difficult to assess simply because so much depends on how the EU, its member states and other countries, including developing countries that are considering increasing acreage planted with biotech crops, react to the decision. If vigorously pursued, the decision clears the path to significantly increased biotech crop development and commerce for a number of reasons. First, the decision authorizes and empowers the EU to get the identified member states to lift their bans on the pre-marketing approval of biotech product introductions into their markets. Second, the decision sends a message to the EU that it is under a clear obligation to use the regulatory tools at its disposal to process biotech product applications in a timely way based on a scientific rules-based review system. Third, the decision sends a message to developing countries that have been holding back on increasing acres planted with biotech products out of concern that crop yields will be shut out of lucrative European markets, that Europe can be a robust market for their product.

Yet even now there are complaints that EU officials are still operating an approval process at a snail’s pace. Added to this are new EU labelling rules that require all foods derived from biotech products, whether or not the genetic alteration is detectable in the final product, to bear a label saying that they have been produced from biotech crops. Coupled with EU regulations that impose extensive documentation requirements tracing the usage of biotech crops from the farm to further processing to the distribution chain, producers and suppliers of biotech products continue to view the European market as one walled off by a dense thicket of regulations and regulatory approvals despite this forceful WTO ruling.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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