US Prepares for WTO Battle on GM Moratorium

Herbert Smith reviews developments on the world stage as a trade war looms between the US and EU.

Last week, the US raised the stakes in the stand-off with the EU over the moratorium on commercialisation of authorised GMOs or further approval of other GMOs. US trade representative, Robert Zoellick, announced that he is in favour of the US challenging the EU’s moratorium by bringing proceedings before the WTO. The EU trade Commissioner, Pascal Lamy, promised to defend any action vigorously.

In practice, the US is increasingly concerned about the block on potentially lucrative US exports of GM foods to the European markets. EU policy on GMOs is viewed as being guided by agricultural protectionism and an increasingly sceptical public, rather than objective scientific evaluation. The US is further frustrated by the refusal by developing African nations to accept food aid from the US, consisting of GM corn, for fear of prejudicing future exports of their produce to EU markets.

If proceedings are brought before the WTO, the outcome will be of fundamental importance for the agribio industry in Europe and worldwide. If the EU were to win such a case, then this would greatly strengthen the hand of opponents to progress of GM technology. The impact would be felt globally.

The WTO Rules allow a WTO member (like the US) to bring proceedings before the WTO dispute settlement body claiming that the EU’s position on GMOs constitutes an unjustified technical barrier to trade. The EU would no doubt contend that the semi-official moratorium on further commercialisation of GMOs in place in Europe at present is either: (1) voluntary by industry and, therefore, not a trade barrier imposed by the EU; or (2) a legitimate sanitary or phytosanitary measure. However, the WTO Rules require that any sanitary or phytosanitary measure: (1) is taken only to the extent necessary to protect human, animal or plant life or health; (2) is based on scientific principles; and (3) is not maintained without sufficient scientific evidence. Provisional measures may go beyond this, but only for a "reasonable period of time" during which the WTO member concerned must obtain more information to make an objective assessment of the likely risk.

The EU, in its defence, would likely need to justify adoption of the semi-official moratorium on scientific grounds. For example, in January 1998, the WTO’s Appellate Body found that the EU’s import ban on US meat from cattle, treated with hormonal growth promoters, violated these rules, because it was not "based on" scientific evidence. In that case, the US and Canada were allowed to impose, by way of countermeasure, economic sanctions against the EU for a value of US$116.8 million and US$7.6 million per year respectively.

The EU may also look to invoke the Cartagena Protocol on transboundary movements of GMOs and and seek to argue that treaties relating to the protection of the environment would have equal status to WTO Rules.

To date, the WTO’s dispute settlement body has only dealt with two high profile complaints by the US against the EU: Bananas and Beef-Hormones. Both cases were won by the US. They remain legally and politically complex matters. This is in part due to number of EU participants (Member States, different departments within each Member State, the European Commission and the European Parliament). Whilst complex, their outcomes have had a major influence on EU policy.

WTO dispute settlement is an inter-governmental matter. There is limited scope for direct intervention by private parties. However, the interests of the agribio companies are likely to be materially affected by the outcome of any dispute in this area. Both sides may seek the cooperation of industry, in providing information/evidence and backing. In particular, the US may seek support from the US and European agribio companies (or their trade bodies) that seek to develop, promote and market GM products. Furthermore, such companies or trade bodies may wish to lobby EU Governments (or the Commission) to ensure that the arguments and evidence put forward by the Commission are representative of industry’s position and reflect factually what is happening (and are not simply driven by a desire to win a case at all costs).

Herbert Smith leads the way in this legal field with a multi-disciplinary agribio practice, involving not only intellectual property, biotech, life sciences, but also regulatory, environmental, WTO and public law expertise. We have unrivalled technical expertise at an EU level of Directive 2001/18/EC (and its predecessor 90/220/EEC), as well as under the national legislation of many Member States (including under the UK’s Environmental Protection Act 1990 and 2002 Regulations on GMO releases). Herbert Smith has been involved in nearly all of the high-profile matters involving GM issues in recent years, including:

• Aventis (Bayer) in the public hearing arranged by DEFRA upon whether Chardon LL (a variety of GM forage maize) should become the first GM agricultural crop to enter the UK National List and the ACRE open hearing on the scientific risk evaluation for T25;
• Advanta in all aspects of their highly publicised, unwitting sale of conventional HYOLA oilseed rape seed across a number of European jurisdictions, which had become "contaminated" with a trace amount of GM seed of a different variety, including at the House of Commons Select Committee hearing;
• BSPB in the judicial review proceedings in the Court of Appeal when a Devon organic sweetcorn farmer (Mr. Watson) objected to a breeder carrying out a GM crop test on an adjacent farm; and
• SCIMAC on policy and action in relation to GM issues, including the industry voluntary agreement and farm scale evaluations.

Herbert Smith also has unparalleled experience of handling complex regulatory disputes in the WTO (and advising upon their wider contexts), including:

• Chiquita Brands International in a €564 million damages suit against the European Commission for failure to comply with the outcome of the WTO ruling in the Bananas dispute between 1 January 1999 and 1 July 2001;
• The Government of Ecuador (as co-complainant alongside the US) in WTO dispute settlement proceedings in the Bananas dispute; and

• A coalition of US agricultural interests in relation to the EU’s continued refusal to lift the import ban on US meat from cattle treated with hormonal growth promoters.

In Europe, Herbert Smith has offices in London, Brussels, Moscow and Paris. Our commitment to quality has also guided our successful international expansion. We have an alliance with two first-class firms: German firm – Gleiss Lutz (with European offices in Berlin, Frankfurt, Munich, Prague, Stuttgart and Warsaw) and Dutch and Belgian firm – Stibbe (with European offices in Amsterdam and Brussels). This alliance enables us to provide an integrated domestic and cross-border service to clients. We also have strong relationships with leading firms in other major European economies, including Cuatrecasas in Spain and Pavia é Ansaldo in Italy.

© Herbert Smith 2003

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