Food & Trade

["Ian Murray" <seamus2001@xxxxxxxx>]

U.S. Urges EU to Scrap Rules on Biotech Food
Labeling Plan Could Spur Trade Battle

By Alan Sipress and Marc Kaufman
Washington Post Staff Writers
Sunday, August 26, 2001; Page A01


Senior Bush administration officials are pressuring the European Union
to abandon new restrictions on genetically modified foods that they
say could cost U.S. companies $4 billion a year and disrupt efforts to
launch a new round of global trade talks.

U.S. officials have repeatedly told their European counterparts that
the regulations, which received preliminary approval last month,
discriminate against U.S. products in violation of World Trade
Organization requirements, raising the prospect of a major and
emotionally charged trade dispute.

The European Commission's decision to require the labeling of
genetically engineered products reflects a European anxiety about food
safety that is far more profound than in the United States, the world
leader in agricultural biotechnology. This is a divide that threatens
to further aggravate U.S. relations with Europe, already roiled by
differences over global warming, arms control and other trade issues.

Undersecretary of State Alan P. Larson, the State Department's senior
diplomat assigned to economic issues, called the new restrictions
"trade disruptive and discriminatory." He said, "It's obviously a very
serious problem that affects a very important trade and one that's of
vital interest to a very important constituency in the United States,
which supports free trade."

Though U.S. officials have declined publicly to detail what type of
punitive action the Bush administration might take against Europe,
U.S. officials say the regulations are inconsistent with the terms of
the WTO because they treat U.S. products less favorably than European
ones.

For instance, Larson said the European regulations would require that
American crushed soybean oil bear a label, while European cheeses and
wine made with biotech enzymes would not be covered. "There are
potential WTO concerns about how it is structured now," Larson said.

U.S. officials have left open the possibility of bringing a legal case
before the WTO, which, after lengthy litigation, could eventually
impose a politically embarrassing judgment and stiff economic
penalties on Europe. But Larson said the administration's immediate
focus is on lobbying European governments to amend the regulations
before they take effect. He added that the United States and Europe
need to resolve the issue quickly so it does not become a
"distraction" that interferes with their shared interest in launching
new global trade talks as planned later this year.

Officials said that economic losses in the United States - where 75
percent of soybeans and more than 25 percent of corn comes from
genetically modified seeds - could far exceed other transatlantic
trade battles, such as those over bananas and growth hormones in beef.
Resolution of the long-running banana dispute earlier this year
removed a major irritant in American-European relations.

The dispute could also harden public opinion about biotechnology and
its ability to transfer beneficial genes from one species into
another. Proponents want it to be seen as a force for progress and
global improvement, but it could become a symbol of divisiveness if it
set off a bitter trade dispute.

The European Commission's new standards, among the most far-reaching
in the world, call for all products made from engineered material to
bear a label saying they contain "genetically modified organisms."
They also require producers to document the source of all their
ingredients. Since the U.S. crop-handling system generally does not
separate modified and conventional crops, the new requirements could
be unwieldy and costly for U.S. businesses.

European limitations on biotech crops already ban most U.S. corn for
food products, estimated by U.S. officials as a $300 million annual
loss. The new requirements, which must be approved by the European
Parliament and Council of Ministers before taking effect by 2003,
could also make it difficult to export corn for animal feed and
soybeans.

Larson said in an interview that he has raised U.S. concerns with
"everyone that comes through this door, every trade minister,
agriculture minister, economy minister from Europe," including those
representing about eight European countries. He said a similar message
has also been delivered by Agriculture Secretary Ann M. Veneman and
U.S. Trade Representative Robert B. Zoellick.

President Bush, who comes from a large farm state and counts on the
agriculture industry for political support, raised the issue
personally with European leaders last month at the Group of Eight
meeting of industrialized countries in Italy, according to a senior
administration official.

Kimball Nil of the American Soybean Association said the food industry
is pleased by the tough talk. "The Bush administration met with EU
commissioners and very clearly laid down a marker that many of us felt
was missing before," he said.

But European officials chafe at the pressure, saying the
administration is trying to impose U.S. acceptance of biotech food on
a European public that does not believe these products are safe
despite scientists' claims. The spread of mad cow disease and other
health crises have fueled public concern about food safety, and
prominent officials, including Britain's Prince Charles, have been
highly critical about biotechnology in crops.

"We are seeing an illustration of American unilateralism," said Tony
Van der haegen, a European Commission representative in Washington.
"There are basic psychological differences between American consumers
and those in Europe, where [genetically modified products] are not
accepted."

Requiring food labels is a way of offering choice to consumers and
restoring their confidence in food, Van der haegen said. He added that
the United States has exaggerated the potential loss to U.S.
companies, putting the figure instead at $2.8 billion a year.

On a policy level, U.S. regulators have embraced the position that
engineered and traditional crops are essentially equivalent, and so
should be treated the same. There is some public - and congressional -
pressure to require labeling of modified foods in the United States,
but promoters of biotechnology have fought tenaciously, and
successfully, to resist the efforts. They argue that labels would
unfairly stigmatize the products.

The European Union has not approved any new engineered crops for
almost three years, and it has been under great pressure from the
United States to begin the review process again. The new regulations
allow for biotech crop reviews to resume, but only with the
requirements that U.S. officials find objectionable.

In an Aug. 9 letter to Secretary of State Colin L. Powell, Veneman and
Zoellick, 24 U.S. trade organizations said the proposed EU guidelines
on biotechnology in agriculture are "commercially unworkable,
inconsistent with WTO obligations and would result in billions of
dollars of lost U.S. exports." The letter, signed by groups ranging
from the Grocery Manufacturers of America to the American Soybean
Association and the North American Export Grain Association, said the
measure would cause a "serious trade impediment" by requiring labeling
and tracing of modified foods, but not of European wines and cheeses.

The European regulations would not apply to the latter items because
the requirements distinguish between food made from genetically
modified material such as seeds and those produced with the assistance
of modified material such as enzymes.

Larson wrote back this week that "I share many of your apprehensions
regarding the proposals," and said he was working to "ensure that any
measures [implemented by the EU] are not onerous, costly or
trade-disruptive."

Mark Mansour, a Washington attorney who represents large food
companies and has been consulted by administration officials, has
written an analysis urging the administration to file a case with the
WTO as soon as possible. Mansour also recommends that the United
States withdraw support for the international Biosafety Protocol
negotiated in Montreal, a Clinton-era agreement that accepted some of
the European concerns about genetically modified foods.

As the regulations now move to the European Parliament, legislators
may tighten the restrictions further. Environmental groups are urging
them to remove a provision that waives the labeling requirement if the
percentage of genetically modified material in a food item is less
than 1 percent of the overall product. "The U.S. is trying to
force-feed modified foods to the rest of the world, and it just isn't
going to work," said Charles Margulis of Greenpeace, which has led the
anti-biotech campaign in Europe.

U.S. troubles over biotechnology and international trade are not
limited to the European Union. The governments of Saudi Arabia and Sri
Lanka have proposed bans on importing genetically modified foods, and
Mexican legislators are also discussing tough labeling laws. Larson
said the United States is concerned that the EU biotech guidelines
could become a model for developing countries and significantly limit
the reach of the technology.

Advocates of biotechnology say it can be especially helpful to poor
farmers by increasing their yields, protecting against pests and
viruses, and allowing them to grow crops in depleted soil. But critics
say poor farmers will never see those potential benefits because the
technology is owned by private, multinational companies interested
primarily in selling seeds for a profit to commercial growers.