Monday, 2 December, 2002, 11:24 GMT New US-EU trade war looms Steve Schifferes BBC News Online economics reporter
The United States is considering a fresh trade war with Europe over the issue of genetically modified (GM) foods. The move would increase tension with Europe at a delicate time for the world trade talks, which were launched one year ago. US has more GM crops than any other country US trade officials are urging the Bush administration to begin proceedings against the EU in the World Trade Organisation for blocking imports of GM food. The EU has maintained a ban for the last four years on approving any US biotech foods, which it says is based on the "precautionary principle" but which the US says has no scientific basis. Already, the US and the EU are at loggerheads over several trade issues. The EU objects to new US "anti-dumping" tariffs on its steel products and US tax breaks for foreign sales of its big multinationals, while the US has taken the EU to task for its ban on imports of bananas and beef. Restraint Previously, the US has refrained from any formal complaint on GM foods, mindful of the strength of anti-biotech feeling in Europe, and concerned that the EU could argue for compulsory labelling of US grain exports - which would force US farmers to implement separate storage facilities for GM and non-GM crops. The EU has banned US hormone-treated beef But now US officials fear that other parts of the world, and especially Africa, are rejecting US agricultural exports because of fears that they may contain genetically modified crops. In October, Zambia rejected 26,000 tonnes of US food aid, despite its famine, on the grounds that it contained GM crops which would pollute its seed stock and hurt exports. US Treasury Secretary Paul O'Neill, who visited Africa with rock star Bono in the autumn, is believed to back tough action against Europe. But US state department officials have reportedly warned that it would be unwise to alienate European public opinion while trying to gain support for a possible war in Iraq. Safety fears The EU has long maintained that GM foods are unsafe until proven otherwise. In 2000, the US and the EU signed an agreement, the Montreal bio-safety protocol, which agreed that this "precautionary principle" should apply to the export of GM foods. It also agreed to the voluntary labelling of GM foods in order to give consumers a choice. However, talks over how to implement a voluntary labelling agreement have stalled, despite a deadline of 31 December 2002. Even in the UK, the government has been under pressure to stop field trials of GM crops from environmentalists. The politics of trade The US would be likely to win any case it took to the World Trade Organisation. Several years ago, the US fought and won a similar action when EU officials banned US beef exports on the grounds that they contained unsafe growth hormones. However, it will take several years before the US obtains a final ruling under the laborious WTO disputes settlement procedure. And that would not necessarily be the end of the matter. In the beef hormone dispute, the EU has chosen to pay a $100m fine each year rather than admit US beef products. Even environmentalists believe that it would be unlikely that European consumers would be persuaded to buy GM foods as a result of a WTO ruling that says they are safe. But US farmers - who export 30% of their crops - would be pleased. They are a key constituency for the Bush administration, which recently passed a farm bill giving them an additional $180bn in aid. However, this aid package could be under threat if the world trade talks reach agreement on limiting agricultural subsidies - something they are scheduled to do by 31 March 2003. And those same trade talks could hold a trump card for the EU. That is because in principle, trade ministers have agreed that in future, environmental agreements like the Montreal protocol should have equal legal weight in trade law treaties.
