Environmental Regulations and Corporate Strategy: A NAFTA Perspective

By Alan Rugman; John Kirton et al. | Go to book overview

9
The Agriculture Disputes

Food safety, trade, and industry protection have evolved into a major issue on the trade policy agenda around the world. This is seen in the WTO Appellate Body's 1998 Beef Hormones decision. The dispute involved the use of growth hormones in the production of beef by both the United States and Canada. Long considered by the EU to be detrimental to human health, hormone-treated beef was thus excluded from the European market, costing North American beef producers hundreds of millions of dollars since 1989. This dispute provided the impetus to develop a detailed sanitary and phytosanitary (SPS) measures code under the auspices of the WTO legal framework, in order to specify what is permissible when countries regulate environmental health and safety standards differently.

In the case of Beef Hormones, both the WTO panel and the subsequent appeal body found that the EU's actions amounted to an unjustifiable restriction on trade and were therefore inconsistent with its trading obligations under the WTO. This decision is thus a victory for those who viewed the restriction on US and Canadian beef as little more than industry protection. Most significantly, this decision underscored for national policymakers that the trade implications of the decisions they make within their domestic sphere must be taken into account in formulating policy. It further underscored the importance of having measures based on sound science and risk assessment, and having some relation to internationally set standards.

From the advent of the WTO to 1998, there have been five cases concerning trade- restricting environmental standards. And within the WTO SPS Committee which attempts to handle such issues before they develop into full-scale disputes, it seems as if more are on the way. In 1998 Australia, Argentina, Brazil, Canada, Senegal, Malaysia, and the United States took issue with the EU's proposed maximum allowable levels of the micro-toxin aflatoxin in agriculture ( BRIDGES 1998; Journal of Commerce 1998). The EU is seeking a much stricter standard than other countries, who argue that the health effects are not relevant in the present case. Other related issues concern cumbersome SPS rules in South Korea, and a Japanese ban on US apples (ibid.). And a number of Latin American countries appear to be fearful that new US SPS rules will have a trade-restricting effect on their fruit and vegetable exports, thereby providing protection to US producers (ibid.).

The key problem is that the domestic administration of SPS measures can be captured, or at least influenced, by domestic producers seeking shelter against more competitive foreign imports. Since fresh food products are highly sensitive to quality deterioration, and since the science of health codes and other environmental regulations is a national prerogative, it is relatively easy for domestic producer interests to

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