THE LAWYERS WEEKLY | By John W. Boscariol and Orlando E. Silva | March 26, 2004
Genetically modified organisms (GMOs), the subject of a long-simmering quarrel between the United States and the European Union, are now at the centre of a major trade dispute at the World Trade Organization.
The dispute not only involves significant issues for Canadian and other exporters seeking access to European Union agri-food markets; it also raises interesting questions concerning the resolution of potentially conflicting obligations under international trade and environmental treaties, and the potential application of WTO obligations to sensitive matters of domestic regulation.
In May of last year, the United States, Canada and Argentina, supported by a number of other countries, initiated challenges to the EU's GMO approval system by formally requesting consultations under the WTO's dispute settlement mechanism.
More recently, the Cartagena Protocol on Biosafety to the Convention on Biological Diversity (Cartagena Protocol), a multilateral environmental agreement concerning the treatment of "living modified organisms", negotiated by more than 130 countries and ratified by the EU, entered into force.
Many have suggested that the Protocol's trade-related provisions or the manner in which these obligations will be implemented are on a direct collision course with WTO Member commitments.
This interplay between trade and environmental treaty obligations has added an extra layer of complexity to what was already a complicated dispute from both a scientific and international trade perspective.
What are GMOs?
The term "genetically modified organisms" generally refers to plant or animal products that have been engineered through the transfer from another organism of specific genetic material (DNA) containing desirable traits.
The use of GMOs continues to attract fierce debate. Advocates of so-called "biotech crops" point to the opportunities for creating plants that are resistant to pests, disease, frost and drought, and developing higher yield crops with increased nutritional values.
Opponents of GMOs fear that there is insufficient information available on the impact of GMO in the food chain and that their distribution should be strictly controlled.
The EU moratorium
The EU has had a system in place for the approval of GMO products since 1990. Its latest reiteration (October 2002) establishes a step-by-step approval process that must be followed before any GMO or any product consisting of or containing GMOs can be released into the environment or placed on the market.
Despite the existence of this system, the EU has not granted a new GMO product authorization over the past six years, since many EU member states have banned GMO products until proposed traceability and labelling rules are adopted. Those rules are expected to take effect in April 2004. (It is anticipated some GMO will be approved later this year, starting with genetically modified sweetcorn, Bt-11.)
The EU's moratorium on GMO has had a significant impact on Canada, the world's third largest grower and exporter of biotech crops. Two-thirds of Canada's commercial production of canola and a third of its production of corn and soy are GMO crops. Since the EU's ban on GMO products was introduced in 1998, Canada's exports of canola have plummeted from $185 million to $1.5 million per year, Canadian officials say.
Inconsistency with WTO agreements
Canada, the United States and Argentina argue that the EU maintains a de facto moratorium on the approval and marketing of GMO products that is contrary to its obligations under a number of WTO agreements, including the General Agreement on Tariffs and Trade 1994, the Agreement on the Application of Sanitary and Phytosanitary Measures, the Agreement on Agriculture, and the Agreement on Technical Barriers to Trade.
At the heart of their complaint is the allegation that the EU's ban has no scientific basis and has unnecessarily restricted international trade in biotech crops. The United States, in particular, has emphasized the impact of the ban on developing countries seeking to produce drought-resistant and higher yielding crops. In certain cases, developing countries, fearing a negative impact on their own agricultural exports to the EU, have refused biotech food aid which might find its way into local crops.
In response to these complaints, the EU denies that there is any moratorium on the approval of GMO foods for distribution, notwithstanding the fact that it has not authorized a GMO product in the last six years. It claims that it is in the process of finalizing its regulatory system for GMO approval, labelling and traceability, a system which is fully compliant with its WTO obligations.
The EU also points to consumer scepticism and lack of demand for GMO foods, rather than any moratorium, as the cause of decreased sales of GMO products in the EU market.
Cartagena Protocol
The Cartagena Protocol entered into force on Sept. 11, 2003, shortly after its ratification by the requisite 50 countries under the agreement. Canada and Argentina have signed but not ratified the Cartagena Protocol. The United States is not a signatory to the Cartagena Protocol and has not yet ratified its parent agreement, the Convention on Biological Diversity.
The Cartagena Protocol regulates the transboundary movement of any living GMO (referred to in the Protocol as "living modified organisms" or LMOs, and which excludes processed foods containing GMOs) and contains several trade-related provisions.
The Cartagena Protocol requires exporters of LMOs that are intended for introduction into the environment (such as seeds for planting) to obtain informed consent from the importing country prior to any transboundary movement.
This procedure does not apply to LMOs intended for direct use as a food or feed, or for processing, which make up the majority of LMO exports. These other LMOs are subject to less onerous requirements.
Specifically, a Party must notify other Parties via a Biosafety Clearing-House of a final decision regarding its domestic use of these LMOs. The importing Party then makes a decision whether or not to accept the LMO.
The Cartagena Protocol also has documentation and labelling requirements for LMOs that were adopted by its member states on February 27. Included are requirements that all bulk shipments of LMOs intended for food, feed or processing be labelled "May contain LMOs."
One of the Cartagena Protocol's more contentious features is that it explicitly permits Parties to rely on the so-called "precautionary principle," whereby lack of scientific certainty does not prevent a Party from making a decision to restrict or prohibit the importation or use of LMOs. This precautionary approach is the basis of the EU's GMO approval system currently being challenged at the WTO.
Is there a conflict?
Whether the WTO agreements and the Cartagena Protocol impose conflicting obligations remains an ongoing point of debate. The relationship between the Cartagena Protocol and other international treaties is confusing at best.
Some of this confusion stems from the interaction of complex customary international rules of treaty interpretation, such as those under the Vienna Convention on the Law of Treaties, and the preamble to the Cartagena Protocol.
For example, the preamble contains what's typically known as a "savings clause" under international law. It provides that the Cartagena Protocol and the WTO Agreements are to be mutually supportive and the Protocol cannot be interpreted as implying a change in the rights and obligations of a party under any existing international agreements, suggesting that the rules of the WTO agreements would apply.
However, the preamble goes on to provide that these statements are not intended to subordinate the Protocol to other international agreements, thus suggesting that the Protocol would trump the relevant rules under the WTO agreements.
What's next?
On March 4, WTO panellists were appointed to hear and decide upon the challenge to the EU moratorium. Following written submissions and oral hearings, including expert witness testimony, the Panel will issue a report which will set out the Panel's findings as to whether the EU's GMO measures offend any of the WTO agreements, and if so, its recommendations that the measures be either amended or removed to comply with WTO requirements.
The Panel's decision may be appealed to the WTO's Appellate Body, which in turn may uphold, modify or reverse the Panel's legal findings. Assuming any Panel decision in this GMO dispute is appealed, a final WTO decision can be expected sometime during 2005.
If the EU fails to comply with a Panel or Appellate Body Report, Canada and other complaining WTO Members may obtain WTO authorization to impose trade sanctions on the EU until it complies with its WTO obligations. These sanctions would likely include the imposition of significant duties on imports from the EU.
If the EU's de facto moratorium on the approval and marketing of GMO products is lifted in the interim, the focus of the controversy will quickly shift to the EU's rules for labelling and traceability of GMOs in food products, which are not included in the current WTO challenge.
Traceability and labelling of GMOs
The EU's new rules for traceability and labelling of GMOs in food products are expected to be implemented in April. Under these rules, products consisting of more than 0.9 per cent EU-approved GMOs, or of more than 0.5 per cent GMOs that have received a favourable risk opinion from the EU Scientific Committee, must be tracked through the production and distribution chain and must be labelled as containing GMOs. A product containing any amount of GMOs that have not been approved by the EU and have not received a favourable risk opinion is fully subject to the traceability and labelling requirements.
The United States has already expressed concerns about the proposed GMO traceability and labelling rules and their negative impact on the international trade of GMO products, and is currently considering whether to launch another challenge at the WTO.
U.S. agricultural groups have complained that these new rules are as inconsistent with WTO obligations as the EU's de facto moratorium.
The issue has the potential of bringing the Cartagena Protocol to the forefront of the transatlantic GMO dispute, should the EU's implementation of labelling and documentation requirements contained in the Protocol be found to be inconsistent with the EU's obligations under the WTO agreements.
This controversy over GMOs promises to provide a fascinating look at how the interests of market access and international trade are balanced with those of environmental and food safety.
It also demonstrates the potential conflict between WTO obligations and the sovereign ability of member nations to regulate sensitive domestic issues such as food safety.
John Boscariol and Orlando Silva are lawyers at McCarthy Tetrault LLP in Toronto and members of the firm's International Trade and Investment Law Group.THE LAWYERS WEEKLY:
