US-EU BEEF HORMONE DISPUTE

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US-EU BEEF HORMONE DISPUTE
Hilary Ross David Salmon Luis Sitoe

• Dispute Settlement (DS) 26

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Brief Background

• The United States (US) and European Union (EU)
  are engaged in a long-standing dispute over the
  EUs decision to ban hormone-treated beef exports
  from the US in the EU market
• Since 1989, the EU has banned all imports of
  hormone treated meat into the EU and generally
  restricts meat imports to a limited quantity of
  non-hormone treated beef
• In 1998, the WTO ruled in favor of the US and the
  US began retaliatory tariffs of 100 on selected
  food products, which remain in effect to this day

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Origin of the Dispute - United States

• Growth-enhancing hormones are used widely in beef
  production in the United States and other
  meat-exporting countries, such as Australia,
  Canada, Chile, New Zealand, South Africa and
  Japan
• Hormones are used because they allow animals to
  grow larger and more quickly on less feed,
  lowering production costs
• In the US, hormones have been approved for use
  since the 1950s
• Within the US, hormones are now used on
  approximately 2/3 of all cattle and 90 of cattle
  on feedlots

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Origin of the Dispute EU

• Beginning in the early 1980s, the European Union
  (EU) enacted a full ban on the importation and
  production of hormone-treated beef
• The ban reflects the EUs approach to food
  safety, known as the precautionary principle of
  taking protective action before there is
  complete scientific proof of risk

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US Position

• EU rejection of hormone treated beef is merely a
  protectionist measure disguised as a safety issue
• Hormone treated beef is safe
• Numerous studies have concluded its safety, EU
  studies have been inconclusive at best
• Many other countries allow for the use of hormone
  treated beef (Australia, Canada, Chile, Japan,
  New Zealand, South Africa)
• This is a direct violation of the EUs
  responsibility under the SPS agreement

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European Union Position

• Hormone treated beef has been linked to
  carcinogens, thus it has not been proven safe
• The EU has the right to ban beef imports under
  the precautionary principle (i.e., the EU may
  take protective action before there is complete
  scientific proof of risk)
• Must protect the health and safety of EU
  citizens
• The EU has fulfilled its requirements under the
  SPS agreement

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US EU Beef Hormone DisputeTimeline1981-1996
June 1996 US requests WTO dispute panel against
the EU, claiming EU ban is inconsistent with the
EUs WTO obligation under the SPS Agreement
1995 Uruguay Round, including SPS Agreement
enters into effect
1981 EU adopts restrictions on hormone treated
beef within the EU
1986 1987 US raises EU hormone ban under the
Tokyo Round of the GATT
Jan 1, 1989 - EU enacts a full ban on all hormone
treated beef imports
1990
2000
1980
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The Sanitary and Phytosanitary Agreement

• Enacted January 1, 1995, as part of Uruguay
  Round.
• Twofold objective
• Respects the right of sovereign WTO members to
  choose a level of health protection deemed
  appropriate
• Precautionary Principle- countries may protect
  their citizens against food safety risks before
  risks are actually scientifically proven.
• Ensures that members do not use SPS requirements
  to enact unnecessary, arbitrary, scientifically
  unjustifiable, or disguised restrictions on
  international trade.
• Allows for food safety and health measure
  disputes to be settled within the WTO dispute
  settlement process.

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SPS Article III

• 3.1
• Members should base standards on international
  guidelines
• 5.1
• Members should use the research of international
  food and health organizations that scientifically
  study the risk to humans, plants, and animals to
  develop their own standards
• 5.5
• Members may not set or use their standards
  arbitrarily to discriminate against other
  Members, and if they are found to have done so
  they must cooperate in setting reasonable
  standards

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US EU Beef Hormone DisputeTimeline1996-2009
June 1996 US requests WTO dispute panel against
the EU, claiming EU ban is inconsistent with the
EUs WTO obligation under the SPS Agreement
2003- EU finally publishes studies, claims it is
in compliance
2008- Panel finds all parties at fault, allows
sanctions to continue on all sides
February 1998 EU loses appeal but is given 15
months to conduct risk assessment
2000
2010
1995
2009- USTR changes list of EU countries/products
affected by sanctions
2004-05- EU requests consultations against US for
old sanctions and initiates new proceedings
against US and Canada
August 1997- The WTO finds the EUs ban IS in
fact inconsistent with SPS
July 1999- US implements sanctions
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Consultations, Proceedings and Appeals

• 1998- EU is still found to be in violation of
  SPS, but is granted 15 months to prepare a risk
  assessment of the original hormones in question
• EU continues ban on hormones during this time
• 1999- Trade concessions in the amount of 116.8
  million USD per year and imposes a 100 ad
  valorem duty on products produced by EU nations,
  including
• Meat, fish, cheese, tomatoes products, fruit
  juice, fruits and vegetables, coffee, mustard,
  soups and broths, toasted breads and cocoa
  products

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Consultations, Proceedings and Appeals

• In 2003 the EU presents its findings and
  concludes that it is necessary to ban one hormone
  permanently and five others provisionally
• This supposedly brings the EU into compliance
  with Article 5.7 of SPS
• The provisionary ban might do that, but the fact
  that the EU still doesnt use international risk
  assessment guidelines to set standards does not
  bring it into compliance with SPS 5.1

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Consultations, Proceedings and Appeals

• In 2004 the EU calls for new consultations to
  force the US to remove its sanctions since the EU
  came back into compliance with the WTO (although
  it did not remove its ban on any of the hormones)
• In 2005 the EU calls for a dispute settlement
  panel to review the case
• In 2008- the panel finds the US and Canada at
  fault for not removing sanctions, and the EU at
  fault for not providing enough evidence
• Later that year the Appellate Body allows the
  continuation of trade sanctions on the EU and
  also the continuation of the ban on beef hormones

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Consultations, Proceedings and Appeals

• 2008- the EU files a new challenge against U.S.
  and Canadian sanctions, pre-emptively in reaction
  to. . . .
• 2009- the USTR updates the list of EU products ,
  then delays implementation by two months to
  negotiate a settlement

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May 2009 Agreement- the end?

• On May 13, 2009, the US and EU signed a
  memorandum of understanding (MOU) to resolve the
  dispute by increasing market access for US
  hormone free beef in exchange for a reduction in
  import duties from EU products into the United
  States
• MOU will be implemented in three phases
• Phase 1 Expand market access for hormone free
  US beef to a max of 20,000 metric tons
• Phase 2 Expand market access for hormone-free
  US beef to 45, 000 metric tons, contingent on the
  successful implementation of Phase 1
• Phase 3 Maintain market access for 45,000 metric
  tons of US beef and US removes import duties of
  select items under dispute

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Observations

• The ban affected an estimated 100-200 million
  in lost U.S. exports less than one-tenth of one
  percent of U.S. exports to the EU in 1999
• WTO panels concluded that the EU ban lacked a
  scientific justification, but the EU refused to
  remove the ban primarily out of concern that
  European consumers were opposed to having this
  kind of meat in the marketplace.
•  

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Observations (Continued)

• The U.S. hard line is buttressed by concerns that
  other countries might adopt similar measures
  based on health concerns that lack a legitimate
  scientific basis according to U.S. standards
• Other U.S. interest groups are concerned that
  non-compliance by the EU undermines the future
  ability of the WTO to resolve disputes involving
  the use of SPS measures

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Observations (Continued)

• WTO disputes involving the United States have
  resulted in greater market access or more
  protection of intellectual property rights
• Hormone case showed, a WTO dispute decision
  against a country does not necessarily result in
  the timely removal of its trade-restrictive
  practice
• The losing country may face higher tariffs or pay
  compensation, neither of which is a goal of
  dispute settlement

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Observations (Continued)

• Reform of multilateral dispute settlement
  procedures to increase the likelihood of
  compliance
• U.S. proposal for carouselling of retaliation
  lists
• promotes the WTO by strengthening the dispute
  process, but can undermines the multilateral
  system through unilateral action
• If not successful, the domestic industry still
  faces the restrictive foreign market, U.S.
  consumers of imported goods on the retaliation
  list have to pay higher prices, and foreign
  exporters lose sales.
• In any case, continuous changes in retaliation
  lists could hurt some U.S. companies, especially
  small and medium-sized businesses and importers
  of items on the lists.
• Aggressive monitoring of compliance, particularly
  for long period of implementation
• Authorization of automatic compensation, and
• Remedies for past damage from violations of WTO
  obligations

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US EU Beef Hormone DisputeSources

• Johnson, Renee and Hanrahan, Charles E. The U.S.
  EU Beef Hormone Dispute. Congressional
  Research Service. January 19, 2010.
  (http//www.loc.gov/crsinfo/whatscrs.html)
• Sek, Lenore. Trade Retaliation The Carousel
  Approach. Congressional Research Service. March
  5, 2002. (http//fpc.state.gov/documents/organizat
  ion/23368.pdf)
• USTR Announces Agreement With European Union In
  Beef Hormone Dispute. Office of the United
  States Trade Representative. February 24, 2010.
  (http//www.ustr.gov)
• WTO Hormone Case. United States Foreign
  Agricultural Service Mission to the European
  Union. August 7, 2007. (http//useu.usmission.gov/
  agri/ban.html)