Chapter 5 Outline

Trade in Hormone-Treated Beef

In the 1970s, scientists discovered how to synthesize certain hormones and use them to promote the growth of livestock animals, reduce the fat content of meat, and increase milk production. Bovine somatotropin (BST), a growth hormone produced by beef cattle was first synthesized by the biotechnology firm Genentech. Injections of BST could be used to supplement an animal's own hormone production and increase its growth rate. These hormones soon became popular among farmers, who found that they could cut costs and help satisfy consumer demands for leaner meat. Although several of these hormones occurred naturally in animals, consumer groups in several countries soon raised concerns about the practice. They argued that the use of hormone supplements was unnatural and that the health consequences of consuming hormone-treated meat were unknown but might include hormonal irregularities and cancer.

In 1989, the European Union (EU) responded to these concerns by banning the use of growth-promoting hormones in the production of livestock and the importation of hormone-treated meat. The ban was controversial because a reasonable consensus existed among scientists that the hormones posed no health risk. Before the ban, a number of these hormones had already passed licensing procedures in several EU countries. As part of this process, research had been assembled that appeared to show that consuming hormone-treated meat had no effects on human health. Although the EU banned hormone-treated meat, many other countries did not, including big meat-producing countries such as Australia, Canada, New Zealand, and the United States. The use of hormones soon became widespread in these countries.

According to trade officials outside the EU, the European ban constituted an unfair restraint on trade. As a result of this ban, exports of meat to the EU fell. For example, US red meat exports to the EU declined from $231 million in 1988 to $98 million in 1994. The complaints of meat exporters were bolstered in 1995 when Codex Alimen

tarius, the international food standards body of the UN's Food and Agriculture Organization and the World Health Organization approved the use of growth hormones. In making this decision, Codex reviewed the scientific literature and found no evidence of a link between the consumption of hormone-treated meat and human health problems, such as cancer.

Fortified by such decisions, in 1995 the United States pressed the EU to drop the ban on the import of hormone-treated beef. The EU refused, citing "consumer concerns about food safety." In response, both Canada and the United States independently filed formal complaints with the World Trade Commission. The United States was joined in its complaint by a number of other countries, including Australia and New Zealand. Created in 1995, the World Trade Organization (WTO) has powers to enforce fair trading practices between its member states, which include all the parties to this particular dispute.

The WTO created a trade panel comprising three independent experts. After reviewing copious evidence and hearing from a wide range of experts, as well as from representatives of both parties, the panel issued a preliminary ruling in May 1997. In a stunning decision, the panel ruled that the EU ban on hormone-treated beef was illegal because it had no scientific justification. Moreover, the panel noted that the EU was inconsistent in its application of the ban. The EU takes a very strict view on the use of growth-promoting hormones in the beef sector, where it has a substantial surplus and is not internationally competitive, while it still allows the use of some growth hormones for pork production where the EU has no substantial surplus and does not compete on international markets.

The EU immediately indicated that it would appeal the finding to the WTO court of appeals. The WTO court heard the appeal in November 1997 and in February 1998 issued its decision agreeing with the findings of the trade panel that the EU had not presented any scientific evidence to justify the hormone ban.

This ruling left the EU in a difficult position. Legally, the EU now has to lift the ban, but the ban has wide support among the public in Europe, and lifting it might produce a consumer backlash. Most observers now expect the EU to seek a negotiated solution to the problem that would allow it to keep the ban intact. Under WTO rules, a country can choose to maintain its restriction if it gives up something of comparable value--by cutting tariffs on other products, for example.

The WTO's precedent-setting ruling could have a direct bearing on potential disputes over genetically engineered crops, which raise many of the same political issues as hormone-treated beef. American companies such as Monsanto are already marketing genetically engineered corn that resists root worms and soybeans that are impervious to powerful pesticides. Both products have generated intense political opposition in Europe. The ruling could also be used to attack scores of other trade barriers--from Japanese certification of apples to European rules for poultry inspection--that are based on health concerns.

http://www.wto.org

Source: C. Southey, "Hormones Fuel a Meaty EU Row," Financial Times, September 7, 1995, p. 2; E. L. Andrews, "In Victory for US, European Ban on Treated Beef Is Ruled Illegal," New York Times, May 9, 1997, p. A1; F. Williams and G. de Jonquieres, "WTO's Beef Rulings Give Europe Food for Thought," Financial Times, February 13, 1998, p. 5; and World Trade Organization, EC Measures Concerning Meat and Meat Products, August 18, 1997, Geneva.