Question

Trade in Hormone-Treated Beef

In the 1970s, scientists discovered how to synthesize certain hormones and use them to accelerate the growth rate of livestock animals, reduce the fat content of meat, and increase milk production. Bovine somatotropin (BST), a growth hormone produced by 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 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. The European Union responded to these concerns in 1989 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. 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, U.S. 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 Aliment Arius, 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 import ban on hormone-treated beef. The EU refused, citing “consumer concerns about food safety.” In response, both Canada and the United States in- dependently filed formal complaints with the World Trade Organization. The United States was joined in its complaint by a number of other countries, including Australia and New Zealand. The WTO created a trade panel of three independent experts. After reviewing evidence and hearing from a range of experts and representatives of both parties, the panel in May 1997 ruled that the EU ban on hormone-treated beef was illegal because it had no scientific justification. The EU immediately indicated it would appeal the finding to the WTO court of appeals. The WTO court heard the appeal in November 1997 and in February 1998 agreed 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 had to lift the ban or face punitive sanctions, but the ban had wide public support in Europe. The EU feared that lifting the ban could produce a consumer backlash. Instead the EU did nothing, so in February 1999 the United States asked the WTO for permission to impose punitive sanctions on the EU. The WTO responded by allowing the United States to impose punitive tariffs valued at $120 million on EU exports to the United States. The EU decided to accept these tariffs rather than lift the ban on hormone-treated beef, and as of 2010, the ban and punitive tariffs were still in place.

Read the Country Focus “Trade in Hormone-Treated Beef.” Applying the facts of the case, answer the following questions.

a) What was the main argument that the European Union used to ban importations of hormone-treated beef? Who benefited from this ban and who did not benefit from this ban? Explain how for each case.

b) What action did the European Union take when it realized that it could face punitive actions for imposing this ban? In your opinion, what were the advantages and disadvantages of taking this action?

c)   Based on the result of the EU-U.S. trade negotiations over hormone-, treated beef, what observations can you make about the realities of

international trade in terms of national sovereignty versus national benefit? Explain your answer.

Answer 1

a) The European Commission has justified its ban as necessary to protect consumer health and safety.The Commission enacted its ban on both the production and importation of meat derived from animals treated with growth-promoting hormones in the early 1980s. This ban restricts the use of natural hormones to therapeutic purposes, bans the use of synthetic hormones, and prohibits imports of animals and meat from animals that have been administered the hormones.

The ban reflects the EU’s approach to food safety policy, known as the precautionary principle, which supports taking protective action before there is complete scientific proof of a risk. The ban also effectively restricts trade of meat and meat products from countries that regularly treat farm animals with these growth promotants

The United States has suspended trade concessions with the European Union by imposing higher import tariffs on EU products. The first U.S. action in 1989 imposed retaliatory tariffs of 100% ad valorem duty on selected food products, and remained in effect until 1996. The second U.S. action in 1999 again imposed a 100% ad valorem duty on selected foods from EU countries.

The imposition of these higher duties is “intended to restore the balance of trade concessions under the WTO and to induce compliance by the EU with the WTO’s rulings and recommendations in the original EC-Hormones dispute. These retaliatory duties have been mostly ineffective since they do not provide any direct benefit to the U.S. beef industry, and claim that it is U.S. and EU consumers who lose by paying higher prices for a wide variety of imported foods. The U.S. beef industry has long maintained that the EU ban is merely a disguised trade barrier, intended to protect EU domestic beef producers.

b) The EU commissioned studies and reviews to address the scientific basis of its ban on hormone-treated meat. Following each of these reviews, the EU reaffirmed its position that there are possible risks to human health associated with hormone-treated meat, given the available scientific data. The EU claims it has complied with its WTO obligations and has challenged the United States for maintaining its prohibitive import tariffs on EU products.

The United States disputes whether the EU has conducted an adequate risk assessment to support its position and maintains there is a clear worldwide scientific consensus supporting the safety to consumers of eating hormone-treated meat. In October 2008, the WTO issued a mixed ruling allowing the United States to continue its trade sanctions, but allowing the EU to maintain its ban.

c) Many have long maintained an interest in the U.S.-EU hormone dispute in support of the U.S. beef industry and its concern that the EU ban may be a disguised trade barrier, intended to protect EU domestic beef producers by restricting imports.

Over the years, the dispute has been invoked at various congressional hearings and has been a subject of introduced legislation, mostly as a means to illustrate how sanitary and phytosanitary (SPS) measures and non-tariff barriers are often used to unjustifiably restrict trade.

The hormone dispute could remove a critical irritant to the overall U.S.-EU trade relationship. In addition, the way in which this dispute is ultimately resolved could have important implications for future WTO disputes involving the use of SPS measures to restrict trade. The 1997 WTO meat hormone decision was the first to deal with SPS measures and, along with subsequent decisions, it provided an affirmation of the SPS Agreement and its requirements that countries base SPS measures on scientific justification and risk assessment. Beyond that, the case is a critical test of the durability of internationally agreed-upon rules and procedures for resolving disputes that are in conflict with popular concerns and national political decision.