Conflicting Rules for the International Trade of GM Products: Does International Law Provide a Solution?
William A. Kerr, Stuart Smyth, Peter W.B. Phillips, and Martin Phillipson
University of Saskatchewan, Canada
The Vienna Convention on the Law of Treaties was designed to provide guidance regarding the legality of primacy between international agreements. Article 30 of the Convention states that when one party to a previous treaty is not a party to a subsequent treaty, then, “the earlier treaty only applies to the extent that its provisions are compatible with those of the latter treaty.” To date, the implications of this have not been well explored with respect to the World Trade Organization (WTO) Agreements and the Cartagena Protocol on Biosafety (CPB). Given that three of the top five producers of genetically modified crops (Argentina, Canada, and the United States) are not signatories to the CPB, this issue could become contentious. This article provides a detailed assessment of the applicability of the Vienna Convention to the WTO and the CPB. The resulting policy implications and potential trade concerns are highlighted and addressed. The results suggest that formal international law has little to offer in terms of determining which institution—the CPB or the WTO—should take precedent in the case of a dispute. Given that most major exporters of GM crops do not belong to the CPB, but most states (both potential importers and exporters) belong to the WTO, the latter should be the venue where disputes are adjudicated. A WTO panel would likely not consider socio-economic concerns as an acceptable justification for the imposition of trade barriers.
Key words: Cartagena Protocol on Biosafety, genetically modified crops, international law, Vienna Convention, World Trade Organization.Introduction
The World Trade Organization (WTO) is the major multilateral organization through which the rules of international trade are agreed and adjudicated. Most large-economy countries belong to the WTO, and its rules cover approximately 97% of global trade (Kerr, 2012).1 There are, however, other multilateral agreements (mostly multilateral environmental agreements [MEAs]) that contain provisions on international trade—largely in specialized areas such as trade in endangered species or hazardous materials (Kerr & Hall, 2004). While they may have rules that conflict with those of the WTO, in the case of most MEAs, there is sufficient international consensus on the problem being addressed, having alternative trade rules that it has never become an issue of dispute at the WTO (Belcher, 2007). This may not, however, be the case with genetically modified organisms (GMOs). The Cartagena Protocol on Biosafety (CPB), in particular, provides an alternative set of trade rules for dealing with the introduction and exchange of living modified organisms. In this case, there is neither consensus on the regulation of trade nor on which agreement should take precedence. The rules of trade embedded in the CPB are, in many ways antithetical to those of the WTO (Hobbs, Hobbs, & Kerr, 2005)—and may have been designed with that specific purpose in mind (Holtby, Kerr, & Hobbs, 2007). Further, while many countries are members of both the WTO and the CPB, some are only parties to the WTO. In particular, a number of the major countries that have adopted and export GM-products are members of the WTO, but not the CPB. Hence, issues of non-overlapping memberships and how they are dealt with in international law need to be addressed.
While the conflict between the rules of the CPB and the WTO has been recognized since the inception of the CPB (Phillips & Kerr, 2000), the issue is coming to the forefront of public policy for two reasons. First, an ongoing process of asynchronous approvals, whereby more and more GM crops are being approved in some countries and not in others, has lead to a rising potential for trade disagreements (Phillips, 2011; Viju, Yeung, & Kerr, 2011). Second, as scientific justifications for placing trade barriers on GM products are fading given widespread adoption without any discernible human health or environmental problems, countries that wish to impose barriers to imports are increasingly relying on socio-economic considerations (SECs) as justifications for the imposition of trade barriers. The CPB allows these as justifications, but the WTO does not. In fact, the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) of the WTO was put in place to de-politicize decision-making in this area by making science the sole justification for the imposition of trade barriers (Kerr, 2003). The WTO’s rules of trade have as a primary motive constraining governments’ abilities to extend economic protection to vested interests threatened by foreign competition—in other words socio-economic considerations (Kerr, 2010). Thus, allowing SECs as a reason to impose trade barriers puts the CPB directly at odds with the WTO’s central concern—economic protectionism. As a result, there is significant potential for direct conflict between the agreements. Hence, a discussion of how conflicts between agreements are handled in international law is warranted. Clarification is required because regulatory uncertainty is likely to depress investment in further development of GM technology (Phillips, 2011).
When International Agreements Conflict—What is the Law?
The WTO and the CPB are highly divergent regulatory regimes. Given this divergence, and the potential for CPB-related measures to contravene WTO rules, what is likely to occur in the event of a clash? What rules, if any, will take precedence?
As a general principle of international law, when two treaties in the same subject area conflict, the latter treaty prevails in the event of a dispute between two states that are parties to both instruments. While this rule appears to be relatively straightforward, it hides a much more complex set of issues. Indeed, as Sinclair observed (1973, p. 62), “with the post-war growth in international co-operation, accompanied by a massive increase in the numbers and range of international agreements of a law-making character, the problem of incidental conflict between successive treaties has become more acute.”
The International Law Commission has wrestled with this problem in the course of its work on treaties. The result of its deliberations was Article 30 of the Vienna Convention on the Law of Treaties (VCLT; United Nations [UN], 1969), which states:
The Preamble to the CPB contains two seemingly contradictory statements that attempt to outline the relationship between the CPB and other international agreements. Initially, the preamble states, “this Protocol shall not be interpreted as implying a change in the rights and obligations of a party under any existing international agreement” (Secretariat of the Convention on Biological Diversity [CBD], 2000, p. 2). However, the next paragraph continues, “understanding that the above recital is not intended to subordinate this Protocol to other international agreements” (Secretariat of the CBD, 2000, p. 2).
These two seemingly contradictory preambular statements represent classic savings clauses. Savings clauses are a common feature of many multilateral treaties and they are effectively an enactment of the principle behind Article 30(2) of the Vienna Convention. The effect of a savings clause is to “save the provisions of an earlier agreement that would otherwise be overcome by incompatible provisions of a later agreement” (Safrin, 2002, p. 613).
This rather ‘confusing’ language (Hagen & Weiner, 2000, p. 707) contained in the Preamble of the CPB is the result of a difficult political compromise reached towards the end of the negotiations. As Safrin (2002) notes, the parties had split into three camps in relation to the inclusion of a savings clause in the text of the CPB:
While the preamble to a convention does not have the same legal force as the main body of the instrument, it is, nevertheless, a significant aid to interpretation. The objective and purpose of a treaty according to the International Law Commission are primarily to be gathered from the text of the treaty and particularly the preamble (Sinclair, 1984). The main text of the CPB contains similarly contradictory statements. Article 2 allows parties to take action on biosafety that is more protective than that envisaged by the protocol, subject to the proviso that such measures will be “consistent with the Parties’ other obligations under international law” (Secretariat of the CBD, 2000, p. 3). However, Article 26 subsequently authorizes parties to “take into account socio-economic considerations arising from the impact of LMOs [living modified organisms] on…biological diversity” (Secretariat of the CBD, 2000, p. 19). As suggested above, SECs are regarded as extraneous by the WTO. Thus, the relationship between the proviso in Article 2 and the authorization contained in Article 26 is at best ambiguous, and at worst, utterly contradictory. In their analysis of these contradictory aspects of the text of the CPB and their relationship with other international obligations (including WTO obligations) Hagen and Weiner (2000, p. 713) conclude:
A key factor in determining the future of the CPB, therefore, is its likely treatment by the WTO should any compatibility issues be raised by aggrieved states. In order to provide a plausible answer to the ‘conflict’ question, an analysis of the likely rules governing such a dispute must be undertaken. Prior to that, a discussion of the SEC issue—which is likely to generate the greatest conflict—is instructive.
There are a number of areas where the WTO and the CPB conflict in the establishment of trade barriers and in how complaints regarding those trade barriers can be dealt with (see Table 1). Both the WTO and the CPB allow trade barriers to be put in place to protect human health and the environment. In the case of the CPB, the country that wishes to export applies to a prospective importing country to be allowed market access for its GMO. The importing country is supposed to examine the available scientific evidence and undertake a risk assessment. It then reports its decision to the applicant. It does not have to justify its decision. There is no mechanism for the applicant country to appeal the decision. The CPB does not have binding dispute settlements. In essence, the importing country is unconstrained in its ability to establish trade barriers under the CPB (Hobbs et al., 2005). In contrast, the WTO has specific requirements—both criteria and procedural—a country must abide by to put trade barriers in place. Further, the WTO has a binding dispute settlement mechanism (DSM) where countries that do not feel that the justification for the trade barrier is valid can complain and have their complaint adjudicated. The WTO DSM is binding: if a country does not comply with a dispute-panel ruling, then the WTO can authorize the use of trade sanctions by the country suffering the economic loss arising from the trade barrier.2
Table 1. Comparison of WTO and CPB: Reasons for trade barriers and avenues to complain.
There is a provision in the CPB for disputes to be taken to the International Court of Justice (ICJ). An appeal to the ICJ might arise if an exporting country faced an importing country imposing a trade barrier justified under the CPB, but felt that the product in question did not fall under the ambit of the CPB. This might happen if the exporter used a production method that the member country of the CPB defined as a GMO, but the exporting country did not believe the technology used constituted biotechnology. The appeal would test whether the importing country exceeded the mandate of the CPB.
SECs present the greatest divergence between the agreements. The WTO does not allow SECs as a legitimate justification for SPS measures and only allows SECs in a limited way in the WTO’s Agreement on Technical Barriers to Trade (TBT). The TBT covers those areas where technical barriers to trade can be imposed that do not relate to sanitary and phytosanitary justifications for the imposition of barriers. Examples include labeling requirements or import bans justified on the basis of the use of child labor or low animal welfare standards in foreign production. In the case of either sub-agreement, members of the WTO have an avenue for complaints to be adjudicated. In contrast, SECs are explicitly allowed in the CPB and there is no avenue for a complaint to be adjudicated.
Risk (and its mitigation, management, and eradication) is an increasingly nebulous topic. As wealth continues to grow, some societies and their governments have become more focused on risks that were overlooked during periods when the economy was developing (or recovering from catastrophe). To a large extent, in the immediate post-Second-World-War period, most societies and economies fixated on a 20-year period of rebuilding, an effort to reduce the risks of unemployment, and—in Europe—dependence on food imports. It might be argued that only with Rachel Carson’s Silent Spring (1962) did the importance of other risks begin to creep into the consciousness of industrial societies. As economic reconstruction concluded, other important risks gained prominence in the social conscience and with public policymakers.
While there are identifiable benefits from the increased focus on risk management and mitigation, one needs to be vigilant to the potential for risk-mitigation strategies to be used as a front for trade distorting protectionist policies. Over time, protectionists have been very adept at co-opting policies that justify the protection of their individual vested interests in the name of social welfare (Kerr & Perdikis, 2003). One area with a long-standing practice of using health and safety as disguised barriers is in the trade of food and agricultural products. Over the past century—since the International Dairy Federation developed new international standards for milk and milk products in 1903—an array of international agreements has narrowed the discretion to use these safety measures to restrict trade. The negotiation and implementation of the SPS Agreement in the WTO in 1995 finally closed off almost all non-scientific justifications in the context of international agri-food trade. While countries continued to justify trade measures using SECs, disputes universally imposed the science-only principle.
Now, with the CPB (especially Article 26), member states are empowered to incorporate SECs into domestic regulatory frameworks (Box 1). While the focus of Article 26 is specifically on biodiversity and impacts on indigenous communities, many countries have broadly interpreted this provision and incorporated SECs that have no apparent connection with reducing the risks to either biodiversity or indigenous communities (Falck-Zepeda, 2009; Falck-Zepeda, Wesseler, & Smyth, 2013; Falck-Zepeda & Zambrano, 2011; Ludlow, Smyth, & Falck-Zepeda, 2014; Smyth & Falck-Zepeda, 2013).
Box 1. Article 26 of the Cartagena Protocol on Biosafety
There is a heated debate about the appropriateness of this broader reading of Article 26. As part of a review of the socio-economic impacts from GM crops, Lusser, Raney, Tillie, Dillen, and Rodriguez-Cerezo (2012, p. 34) suggest that including SECs as part of the decision-making process provides “more and better information about the technological impact for the decision-making process and may help to avoid the adoption of inefficient technologies.” However, others argue that such decisions should be left to the marketplace. In both theory and practice, all new technologies create both winners and losers. Rejecting a technology or other innovation solely on the basis that some people are worse off than without the technology is often simply another justification for protecting vested interests at the expense of aggregate social welfare; when such a policy is bolstered by barriers to trade, this becomes a case of economic protectionism.
International trade of foodstuffs—both conventional and genetically modified—since 1994 is governed by the overall WTO principles of non-discrimination, binding and transparent commitments, and impartial adjudication. Agri-food trade measures are also explicitly targeted in the SPS agreement, which establishes the appropriate structures for enacting measures related to safety and incorporates by reference the technical standards provided by the Codex Alimentarius Commission (Codex), The World Organization for Animal Health (OIE; formerly the Office International des Epizooties), and the International Plant Protection Convention (IPPC).
The IPPC—the most relevant for GM crops—is a multilateral treaty that seeks to protect natural flora, cultivated plants, and plant products from the spread of pathogens through international trade. Through collaboration between regional and national plant-protection organizations, it provides a forum for international cooperation, dialogue, harmonization, and technical exchange of plant information. The IPPC has addressed the regulation of biotechnology and GM crops through several of the International Standards for Phytosanitary Measures (ISPMs). The ISPMs established by the IPPC allow for the implementation of trade barriers under very specific science-based conditions. If a science-based risk assessment generates verifiable evidence documenting increased risk from allowing a specific traded product to be imported, then trade in that product can be proscribed. Every member country of the WTO is allowed to implement these standards into their domestic regulatory framework without fear of challenge. If a WTO member country implements a regulatory standard that contravenes the IPPC standards, then that country may be accused of using a trade barrier in a case brought to the WTO by any other member country. Countries may have higher standards than the IPPC, but only if there is a scientific justification and a risk assessment that satisfies SPS commitments. Annex A.4 of the SPS Agreement (WTO, 1995) defines risk assessment as:
Table 2. Potential socio-economic considerations implied in CPB.
One interpretation is that if a country’s domestic regulatory system incorporates measures that do not improve environmental safety or plant, animal, or human health via science-based risk assessment, then it has violated the principles of the SPS Agreement. Under the WTO, the implementation of new regulations based on the above SECs would constitute a trade barrier in all but a few instances. The SECs in Table 2 that would have the science-based risk assessment justification to be implemented would be in regards to herbicide/pesticide applications and impacts on biodiversity. Risk assessments undertaken on SECs such as ethics, gender impacts, labor, migration, and consumer choice would have no effect on the environment or animal, plant, or human health and, thus, would be considered as unjustified trade barriers.
Disputes by Parties to the CPB will be problematic to resolve due to the absence of a dispute-settlement mechanism. Article 34 indicates that disputes between CPB parties will be addressed through Article 27 of the CBD. That Article suggests that, first, parties will seek to resolve the dispute through negotiation and, failing that, they will move to third-party mediation. If this still does not resolve the issue, then the dispute is to be submitted to the ICJ.
The referral of trade disputes involving the CPB to the ICJ is confusing. Since the ICJ was established in 1945, it has never dealt with a case involving agriculture or trade in agricultural products. The most apparent reason for this is the 1947 establishment of the General Agreement on Tariffs and Trade (GATT) that was purposely created to deal with the problem of how tariffs were being used to affect international trade. Given that GATT’s raison d’etre was to resolve trade disputes, it would be illogical from the ICJ perspective to duplicate what GATT was doing, and hence, the ICJ and GATT (now the WTO) have managed to ensure that duplication of efforts does not occur. Nevertheless, the IJC might rule on whether a policy exceeded the ambit of the CBP.
The challenge of trade in GM products and growing implementation of SECs is that ultimately trade will be negatively affected. While trade could be disrupted between two countries that have adopted, produce, and export GM products—as some adopting countries have included SECs as part of their regulatory framework (Falck-Zepeda et al., 2013)—it will be more likely that a trade dispute will develop between two countries where one produces and exports GM crops and the other imports and does not use GM crops (possibly because of SECs embedded in regulations). The fact that the United States, Argentina, and Canada, which collectively account for 55% of the area under GM production, are not a party to the CPB, and the United States is not even a party to the CBD, suggests that it is not feasible to have a trade dispute resolved via the dispute-settlement process outlined in the CPB and the CBD. Table 3 provides an overview of the countries producing GM crops and their institutional affiliations.
Table 3. GM-crop-adopting countries and treaty obligations.
While the complexities of a trade dispute over GM products involving Bolivia or Sudan would appear to be substantial, given their lack of WTO membership, the larger concern is whether countries could use these two agreements to forum shop. There is significant concern in some quarters that a GM-producing nation could file a case with the WTO regarding a SEC barrier in a non-GM-adopting nation, which could then argue that the CPB should, according to the VCLT, be recognized as the binding agreement by which the dispute should be administered. The following section examines several SECs that have been proposed for inclusion in regulatory frameworks in some countries to illustrate how trade disputes could arise over their implementation.
Critical Assessment of SEC Regulations
Both the WTO and CPB definitions of risk assessment include the ability to evaluate the potential of the risk being assessed. It is posited that the ability to evaluate risks would best be undertaken using the risk assessment as defined by the Food and Agriculture Organization (FAO) where risk assessment is “a scientifically-based process consisting of the following steps: (i) hazard identification, (ii) hazard characterization, (iii) exposure assessment, and (iv) risk characterization” (FAO, 2012, p. 7). Given that Article 26 of the CPB stipulates that all SECs have to be consistent with international obligations, and the WTO requires science-based risk assessments, the following SECs are assessed according to their ability to reduce the risk to the environment or plant, animal, or human health due to the commercial production of GM crops. Those examples unable to verifiably reduce risks of this nature would generally be viewed as violating a country’s WTO commitments and obligations.
Labor is one of the SECs identified by the United Nations Environment Programme (UNEP) report shown in Table 2. The labor market has a long history of being changed by innovative processes and products. Ever since the agricultural revolution, farms have been replacing labor with capital, improved inputs, and machinery to such an extent that agriculture in many developed countries is now a capital and knowledge-intensive activity. Agricultural production in many developing countries remains very labor intensive. The lack of mechanized equipment for seeding, weeding, and harvest and the absence of many labor-saving inputs results in many of these farming activities being done by hand. Several developing countries have more than two workers per hectare of arable land, while at the other end of the scale, countries such as Canada and the United States have only about 0.05 workers per hectare (Figure 1).
Figure 1. Farm workers per hectare of arable and permanent cropland.
Source: World Resource Institute (2013)
The circumstances in South Africa illustrate the challenge of considering labor impacts. Currently, the average small landholder farms only a few hectares. Given the small size of the fields, weeding is done by hand. Gianessi (2009) reports that to prevent weed damage, conventional maize requires 276 hours of hand weeding/ha, sorghum 150 hours/ha, cotton 200-400 hours/ha, and rice 200-418 hours/ha. Women typically perform the weeding. Gouse (2012) found that smallholders cultivating GM maize spent on average 267 (sorghum), 177 (cotton), and 152 (rice) hours/ha on manual weeding over three successive seasons. Gouse further found that the female household members indicated that the labor saving in the maize field enabled them to spend more time at home, caring for children or in their vegetable plots.
Gouse (2014) identifies two methods that can be used to assess labor impacts: computable general equilibrium (CGE) models or a social accounting matrix (SAM). In an ideal scenario, disaggregated time-series, rural-household data would be available and used to assess the labor impacts of GM crops. Gouse acknowledges that the biggest challenge to undertaking these assessments is the lack of data in most developing countries. In instances where data does exist, it is not sufficiently disaggregated to perform simulations. To address the challenges of these insufficiencies, data would have to be gathered, ideally over two to four years, to undertake appropriate assessments.
While an analysis of this kind provides useful information about labor impacts, it neither directly nor indirectly quantifies how risks to the environment or plant, animal, or human health are affected by the related technology. Given that none of these risks can be quantified through a labor impact assessment, any inclusion of this SEC would arguably be viewed as disguised trade protectionism that would violate a country’s WTO obligations.
Intellectual Property Rights and Farmers’ Rights
Intellectual property rights (IPRs) are also identified in the UNEP (2010) report as a socio-economic issue that should be taken into consideration as part of the decision-making process for GM products. Currently, there are several sources of IP protection that can be applied to GM crops. Plant breeders rights’ are available through the Union for the Protection of New Varieties of Plants (UPOV) agreements, while the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) establishes minimum standards for copyright and related rights, trademarks, geographical indications, industrial designs, patents, layout-designs of integrated circuits, and undisclosed information.
Some argue that the operation of IPRs could have major impacts on developing countries by biasing agri-food production and development towards modern improved varieties. Moreover, it is possible that owners of IP may effectively appropriate or marginalize traditional knowledge in ways that jeopardize landraces or traditional farming practices. The resulting dislocation of indigenous people and practices could, in some circumstances, be linked to effects on biodiversity. Lawson (2014) offers a four-step methodology to undertake an assessment of whether IP can or should be restricted in pursuit of specific SECs: (1) identify what IP is embodied in the LMO, (2), identify who owns the IP, (3) identify whether the IP is enforceable in the jurisdiction, and (4) determine whether IP triggers any relevant or important socio-economic consideration.
In theory, one could envisage including IP as one consideration in a national risk assessment for a new GM crop or product, but in practice this would limit the access and ability to assess IP data. While the data can be found in various online IP databases in developed countries—such as the European Patent Office, the Canadian Intellectual Patent Office, and the US Patent and Trademark Office—few developing countries have such developed systems. More challenging is the interpretation of the data; patent landscape analysis is a highly technical and sophisticated practice (Bubela et al., 2013; Smyth, Kerr, & Phillips, 2013).
Absent such detailed and sophisticated analysis, assessments of IP often end up being nothing more than an assessment of the distribution of benefits from commercialization. While interesting to know, it in no way would help regulators to identify ways to reduce the risk to the environment or plant, animal, or human health. As such, the inclusion of a SEC based on intellectual property would be in violation of the WTO SPS Agreement.
While ethics is often included with religious and cultural aspects pertaining to biotechnology, Coe (2014) acknowledges that it can be problematic in trying to separate ethics due to it being quite interwoven with religious and cultural aspects. Coe (2014, p. 249) suggests that two key themes set religious and cultural aspects apart—“the concepts of sacredness and the desire for happiness and well-being.” Given that discussions involving religious and cultural aspects of an innovative technology can be emotionally laden and subject to misinformation, numerous countries have utilized citizen consultations. Table 4 provides a summary of countries that have undertaken democratic engagement methods as a part of addressing social concerns regarding biotechnology.
Table 4. Democratic engagement on biotechnology.
Democratic engagement is most frequently conducted through consensus conferences or citizens’ juries (Medlock & Einsiedel, 2014). This method involves advertising for citizens willing to participate in such an event. Once the group of citizens is formed, they are given background information and are provided with presentations on various relevant topics, allowing for question and answer periods. Discussions are then held and the citizens write a consensus document that serves as the report of the process. While consensus is not a rigid requirement for the process, it is stressed as an important part of the process and that considerable time should be devoted to trying to resolve differences prior to moving on and recognizing areas where consensus may not be reached. These areas of irreconcilable differences signal to governments which issues will be most challenging for society to adjust to or to manage.
Given the strictures of the FAO definition of risk assessment, there is no obvious fit between qualitative democratic engagement exercises and the quantification of risk. Therefore, the inclusion of religious and cultural perspectives mediated through democratic engagement processes such as SECs in biosafety assessment would likely violate WTO obligations.
Market Access and Trade
Market access and assurance that international trade will not be disrupted have become dominant socio-economic issues for many developing nations and are judged to be a major reason for the lack of GM crop adoption in Africa (Paarlberg, 2008; Smyth et al., 2013). Inadvertent mixture of bulk agricultural commodities is an inevitable part of international seed and commodity trade, which is why thresholds have been established that allow for the low-level presence of undesirable items such as weed seeds, stones, insect fragments, and off-type seeds. Some of those tolerances are established through risk assessment, but many are simply market judgements, which vary based on the specific buyers being served.
The issue of comingling of GM and non-GM crops has become a serious concern in recent years. Meeting norms for levels of comingling is particularly problematic for African countries that have strong export market connections with the EU given the zero tolerance for GM products not approved for seed, food, or feed use in the EU. Ensuring that comingling is adequately managed to prevent trade problems for those exports destined for non-GM markets also draws on aspects of another SEC that is frequently included—that of coexistence between conventional, GM, and organic crops.
Gruère (2014) suggests different analytical methods would be required to adequately incorporate domestic coexistence and international trade vulnerabilities in a risk assessment. Viju (2014) extends this discourse at the international level, positing three methods can be used to determine if the commercialization of a GM crop would be welfare-enhancing in specific trade markets—partial-equilibrium models, general equilibrium models, and gravity models—which would each offer somewhat different results.
Gruère and Sengupta (2009) offer a logic model to undertake a ‘market’ risk assessment (Figure 2). The proposed five-step process could be used to determine whether (and to what extent) market risk would exist when faced with the commercialization of a GM crop.
Figure 2. Market risk-assessment decision tree.
KEY TO QUESTIONS: Q1. Is the alleged risk substantiated? Q2. Are export losses likely with the decision? Q3. Are presumed export losses non-negligible for the country? Q4. Is the risk unavoidable? Q5. Is the risk greater than the benefits?
The challenge would be that the questions posed at each of the five steps are quite subjective and could be susceptible to manipulation, with the result that the logic model would be more than likely to routinely deliver conclusions that the market risk of commercializing a GM crop would be significantly larger than any adoption benefits. As with any decision to commercialize an innovation, there will ultimately be those that adopt the innovation and gain a share of the benefits and there will be individuals that choose to not adopt the innovation and, in the classical economic sense, be said to be ‘losers’ from the new market circumstances.
While many would conclude that the market response should be a vital part of any decision, the variable and subjective nature of the process leaves it wide open to regulatory capture and exploitation by producers and marketers seeking protection from competition. The lack of a normalized, repeatable process would make assessments based on this evidence open to dispute under the WTO.
The heart of the debate pertaining to consumer choice depends on whether and how a country labels GM foods and products. While Canada and the United States do not mandate labeling of GM products (instead providing guidelines for verifiable claims), the EU (and a large number of other countries) have mandated that all products containing greater than 0.9% GM ingredients must be labeled as GM (the thresholds vary between <1% to 5% in other countries).
The issue of labeling, either mandatory or voluntary, generates a full spectrum of opinions. Environmental groups and critics of biotechnology claim that greater than 95% of consumers responding to surveys indicate that they want GM content to be labeled, but other surveys show that only 2% of unprompted consumers ask for GM labeling. The real demand for labeling lies somewhere between the two; determining whether it is greater or less than 50% is one criterion one might use to determine what type of labeling is optimal. A second-order concern is then determining what threshold makes most sense—zero tolerance, some standard allowance, or variable and specific tolerances by product, market, and use. Arriving at a repeatable, evidence-based choice related to these two factors appears easy, but has proven otherwise.
There are several survey and experimental methodologies that can be—and are being—used to solicit consumer and citizen preferences. These range from in-store surveys to phone, internet, or observational surveys (where consumers are monitored for their choices but not prompted to offer opinions); some of these surveys focus on discrete choices under varying conditions (e.g., variable prices, presentations, budget constraints), while others examine choice in the context of broader grocery purchasing habits. Increasingly economists are using more sophisticated choice experiments (e.g., bid auctions) to identify willingness-to-pay, willingness-to-avoid, and contingent valuations of a range of attributes (Lusser et al., 2012).
Lusk, Jamal, Kurlander, Roucan, and Taulman (2005) undertook a meta-analysis of 25 studies that collectively reported 57 valuations for GM food. Across all studies, consumers on average placed a higher value on non-GM relative to GM foods, ranging anywhere from 42% (unweighted average using all data) to 23% (weighted average excluding one extreme outlier). They then undertook a regression analysis and concluded that a number of factors significantly affect the value estimates. They identified that the method of value elicitation had a significant effect on valuation: when the actual shopper in a family was surveyed, they required a 72% lower premium than non-shoppers; premiums for real products were 40% lower than for hypothetical products; premiums estimated using the willingness-to-avoid method exceeded by 58% premiums estimated by the willingness-to-pay value measure; and conducting the valuation in-person bumped the premiums by 62% as compared to when the valuation was elicited over the phone or by mail, where respondents might try to answer the question in ways they perceive the interviewer is seeking; alternatively, this may simply be because an in-person process forces people to think more about their answers, which amplifies their concerns. The product being analyzed was also found to significantly affect valuations—GM meat premiums would need to be 49% higher than GM oil premiums to make them acceptable, while GM products that were characterized as providing tangible personal benefits, such as increased freshness or nutrition, decreased premiums by between 28% and 49%.
This divergence of results poses significant difficulty for incorporating consumer preferences in a risk assessment—the underlying assumption of risk assessment is that the methods should be transparent, repeatable, and unbiased. Anything less would provide a basis for a challenge at the WTO.
Many developing countries clearly have concerns about agricultural biotechnology and GM crops that extend beyond the normal boundaries of science-based regulation. While it might seem prudent to dismiss these concerns, some process needs to be established so that the full potential of biotechnology is realized in developing countries. In some instances, SECs may have some tangential or consequential effect on “the conservation and sustainable use of biological diversity, especially with regard to the value of biological diversity to indigenous and local communities” (Secretariat of the CBD, 2000, p. 19). Proponents of there being a valid justification for the implementation of trade barriers, hence, must convince their governments that these concerns should be included in the WTO justifications for the imposition of trade barriers. If convinced, their countries could work to have the issue included in the WTO negotiating agenda in some future round. Even among members of the CPB these may be contentious issues, and as there is no adjudication mechanism, such a mechanism could be put on the agenda of the Protocol.
What happens if a major producer and exporter of GM crops chooses to take action against a state that invokes a measure based on SECs that blocks trade? This section addresses the scenario of an importing state invoking SEC concerns as justification for trade measures that block market access, thus precipitating a trade dispute. To make this a manageable analysis, we have chosen to assume that Canada is the affected party that launches the trade dispute. This raises three main questions. First, if Canada decides to commence formal proceedings, which forum would have jurisdiction to hear the action? Second, once the appropriate forum is determined, which rules would form the substantive and procedural foundation for the dispute? Finally, what would be the likely outcome?
Regardless of which country has enacted the disputed trade measure, the most likely forum for hearing such a dispute would be the WTO Dispute Settlement Body (DSB). There are several reasons for reaching such a definitive conclusion. Firstly, as Neff (2004, pp. 277-278) notes:
Even if it is almost certain that any measures based on SECs raised in a dispute between a non-party and a party to the CPB would be heard by the WTO DSB, it is still important to analyze which rules would apply and how.
Article 26.1 of the CPB clearly allows member states to take SECs into account. However, as noted previously, any decisions or measures must also be consistent with their existing international obligations and must be related to the “conservation and sustainable use of biological diversity, especially with regard to the value of biological diversity to indigenous and local communities” (Secretariat of the CBD, 2000, p. 19). Given the breadth of the potential range of measures that can be classified as a SEC, it is important to ascertain which rules will apply when a dispute over such measures is adjudicated.
In a situation where a potential trade barrier to a biotechnological innovation was implemented on SEC grounds, and a dispute commenced at the WTO, the most likely applicable rules would be the SPS Agreement, which applies to all sanitary and phytosanitary measures likely to impact international trade. As Neff (2004, pp. 269-270) notes:
Given the above, it is clear that if Canada were to launch an action against a state for implementing trade restrictions on biotechnology based on SEC-related grounds, then the dispute would be heard by the WTO DSB and the rules of the SPS Agreement would apply. This conclusion is supported by Thorn (2011), who argues that most SEC measures that would apply to the products of biotechnology can be classified as falling under the SPS. He bases his analysis on two main sources. Firstly, at the COP/MOP 5 (Conference of the Parties serving as the meeting of the Parties) in 2010, the UNEP Global Environment Facility (GEF) presented a report (UNEP, 2010) that contained a list of over 20 potential categories of SEC, most of which would encompass any measure deemed necessary to protect animal, human, and plant life or health (reproduced in Table 2). Furthermore, he argues that the reasoning adopted by the WTO Dispute Panel in the European Communities (EC)-Biotech Case (as detailed in Gruszczynski, 2009) supports a finding that almost all SEC-related measures applying to LMOs fall within the terms of the SPS. Thorn (2011, p. 6) concludes:
As stated above, the VCLT is regarded as having powers that are ‘residual’ in nature. Therefore, more specific dispute-settlement mechanisms and rules such as the WTO DSB and the SPS Agreement would apply to a dispute brought by Canada against any nation that invoked SEC-related trade measures that affected the products of biotechnology. However, this does not mean that aspects of the VCLT are not relevant. As noted, the WTO DSB has invoked several articles of the VCLT in order to justify its own broader enquiries and to enable it to invoke general principles of international law to add key contextual information to disputes that come before it. As Lagomarsino points out, this then opens the door to advocates for the inclusion of broader, less strictly trade-related analyses (e.g., related to sustainable development and precaution) to be proper realms of inquiry for the WTO DSB via their inclusion in the preambular language of the CBD, the CPB, and even the WTO Agreement.
Further when this use of the VCLT is coupled with the status of the DSB as ‘the only game in town’ in relation to international tribunals with effective dispute-settlement powers, it leads to some significant conclusions. Most notably, it suggests that the WTO must embrace such disputes (between states and groups who advocate for differing positions) and act as the arbiter. If the WTO cannot find solutions that provide for some sort of rapprochement, then we are clearly in a highly problematic situation:
While the VCLT will not directly assist in resolving trade-related disputes over SECs and biotechnology, its use by the WTO DSM can provide a way forward. WTO clearly has the membership, jurisdiction, mechanisms, and rules needed to adjudicate virtually all likely disputes that could arise between mega-adopters and exporters (most who are WTO members, but not part of the CPB) and leading importers and parties to the CPB, which invokes SEC in enacting trade measures.
Regardless of one’s position on the legitimacy of SEC matters as justifications for trade measures, a key message from this analysis is that the WTO must be the body that resolves these conflicts for two reasons. First, it has the institutional competence to do so; its dispute resolution system is continually evolving and well regarded. Second, to ensure the mutual goals of further trade liberalization and the realization of key international imperatives such as sustainable development and the improvement of general welfare, the WTO Appellate body must use its authority to more accurately align the core trade-focused language of the WTO Agreements with its broader preambular language. As Lagomarsino (2010) concludes:
1 Preferential trade agreements such as the North American Free Trade Agreement, the European Union, etc., are covered by the WTO and are expected not to contradict WTO agreements.
2 The WTO is the only multilateral organization other than the United Nations Security Council that can authorize the use of trade sanctions (Kerr, 2000).
3 The sea turtle is listed as a highly endangered species, and a major threat to them is unintended death from shrimp fishing. The United States attempted to protect sea turtles by mandating the use of turtle-friendly technologies on US fishing boats. Further, in 1989 the United States attempted to have this technology used by boats from other countries by embargoing imports of shrimp caught not using turtle-friendly technology. A number of developing countries brought a case to the WTO and the Panel found that the United States was not in compliance with its WTO obligations. The case was very complex. See Isaac, Phillipson, and Kerr (2002) for an accessible summary of the case.
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Suggested citation: Kerr, W.A., Smyth, S., Phillips, P.W.B., & Phillipson, M. (2014). Conflicting rules for the international trade of GM products: Does international law provide a solution? AgBioForum, 17(2), 105-122. Available on the World Wide Web: http://www.agbioforum.org.
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