Tag Archives: trade disputes

Economic Analysis in Disputes over Trade Remedy and Related Measures in Agriculture, with Examples from Recent Cases

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By Daniel A. Sumner, Richard C. Barichello, and Mechel S. Pagi

The use of antidumping, countervailing duties and safeguards and protection measures that are again issues for negotiation in the current World Trade Organization trade negotiations. In addition, disputes related to domestic agricultural subsides are gathering attention as the Uruguay Round Peace Clause expires. This paper considers the application of economics in some high profile agricultural cases. Domestic subsidies for agriculture remain high in many countries, which may make countervail, subsidy and serious prejudice cases more common. At the same time, given fluctuation of farm prices, limited short-term control over farm output and with many farms supplying most agricultural markets, the economic logic of dumping and antidumping is even more troublesome when applied to agricultural commodities.

This paper reviews the role of economic analysis and how the law and economics interact in agricultural antidumping, countervail, safeguard, subsidy, serious prejudice, and cases. The paper reviews where economic analysis enters or does not enter and how some legal concepts may differ from the logic applied by most economists. Measurement of the degree of subsidy, the amount of dumping, and the effects of subsidies are considered. In addition, the paper considers issues related to measurement of losses to the affected home country industry from imports, again with reference to how agriculture may differ from traditional cases applied to manufacturing products. Finally, the paper considers how the spread of the use of trade remedy procedures may affect the economic implications for reform, again with particular reference to agriculture.

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Biotechnology – Can We Trade It?

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By Maury Bredahl

Can we trade the current generation of products from biotech or the technology itself? Can we trade future generations of products of the technology? These authors pose these questions and attempt to answer them in their commentary about the future of biotechnology and its trade-ability. Given current consumer concerns about food safety and product attributes, some constraints have already been placed on commodity trade, especially by importing countries. This paper focuses on the future of nutraceuticals and functional foods. These products have consumer-desired traits as opposed to agronomic functionality. How will these biotechnologically engineered foods be classified? As food or as drugs? Currently, we see many private initiatives to heighten consumer awareness and demarcate food containing GMO’s from products that do not or vice versa. Some producers, processors, and marketing agents make it part of their corporate strategy to “protect” consumers from GMO products.

Attempts to resolve this issue on an international level have been spearheaded by the WTO. The Cartagena Protocol on Biosafety has been drafted as a proposed regulatory framework for the trade of biotechnologically engineered organisms and products. Identified as the three most prominent threats to free trade of GMO products are the safety of GMO containing food, potentially detrimental environmental effect, and the ethical concerns with the technology itself. Mainly, the Cartagena Protocol advocates the employment of the precautionary principle, that we should proceed cautiously until product safety and soundness may be proven scientifically. Currently, the largest problem in adapting a regulatory protocol is our lack of knowledge and understanding about the long and short term effects of these products.

However, proceeding without any type of regulation or regulatory guide could encourage market segmentation and inefficiencies may arise out of that. There is already attitude discrepancy between importing and exporting countries in approach to regulation: the importing countries tend to be much more skeptical and likely to enact regulation due to negative consumer response.

Biotech’s next quest is to produce crops with value to the consumer as opposed to ones with agronomic value. This will enable farmers to target the needs of the end user. The future implications for trade of these products will undoubtedly mean that product attributes must be carefully targeted to local markets and this will largely take place through direct investment as opposed to product flows. The EU and the US will establish the tenor of these potential regulations and problems may arise in EU’s greater concern with the safety of the underlying production process.

In conclusion, trade will happen and so will the trade of biotechnology and its products. “Institutional developments such as agreement on labeling standards will be so slow and any outcome so ambiguous that reducing risk and transaction costs will fall to the private sector.” This may be the most efficient and desirable outcome. The market will eventually be differentiated on the basis of consumer attributes that will vary across nations and geographic areas.

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Biotechnology Regulations and the WTO

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By Ian M. Sheldon and Tim Josling

This paper examines the regulation of trade in genetically modified organisms (GMOs) by the WTO. Despite rapid adoption of GMOs by a few exporters, many importers have developed relatively restrictive procedures for pre-market approval of GMOs, and are introducing mandatory labeling. While exporters have yet to seek a ruling from the WTO on these regulations, a trade dispute over GMOs is likely to occur before too long. Exporting countries will likely argue that importing countries’ regulations are too restrictive, given existing scientific knowledge of the safety of current GM crops, and that labeling of GM foods is unnecessary due to the fact that they are typically similar to their conventional counterparts. In response, importing countries will likely argue that existing scientific knowledge about GMOs is insufficient, and that a precautionary approach to approval is appropriate. In addition, importers will claim that labeling is necessary due to the fact that they are not equivalent to their conventional counterparts, and consumers have a right to choose whether or not consume such foods, be it for religious, ethical or other reasons.

In the event a panel will have to decide on whether GM and non-GM products are “like goods”, whether adequate risk assessment was undertaken for any regulation introduced for health reasons, whether labels constitute the “least trade distorting” way of meeting legitimate objectives, and whether regulations imply discrimination among suppliers or in favor of domestic producers. Experience with the SPS and TBT Agreements has not been extensive enough to indicate how such a panel might rule. But one can also view the issue in broader trade policy terms, as a balance between market access obligations that need to be adjusted as domestic regulations on new technologies are developed.

A possible solution is for importing countries with tough GM regulation and mandatory labeling to offer reciprocal increases in market access for non-GM foods in compensation for any losses of market access for GM foods. There is a question though of whether such “rebalancing” is actually practical, and it would certainly add to the costs of dispute settlement in the WTO, but it may be the only viable solution in the long run if the WTO is not to be dragged in to evaluating social and ethical bases for regulation of biotechnology.

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