Bridges Trade BioRes • Volume 9 • Number 9 • 15th May 2009

EU, US Strike Provisional Deal to End Beef Dispute

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Trade officials from the US and the EU arrived at a provisional agreement last week that could mark the beginning of the end of a trade dispute over hormone-treated beef that dates back to 1996. The deal, which was announced on 6 May, would allow the EU to maintain its ban on imports of hormone-treated beef from the US; in exchange, US beef that is free of hormones would be granted much greater access to the European market.

“Following a very good discussion today, we have reached an understanding that provides a pragmatic way forward in the long-running beef dispute,” EU Trade Commissioner Catherine Ashton and US Trade Representative Ron Kirk said in a joint statement.

But to the frustration of some in the US meat industry, the provisional deal effectively sidesteps the controversial question of whether, as the EU has long claimed, the ingestion of beef treated with the growth-promoting hormone oestridiol-17 is harmful to human health.

Outlines of the new deal

Under the terms of the provisional agreement, the US will refrain from imposing additional retaliatory measures that the outgoing Bush administration had threatened to slap on EU exports at the beginning of this year (see Bridges Trade BioRes, 23 January 2009, http://ictsd.net/i/news/biores/38544/).

Statements from Washington at the time seemed to indicate that the announcement of the proposed measures - dubbed ‘carousel sanctions’ because Washington planned to change the list of products subject to the duties every six months - was meant to force a conclusion to the 13-year-old dispute. The revolving nature of the new tariffs, which would have amounted to an additional US$ 79 million worth of duties on EU goods, would have exacted a harsh penalty on European exporters, who would have had no way of knowing which products Washington would target next.

But the carousel sanctions, which were due to come into force just days after the provisional agreement was struck, have been eliminated under the new deal. Instead, Washington will maintain the existing level of sanctions against European products, which are valued at US$ 37.8 million, for three years, then eliminate the sanctions altogether in the fourth year after the deal takes effect. In return, Brussels has said it would allow additional duty-free access for US beef that has not been treated with growth-promoting hormones. The EU currently allows 11,500 metric tons of hormone-free US beef to enter its market each year. The provisional deal would increase that quota by 20,000 metric tons each year for three consecutive years; in the fourth year after the agreement takes effect, the quota would jump by another 45,000 metric tons.

The two parties also agreed to work to find a longer term resolution to the matter before the four years are up. For the next 18 months, both sides have agreed to refrain from pursuing further WTO litigation on the matter.

But the deal is still tentative, and has yet to be signed by either of the trade reps, who said they would discuss the proposed agreement “with our respective stakeholders and constituencies in an effort to finalise it as soon as possible.”

Question of hormone danger left unanswered

Reactions to the proposed agreement were mixed on both sides of the Atlantic.

US Senator Chuck Grassley, who hails from the farm-heavy state of Iowa, said he was happy that US beef would get greater access to the EU market, but called the evasion of the hormone issue “disappointing.” “The European Union should reopen its market to all US beef, which is entirely safe,” Grassley said.

But some in the US meat industry were more optimistic. The American Meat Institute called the deal “an encouraging positive step” and commended Kirk for his work in the negotiations. Gregg Doud, the chief economist of the National Cattlemen’s Beef Association, a US industry group, noted that the proposed deal “conceded nothing in terms of the science; it is simply changing the terms of the payment plan.”

Meanwhile, a major EU farm group criticised the tentative deal as ‘unbalanced’. The proposed resolution “strikes another blow for EU farmers who are already struggling to survive in a market hit by the economic crisis,” said Pekka Pesonen, the Secretary General of Copa-Cogeca, which represents European farmers. “The EU is granting the US very substantial market access from year one but the US would be maintaining its sanctions on EU exports for another three years,” he said.

But Pesonen stressed that “consumer protection must remain our key objective,” and said that the European Commission “must be ready to act” if any US beef shipments to the EU are suspected of containing growth hormones.

Background of the case

The foundations of the dispute were laid in 1988, when Europe introduced import restrictions on meats treated with six different growth-promoting hormones. At the same time, Brussels also banned the use of the hormones.

The US and Canada challenged those embargoes at the WTO in 1996. Two years later, the WTO’s Dispute Settlement Body ruled that Brussels had failed to provide adequate evidence that consumption of the banned hormones poses a danger to human health. The WTO’s Agreement on Sanitary and Phytosanitary Measures (the SPS Agreement), which the EU was found to violate, requires that bans based on health concerns be backed up by ‘scientific justification’ and risk assessment studies.

Despite the ruling against it, Brussels did not revoke the ban, but instead launched a series of studies intended to prove that the growth-promoting hormones subject to its embargoes do in fact threaten human health. Meanwhile, the two complainants began imposing retaliatory trade sanctions against European products. The measures are still in force today.

The plot thickened in 2003, when the EU informed the WTO that it had imposed a permanent embargo on imports of meat products treated with oestradiol-17 and that it had extended its provisional ban on imports of the other five hormones, citing the ‘precautionary principle’. Brussels maintained that it had amassed a sufficient amount of scientific evidence to justify the continued restrictions, and called on the US and Canada to lift their retaliatory trade sanctions.

But when the US failed to do so, the EU brought the case back to the WTO in 2004. The resulting ruling of the DSB’s panel, which was made public in March 2008, concluded that Brussels still had not provided sufficient evidence to justify the ban. However, the panel did fault the US for failing to get the WTO’s approval for continuing its retaliatory measures.

Canada’s trade sanctions against certain EU imports, which were put in place in August 1999, remain in effect in today, although Me’shel Gulliver Bélanger, a spokesperson for Canada’s Department of Foreign Affairs and International Trade, says the two parties are “holding discussions on possible elements that could be included in a negotiated settlement.”

Additional information

To read the joint statement from Kirk and Ashton, please click here.

ICTSD reporting.