By Alan Sipress and Marc Kaufman Washington Post Staff Writers Sunday, August 26, 2001; Page A01
Senior Bush administration officials are pressuring the European Union to abandon new restrictions on genetically modified foods that they say could cost U.S. companies $4 billion a year and disrupt efforts to launch a new round of global trade talks.
U.S. officials have repeatedly told their European counterparts that the regulations, which received preliminary approval last month, discriminate against U.S. products in violation of World Trade Organization requirements, raising the prospect of a major and emotionally charged trade dispute.
The European Commission's decision to require the labeling of genetically engineered products reflects a European anxiety about food safety that is far more profound than in the United States, the world leader in agricultural biotechnology. This is a divide that threatens to further aggravate U.S. relations with Europe, already roiled by differences over global warming, arms control and other trade issues.
Undersecretary of State Alan P. Larson, the State Department's senior diplomat assigned to economic issues, called the new restrictions "trade disruptive and discriminatory." He said, "It's obviously a very serious problem that affects a very important trade and one that's of vital interest to a very important constituency in the United States, which supports free trade."
Though U.S. officials have declined publicly to detail what type of punitive action the Bush administration might take against Europe, U.S. officials say the regulations are inconsistent with the terms of the WTO because they treat U.S. products less favorably than European ones.
For instance, Larson said the European regulations would require that American crushed soybean oil bear a label, while European cheeses and wine made with biotech enzymes would not be covered. "There are potential WTO concerns about how it is structured now," Larson said.
U.S. officials have left open the possibility of bringing a legal case before the WTO, which, after lengthy litigation, could eventually impose a politically embarrassing judgment and stiff economic penalties on Europe. But Larson said the administration's immediate focus is on lobbying European governments to amend the regulations before they take effect. He added that the United States and Europe need to resolve the issue quickly so it does not become a "distraction" that interferes with their shared interest in launching new global trade talks as planned later this year.
Officials said that economic losses in the United States - where 75 percent of soybeans and more than 25 percent of corn comes from genetically modified seeds - could far exceed other transatlantic trade battles, such as those over bananas and growth hormones in beef. Resolution of the long-running banana dispute earlier this year removed a major irritant in American-European relations.
The dispute could also harden public opinion about biotechnology and its ability to transfer beneficial genes from one species into another. Proponents want it to be seen as a force for progress and global improvement, but it could become a symbol of divisiveness if it set off a bitter trade dispute.
The European Commission's new standards, among the most far-reaching in the world, call for all products made from engineered material to bear a label saying they contain "genetically modified organisms." They also require producers to document the source of all their ingredients. Since the U.S. crop-handling system generally does not separate modified and conventional crops, the new requirements could be unwieldy and costly for U.S. businesses.
European limitations on biotech crops already ban most U.S. corn for food products, estimated by U.S. officials as a $300 million annual loss. The new requirements, which must be approved by the European Parliament and Council of Ministers before taking effect by 2003, could also make it difficult to export corn for animal feed and soybeans.
Larson said in an interview that he has raised U.S. concerns with "everyone that comes through this door, every trade minister, agriculture minister, economy minister from Europe," including those representing about eight European countries. He said a similar message has also been delivered by Agriculture Secretary Ann M. Veneman and U.S. Trade Representative Robert B. Zoellick.
President Bush, who comes from a large farm state and counts on the agriculture industry for political support, raised the issue personally with European leaders last month at the Group of Eight meeting of industrialized countries in Italy, according to a senior administration official.
Kimball Nil of the American Soybean Association said the food industry is pleased by the tough talk. "The Bush administration met with EU commissioners and very clearly laid down a marker that many of us felt was missing before," he said.
But European officials chafe at the pressure, saying the administration is trying to impose U.S. acceptance of biotech food on a European public that does not believe these products are safe despite scientists' claims. The spread of mad cow disease and other health crises have fueled public concern about food safety, and prominent officials, including Britain's Prince Charles, have been highly critical about biotechnology in crops.
"We are seeing an illustration of American unilateralism," said Tony Van der haegen, a European Commission representative in Washington. "There are basic psychological differences between American consumers and those in Europe, where [genetically modified products] are not accepted."
Requiring food labels is a way of offering choice to consumers and restoring their confidence in food, Van der haegen said. He added that the United States has exaggerated the potential loss to U.S. companies, putting the figure instead at $2.8 billion a year.
On a policy level, U.S. regulators have embraced the position that engineered and traditional crops are essentially equivalent, and so should be treated the same. There is some public - and congressional - pressure to require labeling of modified foods in the United States, but promoters of biotechnology have fought tenaciously, and successfully, to resist the efforts. They argue that labels would unfairly stigmatize the products.
The European Union has not approved any new engineered crops for almost three years, and it has been under great pressure from the United States to begin the review process again. The new regulations allow for biotech crop reviews to resume, but only with the requirements that U.S. officials find objectionable.
In an Aug. 9 letter to Secretary of State Colin L. Powell, Veneman and Zoellick, 24 U.S. trade organizations said the proposed EU guidelines on biotechnology in agriculture are "commercially unworkable, inconsistent with WTO obligations and would result in billions of dollars of lost U.S. exports." The letter, signed by groups ranging from the Grocery Manufacturers of America to the American Soybean Association and the North American Export Grain Association, said the measure would cause a "serious trade impediment" by requiring labeling and tracing of modified foods, but not of European wines and cheeses.
The European regulations would not apply to the latter items because the requirements distinguish between food made from genetically modified material such as seeds and those produced with the assistance of modified material such as enzymes.
Larson wrote back this week that "I share many of your apprehensions regarding the proposals," and said he was working to "ensure that any measures [implemented by the EU] are not onerous, costly or trade-disruptive."
Mark Mansour, a Washington attorney who represents large food companies and has been consulted by administration officials, has written an analysis urging the administration to file a case with the WTO as soon as possible. Mansour also recommends that the United States withdraw support for the international Biosafety Protocol negotiated in Montreal, a Clinton-era agreement that accepted some of the European concerns about genetically modified foods.
As the regulations now move to the European Parliament, legislators may tighten the restrictions further. Environmental groups are urging them to remove a provision that waives the labeling requirement if the percentage of genetically modified material in a food item is less than 1 percent of the overall product. "The U.S. is trying to force-feed modified foods to the rest of the world, and it just isn't going to work," said Charles Margulis of Greenpeace, which has led the anti-biotech campaign in Europe.
U.S. troubles over biotechnology and international trade are not limited to the European Union. The governments of Saudi Arabia and Sri Lanka have proposed bans on importing genetically modified foods, and Mexican legislators are also discussing tough labeling laws. Larson said the United States is concerned that the EU biotech guidelines could become a model for developing countries and significantly limit the reach of the technology.
Advocates of biotechnology say it can be especially helpful to poor farmers by increasing their yields, protecting against pests and viruses, and allowing them to grow crops in depleted soil. But critics say poor farmers will never see those potential benefits because the technology is owned by private, multinational companies interested primarily in selling seeds for a profit to commercial growers.