Assessment of Biotechnology Policies and International Trade in Key Markets for U.S. Agriculture

Journal of Agricultural and Applied Economics, Aug 2005 by Marchant, Mary A, Song, Baohui

Figure 4 shows that the EU's biotech polices had significant effects on U.S. exports of biotech commodities, especially for corn. In the early 1990s, the EU imported a large volume of U.S. corn (USDA-FAS 2005b). In 1995, U.S. corn exports to the EU reached almost 4 million metric tons. However, after some EU states launched biotechnology restrictions, U.S. corn exports to the EU dropped dramatically from 1.74 million metric tons in 1997 to only 0.33 million metric tons in 1998, a more than 80% decline (USDA-ERS 2000). In 2003, U.S. corn exports to the EU further dropped to 0.09 million metric tons; the United States almost lost the EU corn market. For soybeans, the situation was somewhat better, although U.S. soybean exports to the RU also declined since 1998 (USDA-FAS 2005b). In 2003, U.S. soybean exports to the EU were only 4.35 million metric tons, about 52% of the 1997 export volume.

By contrast, since 1998, Argentina, another leading corn producer, has replaced the United States as the EU's primary corn supplier, and the EU has approved Argentina's biotech corn varieties. Similarly for soybeans, Brazil, another leading soybean producer, has become the EU's preferred soybean supplier since 1998, despite the fact that 10%-20% of the Brazilian soybean crop (70% in southern Brazil) has been estimated to contain biotech varieties (Anderson and Jackson).

In May 2003, the United States, Argentina, and Canada filed a World Trade Organization (WTO) dispute against the EU over its moratorium. "The first step in a WTO dispute is to request and conduct consultations during the next 60 days. WTO procedures were designed to encourage parties to resolve their differences" (USDA-FAS 2003c). However, after consultations, in August 2003, the United States took the next step by requesting a dispute settlement panel to hear arguments in its WTO challenge to the EU's biotech moratorium. "Dispute settlement procedures, including appeal, typically take a total of 18 months" (USDA-FAS 2003c).

"On April 18, 2004 the EU implemented its new regulations on the labeling and traceability of biotech products. Previously, many member states argued that such regulations were needed to protect consumer and environmental interests. Commissioner Byrne has adamantly insisted that these concerns have now been met and that it is time for the member states to move on and begin to approve the products" (USDA-FAS 2004a).

In May 2004, the EU Commission approved a biotech corn variety Bacillus thuringiensis (Bt-11), the first biotech variety allowed for sale in EU markets since 1998 (Smith). This approval of Bt-11 by the EU Commission appears to have put an end to its six-year moratorium, challenged by the United States and other countries through the WTO. However, this approval solely applies to the sale of Bt-11 corn, not for production in the EU, whereby Bt-11 corn has been produced in the United States, Canada, Argentina, and Japan. Although the EU Commission gave the green light for this new biotech variety, the WTO dispute filed by the United States and other countries against the EU's moratorium has not been finalized as of this writing.