when goliaths clash: us and eu differences over the labeling of food products derived from...

When goliaths clash: US and EU differences over the labeling of food productsderived from genetically modified organisms

Andy Thorpe1 and Catherine Robinson21Department of Economics, University of Portsmouth, Portsmouth, UK; 2National Institute for Economic and Social Research

(NIESR), London, UK

Accepted in revised form April 15, 2003

Abstract. There is a fundamental divergence of opinion between the EU and the US over how food productsderived from genetically modified organisms should be labeled. This has less to do with safety, as moves towardsthe international harmonization of safety standards continue apace, and rather more to do with the consumers’ rightto know about the origins of the food they are consuming. This paper uses a framework drawn from the globalpublic goods (GPG) literature of economics and the work by international relations theorists on formal interna-tional organizations (FIO) to explain why there is presently no global consensus on the manner (voluntary ormandatory) in which GM food products should be labeled.

Key words: Biotechnology, Food, Formal International Organizations, Genetically modified organisms, GlobalPublic Goods, Labeling, WTO

Abbreviations: CAC – Codex Alimentarius Commission; EFSA – European Food Safety Authority; EU –European Union; FDA – Food and Drug Administration; FFDCA – Federal Food, Drug and Cosmetic Act; FIO –Formal International Organizations; FoE – Friends of the Earth; GM – Genetically Modified; GMO – GeneticallyModified Organisms; GPG – Global Public Goods; IMF – International Monetary Fund; IR – International Rela-tions; SPS – Sanitary and Phytosanitary Measures; TBT – Technical Barriers to Trade; UK – United Kingdom;UN – United Nations; US – United States of America; USDA – US Department of Agriculture; WHO – WorldHealth Organization; WTO – World Trade Organization

Dr. Andy Thorpe is a principal lecturer at the University of Portsmouth, specializing in Latin American econom-ics. Andy has a strong research interest in fisheries development in the Third World. He has recently published inWorld Development, Food Policy, Defense and Peace Economics, and Marine Resource Economics.

Catherine Robinson is a research officer at the National Institute of Economic and Social Research, London,UK.

Introduction

On January 28, 2002, the European Parliament and theCouncil of the European Union adopted RegulationNo. 178/2002, setting in motion a process that saw theestablishment of a European Food Safety Authority(EFSA) entrusted with developing the framework forEU food law. Central to its mission is the provision ofindependent scientific advice and scientific/technicalsupport, including the development and propagation ofuniform risk assessment methodologies, to ensure that‘‘food shall not be placed on the market if it is unsafe’’(Art. 14.1). While the onus is placed on food and feedbusiness operators to comply with the evolving safetystandards of EU food law, they are also obliged to havein place systems and procedures that reveal both the

source (and nature) of their inputs and the destinationof their outputs (Art. 18 – the ‘‘traceability’’ require-ment). Furthermore, food and feed products destinedfor the Community market are expected to be ade-quately labeled to facilitate traceability.The EFSA, in electing to convene a specific scientific

panel to provide guidance on risk assessment principlesas they relate to genetically modified organisms (GMOs),provides the medium through which the agenda of therevised Community Directive No. 2001/18/EC on thedeliberate release of GMOs into the environment can berealized. The Directive, applicable from October 2002, isexpected to pave the way for the ending of the morato-rium on marketing GMOs within the EU that has oper-ated since October 1998. Yet, rather than resolve theantagonisms surrounding GMOs, this legislation has

Agriculture and Human Values 21: 287–298, 2004.� 2004 Kluwer Academic Publishers. Printed in the Netherlands.

merely elevated the conflict onto another plane, withtraceability becoming the new battleground over whichGMO proponents and opponents are locked. Traceabilityessentially provides a basis for potential product differen-tiation (‘‘identity preservation’’), whether it be for sepa-rating organically grown products from their chemicallyassisted counterparts, or – as examined in this paper –allowing GMO-derived products to be distinguishedfrom their non-GMO-derived counterparts.EU legislation currently in the pipeline (Proposed

Regulation 2001/0180/COD) proposes to introducestandardized Europe-wide mandatory labeling require-ments for all food or feed containing, consisting of, orproduced from, GMOs (or containing ingredients pro-duced from GMOs) so as to allow the consumer toexercise their sovereign rights. But ‘‘identity preserva-tion’’ is costly, studies suggesting that between Euro 5and 25 per ton is added to the total cost in the GMOinstance (NERA, 2001: 84ff.), and so, there is under-standable opposition to the regulation’s all-encompass-ing nature. These concerns are legitimate in tworespects. First, the now widespread prevalence of foodproducts that contain GMOs – Harlander (2002) sug-gests that 70–85% of processed foods sold in the UScontain one or more ingredients originating from GMsources, while Friends of the Earth have estimated that30,000 + food products may contain derivatives of GMmaize or soya, in the form of oils and syrup (FOE,2002a) – make the installation of effective traceabilitysystems and procedures a daunting task. A Food SafetyAuthority (FSA) (Ireland) survey, for example, foundthat 19 out of 26 samples of tortilla chips containedsome elements of GM maize DNA, although all werebelow the 1% certification level (FSAI, 2001). Second,the markedly different regulatory environment else-where, most notably in North America, where labelingbiotechnology-derived products is voluntary, raises amore general question as to the desired level of legisla-tive stringency over product labeling. Should labelingextend no further than allowing producers to declarethat the product is ‘‘GM free’’ as both the FSA-UKand American regulators prefer? (with all the attendantcosts that involves for feed/food business operatorswho wish to produce without using GMOs) Or shouldfood chain participants instead be compelled to statethat GMOs have been deployed in the production pro-cess as the EU proposes? These fundamentally differentregulatory perspectives caused a number of WTO mem-bers to question whether the proposed EU GMO label-ing legislation is seeking to establish an unacceptabletechnical barrier to international trade (WTO, 2002),and fears were expressed that this may have simplybeen the opening skirmish in a new trade war (seeFOE ‘‘Real Food News,’’ The Guardian, October 18,2002, and January 22, 2003, for example).

The objective of this paper, then, is to examine theprospects for the development of a globally acceptablebiotechnology-derived food labeling regime. The fol-lowing section links the notion of international foodsafety and consumer concerns to the emerging literatureon global public goods (GPG) and formal internationalorganizations (FIO). Section three details the EU andUS regimes as exemplars of how different institutionaland cultural environments can spawn two distinctiveapproaches to the labeling of GM food products, whilethe subsequent section examines the global institutionalarena in which the battle to advise consumers over theGM origins of their foodstuffs looked set to be resolved– the Technical Barriers to Trade Committee of theWTO. Finally, we offer some concluding comments onwhether US failure to pursue the matter through theWTO is a step towards an uncontested global GM foodlabeling regime.

Formal international organizations (FIO), globalpublic goods (GPG), and labeling

Recent multi-disciplinary research (see Broz, 1999;Kapur, 2002, for example) has sought to ground theinsights offered into FIO by contemporary internationalrelations (IR) theorists within an extended public goodsframework drawn from economics.While, historically, IR theories regarding interna-

tional cooperation/organizations tended to either mar-ginalize the role of FIOs (decentralized cooperationtheory), their modus operandi and their respective posi-tion in international power hierarchies (regime theory),emphasize the descriptive over the explanatory (legalscholarship), or see the FIO as merely a (poor) exten-sion of national interests and power (realist theories);this has been redressed by contemporary theorists.Abbott and Snidal (1998: 29), for example, assert thatthe independence and global remit of FIOs not onlyallows states to realize objectives that cannot necessar-ily be accomplished on a decentralized basis, but para-doxically provides a window whereby FIOs can proveinstrumental in developing international norms andguidelines that may in turn impinge upon the behaviorof a nation state (Koremenos et al., 2001; Rosendorffand Milner, 2001). FIOs can thus become ‘‘both theobject of strategic choice and a constraint on the nationstate’s behavior’’ (Martin and Simmons, 1998: 729).Increasing attention is now being paid by IR

theorists (‘‘the rational institutionalists’’) as to how‘‘legalization’’ – the legal underpinning of institutions –combines with national political considerations to influ-ence or determine state behavior. Abbott et al. (2000:401) argue legalization can be defined on a tri-dimen-sional level in terms of obligation (states/other actors

288 Andy Thorpe and Catherine Robinson

are bound by a rule, code, principles, norm, rule-book,etc. produced by the institution under consideration),precision (insofar as the rules, etc. are unambiguousregarding the responses open to the affected states/otheractors), and delegation (the extent to which interpreta-tion and enforcement of the obligations is devolved tothird parties). Consequently, institutions can be groupedon a continuum extending from ‘‘soft’’ (low obligation,vaguely expressed principles/rules, etc., highly delega-tive) to ‘‘hard,’’ with those global institutions locatedtowards the ‘‘hard’’ end of the legalization spectrabeing more effective in constraining or influencing anation state’s behavior. One of the more notable areaswhere this analysis has been applied is the trade arena,the metamorphosis of the international trade regimefrom being a ‘‘soft,’’ decentralized, and relatively pow-erless institution in the first half of the last century, intoa ‘‘hard’’ FIO in the shape of the WTO today attractingcomment from a growing number of authors (Abbott,1997; Hudec, 1999; Goldstein and Martin, 2000;Kahler, 2000; Smith, 2000).These theoretical developments have also infused the

literature emerging on the global nature of certain pub-lic goods. Historically, the public goods literature ema-nating from the likes of Samuelson (1954) andBuchanan (1968) denoted that the main properties ofsuch goods were their non-excludability and non-rival-ness (inasmuch as one individual’s consumption of thegood in question did not reduce the welfare of others).As provision of public goods within a market economyis likely to be suboptimal due to free rider and/or col-lective action problems, state involvement was histori-cally viewed as necessary if a socially optimal outcomewas to be attained. Kaul et al. (1999) have recentlysuggested that the concept of public goods can beextended to the global level, as the self-same problemsof free riding and collective action that afflict nationaleconomies are also in evidence on the global plane. Acase in point is money-laundering, generally held to bea ‘‘public bad.’’ In the absence of internationally agreedrules to deal with the phenomenon, collective inactionon the part of nation states is unlikely to mollify theproblem (Masciandaro, 1999). Might there then not bea case for some supra-national coordination mechanismto prevent under-provision of GPGs?Kapur (2002: 340) suggests that supra-national coor-

dination in the supply of public goods may materializefor two reasons. First, where the externalities engen-dered by human activity increase, the appropriate levelof governance to deal with such externalities may wellbroaden also. For example, concerns about chloridepollution in the Rhine could be dealt with by a RhineCommission, whereas a global protocol (the MontrealProtocol) was seen as the appropriate way for tacklingstratospheric ozone depletion (Mitchell and Keilbacch,

2001: 908–13). Second, if individual tastes and attri-butes become increasingly homogenized, there is astrong possibility that global agreement will emergevis-a-vis the policies enacted, or the perspectivesadopted, on a particular issue. For example, an interna-tional moratorium on commercial whaling wasapproved in 1986 following growing global concernover stock levels (although this moratorium has morerecently been challenged by a number of nations on thegrounds that stocks have now recovered sufficiently topermit whaling to recommence (CNN, 2001)). Whetheror not a public good merits reclassification as a GPG,however, will depend to what extent the activities (ben-eficial or detrimental) transcend both national bound-aries and generations.1

Kaul et al. (1999: 13) recommend distinction betweenfinal and intermediate GPGs, final GPGs being tangible(the environment, human history) and intangible (peace)outcomes rather than products in the conventional sense.This list of ‘‘outcomes’’ construed to be GPGs can beexpanded to include justice/equity (Sen, 1999), goodhealth and the control of infectious diseases (Chenet al., 1999), international development (Kapur, 2002),international financial and monetary stability (Broz,1999; Moshirian, 2002), international order (Nye Jr.,2002), climate change (Hackl and Pruckner, 2002), andtropical rainforests (Tomich et al., 1998). Stiglitz(1995), in an early paper on the theme, identified fiveGPGs; international economic stability, internationalpolitical stability, international humanitarian assistance,the international environment, and knowledge.By contrast, intermediate GPGs are not outcomes

per se, but international – both formal and informal –organizations, regimes, agreements or philosophies thatcontribute towards the delivery of final GPGs (‘‘out-comes’’). Thus, the Montreal Protocol provides a meansof protecting the ozone layer, the World Bank isentrusted with providing ‘‘international development,’’the IMF ‘‘international financial and monetary stabil-ity,’’ international cooperation on health (whetherthrough the WHO or other initiatives such as the Inter-national HIV/AIDS Alliance) helps ensure the provi-sion of good health, UNESCO promotes ‘‘the publicgood aspects of scientific research,’’ while altruismoffers a conduit to aid disaster victims and/or globalhunger reduction (Abbott and Snidal, 1998: 14; Barrett,2001; Kaul and Faust, 2001; Blackwell and McKee,2002; Kapur, 2002; Moshirian, 2002).Depending on disciplinary perspective, then, the

WTO is both a ‘‘hard’’ FIO and/or an intermediateGPG entrusted with delivering outcomes. One of theseoutcomes is good health – the WTO Agreement onSanitary and Phytosanitary Measures (SPS) beingcharged with ensuring the international trade in foodconforms to agreed food safety standards. Another of

US and EU differences over the labeling of food products 289

these outcomes is knowledge – as, through the Agree-ment on Technical Barriers to Trade (TBT), the WTOis expected to provide guidance on non-safety foodquality issues.2 This includes whether, as a consumer,one has the right to know if one is eating food derivedfrom GM products. Unfortunately, as the next sectionindicates, this right to know can be interpreted in twocompletely contrasting ways.

National labeling regimes for biotechnology-derivedfoods: The difference between the US and the EUapproach

Food labeling has GPG characteristics inasmuch as itallows consumers to make informed decisions aboutproduct choices. Crucially, however, while states mayoblige producers, manufacturers, and retailers to dis-close whether products contain substances – such asnuts (Tariq et al., 1996) – that are potentially harmfulto certain segments of the population (mandatory label-ing), the provision of additional information is gener-ally left to the discretion of the producer (voluntarylabeling). Some producers exploit this, using labeling/branding as a strategy to enhance unit profits by pro-moting product differentiation in the marketplace (see,for example, Marsden et al., 2000: Mariojouls andWessells, 2002). Most national legislation approves ofsuch identity preservation – as long as the informationsupplied on the label is true and not misleading.The relatively recent appearance of foods derived from

biotechnology, however, has caused many states toexamine their current labeling legislation, with a view toamendment as necessary. Two diametrically opposingapproaches presently appear to be emerging – those thatgenerally support the mandatory labeling of all suchfoodstuffs, a group that includes the EU, Australia andNew Zealand, China and Japan – and a group that advo-cates an industry standard for the voluntary labeling(when there are no food safety issues involved) of bio-technology-derived foodstuffs, principally Canada andthe US (CFIA, 2002a, 2002b; CA, 2002: 95ff.).

The US and the voluntary labeling approach

The Food and Drug Administration (FDA) is the insti-tution charged with interpreting and enforcing the pro-visions of the 1938 Federal Food, Drug, and CosmeticAct (FFDCA), the US statute that with the exception ofmeat and poultry products (overseen by the Departmentof Agriculture – USDA), governs the labeling of food.These delegated powers are somewhat constrained, nev-ertheless, as the FDA is obliged to act in a manner thatpreserves the ethos of the First Amendment of the USConstitution, namely, that ‘‘Congress shall make no

law. . . abridging the freedom of speech.’’ Given thatthe First Amendment protects both the right to speakand the right not to speak (the compelled speech doc-trine) and clearly extends to commercial transactions,3

ipso facto, the labeling of goods is subordinate to thisConstitutional dictate.This constraint has consequently underpinned the US

approach to the labeling of biotechnology-derived food-stuffs, as evidenced by the first FDA policy statementon biotechnology released in 1992 (FDA, 1992). Thisstatement was significant in the sense that it affirmedthat where biotechnology-derived foods did not differmaterially in composition, nutritional value, or safetyfrom their non-GM counterparts (the ‘‘substantialequivalence’’ dictum), then special labeling of suchproducts was unnecessary. Furthermore, even in thoseinstances where biotechnology resulted in a novel food,labeling of the product was not obliged to divulge theproduct’s GM origins, but merely the manner in whichit differed from its conventional counterpart (e.g.,‘‘Reduced fat margarine not suitable for frying’’). Theonus of disclosure was thus left with the producer/wholesaler or retailer to reveal any material facts aboutthe attributes of the foodstuff (FFDCA, 1938: Sect. 201[n]) – irrespective of whether it was biotechnologyderived or not – on the label. A failure to do so left thetransgressor open to an action under Sect. 403 (mis-branded food) of the same Act, on the grounds that thelabel was misleading or false.The FDA position was updated in January 2001, in

the wake of a legal challenge from the US-based non-governmental International Center for TechnologyAssessment, a series of public hearings (1999) and con-sumer focus group meetings (2000) (FDA, 2000,2001a; Isaac, 2001). The new Guidance for Industrystatement accepted consumer perceptions that ‘‘GM-free’’ labels were potentially misleading given the pro-pensity for adventitious contamination, and accordinglyrejected the use of such labeling. Instead, the documentbusied itself with elaborating guidelines for those firmsthat wished to voluntarily label foods made with (orwithout) bio-engineered ingredients. In doing so, it alsoimplicitly supported the need for traceability, insofar asit asserted that those manufacturers who elected to statethat their products were (were not) bio-engineeredshould be able to substantiate such a claim. However,despite continued consumer unease about the issue –92,361 comments were received by the FDA in8 months following publication of the Guidelines(FDA, 2001b) – the statement did not go as far as toinsist on the mandatory labeling of biotechnology-derived foodstuffs as;

The agency is still not aware of any data or otherinformation that would form a basis for concluding


that the fact that a food or its ingredients were pro-duced using bio-engineering is a material fact thatmust be disclosed under sections 403(a) and 201(n)of the act (FDA Guidance for Industry, 2001: 3).

The EU and the mandatory approach to labeling

The EU position was best summed up by David Byrne,the European Commissioner for Health and ConsumerProtection at a Round Table on Food Quality, Safety,and Production in Paris on July 11, 2001;

My approach to a new legislative regime for GMlabeling will be based on science and the expressedwill of consumers. On this basis, consumers can beassured that such foods receive a rigorous safetyassessment at the European level before being placedon the market. In addition, they can be assured thatthey will receive information about their geneticmodification through labeling (the italics are ours).

The EU approach to the labeling of biotechnology-derived products can be traced back to October 1991when the first biotechnology Directive (90/220/EEC)entered into effect. Principally an instrument overseeingthe deliberate release of GMOs into the environment,nevertheless, by maintaining a silence on the labelingfront it effectively endorsed a regulatory stance similarto that encountered within the 1992 FDA policy state-ment. Consumers were entitled to know if the productdiffered materially from its non-GM counterpart – orincluded substances that were potentially harmful to cer-tain segments of the population – but nothing more.From here, regulatory paths diverged markedly however.European consumer groups demanded more knowl-

edge about the presence of GMOs in foodstuffs, andthe EU now chose to champion labeling as a vehiclefor allowing community consumers to make aninformed product choice. The Novel Foods and NovelFoods Ingredients Regulation (EC 258/97) introduced aspecific labeling requirement covering those instanceswhere a GMO was present and/or residues of suchorganisms persisted in the marketed novel product (Art.8). A subsequent regulation (EC 1139/98) extended theretrospective remit of the legislation, requiring all foodsderived from, or consisting of GMOs, whether non-novel or historically novel (in the sense that theyentered the marketplace prior to the adoption of regula-tion EC 258/97) to submit to mandatory labeling. Thelegislation was refined further to acknowledge the pos-sibility of adventitious or technically unavoidable con-tamination – permitting products containing less than1% of biotechnology-derived material to be exemptedfrom the labeling laws (EC 49/2000), whilst extendinglabeling requirements to cover GM food additives and

flavorings (EC 50/2000). Finally, a new biotechnologyDirective was unveiled in April 2001 – Directive 2001/18/EU replacing Directive 90/220/EC as from 17 Octo-ber 2002. The new Directive introduces a common(strengthened) methodology involving pre-market eval-uation and mandatory post-market monitoring of GMOsthat are to be placed on the European market so as toensure they conform to accepted human health, envi-ronmental, and ethical norms. Transparency is height-ened by allowing for fuller public consultation, whilemember states were obliged to have national legislationin place relating to traceability and mandatory GMOproduct labeling (Art. 4(6), Art. 21).Meanwhile, the creation of the EFSA in early 2002

(EC 178/2002) signaled a major general overhaul ofthe EU food safety system to ensure that ‘‘the Euro-pean consumer has access to the safest possible foodsupply in the world’’ (Press Release, IP/02/100). Actingas a European-wide risk assessment body, feedingapposite scientific information on matters relating tofood safety into the relevant European decision-makingauthorities (Commission, Council of Ministers, and/orParliament), the ESFA is expected to evolve into a‘‘hard’’ FIO entrusted with delivering a club good(food safety at the European level). Although the Regu-lation itself only briefly mentions GMOs – obliging theESFA to set up a special panel on GMOs and providescientific opinions thereon (Arts. 22 (5c) and 28 [4d]) –its ramifications for biotechnology-derived food arerather more profound when read in conjunction withDirective 2001/18/EC and ensuing legislation. Ulti-mately, the intention is to promote a ‘‘one door – onekey’’ principle, allowing companies to submit a singleapplication, for either deliberately releasing a GMOinto the environment (Directive 2001/18/EU) or usingit in food and/or feed (COM(2001)425), which will besubmitted to a single risk – environmental and humanhealth – assessment process entrusted to theEFSA(EC178/2002). Approval of the application willallow the GM food/feed product to be released/soldthroughout the community for a 10-year period (subjectto satisfactory post-market monitoring). Labeling formsan integral part of this strategy.The proposed regulations, On Genetically Modified

Food and Feed (2001/0173/COD) and Traceability andLabeling of GMOs and Traceability of Food and FeedProducts derived from GMOs (2001/0180/COD),adopted by the Commission on July 25, 2001, are sig-nificant in the sense that it proposes a ‘‘harmonizedcommunity framework for traceability and labeling ofGMOs (that) should contribute to the effective func-tioning of the internal market (Preamble to traceabilityproposal).’’ Such harmonization would involve stan-dard, community-wide labeling of not only foods thatcontain or consist of GMOs, but also those that are


produced from, or contain, ingredients produced, fromGMOs (Art. 13(1) – subject to the 1% adventitiouscontamination threshold alluded to above (Art. 5)). Assuch, it would compel the UK government, for exam-ple, to align itself with the European position on label-ing, a position that the UK government has stronglyresisted to date on the grounds that it is costly toimplement, difficult to enforce, and vulnerable to fraud.The UK is, however, in the process of presentlyreviewing its position (GM Science Review, 2002). TheEU proposals, currently wending their way through thebureaucratic labyrinth of the EU, are likely to hit thestatute books in mid-2003. Their implications, however,extend well beyond the Community’s frontiers inas-much as, to ensure European producers compete upona level playing field within the internal market, the pro-posed labeling regulations will also apply to importsfrom non-EU countries (EU – OJE, 17/9/2002 Opinion4.10.1). A failure to fully comply with such disclosurerequirements leaves the transgressor likely to see theirgoods frozen out of the lucrative community market.Understandably, this attempt to globalize the ‘‘Euro-

pean food safety and knowledge’’ dimensions wasrejected by the US and other countries who eitherapply less reliable and effective tracing procedures and/or less rigorous labeling systems. Yet food safety andknowledge are potentially GPG rather than simply clubgoods, and the US initially seemed intent on getting anintermediate GPG (or FIO) – the World Trade Organi-zation (WTO) – to adjudicate upon whether the stancetaken by the EU amounted to an unfair restraint ontrade.

Knowledge, biotechnology-derived foodstuffs, andthe WTO

FIOs such as the WTO, UN, IMF, and World Bank areincreasingly prominent participants in the economic,social and political spheres of global life, helping toelaborate international norms, rules, principles, andcodes, and structure legislative processes to ensure theireffective implementation. While the more powerfulnation states undoubtedly shaped the constitutions andmodus operandi of such FIOs in an effort to ensurethey maintained a disproportionate influence over insti-tutional policy and/or the distribution of benefits (seeMearsheimer, 1995; Cerny, 2000; Chesterman, 2002;Kapur, 2002: 351: Woods, 2002),4 these ‘‘embedded’’claims have been contested in a number of fora inrecent years (see Wade, 1996 and Drifte, 1999, respec-tively on Japanese demands for greater influence overWorld Bank spending and a seat on the UN PermanentSecurity Council, for example). Equally, these FIOshave proved to be a battleground for the competing

claims and interests of the most powerful nation states.The trade field is a case in point. One of the first majordisputes dealt with under the auspices of the disputesettlement system at the newly created WTO was thecontroversy between the US and the EU over beef pro-duced using growth hormones (WTO website – DisputeDS26; see also Pauwelyn, 1999; Quick and Bluthner,1999; and Kerr and Hobbs, 2002, for a wider discus-sion of the case). These two major trading entities hadsubsequently clashed over products as diverse as bana-nas (DS27 and 158), steel (DS248), textiles (DS151),steel-wire rod (DS214), flight management systems(DS172), intellectual property rights vis-a-vis film,copyrights and trademarks (DS124/5, 160, 174), pro-cessed cheese (DS104), and solid urea (DS63). Bio-technology-derived foods, given the US commentssubmitted to the WTO in response to EU notificationof its intended legislation, seemed likely to trigger one– if not the next – major trade confrontation betweenthese two global giants, as Kerr and others had previ-ously surmised (Kerr, 1999; Perdikis et al., 2001;WHO–WTO, 2002: 70; Isaac and Kerr, 2003).Essentially, there existed a fundamental difference of

opinion regarding the WTO arena responsible for tack-ling GM food issues. The US chose to argue that GMfoods should be dealt with under the SPS as

. . . it would be our understanding that the proposedregulation is therefore, in whole or in part, a measuredefined as a sanitary or phytosanitary measure underthe WTO. i.e. . . . ‘‘to protect human or animal lifeor health within the territory of the Member fromrisks arising from additives, contaminants, toxins ordisease causing organisms in foods, beverages orfeedstuffs’’ (WTO, 2002a: 5).

The EU did not dissent, however (where the concernwas a safety one), accepting the need to treat foodsafety as a GPG and supporting the efforts of interme-diate GPGs such as the Codex Alimentarius Commis-sion (CAC)5 in devising common global standardswhose implementation can be policed by a FIO such asthe WTO. Indeed, the structured, case by case, pre-mar-ket risk assessment of GM foods presently undertakenby the ESFA augurs well for the future harmonizationof global food safety standards with regard to biotech-nology-derived foodstuffs.More problematic is the fact that the EU does not

see the commercialization of GM products as simply afood safety preserve, but as a question of informedconsumer choice too (see Byrne quote earlier in thispaper). Informed choice is dependent upon knowledgethat, from the EU perspective, is best imparted throughclear and unambiguous labeling schemes backed up byeffective traceability procedures. As such consumer


protection schemes clearly fall outside the remit of theSPS Agreement, it was incumbent of the EU to notifythe WTO under the TBT Agreement6 of its legislativeintentions. While welcoming EU adherence to notifica-tion requirements, the US maintained that labeling wasa safety, rather than consumer choice, issue (CA, 2002:102) and rejected the EU mandatory labeling positionon the grounds that not only does it

. . . impose labeling requirements on products thathave already been approved for use and for whichno specific handling, usage, safety, or compositionaldistinctions have been identified . . . but alsobecause the accompanying traceability requirementsneeded to ensure the necessary identity preservationare . . . not workable or enforceable, (and) wouldbe very expensive to implement (WTO, 2002b: 18and 13).

The EU retort was pointed. Citing existing EuropeanCommunity law it pointed out that it had a duty toinform consumers if food products had undergone anyform of genetic modification. Moreover, consumeropinion within the EC strongly supported disclosure. AUK Consumers Association report (2002: 47ff.), forexample, noted that 57% of May 2002 respondents hadconcerns about the use of GMOs in food production,45% tried to avoid GM foods and ingredients, and 35%rejected any form of GM outright. Significantly, 94%wanted foods containing GM ingredients to be labeledas such – with 87% supporting labeling when the prod-uct was made with, but did not contain, GMOs.Equally, a Eurobarometer December 2001 study involv-ing 16,029 respondents across the 15 member statesfound that 70.9% did not approve of GM foods and,with 94.6% insisting that they wanted the right tochoose whether GM foods entered their personal foodchain, there is a marked expectancy on the part of con-sumers to be clearly informed about the food they areeating.A dilemma emerges, then, as to what extent is

knowledge (about the food we eat) a GPG? Is it simplya case of being reassured that the food we eat is safe(the US position)? Or should wider consumer concernsabout the processes used to produce such food beacknowledged too via mandatory labeling schemes andthe like (the EU position)?Given these distinct views, it seemed inevitable that

the WTO, as the FIO responsible for devising, codify-ing, and adjudicating on international trade standards,would be sucked into the debate. Indeed, recentin-house research at the WTO itself had already implic-itly acknowledged the trade-related benefits of, and dif-ficulties in implementing, a universally agreed labelingscheme;

World welfare can be increased if an internationallabel is introduced . . . (that) takes into account thepreferences for quality of both countries . . . thecountry with stronger preferences for high qualitygains from a move towards this policy, (while) . . .the country with the weaker preferences for highquality loses . . . and will thus oppose the introduc-tion of a harmonized label (Jansen and de Faria,2002: 30).

And the evolving EU–US disagreement in late 2002and early 2003 over the need to voluntarily/mandatorilyinform consumers about the GM origins of the foodthey were consuming seemed to convert the WTO intothe de facto global authority on labeling, determiningwhat could (and what need not) be disclosed on foodlabels. One pertinent factor in the WTO deliberationswas likely to have been the probable cost of the GMOlabeling regime, for the TBT Agreement explicitlystates that technical regulations – labeling being oneexample of this – ‘‘shall not be more trade-restrictivethan necessary to fulfill a legitimate objective, takingaccount of the risks non-fulfillment would create (Art.2.2).’’7 Then, despite all preceding indications to thecontrary, Peter Kurz (US Embassy Official for Agricul-tural Affairs in London) suddenly and rather unexpect-edly announced on February 20, 2003, that a decisionhad been taken at a high level of government not toproceed with a complaint to the WTO (The Guardian,February 21, 2003).

Conclusion

This article has illustrated why the US supports a vol-untary approach to the labeling of biotechnology-derived foodstuffs (for reasons other than food safety),while the EU advocates the mandatory labeling of suchfoodstuffs. In the EU, as exemplified by the commentsmade by David Byrne, the European Commissioner forHealth and Consumer Protection, there is a commit-ment to ensure that knowledge (about the GM originsof food products), through the medium of mandatorylabeling, becomes a club good. Conversely, in the US,the FDA works within the constitutional framework(and specifically, the First Amendment) to ensure con-sumers are informed of all ‘‘significant and materialfacts about their foods (IFT, 2000: 28).’’ As the processof genetic modification is not, by itself, seen by theFDA as material (although food irradiation is), thenvoluntary labeling of such foodstuffs is the norm. Yet,it could also perhaps be asked whether insisting thatlabels indicate the presence of GMOs within the pro-duction process really allows consumers to make aninformed choice? The controversy created in the press


over ‘‘Frankenfoods,’’ allied to the notions of ‘‘prospecttheory’’ emanating from the burgeoning field of behav-ioral economics (Kahneman and Tversky, 1979; Olsen,1997; Detweiler et al., 1999; Blaeij et al., 2003) sug-gests individuals may well give an irrationally greaterweight to some scenarios than others – in this case, thehuman health dangers of consuming GM foodstuffs.Significantly, however, consumer opinion in the US

appears to be aligning itself with the European desire toknow whether genetic modification of foodstuffs hastaken place. An Economist Poll in 2000 notes 57% ofAmericans were disinclined to buy such foodstuffs, con-sumers in focus groups called by the FDA to discuss theDraft for Industry guidelines expressed outrage that theywere unknowingly eating bio-engineered foods, and themajority of 600,000 plus public comments received onthe guidelines favored the mandatory labeling of suchproducts (Economist, 2000; FDA, 2001a, 2001b). This isimportant, as Kirchhoff and Zago (2001) have shown thatvoluntary labeling is optimal in those countries whereproducers have adopted GM technologies and consumersare not strongly averse to such production processes –whereas mandatory labeling is optimal in economieswhere producers use non-GMO technology and consum-ers are highly GMO-averse. If, as seems the case, GMO-aversion is becoming increasingly evident across nationalborders, then the US may have less to gain by supportingproducer groupings in maintaining a voluntary stance,and the optimal level of governance at which the‘‘knowledge’’ public good is supplied can indeed beextended to the global level as Kapur (2002) suggests.Yet, if mandatory labeling of biotechnology-derived

foodstuffs were to become the norm, any increasedtraceability and monitoring costs would be incorporatedinto product prices, consumer demands ultimately driv-ing the market in the direction of their preferences.Winners from such a policy would include GM-averseconsumers across both states, while biotechnology andnon-biotechnology producer (dis)benefits would dependupon respective price cross-elasticities for GM andnon-GM foodstuffs. Conversely, support for the USposition would benefit GM-indifferent consumers andGM producers (who would not now be obliged tointroduce identity preservation procedures).Herein may lie one explanation for the US decision

not to proceed against the EU on the GMO labelingissue. A high-profile WTO dispute could be a potentialmedia disaster for biotechnology producer companies,irrespective of the subsequent WTO ruling on the issue,in much the same way media focus worked against theinterests of US pharmaceutical companies regarding theproduction of generic HIV/AIDS drugs in 2001(Oxfam, 2002). Better, perhaps, for biotechnology pro-ducers to content themselves with the (US) market theyhave presently got, and instead seek to undermine the

EU position by requesting authorization to plant andsubsequently market GM food crops in Europe (‘‘GMlicensing gets go ahead,’’ The Guardian, March 4,2003)? Once such internally produced crops enter theEU food chain the economic case for mandatory label-ing becomes much less clear-cut.

Notes

1. Sandler (1999: 24, 25), for example, provides a taxonomyillustrating how GPGs can be either intra- or inter-gener-ational in scope. Our paper – given its title – henceforthfocuses solely on the spatial, rather than generational,nature of GPGs.

2. The safety of GMO-derived food products is an issue thathas provoked an extensive debate in both scientific andacademic circles (see Nordlee et al., 1996; Ewen andPusztai, 1999; Royal Society, 1999, 2002; IFT, 2000;Salyers, 2000; Perdikis et al., 2001, amongst others). Ithas also seen the joint FAO/WHO body (the Codex Ali-mentarius Commission) responsible for developing aninternational food code, elaborate principles for thehuman health risk analysis of GM foods (adopted in July2003). While we recognize the importance of the WTO– via the SPS – in this field, our principal concern in thispaper is to examine the latter (knowledge) issue.

3. See Virginia State Board of Pharmacy v Virginia CitizensConsumer Council, 425 US 748 (1976) and Rubin vCoors Brewing Co. 514 US 476 (1995) for confirmationof this.

4. The UN Security Council, for example, has five perma-nent members (China, Russian Federation, US, UK, andFrance–the victors of World War II) who retain the rightto veto proposals placed before it (http://www.un.org/Docs/scinfo.htm#STRUCTURE). Although the IMF israther more democratic, as voting is based on member’squotas, the US has a disproportionate say in IMF policyas it presently accounts for 17.11% of the vote – Japanhas 6.14%, Germany 6%, and 4.95% for both the UKand France (http://www.imf.org/external/np/sec/memdir/members.htm#3).

5. The CAC was jointly created by FAO and WHO in 1963to develop food standards, guidelines, and codes of prac-tice geared towards protecting consumer’s health andensuring fair trade practices in the international foodtrade.

6. The TBT Agreement deals with a wide variety of techni-cal, non-safety, food quality issues, including the packag-ing (labeling, symbols, and markings deployed) andgrading of foodstuffs. To facilitate the development ofinternational trade it encourages the development ofinternationally agreed standards and conformity assess-ment systems (WTO–TBT, 2002).

7. The trade effects of selecting different standards – in thiscase food safety, as opposed to TBT standards – are wellillustrated by work undertaken by Wilson and Otsuki(2001) and Otsuki et al. (2002). They suggest that whileadoption of the more rigorous EU aflatoxin B1 standard


would reduce health risks by approximately 1.4 deathsper billion per year, it would also cause developingcountries trade flows in affected products (largely cere-als, nuts, and dried/preserved fruits) to be US$7.1 billionbelow that expected were the current Codex guidelinesto be applied instead. Similarly NERA (2001) cite datafrom the EU Directorate General of Agriculture suggest-ing identity preservation in line arising from the need tolabel GM food products could add between Euro 5 and25 per ton to crop prices, while a Canadian KPMG Con-sulting (2000) study places a preservation value on cornof $34–39 and on soyabeans of $47–52.

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Address for correspondence: Dr Andy Thorpe, Department ofEconomics, University of Portsmouth, Richmond Building,Portland Street, Portsmouth, Hants, PO1 3DE, UKPhone: +44-2392-844251; Fax: +44-2392-844037;E-mail: [email protected]


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