How to resolve trade disputes quickly - or better still prevent them occurring - is a bit of conundrum for the transatlantic partners. There is no shortage of avenues to go down - bilateral and multilateral - designed to bring about a solution. The problem is that many of them take too much time and resources, typically dragging on for years. Moreover, at the end of the process the two sides often have still not budged positions, the barrier remains, and sometimes a new one has been erected in retaliation.

From a trade perspective, the ideal solution would be the introduction of an overarching mutual recognition framework whereby each side would recognise the other’s food safety requirements as equivalent. Indeed, the Word Trade Organisation’s 1994 Sanitary and Phytosanitary Agreement explicitly provides for this to happen through the conclusion of bilateral or multilateral equivalence agreements (see box). But such a solution looks like a pipedream given where things stand today. There are certain sensitive areas where for ethical, environmental or protection of human or animal health reasons, mutual recognition is simply not possible because of deep-rooted cultural differences. Genetically modified (GM) foods may be the best example of this in the current decade, while food from cloned animals could become the ‘GM foods’ of the next decade.

WTO A LAST RESORT

The WTO’s dispute resolution process is the most obvious multilateral channel to choose. But it is one that both parties try to avoid wherever possible because they know that it will take years to complete and may involve multiple appeals that could overturn the original ruling. Even if someone does win a clear legal victory, it does not always translate into a commercial gain as the market may have changed dramatically in the meantime. And yet, the WTO card is one they want to be able to play as a last resort in the event a bilateral solution cannot be achieved. As US Trade Representative Ron Kirk noted recently, commenting on the May 2009 EU-US interim beef agreement (see separate article), “we are confident that the agreement will move us in the right direction on these outstanding issues. If not, we reserve the right to return to the WTO”.

A much newer forum for resolving such disputes bilaterally is the Transatlantic Economic Council (TEC), the intergovernmental body set up in April 2007 to remove regulatory barriers to transatlantic trade. This was the brainchild of German Chancellor Angela Merkel, who had the foresight to recognise that the biggest trade barriers between the EU and US today are not tariff-related but are caused by regulatory divergences. The TEC has an EU and US co-chair and meets twice-yearly, rotating between Washington and Brussels.

FAITH IN TEC SHAKEN

But despite initial enthusiasm surrounding the TEC and strong support from industry, disillusionment about what it can achieve has grown over the past year. This is in part because of the TEC’s highly-publicised failure to resolve the dispute over the EU’s ban on US chickens washed in chlorine (see separate article). Washington put this on the TEC’s agenda, proclaiming it would be a true test of the TEC’s usefulness, but the ensuing deadlock over it seems to have shaken its faith in the body. One US trade official said that “the TEC might be good for higher level discussions about the intersection between science and risk. But translating it into specific dossiers, I am not so sure”. The EU’s Co-Chair of the TEC, Commission Vice-President Günter Verheugen, admitted “it was not the wisest decision to have this on the agenda. We did not know how sensitive it was”.

Another option is to take a specific dispute and work bilaterally to resolve it. This was the model used for the May 2009 beef agreement. But again, there is caution from US trade officials about seeing this as the template to be followed elsewhere. “The beef situation was a little unique because both sides were motivated to get a deal. Retaliatory measures already existed and the pain was being felt on both sides. There was not much interest in the US in exposing our consumers to higher prices,” the official said. The two parties have agreed to hold off on pursuing a complaint in the WTO until November 2010. After that they are free to do so – and most likely will if they have not signed a long-term agreement by then.

There are certain sensitive areas where for ethical, environmental or protection of human or animal health reasons, mutual recognition is simply not possible because of deep-rooted cultural differences   

Equivalence principle

“Members shall accept the sanitary or phytosanitary measures of other members as equivalent, even if these measures differ from their own or from those used by other members trading in the same product, if the exporting member objectively demonstrates to the importing member that its measures achieve the importing member’s appropriate level of sanitary or phytosanitary protection. For this purpose, reasonable access shall be given, upon request, to the importing member for inspection, testing and other relevant procedures.

Members shall, upon request, enter into consultations with the aim of achieving bilateral and multilateral agreements on recognition of the equivalence of specified sanitary or phytosanitary measures.” (Article 4, WTO Sanitary and Phytosanitary Measures Agreement)