Genetically Modified Foods and the Limits of Trade Agreements

Last weekend, The Washington Post had a good article about how difficult it will be for the upcoming U.S.-EU trade talks to deal with the issue of genetically modified foods. Many people in the EU — government officials, farmers, consumers — are wary of these foods, and want to keep them out of the EU entirely (no production, no importation). By contrast, most people in the U.S. are less concerned, and the products are widely produced and sold here. For those Americans who try to avoid these foods, Whole Foods and similar stores are good market-based options. As my colleague Bill Watson points out, consumer demand for non-genetically modified foods results in “a market response that provides convenient access for GM-wary eaters while (most importantly) preserving choice for less-cautious consumers.”

Can trade negotiations resolve the differences in U.S. and EU attitudes and provide the basis for more trade in these products?”

Let’s put aside the issue of whether there is any rational basis for the fears related to these foods. From a trade policy perspective, the issue is whether trade negotiations can resolve the differences in U.S. and EU attitudes and provide the basis for more trade in these products.

My guess is that the answer is no. The EU views are just too strong. They may be irrational, but they are deeply held. They can’t be broken down by the demands of trade negotiators (U.S. negotiators have been making these demands formally and informally for many years, with little success).

Beneath the surface of all this is one of the core issues of trade policy: What is free trade? Is free trade the removal of protectionism? Or does it mean creating a single market where all goods and services sold in one market can also be sold in other markets?

There are efficiency arguments for the latter. But politically, I’m not sure it’s achievable. Convincing people in two or more countries that we would all be better off if we remove our protectionism is one thing. (It’s kind of a no-brainer, to be honest.) By contrast, convincing people that their deeply held policy preferences (rational or otherwise), and the regulations that result, are misguided is something else entirely.

As I see it, trade negotiations are best suited to dealing with the issue of protectionism, that is, when a government discriminates against foreign products to favor domestic competitors.

Of course, sometimes multiple policy goals may exist, and protectionists can latch on to other, non-protectionist policy goals to give their views more credibility. Some might argue that this is what is going on with genetically modified foods, as European producers use this as a reason to keep out American competitors. It may be that protectionist EU farmers were just looking for a way to keep out U.S. products, and saw a convenient ally in the anti-GM food groups.

That may be the case at the margins, but my sense is that most of the European concerns are authentic. That doesn’t mean they are rational, just that they really do believe what they are saying.

So what to do about the EU food regulations that keep out American products? I don’t mean to suggest that nothing can or should be done. Producers with an interest in the issue should keep pushing the EU. They should lobby on this issue within the process of the EU and its member governments.

However, asking trade negotiations to solve the issue in the next year and a half — the projected time-frame for the talks — may doom the whole process of U.S.-EU trade negotiations. Let’s not risk killing a possible free trade deal due to a quixotic quest to improve the EU regulatory process. Instead, put the EU arguments to the test: If protectionism is not the reason for the reluctance to approve genetically modified foods, the EU should have no objection to lowering tariffs and removing quotas for U.S. food products that are not genetically modified. Let’s push the EU on that issue instead, moving us towards free trade in the most simple and direct way we can.