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Opinionista

When food fights become a smokescreen for unfair trade barriers

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

The European Union is infamous for its strict food import regulations. It uses precautionary measures with scant scientific basis as an excuse to protect its local farmers. South African citrus growers have been caught up in this red tape for decades.

Protectionism was once a staple of the political left. In the era of globalisation, malcontents protested frequently outside meetings of the World Trade Organisation (WTO), established to liberalise world trade and settle disputes over unnecessary or unfair trade barriers.

Perhaps the most infamous of these protests was the Battle of Seattle, at which a loose assortment of labour unions, student groups, nongovernmental organisations, media activists and left-wing anarchists plunged the city into violent chaos to disrupt a ministerial meeting of WTO countries.

These days, however, the right – exemplified by US president Donald Trump – is the protectionist menace to global trade, raising trade tariffs left, right and centre. If tariffs weren’t out of favour before, they certainly are now. If one favours free markets and free trade, and opposes protectionism both on the right and on the left, one would think that is good news.

The problem is that Europe’s farmers have a stranglehold on EU policy. If they don’t get what they want, they blockade highways and bring trade to a standstill, even if that threatens the core ideals upon which the EU was founded. This gives them outsized political clout in EU rule-making bodies.

So how do you protect domestic commercial interests in a world in which free trade is the rule, and everyone denounces tariffs on imports as unjust protectionism that hurts the developing world? Easy. Use food and agricultural standards to restrict imports instead.

The Economic Partnership Agreement (EPA) between the South African Development Community (SADC) and the European Union (EU), which came into effect in October 2016, was designed to give SADC countries better trading terms under which to export to the EU. Excessively strict agricultural or food safety standards, however, can easily undermine such agreements, and keep developing-country food and farm products out of rich-world markets.

Under the WTO Rules of international trade, countries are entitled to enforce so-called “sanitary and phytosanitary” (SPS) measures to ensure that imported food meets domestic food safety standards. Their purpose is not only to protect human life and health, but also the health of animals and plants. The caveat is that such measures “should not be used as an excuse for protecting domestic producers”.

They should not be, but they inevitably are.

The United Nation’s Food and Agricultural Organisation (FAO) has for over 50 years maintained a set of global food safety standards, guidelines and codes of practice, wonderfully named the Codex Alimentarius. These standards are based on scientific risk assessment and risk management principles.

One might have hoped that the WTO’s SPS agreement would require countries to abide by such a global set of standards, but it doesn’t. The Codex standards are voluntary, and the WTO permits members to set their own standards. Stricter standards only have to be defended with sound scientific reasoning if formal legal challenges are made.

Many countries have fallen victim to the weapon of SPS measures used merely to block or restrict competitive exports. The EU once tried to block US beef on the grounds that US cattle were fed growth hormones. When the EU was unable to produce science to support the import ban, the measure was declared to be unfair protectionism, and the WTO permitted the US to raise retaliatory tariffs against EU products.

The South African citrus industry, which produces the country’s main agricultural export and supports an estimated 100,000 jobs, has for 27 years been fighting a running battle with the EU over a fungal disease known as Citrus Black Spot. Under the SADC-EU agreement, South Africa is supposed to have duty-free access to the EU market for its citrus produce, but the EU’s SPS standards have proved a substantial non-tariff barrier to the citrus trade.

As one might expect, the fungus, which is common in the sub-tropical climates of South Africa and Australia, causes small black spots on the fruit. The disease’s effect is largely cosmetic; the fungus poses no harm to human health.

In 2013, the EU went so far as to ban imports of South African citrus fruits, on the grounds that it posed a risk to the continent’s own citrus industry, mainly concentrated in Spain and southern France.

In response, the South African government lodged a “trade concern” with the WTO’s committee on SPS measures, based on scientific findings that concluded there was no risk of the fungus spreading in Mediterranean climates, that the disease was spread via leaves, not via fruit, and that Europe’s citrus fruit had not become infected despite decades of unrestricted movement of produce from areas where Citrus Black Spot is endemic.

South Africa exports 79% of its citrus produce, and almost half of that is destined for Europe, so such a ban can have a catastrophic impact on the industry. Luckily, it applied only to fruit harvested in 2013, and came at the end of that year’s export season, with the result that exports to the EU only fell by 9% (by weight) the following year.

The EU then threatened to impose inspection standards that South Africa couldn’t hope to meet, which prompted the local industry to search for other markets for its produce.

By the middle of the decade, the industry was spending R1-billion per year – over 10% of the industry’s revenue – on combating CBS, but in 2016 the EU imposed “emergency measures” to restrict imports that might be contaminated.

Meanwhile, Spain, the EU’s largest citrus producer, accused South Africa of avoiding its ports to avoid that country’s strict inspections, even though by far the largest share of citrus exports to the EU go to the Netherlands and the UK.

In 2017, while EU farmers’ organisations continued to push for stricter SPS controls on imported citrus, the local industry itself suspended exports due to black spot, for fear of imperilling exports to the EU in future.

In 2018, it was shown that the pathogen that causes black spot is present in several EU regions, but the disease itself is not. This strengthened the international scientific consensus that the disease poses no threat to European citrus farmers.

In the EU, meanwhile, the citrus-growing countries of Spain and France backed a campaign to have citrus categorised as a “high-risk” plant or product. The campaign was defeated mainly by a group of northern European countries, among which are those that import the majority of South African fruit.

The way producer and consumer countries within the EU lined up on this measure reveals that the Spanish and French citrus growers were primarily after a non-tariff trade barrier, not a scientifically-justified phytosanitary measure.

Despite the defeat of this new measure, and despite an excellent 2018 season in South Africa, during which black spot detections in exports destined for the EU came in at only 40% of the EU threshold, the EU has remained “aggressively protectionist”, according to local growers, and it “seems determined to meet South Africa’s best efforts with unflinching bureaucratic coldness”.

By now, the industry’s direct costs and opportunity cost related to CBS amounted to R1.86-billion per year, not to mention that it requires intensive spraying, neither of which are sustainable in the long term.

The EU’s 2016 emergency measures were set to expire in March 2019, but were instead extended, leading South Africa to open a formal dispute through the WTO.

Citrus is just one example. This same scenario, with standards set higher than international norms and beyond what is necessary to protect domestic human, animal or plant health, combined with endless paperwork, onerous inspections and costly mitigation requirements, keeps playing itself out as rich-world countries try to protect their farm sector from developing-world competition.

The cost of SPS compliance alone can sink industries in competing countries. Meanwhile, farmers in Europe continue to clamour for more protection for their own, more expensive, products. And if they can’t get it through tariff protection, they’ll try to get it by any other means, fair or foul.

What the WTO needs is a new international SPS agreement, which declares the standards in the Codex Alimentarius to be sufficient for all imports, and actively prevents SPS measures from being exploited as non-tariff trade barriers. Any new SPS measures, when required in special cases, should be subject to explicit WTO approval based on solid scientific evidence of hazard, risk analysis and risk management.

That, finally, might level the playing field, which was the intent of the WTO treaty in the first place. DM

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