Policy Discussion Paper
No.0005
University of Adelaide • Adelaide • SA 5005 • Australia
AN ECONOMIC ANALYSIS OF FOOD SAFETY ISSUES
FOLLOWING THE SPS AGREEMENT:
LESSONS FROM THE HORMONES DISPUTE
Sallie James
February 2000CENTRE FOR INTERNATIONAL ECONOMIC STUDIES
The Centre was established in 1989 by the Economics Department of the University of
Adelaide to strengthen teaching and research in the field of international economics and
closely related disciplines. Its specific objectives are:
• to promote individual and group research by scholars within and outside the
University of Adelaide
• to strengthen undergraduate and post-graduate education in this field
• to provide shorter training programs in Australia and elsewhere
• to conduct seminars, workshops and conferences for academics and for the wider
community
• to publish and promote research results
• to provide specialised consulting services
• to improve public understanding of international economic issues, especially among
policy makers and shapers
Both theoretical and empirical, policy-oriented studies are emphasised, with a particular
focus on developments within, or of relevance to, the Asia-Pacific region. The Centre’s
Director is Professor Kym Anderson (Email kym.anderson@adelaide.edu.au) and Deputy
Director, Dr Randy Stringer (Email randy.stringer@adelaide.edu.au)
Further details and a list of publications are available from:
Executive Assistant
Centre for International Economic Studies
University of Adelaide
Adelaide SA 5005 AUSTRALIA
Telephone: (08) 8303 5672
Facsimile: (08) 8223 1460
[International prefix: (+61 8)]
Email: cies@adelaide.edu.au
Most publications can be downloaded from our Home page:
http://www.adelaide.edu.au/ciesCIES POLICY DISCUSSION PAPER 0005
AN ECONOMIC ANALYSIS OF FOOD SAFETY ISSUES
FOLLOWING THE SPS AGREEMENT:
LESSONS FROM THE HORMONES DISPUTE
Sallie James
Agricultural and Resource Economics Group
University of Western Australia
Nedlands WA 6907
AUSTRALIA
ph: +61 8 9380 2514
fax: + 61 8 9380 1098
email: sjames@agric.uwa.edu.au
February 2000
--------------------------------------------------------------------------------------------
Paper presented at the 44th Annual Conference of the Australian Agricultural and ResourceEconomics Society, University of Sydney, Sydney, NSW, 23-25 January 2000
Without implicating them, the author wishes to thank Kym Anderson, University of Adelaide;Michael Burton, University of Western Australia; Thomas Cottier, University of Berne; LyallHoward, National Farmers Federation; Joost Pauwelyn, World Trade Organization; DonnaRoberts, US Trade Representative’s Mission to the WTO and USDA; and Carolyn Tanner,University of Sydney for their helpful comments.
This paper was partly written while at the School of Economics and Centre for InternationalEconomic Studies, University of Adelaide.ABSTRACT
AN ECONOMIC ANALYSIS OF FOOD SAFETY ISSUES
FOLLOWING THE SPS AGREEMENT:
LESSONS FROM THE HORMONES DISPUTE
Sallie James
The long-running feud between the US and the EU over trade in hormone-treated beef
was the first case under the Uruguay Round's SPS Agreement to be disputed formally at
the WTO. It provides a classic example of how cultural differences with respect to food
attributes have the potential to hamper trade and to challenge WTO agreements designed
to limit trade disruptions, especially when scientific evidence is limited or spurious. After
outlining the legal arguments used by the parties to the Hormones dispute, simple
economic models are used to represent the EU beef market and examine the effects of the
hormone-treated beef ban and its removal. The implications for the practical
implementation of the SPS Agreement are then explored.
Keywords: Agriculture, WTO, multilateral trade negotiations, agricultural policy reform,
new trade issues
Contact author:
Sallie JamesAgricultural and Resource Economics Group
University of Western Australia
Nedlands WA 6907
AUSTRALIA
Tel: +61 8 9380 2514Fax: + 61 8 9380 1098
Email: sjames@agric.uwa.edu.auNON TECHNICAL SUMMARY
AN ECONOMIC ANALYSIS OF FOOD SAFETY ISSUES
FOLLOWING THE SPS AGREEMENT:
LESSONS FROM THE HORMONES DISPUTE
Sallie James
The signing of the Uruguay Round Agreements of the World Trade Organization (WTO)
and the ever-increasing products and people movements between countries will put
governments under increasing pressure to maintain effective and scientifically justified
quarantine and food safety policies to protect their citizens, animals, plants and natural
environments from the importation of pests and disease. But those policies can be abused,
with governments at times adopting excessive restrictions so as also to offer domestic
industries economic protection from import competition.
The WTO Agreement on the Application of Sanitary and Phytosanitary Measures
(the SPS Agreement) was designed to prevent human, animal and plant health policies
from becoming disguised restrictions on international agricultural trade. The Agreement
provides clear guidelines as to acceptable bases for SPS restrictions. In general, it is
admissible under the terms of the SPS Agreement for a Member to restrict imports to
protect human, animal and/or plant life or health, so long as those restrictions are
transparent, consistent and based on international standards (where they exist) or a
scientific assessment of risks. Through legal and economic analysis of specific cases we
can, to some extent, measure the Agreement’s success.
The long-running feud between the US and the EU about the use of hormonal
growth-promotants in beef (the Hormones dispute) was the first to be disputed formally at
the WTO. It provides a classic example of how cultural differences with respect to food
attributes have the potential to hamper trade and to challenge WTO agreements designed
to limit the disruptions, especially when scientific evidence is limited or spurious.
The paper begins by outlining the legal arguments used by the parties to the
Hormones dispute, and a simple analysis of the outcome. The Panel and the Appellate
Body, which heard the dispute, found that the EC violated its obligations under the SPS
