This On the Subject discusses the impact of unjustified technical and food safety barriers in international trade. Industries and companies that trade in the global marketplace should learn to identify and effectively deal with these barriers.
Industries ranging from consumer product manufacturers to food processors face increased exposure and threat from trade-distorting technical and food safety standards in the global marketplace. Whereas importing countries traditionally relied on tariffs and quotas to protect domestic markets and shelter sensitive domestic industries, they are, under the World Trade Organization (WTO) Agreement, reducing or eliminating these barriers entirely. In their stead, countries are turning increasingly to different types of home market protection such as technical barrier to trade (TBT) and sanitary and phytosanitary (SPS) restrictions. These restrictions can be devastating for both exporters and importers and often close markets entirely to select products or industries. When legitimately applied, these measures serve to protect human, animal and plant health and ensure product quality. As highlighted by the recent Chinese ban on U.S. beef in the wake of U.S. actions against tainted Chinese seafood, pet food and toothpaste products, however, there is a growing trend to couch market driven, protectionist actions in the "sheep’s clothing" of TBT and SPS measures. In light of possible "bet the business" consequences, industries should understand that international trade laws can be brought to bear on such illegal market restrictions.
Whether they consist of toy trains or a cargo loads of beef, imports and exports are under greater scrutiny in the global marketplace and increasingly susceptible to TBT and SPS restrictions, and the potential downside to running afoul of a particular country’s TBT or SPS requirements is significant. Recently, for instance, several trading partners of the United States closed their markets to U.S. beef due to alleged food safety concerns regarding bovine spongiform encephalopathy (BSE), costing the U.S. meat industry billions of dollars and valuable market share. In light of this and numerous other examples, it has become increasingly important that exporters and importers, as they focus on international markets, understand the rules of the road for navigating this complex area of international trade law and comprehend how, when and why importing countries may legitimately apply these restrictions. Moreover, it is essential that importers and exporters stay abreast of any changes in relevant TBT and SPS requirements in this constantly evolving area of international law, which will only become more complex as importers seek to tighten inspection systems in the wake of product scares and concerns over the effectiveness of import inspection regimes.
Identifying and Keeping Abreast of Unfair Technical and Food Safety Restrictions
Technical and food safety restrictions can take several forms, and it is essential that companies and industries that rely on global markets be able to identify these restrictions and understand how they affect their business. Global traders should also learn to distinguish between justified and illegitimate TBT and SPS restrictions, the latter of which can range from over burdensome testing and inspection requirements, to disparate treatment of domestic versus imported product, to outright bans on imported product that lack scientific bases. Events such as the recent Chinese ban on U.S. beef exports are a wake-up call to the trading community of the power and disruptive effect of these measures and restrictions, and emphasize the need for exporters and importers to take appropriate action in response to unjustified market restrictions to maximize and protect the market access they have been promised under international agreements such as the WTO Agreement.
TBT and SPS restrictions also represent an area of trade policy that is in substantial flux, as government policymakers respond to recent food, pet food and consumer product scares, as well as a public outcry for more restrictive treatment of imported products. U.S. exporters and importers, as well as foreign exporters to the United States must therefore stay abreast of any changes in TBT and SPS requirements that affect their industries.
It is imperative that U.S. exporters and importers and foreign exporters to the United States that are faced with trade disruptive TBT or SPS measures understand how, when and why importing countries may legitimately apply TBT and SPS measures. In particular, global traders must understand how the texts of bilateral and regional free trade agreements (FTAs) and the WTO Agreement, including the General Agreement on Tariffs and Trade 1994 (GATT 1994), the TBT and the SPS Agreements, set the parameters for what is and is not a legitimate technical or food safety restriction.
As a starting point for determining if a restriction legitimately satisfies the terms of relevant international agreements, exporters and importers should ask several preliminary questions. For instance, in the case of technical regulations, or TBT measures (which could affect a wide range of consumer products), an exporter or importer might ask:
- Is the importing country applying this same standard to its domestic producers?
- Is the importing country applying the same standard to all third country exporters?
- Is the measure based on relevant international standards?
- Is the measure more restrictive than necessary to achieve a legitimate objective?
In the case of food safety, or SPS measures (which affect products posing a risk to human, animal or plant health), exporters and importers should determine, among other things, answers to the following:
- Did the importing country base its restriction on a risk assessment?
- Does the restriction appear to be based on sufficient scientific evidence?
- Is the restriction based on an international standard?
- Is it a temporary restriction?
If so, was it not possible for the importing country to complete a risk assessment and is the measure based on available scientific information?
With the answers to these and other questions in hand, affected companies and industries can take the necessary next steps to engage with the appropriate government decision makers to re-open the market in question. Next steps can range from consultations with the country imposing the restriction to litigation challenging the unfair restriction at international bodies such as the WTO.