Ryan Greenaway-McGrevy looks at the balancing act of getting NZ exporters greater overseas access whilst also protecting NZ from imported biological threats

This is the eighth in a series of articles Interest.co.nz has commissioned reviewing the key chapters and issues for New Zealand in the Trans-Pacific Partnership Agreement (TPPA). Links to all the analysis in this series are below.

Ryan Greenaway-McGrevy*

Trade can increase the risks to health and safety – not only of humans, but the broader ecosystems upon which the economy relies. Varroa mite, mad cow disease, kiwifruit PSA - these all present threats to the health of our people, ecosystems and economy. 

Trade agreements often incorporate protective measures that allow countries to prevent these and other pathogens from gaining a foothold on their native soil. In the TPPA, many of these measures are contained in chapter seven - Sanitary and phytosanitary measures. 

Easier in theory than in practice 

Trading partners tend to agree that these provisions should be included in trade agreements in principle. After all, who wants to allow something as destructive as mad cow into their ecosystems? In practice, however, there are many hurdles to overcome when it comes to the fine print of a Sanitary and Phytosanitary (SPS) agreement.  

Trading partners often have different health and safety standards, and trading partners therefore often disagree over whether a specific product is a significant health or safety threat. The EU has maintained a long-standing ban on importing beef from cattle treated with growth hormone, much to the ire of cattle farmers in the US and Canada. Meanwhile the EU and Canada have banned so-called pink slime due to the use of ammonia in production. But consumers in the US are still happily munching away on burgers and other meat products that contain the substance. Gross.

In such situations trade agreements can have a big effect on the balance of power between the trading partners when resolving these disagreements. And there are two main frameworks to dealing with these disputes. 

Under the precautionary principle, the importing country is permitted to block or hinder trade if it suspects there is a threat to health and safety, particularly in the absence of a clear scientific consensus on the magnitude of the threat. In other words, it must be proven that the product is safe before unfettered trade can happen. 

Application of the precautionary principle often results in imports being blocked altogether. Or, if imports are permitted, they are subjected to various protective measures, such as fumigation, which can be expensive. These additional costs are usually passed on the consumer, making it difficult for the imported product to compete with the alternatives.

The fact that protective measures can be abused in order to shelter domestic special interest groups further exacerbates the problem. For example, a government wanting to protect its apple growers can claim that foreign apples represent a safety risk, and then either block these imports or insist that imports be subjected to expensive biosecurity measures. (Looking at you, Australia.) 

On the other hand, under the so-called scientific approach, the importer can only block or hinder imports if it has been proven that there is a threat to health and safety. In other words, it must be proven that product is unsafe before free trade can be stopped. This approach obviously enables more trade, but potentially comes at the cost of relaxed protection of consumers and ecosystems. 

Sorting through these issues is one reason why trade negotiators earn their salaries. SPS provisions do not set specific details on the treatments applied to imported products, but they do set principles. And these principles affect how SPS measures are applied in practice.

The US vs. the EU 

The TPPA is often framed as part of the geopolitical arm wrestle between the US and China. But it is also part of an arm wrestle between the US and the EU, especially when it comes to SPS measures. The EU prefers the precautionary principle, while the US favours the scientific approach. 

Currently the WTO Agreement on the Application of Sanitary and Phytosanitary Measures allows countries to follow the precautionary principle in some circumstances. But some – particularly experts in the health sciences – are concerned that the TPPA may undermine the precautionary protections permitted under the WTO agreement. The language in the SPS chapter of the TPPA is different to that of the WTO, and follows the scientific approach that the US prefers. This pushes the global norm towards the scientific approach, thereby giving the US more leverage in their trade negotiations with the EU. Several other mechanisms in the chapter tilt the balance in favour of exporters. 

First, disputes are to be dealt with swiftly. Article 7.17 establishes a Cooperative Technical Consultations (CTC) framework to deal with disputes. It stipulates that when a dispute arises, the two parties must meet within 30 days to address the issue, with the aim of resolving the matter in 180 days. 

Second, disputes are likely to be dealt with confidentially, at least initially, because both parties must agree in order to make the dispute public. Article 17.7.6 states; 

All communications between the consulting Parties in the course of CTC, as well as all documents generated for CTC, shall be kept confidential unless the consulting Parties agree otherwise. 

It is unlikely that the exporting country will want the media to know that trading partners are concerned about the safety of their product. Only after the full dispute settlement process is invoked will the disputes become public knowledge. 

Finally, Article 7.5 also establishes a committee on SPS measures with the objective of enhancing mutual understanding of each party’s individual SPS standards and the implementation of the chapter. Some critics, such as the Institute for Agriculture and Trade Policy, are concerned that this panel will be comprised of trade representatives rather than scientists, and that this will have a detrimental impact on the determination and enforcement of the appropriate level of protection.

Apples and Australia 

The precautionary principle provides cast iron protections of the health and safety of consumers and ecosystems. But because it can easily be abused in order to protect special interest groups, the precautionary approach can come at the expense of fair trade. 

The apple growers of New Zealand know this all too well. 

Up until very recently, Australia had maintained a long-standing ban on importing apples from New Zealand on the basis that fire blight had been found on trees in Northland. Kiwi apple growers began to seek a lift on the ban in 1986 after studies failed to show that the fire blight disease could be spread through commercially traded apples. 

After two decades of discussion, the ban was finally lifted. But, although kiwi apples were permitted into the country, they had to be subjected to prohibitively expensive biosecurity measures. These were effectively the same as the ban. 

The case was then taken to the WTO dispute settlement body (DSB) in August 2007. In 2010, the WTO panel found that the biosecurity measures were not justified, and Australia lifted the biosecurity measures the following year. 

The case illustrates that it is possible to restore fair trade under an SPS agreement that does permit precautionary measures. But it can take some time – four years in the case of the kiwi apple growers. Which approach is best – the precautionary or the scientific? It is a difficult balancing act. But it is important that we get it right.

On the one hand, we are a small open economy that must trade to survive. We should cheer any measures that make it harder for our trading partners to shelter their domestic industry from our exporters by hiding behind frivolous safety concerns. But on the other, we are an island nation blessed with a natural maritime border that prevents many pathogens from arriving on our shores. Trade is often how these pathogens make it to our shores – and we should be wary of any measures that make it harder for us to stop them. 

*Ryan Greenaway-McGrevy is a senior lecturer at the University of Auckland in economics. Prior to that he was a research economist in the Office of the Chief Statistician at the Bureau of Economic Analysis (BEA) in Washington DC.

Amber Carran-Fletcher contributed to this article.

The series so far:

Investor-state dispute settlement

Labour standards

Settling disputes

Intellectual property

SOEs and designated monopolies

Environment

Government Procurement