January/February, 2000

From the Editor

Industry Must Band Together

When the specialty food industry last gathered in San Francisco for the Winter Fancy Food Show, the cloud hanging over the industry was that European refusal to abide by the World Trade Organization’s decision regarding its discriminatory policy on banana imports might lead the United States to impose punitive tariffs on items such as “sweet biscuits, waffles and wafers” and “pecorino cheese, from sheep’s milk, in original loaves.” That particular shipwreck was avoided when the specialty food items were removed from the tariff list when the total value subject to the punitive tariffs had to be lowered.

The industry was not so lucky as the battle over the admittance of U.S. beef raised with growth hormones led to another WTO decision requiring the European Union to drop its policy requiring only hormone-free beef. When the E.U. did not comply with the WTO ruling, the U.S. imposed retaliatory tariffs on a variety of products, including specialty food items such as certain mustards, jams and Roquefort cheese.

It is, of course, hard luck for those completely innocent business people who have gotten hurt by the choice of items singled out for tariffs. Whether a producer in France, an importer in the U.S. or a retailer of the now prohibitively expensive product, all of these people are being hurt. Consumers in the U.S. are being hurt as well as they are denied their choice of products or are made to pay more for them.

From a business perspective, the solution is obvious: The specialty food industry needs to stand together and fight as a common entity. After all, the creation of lists to put tariffs on is an inherently political decision, and if the specialty food industry doesn’t lobby effectively, it cedes the playing field to those industries that will do so. Lest anyone need to be reminded: Though the current controversy may not affect you, the next one may…and it can be on either the import or export side.

We have to make sure our industry organizations are placing adequate priority on fighting the battle in Washington. We have to look at branch offices, staff lobbyists and the hiring of outside lobbyists as well as the organization of grass roots efforts.

Lobbying and grass roots efforts are well and good and, in our day and age, necessary. From a business perspective, these types of efforts would have the effect of insuring that our industry is not taken advantage of due to perceived weakness. But from a broader public policy perspective, such efforts would accomplish little. The tariffs would be shifted to other products, and other people and industries would suffer.

To make a difference from this perspective, our industry has to reach out to its suppliers in Europe and impress upon them the importance of lobbying their own governments to adhere to treaties, particularly those treaties related to trade.

The issues in dispute in areas of trade are often highly controversial. For example, even in the United States, there are many who would like to ban the use of growth hormones when raising cattle. So, in thinking about these issues, it is easy to fall into the trap of looking at them substantively. But the truth is that the substance is not the point. For the very reason that there will never be agreement on the substance, countries must agree to a process for resolving these difficult disputes. The process that most countries have agreed upon is the WTO.

Understand it is not a question of sovereignty – because as a sovereign state, the Untied States and the European Union have both chosen to enter into this agreement. If either party wants out – it can withdraw from the WTO.

But it is typical in problem resolution to agree on a process. When Spain and Portugal could not agree on their boundaries in Latin America, each country agreed to let the Pope decide. Inherent in this decision was a recognition that the Pope might disagree with one or both of the parties. In business disputes, it is common to agree on an arbitration process – you pick an arbitrator, I pick an arbitrator and the two arbitrators pick a third, all of whom then decide the dispute by majority vote.

Once again, the idea is that these disputes will never be resolved through negotiation on the substance of the matter. So since all parties recognize the value of seeing trade disputes resolved amicably, the WTO process has been established to provide fair and impartial decisions in these matters.

If a country feels that the WTO process is corrupt or biased, then let it withdraw – but that is not the contention. Here the only issue is that the WTO has ruled in a way different from how European Governments would like to act. But this is precisely the purpose of the WTO. We wouldn’t need the WTO if all countries would do whatever they like in trade disputes.

Europe lost these particular battles on hormone-free beef and bananas, but there will be other battles in the future. The U.S. recently imposed tariffs on lamb from New Zealand. The decision is being challenged and, very possibly, the U.S. will lose at the WTO on that decision. One day, Europe will have a dispute it will win at the WTO. But if the E.U. continues on this course of behavior, it will be an empty victory. For the European Union is establishing the precedent that WTO rulings are not binding. If that is the case, why have the WTO at all?  FDM