UPDATE 2-WTO condemns EU over GMO moratorium - diplomats

GENEVA, Feb 7 (Reuters) - The World Trade Organisation, in a closely watched ruling, decreed on Tuesday that the European Union and six member states had broken trade rules by barring entry to genetically modified crops and foods, diplomats said.

The preliminary finding, contained in a confidential verdict sent to the parties to the dispute, addressed a complaint brought against the EU by the United States, Argentina and Canada.

In a 1,000-page report, which diplomats said that they were still seeking to digest, WTO trade judges found that the EU had applied an effective moratorium on GMO imports for six years from 1998. Moratoriums are barred under WTO rules.

"The panel confirmed that there was a moratorium, and that is not allowed," said one diplomat who had seen the verdict.

"Members' safeguard measures have also been condemned," he said in reference to the complaint against individual market and import bans imposed by France, Germany, Austria, Italy, Luxembourg and Greece.

Diplomats said that other parts of the WTO ruling, which also covered individual crops and foods, were more mixed, although they were still wading through the detail. The decision, which still needs to be confirmed in a final ruling in a month's time, and can be appealed, came as little surprise to diplomats and industry watchers who had forecast that the EU could come off worst in the long-running case.

"NOT BASED ON SCIENCE"

The EU's opponents asserted that the moratorium, which Brussels argued was never officially declared, hurt their exports and was not based on science.
The ruling had been keenly awaited by the world's biotech industry, which would like to ship far more GMOs to Europe.

Although Brussels began once again authorising imports of GMOs in May 2004, only seven crops and foods have been given the green light, and a number of member states have maintained individual bans.

Europe's shoppers are known for their wariness towards GMO products, often dubbed "Frankenstein foods" by European media.

Opposition is estimated at more than 70 percent, a stark contrast to the United States where the products are far more widely accepted.

But trade sources said the ruling would send a message to other WTO members, including some in Africa, which have been taking, or are considering taking, a similar line to that of the EU, that they could face legal action.

U.S. farmers say the EU ban cost them some $300 million a year in lost sales while it was in effect since many U.S. agricultural products, including most U.S. corn, were effectively barred from entering EU markets.

"Biotechnology produces safe food ... we believe it will help reduce poverty in poor countries. We believe it enhances development and it provides important environmental benefits," said United States Trade Representative Rob Portman before the ruling's release.

The EU says its cautious approach to GMOs is in line with scientific opinion which, it says, has concluded that GMOs must be assessed on a case-by-case basis even if they are not intrinsically unsafe.