WTO Rules Against EU's Biotech-Seed Rules, People Say (Update1)

Feb. 7 (Bloomberg) -- The World Trade Organization ruled against the European Union in a dispute over genetically engineered crops from companies such as Monsanto Co., people familiar with the ruling said, aiding U.S. efforts to limit worldwide regulation of the technology.

The Geneva-based WTO concluded that the EU discriminated against biotech seeds without adequate scientific evidence, the people said. The decision stems from a complaint filed in 2003 by the U.S., Canada and Argentina, which accounted for 80 percent of the area planted to biotech crops globally last year and accused the EU of maintaining an unlawful ban on the seeds.

While today's confidential ruling won't open markets in Europe -- where some governments are fighting EU-wide rules that the European Commission says will allow such crops -- it may set a precedent for nations including China, India, Brazil, Japan, Indonesia, Russia, Mexico, New Zealand and Australia. Those countries all have rules stipulating strict consumer labeling and tracing of goods containing bio-engineered ingredients.

The U.S. insists that the crops are safe and shouldn't be distinguished from conventional seeds. The administration of George W. Bush said the EU violated WTO rules because its approvals process wasn't based on science and was subject to ``unnecessary delays.''

`Strong Signal'

``I hope this will send a strong signal to countries around the world that no measure can be taken unless it's based on sound science,'' Christian Verschueren, director general of CropLife International in Brussels, which represents companies including Monsanto and DuPont Co., said in an interview.

The 1,047-page WTO decision also condemns national bans on marketing and releasing genetically modified organisms into the environment, imposed by governments including Germany, France, Austria and Greece, said the people, who declined to be identified before the EU and U.S. comment publicly on the trade body's decision.

The refusal of those governments to approve new seeds began the moratorium in 1998, because the EU's barrier-free trade rules mean a product sold in one member nation can be marketed in all the others.

U.S. industry groups say the EU ban has cost their exporters $300 million a year in lost sales to the 25-nation EU. The bloc counters that consumers were already buying fewer biotech products before 1998.

New Legislation

The commission says new laws since 2004 allow biotech seeds to be planted, traced and labeled and points to more than 30 gene-altered products approved for marketing in the bloc. The EU's executive blames national governments including France and Austria for continuing to obstruct new approvals in an environment where more than half of the region's 450 million consumers consider gene-engineered foods to be dangerous.

The commission has separate cases under way against those two countries as well as Luxembourg, Germany and Greece for refusing to lift bans on biotech products, including Basel, Switzerland-based Syngenta AG's Bt11 pest-resistant corn.

Today's decision against national bans ``is a direct attack on democracy,'' said Adrian Bebb, a campaigner at environmental group Friends of the Earth. ``EU governments only last year voted to maintain their bans and now the WTO has called them into question.''

Lack of Majority

All EU governments have a say over biotech decisions because the bloc's barrier-free trade rules mean a product sold in one member can be sold in the others. Since imports of GM products resumed in 2004, the commission has approved just three varieties, including Monsanto's MON863 corn. The commission can make decisions unilaterally because there's no majority among EU governments either to approve or dismiss new approvals.

With 98 million hectares (242 million acres) under arable production in the EU, second only to the U.S., the 25 nations grow less than 1 percent of the world's genetically modified crops. Global biotech sales in 2006 will amount to $5.5 billion.

Switzerland, Thailand, Saudi Arabia, Bolivia, Algeria, Ghana, Benin, Zambia and Georgia are among countries that prohibit the planting of genetically engineered crops.

Today's report, under WTO rules, is designed to remain confidential in an effort to give the governments involved a chance to make any amendments or to negotiate a last minute solution. The substance of a confidential decision has only been altered twice at the final stage -- in cases over U.S. steel duties and South Korean paper -- in more than 130 disputes that have reached this stage.

EU Food Policy

``We're not going to say anything tonight, under no circumstances,'' Peter Power, a commission spokesman, said by telephone from Brussels. Monica Meda, a spokeswoman for the Argentine agriculture secretary, also declined to comment, saying the government hadn't yet received a copy of the ruling.

The case is a test for the EU's ``better-safe-than-sorry'' food policy, known as the precautionary principle, which has kept hormone-treated beef from the U.S. and Canada out of the EU even though the WTO ruled in 1998 that found the bloc hadn't scientifically proven a cancer risk to consumers from the treatments. The EU has been paying $126 million a year in sanctions as a result and is working to get the retaliatory duties lifted on the grounds that it now has enough evidence.

GM varieties are engineered to resist specific herbicides or pesticides, letting a farmer spray his field with products that kill everything except his crop. Some have genes that act as insecticides, prevent fungal growth or withstand drought.

Advocates, Opponents

Advocates say the technology boosts yields and cuts the number of times chemicals must be sprayed, meaning the soil is less compacted and limiting rainwater run-off and erosion.

The U.S. accounted for 55 percent of the global area planted to biotech crops last year, or 49.8 million hectares, Argentina 19 percent and Canada 6 percent, according to the International Service for the Acquisition of Agri-biotech Applications. Brazil became the third-biggest grower last year with just over 10 percent of the total area and worldwide, sowings rose 11 percent to 90 million hectares.

Opponents say there are no proven health or environmental benefits to GM crops. They argue that they're no cheaper, nor have they helped alleviate hunger in Africa, because the crops are mostly for animal feed. They also say that engineered genes can't be contained, once released into the environment.

The crops have increased the use of herbicides and pesticides over the last decade, environmental group Friends of the Earth says, and have contributed to deforestation and soil erosion.