Cracks In The Mirror - Trouble ahead for European agrifood trade?

Mirror clauses are back...with a vengeance?

Cracks In the Mirror

Next week the European Commission will adopt its Vision for the Future of Agriculture, a leaked version of which is already creating controversy. Much of the vision is aspirational rather than operational, except for one gloomy paragraph that proposes that imported food products will have to be produced in line with the EU’s own production standards.

“The Commission will pursue, in line with international rules, a stronger alignment of production standards applied to imported products, notably on pesticides and animal welfare”

To paraphrase the movie Jaws, just when we thought it was safe to go back into the water, the notion of Mirror Clauses rears its ugly head again.

On the surface, what is not to like? Surely it is reasonable to insist that imports be produced in the same way as European food? Don’t foreign products get an unfair advantage if they use pesticides that cannot be used in Europe, or if farms pay lower wage rates or apply different environmental rules on soil or water pollution? Farmers in Europe have been calling for a more level playing field faced with competition from more cheaply produced imports. One understands their frustration.

But scratch below the surface and the proposal is highly problematic, potentially illegal under international law, and risks rebounding back in the faces of Europe’s farmers. Let me explain why, without getting too technical.

The mirror clause idea has nothing to do with consumer health and safety. All imports from all sources have to meet European health and safety standards in exactly the same way as domestic goods. This is not negotiable. If a product is unsafe or carries residues of a toxic chemical it cannot enter the EU. The EU has the highest safety standards in the world, product by product, risk by risk.

But you cannot ban a product simply because the way it is produced is not identical to the way it is produced in the EU, when that imported product complies with EU health and safety rules. The WTO Agreement, which the EU claims to believe in, is clear on this. And for very a good reason. Banning goods simply because they are made in a different way leads rapidly to protectionism. One does not need to be Adam Smith to recognise that it is perfectly reasonable for another country to have different environmental standards, have a labour market that is less expensive than that of Europe, have more modern and efficient farming practices, or better soil or climate for production. Or use pesticides that are not used in Europe because they are needed to fight pests that do not exist in Europe, in tropical production for example. Or even because a given developing country has decided that poverty reduction is more important right now than preventing seepage of chemicals into a local river. A different calculus which that country should be free to make.

As a young negotiator representing Hong Kong in the GATT Uruguay Round, in 1991 I personally drafted and negotiated the provision in the GATT Agreement on Technical Barriers to Trade which – I simplify – outlaws mirror clauses, import restrictions taken due to a product’s process and production methods (PPMs) which do not affect the imported product. I presented my text to the EEC and US negotiators. They read it carefully, looked at each other and smiled and winked. They were fighting protectionism in those days and liked what they read. So they agreed it knowingly.

There is a second troublesome proposal in the Vision, namely to ban the export of pesticides and herbicides that are not allowed in Europe. This is also not the no-brainer it might seem to be. Surely countries should be free to decide whether or not to import a particular pesticide, and not have Nanny Europe telling them what is good for them or not? The Rotterdam Convention exists for this reason – an international treaty through which countries explicitly give prior consent to importing a product banned for use in the country of export. Rotterdam is reflected in the EU’s own tight export regulations and works well. A unilateral export ban would be a clear breach of the principles of Rotterdam. And an export ban on these products would not only hamper the competitiveness of Europe’s pesticides industry by closing them out of overseas markets, it could lead to developing countries sourcing their pesticides from less scrupulous suppliers who do not, unlike responsible European companies, guide the farmers on their safe use. So the health and safety situation in third countries could actually be made worse through an ill thought out export ban. Lose-lose all round.

There are exceptions to the general WTO rule that prevents imposing mirror clauses. Europe can ban imports produced using child labour for example, based on the international agreements of the ILO. It can ban imports if the way the product is produced objectively offends public morals. Seal skins because of the way the seals are clubbed to death, for example. Some Arab countries ban pork or alcohol for religious reasons. And countries can ban imports, along with a domestic ban, if the production method damages the global environment and exacerbates climate change. This is the rationale behind the EU’s Deforestation Directive.

But these are legitimate exceptions. For Europe to impose its production methods - mirror clauses - on other countries not only risks falling foul of Europe’s international WTO obligations, it smacks of neo-colonialism, the Brussels effect on steroids as a developing country ambassador put it to me the other day. If this proposal goes ahead unaltered it will be deeply resented by Europe’s trading partners and scupper Europe’s efforts to develop strategic partnerships – with India, with Latin America, with Canada, with many others - in an increasingly hostile and unstable world where Europe needs all the friends it can get.

It is likely that if Europe imposes mirror clauses on its trading partners they will retaliate in the WTO with measures against European exports. And as the world’s biggest exporter of agrifood products, enjoying a EUR 70 bn annual surplus, the EU and its farmers really cannot afford to have their exports taxed to death or banned from overseas markets. So it is to be hoped that wise heads in the Commission will delete or tweak this provision in the Vision : to make it clear that any mirror clause, any reciprocity measure, must be done in full compliance with the EU’s WTO obligations (the Vision takes a nod towards being “in line with international rules” which is welcome but needs to be firmer), must be based on science and evidence, must be the least trade restrictive means to achieve a legitimate objective – and levelling the famous playing field is not one; must be taken in order to meet EU consumer health and safety requirements, and must be discussed with Europe’s trading partners in advance… to ensure it does not damage Europe’s already precarious international relationships.

Alfred Lord Tennyson in his great poem “The Lady of Shalot” wrote that “…the mirror crack’d from side to side’. If mirror clauses are pursued recklessly similar cracks will rapidly appear in Europe’s trade relations, without doing anything to help the environment or health and safety.