CASE NUMBER: 160 CASE MNEMONIC: EUMEAT CASE NAME: Bovine Hormones and EU Trade
1. The Issue
This case study will examine the use of bovine growth hormones and the effect they have on trade and the environment in the European Union. Since the 1970s, U.S. meat industries have been using hormones to improve the growth rate of animals. These hormones have greatly increased the growth of livestock, saving farmers both time and money. The natural life cycle of the livestock is cut short, thus the meat industry saves in the costs it would normally pay. The EU has banned the import of US beef because of fear that the hormones are dangerous and may cause health problems to those who ingest them. The ban however is controversial because a reasonable consensus exists among scientists that some of the forbidden products are safe for human consumption. The following will examine the claims from both sides of the issue, looking at the actual effects the hormones cause to the environment as well as their impact on trade.
For more than thirty years U.S. farmers have used both natural and artificial hormones to increase the growth rates of livestock. Since the 1970s, the use of hormones to promote weight gain in animals has become fashionable. This is because farmers found the hormones as a means to cut costs and satisfy the consumer demand for leaner meat. The shorter life cycle of the livestock would save in costs for both feeding and boarding.
On January 1, 1989, the European Community placed a ban on meat imports from animals treated with growth inducing hormones. This had a direct impact on the U.S. beef industry, which uses hormones in more than half of the cattle sent to market each year. The ruling effectively blocked $140 million worth of American beef exports, during the first year. In retaliation of the ban, the United States initiated 100 percent tariffs on a range of agricultural products including canned tomatoes, fruit juices, and ham. The EC further threatened to target U.S. nuts and fruits in retaliation of the tariffs.
The European fears of growth inducing hormones are not without reason. Europeans became fearful of hormone supplements in the early 1980s after the dangerous synthetic hormone diethylstilbestrol, or DES, was detected several times in baby food made with veal. The baby food was manufactured from French cows treated with DES. This reportedly led to various deformities in infants, such as Italian babies growing breasts. The growth inducing compound, DES, was banned in the U.S. in 1979 because of its link with cancer and birth defects. The uproar led some European countries, such as France and Belgium, to ban the use of all hormones in cattle. Those who imposed the EC ban claim that hormones used in U.S. meat causes tumors and genital deformities in children. see HOOF case
EC officials insist that the ban is strictly designed as a regulation to protect the public health. The EU s agricultural counselor in Washington, Derwent Renshaw, stated after the ban that (European) consumers have expressed a strong preference to eat hormone free meat. They suggest that the laws are nondiscriminatory, since all nations exporting meat to Europe must maintain the standard. Major beef exporter such as Argentina, Australia, New Zealand and Brazil all have agreed to ship hormone free meat to the EU. see BRAZIL case. Because the ban is applied equally to European and foreign producers, it will not break the rules of the GATT under non-discrimination.
The ban in Europe has unfortunately led to a black market of hormones available to European farmers. While most of these hormones have been proven to be safe, others contain the harmful, synthetically manufactured DES. Tests by the U.S. Department of Agriculture have found traces of DES from recent imports of beef from West Germany.
The ban has not only had a negative affect on the meat industry in the U.S., but also on the manufacturers of the hormones themselves. Major chemical companies such as Monsanto, Eli Lilly, American Cyanmid and Upjohn all produce the beef hormone known as bovine somatotropin (BST). BST was part of the EC ban and moratorium on hormones, although it was already proven safe for human consumption by the FDA. BST is supposed to increase milk production by 20-30 percent in cows, but other countries, including those of the EC, still want more tests done to prove the product safe.
In the United States, the Food and Drug Administration has approved the use of most hormones for controlled use. The hormone pellets are implanted in the animal under the skin behind the ears. The tiny capsules slowly release hormones during key growth stages of the livestock. According to a report by the U.S. Department of Agriculture, some hormones can eliminate as many as 21 days of feeding time before the animals reach the target weight of 1,000 pounds. The hormone treatments, which cost about $1 per implant, save the cattlemen about $20 a head, making profit more likely in an unstable industry.
The U.S. is critical of the EU ban and sees it as a clear case of unfair trade. The regulation, which does not set any specific quotas or tariffs, can be seen as a non-tariff trade barrier (NTB), because universal tests on the hormones in question have proved them to be safe to the consumer. A 1988 report by the World Health Organization concluded that the natural hormones used were unlikely to pose a hazard to human health, if good animal husbandry is practiced. It also recommended limiting synthetic hormones to levels between 1.4 and 2 micrograms per kilogram in beef muscle. Reports done by the EU themselves also tend to support the position of the U.S. that the hormones are safe and pose no health hazard to meat eaters. The report from 1982 found that the hormones would not present any harmful effects to the health of the consumer when used under the appropriate conditions as growth promoters in farm animals.
Currently, the restrictions still exist, but have been slightly relaxed. According to the Report on U.S. Barriers to Trade and Investment, by the European Commission, U.S. beef exports have risen steadily to $34.3 million in 1994. The U.S. however has not made steps to reduce retaliation, maintaining that relevant trade data has suggested that no such adjustment is warranted. Although recent figures have shown an increase in U.S. beef exports into the European Union, the industry has already lost millions of dollars worth of potential trade. This is because more than half of all cattle raised in the U.S. are treated with hormones. One reason why the controversy over beef hormones is so great is due to the protectionist nature of the ban. Beef was specifically chosen because the EU market has historically been very dependent on the import of beef from other regions, including both the U.S. and Brazil. This can be attributed to the fact that there is very little profitable grazing land in the EU, and other countries have filled the gap in the beef market providing a high quality product at a reasonable price. The BST regulations are not as heavily enforced for pork and poultry products, because EU industries could not afford to abide by the regulations themselves and are not dependent on the imports of such products. In order to protect the inefficient beef markets of the EU, this regulation was created and has received generous consumer support despite the lack of conclusive evidence.
3. Related Cases
a. HOOF Case b. BOTSWANA Case a. COSTBEEF Case b. BRAZIL Case Keyword Clusters (1): Trade Product = MEAT (2): Bio-geography = TEMP (3): Environmental Problem = HEALTH
4. Draft Author: Richard Weir
B. LEGAL Clusters
5. Discourse and Status: DISagreement and INPROGress
The issue is over the 1989 ban on meat imported into the EU treated with bovine growth hormones. The U.S. disagrees with the ban and negotiations to end it are still in progress as several trade retaliatory measures remain on the discussion table.
6. Forum and Scope: EURCOM and REGIONal
The issue involves mainly the US and EU, but other countries also must abide by the anti-hormone regulation.
7. Decision Breadth: 13 (USA and European Union)
8. Legal Standing: TREATY
The ban is a treaty drafted by the sovereign powers of the EC in 1989.
C. GEOGRAPHIC Clusters
9. Geographic Locations
a. Geographic Domain : North America [NAMER]
b. Geographic Site : Western North America [WNAMER]
c. Geographic Impact : Europe
10. Sub-National Factors: NO
11. Type of Habitat: TEMP
The habitat for cattle in the US is quite temperate as they can be brought up anywhere with a fairly warm climate and spacious terrain.
D. TRADE Clusters
12. Type of Measure: Import ban [IMBAN]
A regulatory ban was placed on the import of all horomonally treated meat into the EU.
13. Direct vs. Indirect Impacts: DIRect
This has definitely had a direct impact on the meat industry in the United States, as beef exports have been cut drastically because of the ban. While the species itself is not threatened, the industry has already suffered heavy losses. Other industries such as pork, dairy, and poultry have not been effected as significantly as the beef industry. This is because they do not rely as heavily on exports.
14. Relation of Measure to Environmental Impact
a. Directly Related : YES MEAT
b. Indirectly Related : NO
c. Not Related : NO
d. Process Related : NO
15. Trade Product Identification: MEAT
16. Economic Data
In the U.S., hormone treatments in cattle cost about $1 a head to administer, but save approximately $20 per cattle in feeding costs. More than one half of all U.S. cattle receive hormonal treatments to increase both growth rates and the quality of meat. During the first year of the ban, 1989, $140 million worth of American beef exports were blocked from being imported into the EU.
17. Impact of Measure on Trade Competitiveness:
Since the ban, the U.S. has lost over $100 million a year in sales of meat to the EU, according to the US Department of Agriculture. This protectionist measure has closed a large amount of the meat markets in the EU to foreign imports. Consequently, the price of meat in the EU has risen and consumer demand has decreased substantially.
18. Industry Sector: FOOD
19. Exporters and Importers: United States and EURCOM
Case Exporter :United States
Case Importer :European Union
E. ENVIRONMENT Clusters
20. Environmental Problem Type: General HABITAT
21. Name, Type, and Diversity of Species
22. Impact and Effect: LOW and REGULatory
23. Urgency and Lifetime: LOW and NEVER
There is no need for urgent worry about the negative effects of the hormone use in meat products. The current hormones being used for beef treatment have been proven to be safe by both EU and US studies. Not one scientific study has proven or found any significant evidence that safely treated hormonal meat causes damage to the environment or humans. The likelihood that either cattle or humans are soon to be extinct is highly unlikely.
24. Substitutes: LIKE products
With the recent decrease of affordable meat into the EU, other means of food such as fish [SEE TURBOT CASE] and grains have had more consumption.
VI. OTHER Factors
25. Culture: YES
According to EC officials, the cultural aspect is the reasoning behind the ban in the first place. Because citizens do not want to eat hormonally treated meat, regardless of its safety, is the reason for the import ban. Nationalism also comes into play as the consumption of European food products means that farmers and ranchers in the EU will continue to make ends meet, (please excuse the pun). Protecting domestic industries has been a recent trend in the evolution of what some refer to as "Fortress Europe," where the community acts as an extremely powerful and effective regional trading bloc with little to zero barriers between its members. Culturally, most European farmers have grown accustomed to government protection and have developed strong unions to ensure job security. Consumers also are aware of how their actions can impact the industry, and choose to keep the meat hormone free.
26. Trans-Border: YES
This issue crosses boarders with all EU members as well as the U.S.. The ban was designed for all members of the European Community but also had a direct effect on the U.S.. Other trans-border implications involve the future of free trade between the U.S. and EU. When the ban was first implemented in 1989, the U.S. took retaliatory measures imposing tariffs on agricultural imports from the EU. Tensions still remain in regards to the hormone regulations and other NTBs imposed by both sides.
27. Rights: NO
28. Relevant Literature
Castro, Janice. Why the Beef over Hormones? Time, January 16, 1989.
Comes, Frank and Paul Magnusson. Is the Beef Flap a Taste of Trade Wars to Come? Business Week, January 16, 1989.
Lewis, Sara. Drugs and Environment in Europe, The Lancet, p 467, August 13, 1994.
Marshall, Eliot. Europe Bans Boeuf a l Estradiol, Science, January 13, 1989.
Sheets, Kenneth R. Hormonal Difference, US News and World Report, December 5, 1988.
Southey, Caroline. Hormones Fuel a Meaty EU Row, The Financial Times, July 9, 1995.
---. Beef Growth Hormone: Bad Moos, The Economist, pp 66-70, August 11, 1990.
---. Beefing About the Bush, The Economist, pp 78-79, December 24, 1988.
---. Notes and News: Boeuf au Xenobiotique, The Lancet, p 569, March 11, 1989.
---. Report on U.S. Barriers to Trade and Investment, Services of the European Commission, Brussels, May 1995.