Lesson 1: A Brief Overview of World Trade

Topic 2: Emergence of an SPS System

In this topic you will learn why the SPS Agreement was necessary. Ask yourself, why is trade in agricultural goods special?

Objectives:

  • Explain why non-tariff trade barriers and farm trade were not dealt with explicitly in the GATT
  • Describe how measures intended to protect human, animal or plant health were ineffectively handled in the GATT
  • Describe why an agreement was necessary that set out the basic rules for food safety and for animal and plant health measures
Treatment of Agriculture in the GATT

The main objective of the GATT was to reduce tariffs. Agreements were reached that benefitted many sectors and led to the overall reduction of unfair trade practices. However, little consensus was reached on agricultural commodities in the initial agreement or in the negotiating rounds that followed.

There were several reasons why agricultural products were considered differently than other goods. Some countries were interested in protecting large domestic producers, while other countries were interested in helping small producers maintain market share. Other countries acted to preserve national identity and food security through domestic production. It is important to understand that each of these reasons was contrary to the original goal of the GATT, and later to the goal of the WTO. The inconsistency of the treatment of agricultural products would lead to further discussion and negotiation.

While the GATT treated agricultural commodities differently than other types of products, text from Article XX (General Exemptions) clearly details the rights of countries to protect themselves beyond tariffs, subsidies, and quotas. As long as measures are applied in a consistent, systematic manner, nothing in the GATT prevents a country from applying measures it considers necessary to protect human, animal, or plant life. It is important to remember that, while Article XX outlines a country’s rights, it does not describe how a country may ensure that its measures are necessary and consistent, and that its measures adhere to the rules.

Here is an excerpt from the GATT Article XX (General Exemptions) that outlines the rights of countries to protect themselves beyond tariffs, subsidies, and quotas:

  1. “Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:(b) necessary to protect human, animal or plant life or health.”

GATT General Agreement on Tariffs and Trade. Geneva.

Available here or online at http://www.wto.org/english/docs_e/legal_e/gatt47_e.pdf

Why Further Agreement Was Needed

While Article XX clearly states a country’s rights, it does not provide guidance on how a country can demonstrate that its measures are necessary, consistent, and systematic. Without additional guidance to Article XX, countries could impose measures under the justification that they were necessary to protect human, animal, or plant life or health (herein referred to as sanitary and phytosanitary [SPS] measures). The lack of clarity of the original GATT introduced the possibility of misuse of Article XX because measures used to reduce risks to humans, animals, and plants could be very different and could take many forms. Countries are responsible for protecting themselves and their consumers, but what happens when strict regulations are used as an excuse for protecting domestic producers?

As non-tariff barriers, such as quotas and subsidies, were addressed in later negotiating rounds, the use of other technical measures to unfairly limit trade became an increasing concern. SPS measures were often based on technical grounds, and could be an extremely effective way to limit or prohibit trade. Without clear guidance about how these measures could be justified, negotiators feared that these complex measures would take the place of tariffs, quotas, and subsidies, and would therefore restrict trade. To address this need, the Agreement on the Application of Sanitary and Phytosanitary Measures, also known as the SPS Agreement, was created. The SPS Agreement entered into force with the establishment of the WTO on 1 January, 1995.

In this topic you learned that non-tariff trade barriers and agricultural trade were not covered clearly in the GATT. You also learned that an agreement was needed to outline the basic rules for food safety and animal and plant health. GATT negotiations did not handle measures intended to protect human, animal, or plant health. The agreement created to clarify rules for these measures was called the Agreement on the Application of Sanitary and Phytosanitary Measures. It is also known as the SPS Agreement.

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