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Protection or protectionism?

Government regulation is meant to protect our health, our safety, and our environment. But increasingly, regulations are being used as protectionist impediments to international trade--defending the interests of specific industries and classes of workers under the camouflage of guarding the public from risks. Foods and drugs, agricultural products, and chemicals are favorite targets of such tactics. Scientific objectivity, which is supposed to be at the core of the regulatory process, is being replaced by political or economic expediency, threatening hopes for international agreements to facilitate orderly and free trade.

Scientifically unjustified and transparently protectionist regulations are appearing everywhere. The practices range from the embarrassingly obvious to the blatantly cynical. For example, U.S.-made aluminum baseball bats sat on the docks for months in Japan while regulators maintained that their safety had not been established. Underdeveloped countries have protested that bioengineered crops are unsafe and won't be allowed inside their borders--unless the new seeds and crops are provided free of charge or royalties.

Rapid technological progress is the driving force behind these protectionist efforts. New processes and new products are flooding into the world market, leaving no economic niche safe from disruptive change and competition. Faced with an unexpected challenge, too many economic interests respond by trying to block the competitor, which is faster and cheaper than fighting back with a better product. With products that incorporate new science and technology, it is easy to rouse public fears of unanticipated health, safety, or environmental risks. Such concerns resonate far more powerfully than bald appeals to economic self-interest. In a highly competitive world, a few months' delay provides time to play technological catch-up, or to find some basis on which the product can be restricted or banned. It is a game that can be played by anyone, and is.

Many international organizations and negotiating groups work in favor of free trade. The General Agreement on Tariffs and Trade (GATT) was born of the consensus that greater freedom to operate in the global marketplace leads to greater economic growth and efficiency for all. GATT exists for the purpose of reducing and removing protectionist barriers. The Organization for Economic Cooperation and Development (OECD) pursues the same goal among its 24 member nations, though without binding authority. Given this overwhelming endorsement that free trade is a good idea, it is becoming increasingly awkward to be blatant about protectionism when internal forces demand protection. The trend is, therefore, to find a disguise for preserving the existing social or economic order within nations. Environmental protection, which is clearly needed and has a strong constituency, is a favorite disguise. So is human health.

Milking consumers

The story of the European ban on U.S. beef is a perfect illustration of what is happening with innumerable products in virtually every country in the world. In the mid-1980s, Europe was faced with a milk glut that threatened to drive down prices and hurt dairy farmers. Although the problem is obviously too many farmers raising too many cows, European farmers are deliberately kept on the farm because that's where they want to be, because they have political clout beyond their numbers, and because officials fear an influx of farmers to the cities where they might end up on unemployment rolls. The only politically acceptable means of maintaing the current balance is to limit the amount of milk reaching the market. That can be done by limiting imports or slowing domestic production through restrictions on the use of productivity-enhancing technology or through other means. Europe decided to cull its herds to reduce milk production, but that created a surplus of domestic beef that threatened to lower prices for current producers. To prop up prices, the Europeans decided to reduce the supply by banning U.S. beef. But to do that, they needed a rationale. Voila, hormones in U.S. beef are suddenly discovered to be a serious health threat.

Science did not play a role in this discovery. The steroids used as growth promoters have been thoroughly reviewed and approved in the United States, and they are used widely around the world. The Center for Veterinary Medicine, Europe's scientific review board, found no safety risk with their use, but this did not stop the Europeans from implementing the ban. When the United States demanded that the ban be rescinded unless it could be justified scientifically, the European Community cited "consumer preference" as the basis, and in so doing, wrote a dangerous new requirement into its regulatory framework.

The new barrier is commonly referred to as the "fourth hurdle"--an addition to the three traditional regulatory requirements of safety, efficacy, and quality. This regulatory requirement is essentially a social or economic test that amounts to subjecting a product to review by the political and economic interests that are affected by it. The same strategy is used in domestic disputes. The proposal to extend the energy tax to any imported product with a high-energy content has been called "green protectionism" by critics.

The motives are understandable. We all have a stake in the status quo, and we can't all expect to be short-term winners during periods of transition. In The Lever of Riches, Northwestern University professor of history and economics Joel Mokyr writes: "By and large, the forces opposing technological progress have been stronger than those striving for changes." Some of those forces, he writes, "protect entrenched vested interests; others are simply don't -rock-the-boat kinds of forces." The conflict can be found throughout history. And history teaches that when the forces of stasis block technological progress, the outcome is fore-ordained: When the present wins, the future loses.

This does not mean that we can ignore the internal politics of nations in the quest for technological progress. Each nation has its culture, its history, its special interests, its economic verities. Politics is based on the status quo--service to those who elected you, or, in less democratic lands, preservation of the system that put you in power. The political process works to protect what we have, or protect our agendas. The difficulty arises in deciding whose agenda shall be protected. And in a world in which open global trade enhances economic efficiency and boosts productivity, nations that introduce unnecessary regulations are hurting the global economy.

Regulatory Babel

One reason that international trade is so vulnerable to regulatory impediments is that each nation has its own system for classifying and regulating commercial products. The result is that for any given substance, the accepted degree of risk and the methods of control and handling the risk differ from country to country. Hazard classification is a hodgepodge, because there is often no agreement on the basic underlying data.

There is no evil intent behind differences in data. But the opportunity for mischief is apparent. Indeed, GATT owes its creation in 1947 to the presence or potential of trade-limiting barriers that can spring from such differences, and today's trade negotiators are well aware of the problem. Indeed, GATT staff members have devoted an enormous effort to reaching agreement on data pivotal to the discussion of the highly contentious agricultural issues that have dominated the current round of talks. One particular area of concern is food safety, including the specific question of U.S. beef.

Other international institutions are at work on the same set of problems. For example, Codex Alimentarius, an international organization devoted to facilitating world trade in food by establishing internationally accepted standards, has in the past three decades generated hundreds of standards on everything from food additives to hygiencic food handling, in an effort to eliminate trade barriers among nations. The standards are, however, nonbinding--as they should be. Although complete international harmonization would facilitate trade, nations cannot be expected to surrender their sovereignty to the international imposition of standards that would affect their home markets. Harmonization cannot be dictated by an international superagency but must be negotiated by governments and include private-sector participation.

The 24 OECD countries must also provide guidance for developing nations, which often lack regulatory infrastructures of their own. For example, the OECD's agreement on Good Laboratory Practice (GLP) helps standardize the regulatory practices of nations, and the organization is working on developing common data bases, testing methods, and even regulations.

Fortunately, institutions exist to manage disagreements. The efforts of GATT negotiators, OECD experts, and others working to minimize trade barriers deserve every support. The U.S. participants, led by the office of the U.S. Trade Representative (USTR), have been quite effective in fighting against unjustified barriers to trade. One reason for U.S. success is that USTR staff have worked closely with industry and academia to develop a thorough understanding of the underlying scientific issues.

Regrettably, U.S. industry and the scientific community fail to appreciate how important this work is to their intellectual and commercial interests. Whereas Japanese industry supports two technical experts as regular participants in OECD studies and discussions, the United States has no full-time non-governmental representatives. In spite of the entreaties of U.S. government officials to American industry to follow the Japanese lead, it has not. There needs to be better understanding of OECD's role at the senior corporate level. As the organization that sets guidelines covering agriculture, food, and medicine, not to mention tax and trade policy, it deserves more recognition and support.

Thus, one critical step toward protecting industry from artificial trade barriers is to contribute talent, thinking, and our considerable political clout to international organizations that are working on our interests. Trade associations and industry groups should step up their education efforts to raise company consciousness about these issues.

Equally important is to use whatever influence, knowledge, and political power the scientific community has to keep regulations within the appropriate limits. The U.S. research establishment should act on its commitment to make public policy reflect scientific knowledge, and it should recognize that restrictive trade policies that discourage technological innovation will also reduce support for scientific research. Nonscientific barriers to scientific progress should be on the agendas of scientific meetings and conferences, but seldom are.

Majority rules

The struggle for free trade can become frustrating when, after negotiators spend years hammering out all the details of a trade agreement, a small and narrowly focused group of special interests can then block approval of an initiative that could result in broad benefits. But we must remember that the vast majority of countries and companies want to reduce trade barriers. If more of those who support free trade participate in trade negotiations, they will make faster progress on the technical details and have the political power to see that the agreements are implemented.

The effectiveness of active participation has been demonstrated through the work of the International Bioindustry Forum (IBF), which Monsanto helped create. The IBF is a private-industry grouping, formed by Japanese and American companies that recognized their stake in each other's technology and in each other's markets. The bilateral group, formed in 1988, was able (to the surprise of some) to come to broad agreement on principles, data, and definitions in the areas of food, agriculture, and pharmaceuticals. For example, it developed standards for the handling and storage of drugs and a definition of what constitutes a recombinant DNA product.

The work was informally encouraged by our governments, and the results informally accepted. Of course, private industry does not write government rules and regulations, but resolving business issues independently simplifies the work of government officials. The IBF has since expanded to include companies from Europe and Canada, and is reaching out to others, including developing nations. Together, we are confident that we have solved many problems for one another before they have had a chance to arise. The system has not been tested thoroughly because no major agricultural products have been approved. But the combined weight of companies from three continents is sure to have an effect if the need arises.

Such activism is necessary to bolster the official efforts under way. Major economic powers are struggling to grow, and the temptation to protect powerful vested interests using whatever cloaks and disguises are available is hard to resist. Nations must work together toward consensus on data and rules, and researchers and industry leaders must add their voices to the call for institutions such as GATT and OECD to preemptively eliminate the bases for trade barriers.

If technology is one of the principal engines of growth, then it seems axiomatic that it be unfettered except by those regulations that are commonly and honestly agreed upon to be necessary. There is no magic formula for ridding the global trading system of unfair barriers that impede growth. But those who generate the new ideas that become new technologies have to recognize that public policy is also part of their world. Researchers in industry and universities can play a valuable role in promoting the development of open international markets, which will provide a powerful catalyst for technological innovation.
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Title Annotation:health and safety measures
Author:Harbison, Earle H., Jr.
Publication:Issues in Science and Technology
Date:Jun 22, 1993
Previous Article:Waste management.
Next Article:The economic case for sustainable development.

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