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Quality, Health & Safety - the issue of PPMs

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It can be argued that international trade agreements protect consumer interests from trade protectionist producer interests, which lead to the principle of non-discrimination between like-goods.  [On the other hand, it can equally well be argued that this is simply the outcome of producer interests negotiating amongst themselves for access to each others markets, and eventually trading access for their imports into our markets, in return for equivalent access for our exports into their markets (the mercantalist perception of MTNs).]  Whatever the evolution of the international agreements, they have the following form:

• Violation of this principle in any of its three main concepts:
• like-goods themselves (differential treatment is allowed between unlike or different goods)
• national treatment - non discrimination between domestic and imported like goods.
• most favoured nation - what applies to the most favoured nation applies to all - i.e. non discrimination between countries or sources or origins
• can only be justified by scientifically grounded reasons (legitimised by the appropriate international authority) that relate explicitly to harming or disadvantaging consumersí welfare (by reason of safety, hazard, novelty/risk of unknown).


However, many current disputes and dissatisfaction with the WTO authority now concern production and process methods (PPM) rather than the end product. Examples of concerns which are about PPM rather than about the final good are, most obviously:  animal welfare, fishing (e.g. where tuna fishers regularly catch and destroy porpoises) and GMOs.  However, these concerns also extend to more general concerns over the sustainability of production methods and about both general environmental and social degradation generated by trade-encourgaged production systems.

Particularly where PPMs are either novel, or where they affect the natural environment, (or the welfare of the populations (human or animal) being exploited by production), they give rise to pressure for trade legislation (protection or discrimination) which cannot be legitimised through the current conventions ? because the final good or product traded is not objectively distinquishable from other ëîlike-goodsí.  Neither trade exclusion (restricted access) nor mandatory labelling are technically allowed since these concerns are ëout of scopeí of the WTO, unless

1. the end products of different PPMs  can be distinguished purely on their end product characteristics (which is often practically impossible);
2. and then the differentaited product itself can be demonstrated to be harmful or of disadvatnage to consumers welfare by reason of safety, hazard or risk of the unknown (which is frequently extremely difficult).
Proof of both (to the satisfaction of the legal bindings of the WTO agreements) is required before trade sanctions to prevent imports of undesirable PPM goods are allowed.

Although it is fashionable to complain that the WTO is to blame for the resulting travesties of simple justice or common sense, these rules have been negotiated and agreed by the signatory countries.  The WTO is simply responsible for implementing and policing these rules. It follows that dissatisfaction or complaint about the WTO should be addressed to the signatory states, to whom the WTO is ultimately answerable.

This is a particularly difficult problem - if it were easy, it would have been solved already.

The economic issues arising from GMOs can be categorised as follows:
 

	Food Health & Safety	Environmental Concerns	Market Performance
Imperfect Information	yes	yes	yes
Imperfect Competition			yes
Externalities	yes	yes
Sub-optimal provision of Public Goods or Bads	yes	yes

Note:  Imperfect information afflicts the GMO issue in two conceptually separate ways.

• First, consumers and users are faced with an information problem, and are required to rely on secondary sources and filters, whose trustworthyness is dependent on context, circumstance, character and culture of both sender and receiver.  Recent history, perhaps especially in Europe, leads people to distrust all of science, big business and government as providers of trustworthy information (BSE, drug failures etc.). We need more competition in the provision of information, but more competition confuses the signals.
• Second, optimal market performance relies on freedom of information, which is necessarily denied with patenting of GM information, which can only lead to imperfect competition, justified, presumably, on the grounds that such information is costly to provide - a second best argument.  But this argument rests on their being no alternative to the present transactions systems used to provide information.  Information is a public good - it will be under-provided (and over-priced) if left to the private market - hence the entry in the market performance box in the above table, and also the entry under the imperfect competition issue.


However, our present economics is not well equipped to deal with imperfect information, especially when the reliability of the information is in question because of the perceptions of consumers or the electorate (or at least the chattering classes amongst the electorate), and when, as in this case, there is at least the suspicion that questions of distribution -  fairness, justice and equity  - are at stake - who is gaining from the GMO?  Mostly the answer appears to be (at least in the Western rich countries) that producers (big multinational companies) are the gainers, while consumers gain nothing (apart from cheaper food, which may turn out to be nasty).  But economics cannot make sensible judgements about the equity of distribution.

Factors that people use in assessing their risks (the consequences of imperfect information) are summarised in a 1997 Department of Health publication, Communicating about Risks to Public Health:
"Risks are generally more worrying if perceived:

1. To be involuntary (eg exposure to pollution) rather than voluntary (eg smoking)
2. As inequitably distributed
3. As inescapable by taking personal precautions
4. To arise from an unfamiliar or novel source
5. To arise from man-made rather than natural sources
6. To cause hidden and irreversible damage
7. To pose some particular danger to future generations
8. To threaten a form of death or illness/injury arousing particular dread
9. To damage identifiable rather than anonymous victims
10. To be poorly understood by science
11. As subject to contradictory statements from responsible sources."


GMOs score on all of these counts, with the exception of 9.  It is no surprise, therefore, that GMOs are generally perceived as extremely risky, or that there will be strong pressure on politicians to do something about them.  It is also no surprise that politicians natural response is to ban them.  But we run into problems as soon as there is some clear gain to consumers or users from using a risky product - that the GMO product promotes better health (a new rice variety which contains carotin, which substantially improves the health of the consuming population), or that the GMO product can be grown in conditions where its natural cousin cannot - thus improving the food security of people in poor conditions (drought resistant crops etc.).

There will be continual pressure within and around the WTO to do something about these issues - but as yet it is very unclear what, exactly, is likely to be done.  Among the apparent options are:

• the WTO rules about scientific grounds for discrimination between goods needs updating to include ëlegitimateí consumer or elector concerns about PPM, either through amending existing rules or through establishing a new procedure within the WTO for these PPM/sustainability concerns - which is likely to be storngly resisted, simply on the grounds that such rules will have to rely on particularly inexact, arguable and judgemental grounds.
• A New International Organisation (treaty) be established to look after sustainable development independently and separately from the WTO.  But we already have one of these, and the conflicts between the two organisations are part of the problem, not part of the solution.
• Labelling and information to consumers - let each of us decide what we are prepared and buy and what not.  If the whole population of the UK, or any other country, voluntarily decides not to touch GMO products with a barge pole, there will be nothing that the WTO or anyone else can or should do about it.  Problems - who is to provide the information and who is to police the accuracy and reliability of the information?  Perhaps we need an international repository and ombudsman service for such information, accessible through the web, so that each of us (or our voluntary consumer organisations and watchdogs) can test the propositions and arguments on our own behalf.