Weird Science: Europe Hates Chlorine

This chlorine chicken thing is going too far. Politicians and self-appointed consumer protection groups in Europe (especially Germany) are threatening to kill the Transatlantic Trade & Investment Partnership (TTIP) before it can get started. And some fear the spat over poultry could expand to beef and other food products that also use chlorine washes to kill off micro-organisms in the stuff we eat. The idea, probably an urban myth, is that the chlorine in the disinfectant wash stays on the meat and becomes a danger to human health.

Ah, the aroma of chlorine ...

Ah, the aroma of chlorine …

Troglodytes on both sides of the Atlantic may have missed the discovery of harmful bacteria and micro-organisms a few decades back. Food safety authorities, however, tend to keep up with such weird science – as do food processors scared of liability suits. Scientists figured out that chlorine rinses would kill most of the bad stuff on the chicken, carrots, beef or whatever. They also figured out that after the chlorine rinse, it was a good idea to wash the chicken again with plain water. This cuts any chlorine residues to near zero and stops your food from smelling like a public swimming pool in July. But don’t take my word for it. I’m no scientist. Take the word of the European Food Safety Authority (EFSA).

EFSA has only been around for a dozen years, so you may not be familiar with it. It is the official European Union body that conducts risk assessment in the food chain. Here’s what EFSA says it does:

As the risk assessor, EFSA produces scientific opinions and advice to provide a sound foundation for European policies and legislation and to support the European Commission, European Parliament and EU Member States in taking effective and timely risk management decisions.

EFSA’s remit covers food and feed safety, nutrition, animal health and welfare, plant protection and plant health. In carrying out its work, EFSA also considers the possible impact of the food chain on the biodiversity of plant and animal habitats. The Authority performs environmental risk assessments of genetically modified crops, pesticides, feed additives, and plant pests. In all these fields, EFSA’s most critical commitment is to provide objective and independent science-based advice and clear communication grounded in the most up-to-date scientific information and knowledge.

EFSA’s independent scientific advice underpins the European food safety system. Thanks to this system, European consumers are among the best protected and best informed in the world as regards risks in the food chain.

One would think that EU consumers and politicians might pay attention to EFSA’s findings, but no. (Not unlike certain U.S. and Australian politicians when it comes to climate science.) They have managed to ignore a 2005 EFSA study, done at the request of the EU Commission, that looked at the “Treatment of poultry carcasses with chlorine dioxide, acidified sodium chlorite, trisodium phosphate and peroxyacids“. No, I don’t know what all these are either. It has been a long time since high school chemistry. And it is the conclusions of Europe’s food science experts that interest me. Here we go, point by point (the bolding is mine):

Trisodium phosphate: On the basis of the available data, the Panel considers that treatment of poultry carcasses with trisodium phosphate as described is of no safety concern. …

Acidified sodium chlorite: On the basis of available data, the Panel considers that treatment of poultry carcasses with acidified sodium chlorite as described is of no safety concern. No chlorinated organics have been found upon treatment of poultry carcasses with acidified chlorite. Furthermore, potential semicarbazide levels from this treatment were below the limit of quantification of the analytical method (≤ 1 µg/kg) and would therefore be of no safety concern.

Chlorine dioxide: In contrast to the situation with acidified sodium chlorite, no specific data on chlorine dioxide by-products formation from poultry proteins or lipids were available to the Panel. Nevertheless, the Panel notes that chlorine dioxide is a less aggressive oxidant than acidified sodium chlorite and that it is used in lower concentration. Therefore, the Panel assumes chlorine dioxide will not significantly affect poultry lipids. … The Panel considers that the available data on the treatment of poultry carcasses with chlorine dioxide does not indicate a safety concern. …

Peroxyacids: On the basis of available data, the Panel considers that treatment of poultry carcasses with peroxyacids as described is of no safety concern. No detectable effects on the oxidation status of fatty acids or fatty acid profiles in poultry carcasses were reported following treatment with peroxyacids.

There you have it, folks. Europe’s own experts say that chlorine washing for poultry is of “no safety concern“. Let’s see if the birthplace of modern science will pay attention to its scientists. Not likely.


Is China Ready To Grow Up?

china-and-wtoI am reading between the lines, but I get a strong feeling that the members of the World Trade Organization think it is time for China to accept responsibility for the impact its trade regime has on other countries. The WTO did a Trade Policy Review of China early this month, the fifth review since China joined the WTO. It quickly became clear that China’s actions have an impact on trade all over the world. China has tried to hide behind development and “infant industry” arguments for what it does, but the rest of the world is not buying it. Of course, they don’t say that flatly in the genteel atmosphere of a well-appointed conference room on the shores of Lake Geneva, but I have read enough of these TPR reports to have an idea of what was going through their minds.

I am not going to summarize the nearly 350 pages of documents prepared for this TPR. The basic paper by the WTO Secretariat runs to 200 pages with a summary of 33 dense paragraphs. You can read it all here and, if you are doing business in China, it might be a good idea to skim your way through. What neither you nor I can see is the more than 1,700 written questions turned in by WTO members before the review even started. More than fifty countries participated actively in the review, and – while done politely – it is clear from the chairperson’s concluding remarks that they had a ton of concerns about China’s unilateral actions.

Members remarked that during the period under Review, China had become the major global merchandise trader and noted the impact that China’s policies had on the world economy and on the functioning of the WTO. Hence, they highlighted the need for China to recognize the increased responsibility that comes with becoming a lead player in the multilateral trading system.                                                                           ~ Chairperson’s concluding remarks, July 3, 2014

WTO members congratulated China on the many reforms Beijing is making in its trade policies, though they would like to see greater clarity on what further changes to expect. In fact, the lack of transparency was one of the dominant topics of the review. The chairperson’s remarks summarized the main issues of contention:

  • Transparency: as the world’s largest trader China bore great responsibility for supporting a predictable and transparent global trading system. China was encouraged to ensure the effective use of transparency mechanisms within the WTO, including ensuring that its notification obligations are fulfilled in a timely way. Members noted that although China had committed to publish in a single official journal all laws, regulations and other measures related to or affecting trade in goods, services, IPR or foreign exchange, both at the central and sub central level, and to make them available in a WTO language, this had not been effectively accomplished. Members urged China to address this shortcoming by making information regarding trade-related measures available. This would be beneficial to all as it would lead to increased trade and investment.
  • Consistency in implementation of laws, regulations and policies: Members understood the difficulties that China faced in ensuring the consistent implementation of laws, regulations and policies in such a vast country. It was noted that implementation inconsistencies affected business directly with and within China, compounding the often-reported problems of predictability and transparency. Members stated that addressing these issues was of the utmost importance, both to improve the operating environment of business – domestic and foreign alike – and to limit the risk of discretionary treatment.
  • Role of the State: Members noted that the State still had an active role in China’s economic development and that China continued to pursue policies to support domestic industries including those controlled by state-owned enterprises. They stated that on occasions this had led to overcapacity and excessive credit expansion. In Members’ view, given China’s size and importance, Government intervention affected the allocation of resources and competitive conditions of companies in and outside China.
  • TBT and SPS: Members expressed concern with respect to the use of technical requirements that diverged from international standards and the insufficient involvement of interested stakeholders in the standardization process. Regarding SPS measures Members questioned their scientific justification in certain instances, and requested China to make further efforts to increase transparency and predictability in this area.                                          ~ Chairperson’s concluding remarks, July 3, 2014

Members also raised questions about China’s subsidies and other support policies for domestic industries, the use of export restraints and export taxes to restrict the flow of certain commodities (e.g., the rare earth cases), and restrictions on market access for foreign-sourced services. No surprise that other countries are still worried about lax enforcement of intellectual property rights and protection of companies’ trade secrets. Questions were raised about restrictions on activities by foreign investors.

I was struck by the chairperson’s enigmatic mention of concerns about China’s “retaliatory use of trade remedies“. We have seen Beijing use export restrictions in retaliation for disagreements with Japan and the Philippines. And I have ranted here about China’s practice of quickly filing retaliatory WTO cases against any country that dares to challenge Beijing with a dispute settlement case.

It wasn’t all negative. WTO members liked some of China’s trade reforms and Beijing got credit for its work on the new Trade Facilitation Agreement. That said, Beijing was scolded for foot-dragging on joining the Government Procurement Agreement and its refusal to expand the coverage of the Information Technology Agreement. The chairperson summed up what must have been a largely negative Trade Policy Review:

China as a global economic power had an indisputable role to play in maintaining a rules-based trading system which is vital to the current and future prosperity of trading nations. … I would wish to emphasize that it is essential for the system that China abides by its WTO commitments including that of transparency. This, in turn, would allow China to continue reaping the benefits of economic liberalization in a rules-based multilateral framework. Members believed that it is crucially important that China continues to pursue trade liberalization and economic reform despite the challenges that could arise …                          ~ Chairperson’s concluding remarks, July 3, 2014

Building Your Global Value Chain

Global value chains are one of the most talked-about tools in companies and business schools today. Value chains take a product, whether hard goods or services, from conception to delivery to the customer – breaking that extended process into discrete links of the chain. Those links can be anything needed to create and sell the product: R&D, lining up suppliers for inputs, transport to market, after sales service, whatever it takes. A company can do all the links itself, or it may break up the chain by hiring other specialist companies to do some of the links. And a company can make a good living by supplying links to other firms. Just think about transportation and delivery by FedEx or its competitors. Of course, a value chain can be purely domestic. But when you go international, the chain goes with you.

Possible Global Value Chain

Possible Global Value Chain

Where does your company fit into global value chains? The answer will be different for every firm, but there will be few companies that do it all themselves. It is worthwhile to take some time to look at your firm’s value chain with an eye to deciding if you are doing too much of it in-house, or perhaps outsourcing inappropriately. Value chains can be vague concepts, so – to help you out – I recommend you take a look at Linking In to Global Value Chains: A Guide for Small and Medium-Sized Enterprises. This is a brief guide published by the Canadian Trade Commissioner Service, Canada’s analog to the U.S. Commercial Service that I often mention. (You can also check out their guides for exporting from Canada to the United States, a step-by-step guide to exporting and investment guides for Canadian companies.)

Linking In to Global Value Chains won’t give you a blueprint to build your value chain because every situation is different. But it will provide a format and questions to help you think about your global chain. You gotta start somewhere.

Get Your Organic Kimchee!

July 1 saw the opening of trade in organic food products between the United States and South Korea. Not that these foods couldn’t be traded before, but it is a lot easier now that a bilateral equivalency agreement is in place. What that means is that if one country certifies a product as organic, the other country will recognize it as organic, too. That clears away a lot of the bureaucratic underbrush to make it easier to market and label your products. Given that definitions of “organic” often are subject to dispute within a country, and that few consumers have a clue what “organic” really means, the spread of bilateral equivalency agreements is rather extraordinary.

Where can you trade organic foods?

Where can you trade organic foods? Source: Organic Trade Association

Washington has negotiated bilateral equivalency agreements for organic products with Canada, the European Union, Japan and now South Korea. More are in the offing. The New Zealand and Taiwan markets are already open to U.S. organic exports under existing trade agreements. Some countries (e.g., the Dominican Republic) have unilaterally opened their borders to organics. More allow organic products in while they figure out what their own laws and regulations should be. If you are producing organic food and want to sell overseas, check out the Global Organic Trade Guide. You may want to get your company listed in the  Organic Trade Association’s directory of American organic food exporters.

Betcha these aren't organic

Betcha these aren’t organic

But don’t get your hopes too high. While the United States and a few other markets may have well-developed demand for organic products, most countries do not. I chatted last week with some folks who know the Korean and Japanese markets well. They cautioned against expecting a huge spike in organic sales. Korean and Japanese consumers are just as confused by what “organic” means as any American consumer, and are just as likely to skip the organics in their shops due to high prices. “Non-organic” foods (oxymoron alert!) are just more budget-friendly. Plus, both markets, particularly Japan, put a high premium on the physical beauty and standard appearance of food products, the antithesis of what organic foods tend to look like. You can bet that none of those huge, beautiful, perfectly matched pears or apples that Japanese like to use as gifts are organic. No uneven sized, blemished tomatoes for them. Big sales of organic foods may be a long time coming.

Catfish May Fry TPP

There was a fish camp on a muddy river near our house in North Carolina. We would occasionally get some local fried catfish, but – over time – the catfish came from somewhere else. I think it was Mississippi. The fish camp is long gone, replaced by a truly great barbecue place. The origin of catfish, however, is still an issue.

Our catfish were river caught, but they were beaten out by farm-raised catfish. Catfish farms spread across the Gulf Coast in the 1960s and 1970s, rising to 600 million pounds in annual production. No way could river-caught fish compete and no protection was offered for traditional river fisheries. After all, it wasn’t against the law for mass-produced Mississippi catfish to outsell those caught by river fishermen in North Carolina.

Fried catfish - but from Mississippi or Vietnam?

Fried catfish – but from Mississippi or Vietnam?

But success often attracts competition. Thus, the sales figures for farm-raised catfish inevitably caught the eyes of fish farmers overseas who thought they might earn a few dollars. Vietnamese catfish started coming into the United States in volume in 2001. Sure, there were arguments as to whether or not the Vietnamese fish were the same species (they aren’t), but if it looks like a catfish, swims like a catfish and tastes like a catfish … Today, the United States imports catfish from Bangladesh, Brazil, China, the Philippines, Thailand – but mostly from Vietnam.

That’s not to say that the U.S. catfish farmers are doing badly. Yes, about 20% of U.S. catfish farms have closed, but the survivors still have about 60% of the market and are avidly exporting their own U.S. catfish to places like Canada, China, Kuwait, Mexico, the Turks and Caicos (!), the United Arab Emirates and even to Vietnam. But the Mississippi-based Catfish Farmers of America is still mighty upset about all those imports to their own turf. And they have a powerful ally in U.S. Senator Thad Cochran, not coincidentally from Mississippi. Working together, they came up with a strategy to use health and safety standards and inspections to deep six the imported competition. They argued that existing FDA health and safety inspections of imported fish did not sufficiently protect American consumers – despite no particular evidence that protection was called for. Admittedly, FDA only has the money and inspectors to look at about 2% of U.S. food imports.

Senator Cochran pushed through a provision in the 2008 Farm Bill that created a new catfish inspection program in the U.S. Department of Agriculture, with $20 million in annual funding. While likely delighted to get all this money, USDA soon got cold feet when it could find no food safety justification to inspect all those fish. USDA knew it needed help if it was to defy Cochran, so it asked the Government Accountability Office to investigate safety problems with imported catfish. The GAO concluded that the catfish inspection program was “wasteful and unnecessary”. In fact, GAO, backed up by the Centers for Disease Control & Prevention, told Congress that it doubted that the USDA inspection could measurably improve safety of imported catfish when the incidence of health problems is already close to nil. It seems clear that Senator Cochran’s intent was to protect Mississippi’s catfish farmers, not U.S. catfish eaters.

The Obama Administration then came out against the inspection program and its repeal was included in the 2014 farm bill. But they hadn’t counted on Senator Cochran being one of the negotiators on the final version that became law. Cochran made sure that the repeal of the catfish inspection program was dropped and, for good measure, added U.S. catfish farmers to a crop insurance scheme to cover their losses.

This seemingly domestic spat has taken an international turn. Vietnam, as the largest supplier, has the most to lose and is leading the way. Not to a WTO dispute case, since USDA is still dithering on whether or not to carry out the inspections. Cleverly, Vietnam convinced nine other Asia and Pacific countries to jointly send a letter to the U.S. Trade Representative that they view the catfish inspection program as a violation of international law and, as such, it could jeopardize final negotiations for the Trans Pacific Partnership. Ironically, they accuse the United States of planning to use health and safety standards as a trade barrier that runs counter to scientific findings on the safety of catfish. Exactly the argument that Washington uses, for instance, against EU restrictions on hormones in beef or on labeling of foods that contain GMOs.

The countries that signed the May 28 letter include Vietnam, the Philippines, Myanmar, Thailand and Indonesia. (Not sure who the others are.) Some produce catfish but others do not, so it seems they worry that if the United States successfully goes this route on catfish then we might think of pulling similar shenanigans on other food products.

The hint that the catfish dispute could stop the TPP in its tracks is a masterstroke given the Obama Administration’s determination to reach a successful trade agreement. The TPP is already jeopardized by near total opposition among other countries to the U.S. proposals on environmental clauses. Not to mention Congressional suspicion of the agreement and how it has been negotiated.

Just to cover themselves, too, the Vietnam Association of Seafood Exporters and Producers has hired James Bacchus to prepare a possible complaint to the WTO. U.S. catfish producers may know Jim Bacchus as the former Congressman from Florida, but the world sees him as the former chair of the WTO’s Appellate Body, the final court for the dispute settlement process. Bacchus knows a thing or two about international trade law and says “I’m confident that Vietnam would have a case before the W.T.O. if they decided to bring one.” I agree.

Thanks to Senator Cochran and his catfish-farming friends for putting the United States in a lot of hot water. Not the recommended way to cook catfish.

Buy America Comes Back To Haunt Us

Politicians are so predictable. Whenever there is any kind of economic strain, they feel it as electoral pressure, so something has to be done to show that they – the politicians – are actively helping the people who might (or might not) vote for them. The fact that their actions might hurt people who are not in their districts, or even in their countries, is of no consequence – since those folks, however nice they may be, can’t vote against the politician. Democracy has an unfortunate side-effect of making all politics local.

One popular move when economic times are tough is to try to restrict government purchases to buying from local producers. Hey, it’s our money so we can choose to spend it only on our people, right? So much for spending wisely and efficiently, and getting the most bang for the buck.

Cities and states have tried to do this and have been swatted down in the United States by the inter-state commerce clause of the U.S. constitution. Non-discrimination in government procurement was enshrined in the General Agreement on Tariffs & Trade in 1947 and has been expanded on since. State Buy America laws have been struck down often, apparently beginning with Baldwin-Lima-Hamilton Corp. v. Superior Court in California in 1962. The United States and many other countries have been defeated on buy national legislation in both the GATT and in the WTO, often defending their own discrimination while condemning that of others.

But politicians keep coming back to requiring governments to buy only their own country’s products. Even knowing full-well that such legislation is illegal under the international government procurement code, the GATT, the WTO and often forbidden by their own laws. It’s just so darn popular to do dirty to people who can’t vote against them.

Canada has had enough. In recent WTO meetings in Geneva, Canada produced a laundry list of new American legislation that requires a preference for U.S. content in federal, state and local procurements. Ottawa had tried to smooth things over with Washington about such laws in a 2010 agreement on procurement. But Congress and the states keep passing new Buy America rules. The Canucks are ticked.

Canada is very concerned with recent legislation in the United States which reflects repeated attempts to impose domestic content requirements for products purchased by federal, state and municipal-level governments within the U.S. … Canada’s focus is on eliminating trade barriers, not erecting new ones. Protectionism is bad policy, and bad for businesses on both sides of the border.                                              ~ Ed Fast, Canada’s International Trade Minister 

What is Canada upset about? Let’s begin with the Water Resources Reform & Development Act, signed by President Obama last month. On the surface, this is a benign infrastructure development law that provides billions to fund needed water projects. All good until you read the fine print, which requires that much of the financing is limited to projects that buy all their iron and steel products from U.S. manufacturers. Cutting out Canadian suppliers.

Only allowed if Made In America

Only allowed if Made In America

Then there is the Grow America Act, which the Obama Administration is pushing in Congress. The Act’s fate is highly uncertain, but it is intended to pay for repairs to U.S. highways while also funding public transit projects, such as light rail systems. The problem comes with a small clause that requires that any rail cars purchased under the Act must contain a high percentage of U.S. content – to reach 100% U.S. content by 2019. That’s a no-no, folks.

The Canadians are also worried about new state Buy America laws, specifically a bill passed this spring in Minnesota and two more bills being considered in Massachusetts and New York. The Minnesota and New York bills provide preferences for American steel products in state projects. The Bay Staters are more ambitious, trying to limit purchases of non-American products on all state procurements.

These state initiatives raise several systemic issues of concern to Canada. Even though many of these new initiatives may not pass, the reoccurring threat of new forced localization requirements discourages foreign suppliers from investing the time and energy in developing new opportunities in foreign public procurement markets…. Uncertainty — in and of itself — has the potential to undermine market access.                        ~ Canadian statement to the WTO, June 25, 2014

Canada has put Washington on notice that it may soon face a whole bunch of WTO cases for flaunting the world’s government procurement rules. Not that this will stop our politicians.

Trade Disputes: Is the Victim a Perpetrator, Too?

You can tell there is an election coming up in the United States. The Office of the U.S. Trade Representative recently put out a puff piece on how tough the Obama Administration is on calling others to task about trade restrictions that hurt U.S. companies (and, therefore, American employees).

HIGH VOLUME OF DISPUTES: Under this Administration, USTR has filed 18 WTO complaints, more than any other WTO Member. Nine filings target measures adopted by China; three target Indian measures; other complaints addressed an array of major economies including Argentina, the European Union, Indonesia, and the Philippines.

I might quibble with those numbers, but I guess it depends on who is doing the counting. The World Trade Organization’s dispute settlement records list 15 cases brought by the United States under the Obama Administration. Eight against China, three versus Indonesia, two against India, and one each versus the Philippines and Argentina. Whatever the numbers of cases brought by the United States, something is missing.

Where the WTO settles trade disputes

Where the WTO settles trade disputes

What is missing is the cases filed against the United States in the same timeframe. This is because any sitting administration wants to appear both tough and virtuous, facing election competition that will be tempted to say the opposite. Unfortunately, releases like that quoted above feed the public impression that everybody else cheats on trade – and that the United States is a patsy for actually living by the rules.

The average American can relax. Not only is the United States not a patsy on trade, but our own trade practices are among the most challenged in the world. Using those same WTO dispute settlement records, under the Obama Administration, other countries have filed sixteen complaints against the United States – one more than we have filed. Let’s see, that is six cases brought by China, three by South Korea, two each by Vietnam and Argentina, and one each by Indonesia, the European Union and India.

I am not commenting on the quality of the cases brought by the United States or filed against us. In fact, some of the cases brought by China seem frivolous and ill-prepared, timed to retaliate for cases filed against China. And the United States has a good batting average of cases decided in its favor. Our trade lawyers know their business.

My point is that such election-year announcements give a false impression to the American public. Yes, Washington is right to challenge foreign practices that ignore or conflict with our international trade agreements. But don’t give the impression (even by omission) that the United States is a model of perfection. To achieve that, we need to hold our own trade practices up to the light. I have never seen a politician of any stripe willing to do that.

Both the administration and the Congress need to be held accountable for how often the United States is challenged by cases in the WTO. Too often, our leaders in Congress pass legislation that blatantly violates trade agreements. We’ll look at some in the next post or two.