Geoffrey S. Becker
Specialist in Agricultural Policy
Resources, Science, and Industry Division

On July 20, 1999, the United States and the European Union (EU) finally signed an agreement establishing the process for recognizing the equivalency of each other's safety and sanitary standards for animal products. The agreement covers more than 40 types of animal products-including live animals, meats such as beef and pork, dairy and egg products, seafood, pet foods, and byproducts such as fats and hides. The agreement, which culminates more than 6 years of negotiations, covers two-way trade in various animal products valued at about $3 billion annually. This report will be updated as events warrant.

Veterinary equivalency is aimed at facilitating trade, through mutual recognition by each party that the other's safety and sanitation standards for animal products, even where not identical, provide an equivalent level of protection to public and animal health. The practical effect is that each party's individual products and facilities will not have to submit to the separate standards of importing countries and to cumbersome and costly inspections by foreign reviewers. Veterinary equivalency is consistent with the Sanitary and Phytosanitary (SPS) agreement that emerged from the Uruguay Round (UR) trade talks. The SPS agreement requires countries to recognize another country's SPS measures as equivalent, whenever that country objectively demonstrates that its measures-even if different-will assure an appropriate level of safety.

The U.S.-EU negotiations began as informal consultations in 1993 after the EU began implementing harmonized systems for meat and poultry safety for its own 15 member countries. It also was introducing new controls for animal product imports. Potentially at stake in these negotiations have been some $1.5 billion in U.S. animal product exports annually to the EU. The value of EU animal products imported into the United States has been approximately the same, although the mix of products differs.

On April 30, 1997, the United States and the EU formally announced that they had reached consensus on the text of an agreement for determining equivalence regarding all relevant products. The two sides did not actually sign an "official" document; rather, they exchanged lefters confirming that an agreement had been reached. Final language and terms were reviewed separately by U.S. and EU lawyers, and underwent scrutiny by the individual EU countries. The agreement was first slated to be signed formally on October 1, 1997. However, EU procedural issues, an unresolved poultry dispute, and disagreement over regionalization rules (see next section) posed obstacles to final implementation.

Nonetheless, trade in many animal products was continued, even during the period of delays. Other important elements of the agreement include guidelines for a continuing evaluation of each side's inspection rules for egg products (which had been one of the more contentious issues), the U.S. residue testing program, and seafood inspection system; and procedures for improving communication, cooperation and the sharing of scientific and policy information.

The 1997 language also called for each party to recognize the regionalization decisions of the other party, but differences over their application became a major obstacle to formalization of the agreement. Under regionalization, if a disease outbreak required a ban on trade in certain animal products, this ban would apply only to the part of the country where the outbreak occurred; it would not apply to the entire country. Regionalization is a fundamental principle in the SPS agreement of the UR accords.

USDA's Animal and Plant Health Inspection Service (APHIS) in late 1997 had issued a general rule on regionalization. The rule established a framework for APHIS to use in determining, through subsequent rulemaking, which regions of a foreign country would be permitted to export here (because it could be certified as having eliminated or controlled an animal disease present elsewhere in that country). Under this new regionalization policy, APHIS drafted a risk assessment (as the basis for a proposed rule) for determining whether particular EU regions can be declared free of certain animal diseases (i.e., hog cholera, foot-and-mouth disease, and swine vesicular disease). The rule is a necessary prerequisite for exporting certain animals and animal products to the United States. However, several of the EU countries objected to key aspects of the draft risk assessment, and a second was undertaken in early 1999, delaying publication of the proposed rule for the EU until June 25, 1999. Nonetheless, the proposed rule, open for comment until August 24, 1999, cleared the way for the final agreement that was signed on July 20.

USDA and industry officials have been hopeful that pork and possibly beef exports to the EU will increase once a new veterinary equivalency agreement takes effect. It is supposed to enable USDA's Food Safely and Inspection Service (FSIS) to assume the EU reviewers' role in determining whether U.S. plants meet EU standards, with the EU occasionally checking to ensure FSIS is enforcing the rules. Although more plants could qualify, U.S. exports will remain limited by tariff rate quotas negotiated in the UR trade talks, including a 38,000 ton quota for pork loins and a 10,000 ton quota for high quality beef.

Although technically a separate dispute, the beef hormone ban also will constrain expansion of beef exports to the EU, at least for the present. World Trade Organization (WTO) dispute settlement panels have twice ruled that the ban lacks a scientific basis and is inconsistent with the UR SPS agreement. The WTO left open the option for the EU to conduct a risk assessment of meat from hormone-treated animals; and gave the EU until May 13, 1999, to bring its hormone measure into compliance with SPS rules.

The EU did not meet this deadline. Citing studies that, it contends, raise human health questions about the use of such hormones, the EU said it intends to maintain the ban while it continues its risk assessment. In response, the United States imposed, effective July 29, 1999, economic sanctions- in the form of 100% import tariffs- on a wide range of EU agricultural products valued at about $117 million. This level was set by a WTO panel, which earlier had agreed that sanctions were warranted. The EU has requested arbitration over the amount of goods on which duties would be levied. (For background, see CRS Report RS20142, The European Union's Ban on Hormone-Treated Meat.)

The key area of dispute has been the EU's opposition to U.S. processors' use of chlorinated water for washing poultry carcasses. The EU contends that the process is ineffective in removing bacteria, and that the chlorine itself may pose a danger to human health. U.S. poultry companies argue that they must use chlorination in order to meet USDA's pathogen reduction standards under its meat and poultry inspection programs. They also assert that the United States has been singled out unfairly, because poultry plants in some EU countries themselves in fact use chlorinated water.

U.S. meat and poultry exports have been experiencing strong growth in recent years- outpacing, in value, total agricultural export growth rates by nearly fivefold since 1981. However, countries outside of the EU are the leading markets for our animal products- places with younger populations and growing economies, like nations in Latin America and East Asia. In fact, although the EU is the second largest buyer of all U.S. agricultural exports (following Japan), purchasing about $8 billion or 15% in 1998, it bought only 2-3% of U.S. meat and poultry product exports specifically, and about 7% of all U.S. animal product exports (i.e., meat and poultry plus all other animal-based goods such as hides and skins, pet foods, etc.).

Nonetheless, U.S. officials assert that implementation of an EU equivalency agreement is important: it will preserve most of the $1.5 billion in overall animal product exports annually to the EU, open the way for additional market growth there, and help to set the stage for future U.S.-EU cooperation in resolving other agricultural trade disputes. But the ultimate benefits of the final agreement to U.S. animal producers remain unclear, due to continuing disputes with the EU over a number of other animal trade issues, such as the beef hormone ban, and differing poultry safety practices, among other things.