Foot-and-mouth disease and Argentina’s beef exports : the WTO’s US – Animals dispute

Abstract

This paper provides a legal-economic assessment of the Panel Report in US – Animals, one of a growing list of WTO disputes arising due to problematic conditions under which an importing country closes and re-opens its market after an infectious-disease outbreak in an exporting country. The US banned imports of beef from Argentina following a 2000 Argentine outbreak of highly contagious foot-and-mouth disease (FMD), a disease not found in the United States since 1929. The US refused to relax its import ban, and Argentina filed a WTO dispute in 2012, more than six years after its last FMD outbreak. Our analysis starts with Argentina’s claim that the gap between its first requests – in 2002 – to restore its trading rights and no action by the US as of 2012 constituted “undue delay.” We rely on simple insights from economic research on asymmetric information problems – moral hazard and adverse selection – to describe the difficulties ultimately confronting the World Organization for Animal Health (OIE) and the WTO’s SPS Agreement in dealing with problems like FMD. Such an environment creates disincentives for socially efficient behavior that were clearly realized in this particular episode. The exporting country has an incentive to hide information on outbreaks and report being disease-free too quickly, and the importing country has no incentive to quickly undertake the costly effort of conducting the necessary inspections to restore the exporter’s market access. Finally, we address the Panel Report’s treatment of alleged discrimination that arose both across different FMD-impacted countries and across FMD-impacted and non-impacted geographic zones within Argentina, and we touch on the Panel Report’s shift in approach regarding the obligation of the US to take into account the special needs of developing countries such as Argentina.