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There seems to be two issues present. I think that in taking the second issue first, I think that there should be a labelling of genetically modified goods. In the interests of full disclosure and government protection of the consumers, it should be known how a particular good was made. In some respects, the marketplace can be the ultimate adjudicator in such a setting. If consumers are made aware that a particular product was genetically modified, they can make a more informed decision as to whether or not they want the product. If it turns out that it makes no difference to them via purchasing the product, then the market has spoken, and there is little violation of the spirit of free trade. In all trade transactions, there is constant discussion as to the components being sent and received, and there is little to indicate the genetically modified goods should be the exception.
I think whether the banning of genetically modified goods violates the spirit of free trade truly depends on the motives behind the ban.
We would never, for example, say that banning the importation of marijuana from some country where it was legal violated the spirit of free trade. So if the people of a country truly feel that genetically modified foods are dangerous, they should be able to ban their import. (They probably should ban them domestically as well, I'd say.)
However, countries often use issues like this as a "fig leaf" for protectionism. This can be seen when countries ban our beef, for example, because of alleged fears of BSE. You also hear accusations that our talk of limiting imports from countries with poor working conditions, for example, is a fig leaf like that.
So I think it really depends on why the ban is being imposed.
It depends on the reason for banning importation. Public safety trumps any kind of legal agreement where free trade treaties are concerned. You'll remember that Japan has blocked imports of US beef on a few occasions when Mad Cow Disease was a suspected issue. If there is any health and safety laws or requirements dealing with specific genetic modifications, then it would not be violating the spirit of free trade.
As another example, consider if they were using DDT or other dangerous and banned pesticides that contaminated foods that were then shipped to the US. When that produce failed inspection, we would have the right to deny further shipment from that country until we were satisfied the problem had been remedied.
If, on the other hand, the exporting country can prove that no such situation existed, and that the banning was punitive or retaliatory, then they would have a case before the World Trade Organization.
Either the the reality or spirit of free trade is not violated when when a country bans import of any goods because of the inherent quality of goods, which may be harmful for the users for any reason. Classification of the item as being or not being genetically modified has no relevance in this matter. The most common example is the restriction that every civilized country places on import of drugs.
A government will be fully justified in banning the seeds for producing some genetically modified goods because growing and using of such genetically modified drugs poses serious threats to other agricultural crops or to the health of users.
A restriction on import of any commodity violates the spirit of free trade only when the real purpose of the restriction is to protect the local producers against overseas competition.
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