BIOSAFETY PROTOCOL: IMPACTS ON GLOBAL AGRIFOOD SYSTEM

Nicholas KalaitzandonakesUniversity of Missouri-Columbia

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The Emergence of BSP

1992 Rio de Janeiro --Convention for Biodiversity (CBD)Targeting conservation and sustainable use of biodiversityRaising need for Protocol for use & movement of LMOs

1994 CBD-COP commences process for protocol1999 Cartagena draft of the protocol1999 Montreal – signing of a compromise protocol 2003 Biosafety Protocol enters into forceToday 188 countries have signed

Operational details still under consideration

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Deciding the Scope of BSP for LMO-FFPs

What kind of labeling should be required for LMO-FFPs ?(e.g. “may contain”, “list,” “identify”)

How will “Adventitious Presence” (AP) be defined?AP considerations in GM crops only or in all crops?How will approved vs. unapproved events be treated?

What should thresholds for AP be? What will be appropriate enforcement mechanisms?

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The BSP will affect most of the global agricultural commodity system

Few crops represent large share of global land use, production & consumption

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..the same crops also dominate agricultural commodity trade

0

20

40

60

80

100

120

MMT Traded

oilseedsricewheatcoarse grains

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International trade of key grains & oilseeds: few key exporters – many importers

Many importers – but few key exporters

Source : C. James, ISAAA Brief 30, 2004

2003 GLOBAL ACREAGE

Soybean 61%

Corn 23%

Cotton 11%

Canola 5%

00

2020

4040

6060

8080

100100

120120

140140

19971997 19981998 19991999 20002000 20012001 20022002

CanolaCanolaCottonCottonCornCornSoybeanSoybean

19961996

160160

180180

20032003

Global Adoption of Biotech Traits in Key Crops

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Source : C. James, ISAAA Brief 30, 2004

Adoption of Biotech Traits in Key Country

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US Grain and Oilseed Industry: A case study of BSP implementation

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US uses a vast, fungible & efficient bulk system

to move grains & oilseeds across markets

Large storage capacity

Efficient logistics

Blending & commingling

That facilitates temporal, spatial, quality equilibria

A fungible and flexibleefficiency-focused

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“May contain” “list” “identify” --which one? ..and does it matter?

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Can the US system handle exports in the presence of unapproved events? --The case of RR Corn

US Production & Trade of Corn Gluten (1997-2002 average) (in MT)

US Exports (volume & destination) US Imports

TOTAL US 4,970,004 39,875 EU 4,771,668 MEXICO 12,561

JAPAN 3,602

CHINA & HONG KONG 108 HONG KONG 51

BRAZIL 8

CANADA 38,992

PERCENT OF TOTAL 96% 98% Source: USDA FAS FATUS

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Can the US system handle IP/segregation?

Soybeans

($/MT)

Corn

($/MT)

2000 16 14

2001 16 12

2002 16 10

2003 20-22 10

2004 22-27 10

Incremental delivery costs – at point of importation US non-GM exports to Japan

3.2 - 4.2 MMT of non-GM corn1.0 – 1.5 MMT of non-GM soybeans

Thresholds are at the regulatory level set by Japanese authorities -- 5%

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Can the US system handle “practical zero” AP thresholds? – the case of Starlink corn

MY Dates No. tested No. Pos. No. Neg. % Pos. % Neg.

00/01 Nov ’00 – Sep ’01 220,222 18,844 201,378 8.6 91.4

01/02 Oct ’01 – Sep ’02 101,560 2,261 99,299 2.2 97.8

02/03 Oct ’02 – Sep ’03 39,047 462 38,585 1.2 98.8

03/04 Oct’03 – Aug ‘04 24,832 79 24,753 0.3 99.7

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How will BSP be enforced?The troubles with testing for GM & holdup costs

Sampling, the type of the test (e.g. DNA, protein), the test plan (e.g. number of kernels), the test method (e.g. quantitative) are all conditioning factors on outcomeMajor sources of conflict in test results come from sampling, uncertainty or error rates in test methods and non-agreement in interpreting units toward a given threshold.

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What are the costs/risks of holdup and what are some implications for trade?

M/V "VAKY JUNIOR“Cargo intake basis SF 55: abt. 56.000 mt

Intended discharge port: Tarragona - Deviated to: Brake Re-Delivery: Cape Finisterre

6.73 days delay

Case study:Demurrage Costs

•7.73 extra days @ $30,000/day•IFO for 6.73 days @ $200/mt --37mt/day•MDO for 7.73 days @ $500/mt – 3 mt/day•Port disbursement Tarragona - $37,000

Total charge $330,327

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Some key conclusions from scenario analysis

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Potential Impacts -- Costs

The scope of BSP will influence the size of compliance costs – the following observations characterize these costs:

•Compliance costs increase exponentially as AP thresholds become lower

•Compliance costs are unevenly distributed across the supply chain– e.g. importers with low volumes & inefficient infrastructure bear disproportionately higher costs•Compliance costs are unevenly distributed across commodities

with trade and distributional effects among importers and exporters

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Potential Impacts -- Risks

The scope of BSP will influence the amount of incremental risks – the following observations characterize these risks:

•Test-based enforcement creates incremental risks. Adoption of testing standards decreases but does not eliminate

incremental risks (e.g. sampling risk, testing error)•Incremental risks are difficult to estimate and hence cannot be

easily priced and insured•Incremental risks expand disproportionately when AP thresholds become lower•Uncertain status of approved/unapproved events in countries that lack on-going regulatory process amplify incremental risks ©

Potential Impacts – Market Dynamics

Incremental risks and compliance costs resulting from BSP implementation are not static – they change with changing market conditions such as:

•Increasing adoption of GM crops•Increasing number of GM events/traits•Increasing number of GM crops•Improvements in testing technology•Etc.

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Potential Trade & Structural Impacts

Incremental risks and compliance costs will change the incentive structure in supply chain and will affect trade & economic welfare – some potential impacts are:

Increased costs of commodities and ultimately of feeds and foodsChanges in composition of trade, such as:

shift from certain commodities to others, shift to processed & byproduct material (e.g. from soybeans to

soymeal),shift to value added exports (e.g. from soybeans or soymeal to meat

exports)Structural change – increased vertical integration to improve control

of costs and risks©