CLIMATE CHANGE: GENETICALLY MODIFIED ORGANISMS (GMO) AS A

MITIGATING MEASURE? Intersessional Meeting of the Intergovernmental

Group on Tea Rome, 5-6 May 2014

Cemal Atici, Economist, Trade and Markets Division, FAO

Introduction

The land area under cultivation with genetically modified organisms (GMOs) has grown steadily over the last two decades.

Alleviation of the impacts of climate change and farmers adaptation are some of the arguments for GM crops.

However, current systems of production, handling and transportation can lead to the unintentional low level presence of GMOs in non-GMO consignments.

National policies and regulations that govern the acceptability of GM crops vary, and a number of trade-related problems have been reported as a result of the unintentional mixing of GM and non-GM crops.

FAO conducted a survey to increase understanding of the extent of trade disruption due to the low level presence (LLP) and adventitious presence (AP) of GMOs.

Tradeoffs of GM Crops

Positive: Higher Productivity (food security), Resilience to climatic (drought resistance) and other related (pests, herbs,

salinity) problems, less input use. Nutritionally enriched products. Negative: Higher initial research and input (seed) cost, Concerns for health (human & animal), Environment concerns (loss of biodiversity, impact on non-target organisms), Unintentional gene transfer from GM to non-GM crops Low level presence and adventitious presence Limited access to GM seeds (Patenting), Lack of information for consumers (Labeling), Concerns of traditional farmers, ethical concerns, Lack of related regulations and technical capacities to detect GMOs in trade.

1Climate Change: Impact on Agriculture and Cost of Adaptation, IFPRI, 2009

An IFPRI Study (2009)1 found that even with no climate change world prices for many agricultural commodities (rice, wheat, maize) will increase by 39-63 % in 2050 driven by population, income growth, biofuels).

Climate change (rise in temperature and change in rainfall patterns) results in additional price increases by 11-100 % even after CO2 fertilization effect.

Source: FAOSTAT, 2014

Change in precipitation (mm), 2000–2050

Change in average maximum temperature (Co), 2000–2050

Source: IFPRI, 2009

Global area of GM crops, 1996–2012

0

20

40

60

80

100

120

140

160

180

Area

, mill

ion

hect

ares

Source: Compiled from James, 2010, 2013.

Share of countries in global GM cropping area, 2010

USA 45%

Brazil 17%

Argentina 16%

India 6%

Canada 2%

China 2%

Paraguay 2%

Pakistan 2%

South Africa 2%

Others 6%

Source: Compiled from James, 2010.

International Guidelines/Agreements Related to the GMOs Food and feed: The Codex Alimentarius Commission OECD Task Force for the Safety of Novel Foods and

Feeds. Environment: The OECD’s Working Group on Harmonization of

Regulatory Oversight in Biotechnology The Cartagena Protocol on Biosafety to the Convention

on Biological Diversity (CBD)

Trade: The Agreement on the Application of Sanitary and

Phytosanitary Measures (the SPS Agreement) is an international treaty of the World Trade Organization (WTO)

Agreement on Technical Barriers to Trade (TBT) Agreement on Trade-Related Aspects of Intellectual

Property Rights (TRIPs)

Economic Effects of GM Crops Source Method Commodity analysed Findings

Anderson and Jackson (2005)

Global Trade Analysis Project

GM varieties of various grains and oilseeds

Gross economic benefits to farmers from adopting GM crops under a variety of scenarios could be positive even if the strict controls on imports from GM-adopting countries imposed by the European Union (EU) are maintained.

Sobolevsky et al. (2005)

Partial equilibrium four-region world trade model

Roundup Ready (RR) soybean

The USA, Argentina, Brazil, and the Rest of the World all gain from the introduction of RR soybeans although some groups may lose.

Gruere et al. (2007)

Multi-country general equilibrium model

GM field crops (rice, wheat, maize, soybean and cotton)

The gains associated with the adoption of GM food crops largely exceed any type of potential trade losses these countries may incur. Adopting GM crops also allows net importing countries to reduce their imports greatly.

Vigani et al. (2009) Trade flow Food trade Bilateral variations in GMO regulations negatively affect trade flows. Main impeding factors are the approval process, labelling policies and traceability requirements.

Bouet et al. (2011) Spatial equilibrium model

Maize and soybean Information requirements (labelling) would have greater effects on trade, creating significant trade distortion that diverts exports from their original destination.

Gruere (2009) Analytical model Maize and soybean A GM ban is the most costly option, and can only be justified if the country does not import that crop or perceived risks exceed the cost. An LLP policy with a 0 percent tolerance level is almost identical.

Kalaitzandonakes et al. (2011)

Spatial equilibrium model

Maize Smaller Latin American importing countries are likely to experience 2–8 percent price increases as a result of trade disruptions, whereas larger importers would experience price increases of 9–20 percent caused by a zero tolerance level for LLP.

Total Number of Surveys Sent 193

Total Number of Responses Received

64

Response Rate, % 33.16

FAO-LLP Survey Response Rate

Results of the FAO Survey on Accidental Presence of Low Levels of Genetically Modified Organisms (GMOs) in Internationally

Traded Food Crops, 2013

Yes - Research only (field trials)

24%

Yes – Both research and commercial production

23%

No 53%

GM Crops Production

Yes 78%

No, but we plan to have

one in the future.

11%

No, we don’t have one.

8%

No Answer 3%

GM Regulation

Yes 72%

No 22%

No Answer 6%

Zero Tolerance for Unauthorized GM Crops

According to the international

guidelines (Codex principles and

guidelines) 9% According to the

domestic guidelines 9%

According to the other guidelines

(regional, private, trade-partner countries’ etc)

33%

We do not conduct food safety

assessment of GM crops 24%

Combination of above 17%

No Answer 8%

Food Safety Assessment

Yes 37%

No 50%

No Answer 13%

LLP Threshold

Yes 33%

Partially 11%

No, but capacity is

being developed

14%

No 20%

No Answer 22%

Technical Capacity To Detect GMOs According to Codex Guidelines

Yes 37%

No 55%

No Answer 8%

LLP/AP in Imports in the last 10 Years

US 34%

China 29%

Canada 20%

Argentina 3%

Thailand 2%

France 1%

Pakistan 1% Colombia

1%

Brazil 1%

Chile 1%

Romania 1%

S. Africa

1% Vietnam 1%

Italy 1%

Others 3%

Number of LLP/AP incidents by country of origin (exporting countries)

0

10

20

30

40

50

60

Num

bers

LLP/AP Incidents by Commodity, 2000-2012

0

10

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Num

bers

Number of LLP/AP Incidents and Trend (2000-2012)

Importance of Factors Contributing to the Trade Risks Posed by LLP/AP

1; 8% 2; 4%

3; 15%

4; 17% 5; 56%

Different policies on GMOs exist between trading partners

1; 12%

2; 13%

3; 14%

4; 12%

5; 49%

Unintentional movement/development of unauthorized GM crops/ seed

1; 10% 2; 6%

3; 25%

4; 11%

5; 48%

Different timing (and duration of the process) for approval of GM crops

Econometric Analysis of the Effect of LLP on Trade Flow

- ij 1 i 2 j 3 ij 4 j 5 j ijlnE lnα β lnY β lnY β lnD β lnReg Index β lnLLP lnε = + + + + + +

E: Bilateral export flow between country i and j, in volume, Yi: GDP of exporting country, Yj: GDP of importing country, Dij: Distance between exporting and importing country, Reg-Indexj: GMO Regulation Index of importing country, LLPj: LLP Threshold of the importing country, εij: Residual term.

:

=

−

∑=

Index:100AdjustedMax:10Min:0

ItemsRegulationRI

IndexRegulation

12

1i

ln1ln1lnln 10 ijjiijjiij Pσ)(Pσ)(T)Y/Y(X εββ +−+−++=

Number Item

1 Existence of Food, Feed and Environmental Regulation

2 Safety Risk Assessment 3 Labelling Requirement 4 LLP Test Requirement 5 Traceability Requirement 6 Socio-Economic Assessment 7 Existence of Zero-Tolerance for Unauthorized GM Crops

8 Conducting Food, Feed, and Environmental Safety Assessments According to International Guidelines

9 Restrictiveness of Authorization Policy

10 Testing Requirement from Exporting Country

11 Technical Capacity to Detect GMOs

12 Detection Methods Utilized

Table 4. Composition of GMO Regulation Index

[Model 1] (GMO regulation

impact)

[Model 2] (GMO regulation

impact)

[Model 3] (LLP impact)

[Model 4] (LLP impact)

Constant –10.28 (–3.43***)

–10.28 (–3.43***)

–10.68 (–3.99***)

–10.73 (–3.98***)

Ln-Yi 1.00 (10.20***)

– – –

Ln-Yj 0.84 (9.23***)

– – –

Ln-GDPCi –1.70 (–7.72***)

–0.69 (–3.76***)

–0.69 (–4.08***)

–0.68 (–3.94***)

Ln-GDPCj

–0.56 (–3.43***)

0.28 (2.10**)

– –

Ln-Pi – 1.00 (10.21***)

1.03 (10.47***)

1.01 (10.23***)

Ln-Pj – 0.84 (9.23***)

0.86 (9.39***)

0.86 (9.44***)

Ln-Dij –0.97 (–8.68***)

–0.97 (–8.68***)

–0.92 (–8.20***)

–0.93 (–8.35***)

Ln-Reg-Indexj –0.49 (–1.70*)

–0.49 (–1.70*)

– –

Ln-LLPj – –0.10 (–1.48)

–0.17 (–1.48)

R2 0.23 0.23 0.22 0.22

F 28.21*** 28.21*** 32.63*** 33.10*** Schwarz B.I.C. 1468 1468 1467 1467 N 582 582 582 582

Regression Result of Bilateral Maize Export Flow

(Dependent variable: natural logarithm of the ratio of export flow to product of incomes) Variable

[Model 6] (Regulation impact)

[Model 7] (LLP impact)

Ln-Dij –1.35*** (–11.94)

–1.48*** (–13.00)

Ln-Reg-Indexj –0.63** (–2.25)

–

Ln-LLPj – 0.20* (1.79)

R2 0.41 0.40

F 5.26*** 5.12***

N 582 582

Maize export flow regression with country fixed effects

Conclusions

The FAO Survey revealed that almost half of the responding produce GM crops for commercial or research purposes.

However, 67 percent of the respondents indicated that they have no, or limited, technical capacity to detect GMOs according to Codex guidelines.

Some incidents reported by importing countries related to LLP/AP. Generally, such situations are handled through rejection or market withdrawals by importers in developed countries, but in some cases consignments were accepted by some developing countries because of the lack of regulation.

Restrictiveness of regulations, including zero tolerance, does have a deterrent impact on maize trade. However, the restrictive LLP threshold itself has a limited deterrent effect on bilateral export flows in general.

IMPLICATIONS Biotechnology can be used as a mitigating measure for

climate change. However, risks assessments (health, environment etc.) should be made accordingly.

The occurrence of GMO related trade disruptions beyond a certain level can lead to income loss for exporters and consequently for producers, and consumers in importing countries can face higher domestic prices when imports are restricted.

Possible loss of export markets due to LLP/AP caused by GM crops especially for developing countries would be a major concern. Especially those countries that depend on the export of (non-GM) that commodity.

Technical capacities should be developed/improved to detect low levels of GMOs.

Biosafety/GM regulations should be designed optimally such that they include risk assessments, liabilities, labelling requirements, etc.

Thanks…