The Price of Folly: Trade Disruptions Caused by Flawed Agricultural Biotechnology Regulations

More than €1.5 billion: that’s how much economists estimate European livestock producers lost thanks to a disruption in the import of corn gluten animal feed from the United States beginning in June 2007. These costs, of course, were passed on directly to EU consumers. In another case, economists estimate that when the export of biotech-improved flax from Canada to Europe was disrupted, the “Triffid” episode (so called from the name of the flax variety involved) cost Canadian flax producers C$30 million and European food producers and consumers €39 million. And according to the United Nations Food and Agriculture Organization, these two are just the tip of the iceberg comprised of more than 150 similar trade disruption train wrecks in at least 25 countries over the past decade. So what caused these disruptions? A recent report (that I co-authored) from the Council for Agricultural Science and Technology (CAST) took a closer look, and documented that the culprit is “asynchronous approvals.”

All of these trade disruptions are unintended consequences from the regulations countries have put in place for crops improved through biotechnology. The “asynchronous approvals” happen when a major exporting country (e.g., the United States, Canada, Argentina, or Brazil) has approved a biotech-improved crop, and farmers in that country have planted and harvested it and sold it into the global grain trade, but a major importer (e.g., the European Union, Japan, South Korea, and more recently, China) has not yet approved it. For purely political reasons, most major food- and feed-importing countries have adopted special requirements for pre-market regulatory review and approval before they will allow imports of crop varieties improved through biotechnology. These same countries have “zero tolerance” thresholds prohibiting even minuscule levels of accidental or unintended presence of material from not-yet-approved varieties. This applies not just to the occasional errant soybean or corn kernel, but even airborne dust fragments. So the lack of import approval, coupled with a zero tolerance for even the most infinitesimal amounts of “unapproved” materials, combines to impede imports, plague exports, and disrupt trade on a global level.

To be clear, there are no safety issues here. There is not a single verified case of a negative consequence to human, animal, or environmental health caused by genetically modified crops or livestock. Indeed, hundreds of billions of meals derived from such improved varieties have been consumed over the past three decades, during which time animal health has improved, human lifespans have increased, cancer death rates have declined, and environmental sustainability of agriculture has improved significantly.

But despite the data and experience confirming the lack of any risks to justify these regulatory obstacles, these asynchronous approvals are costing everyone. There are no winners; everybody loses, and CAST has brought numbers to it. The report gives the broadest picture to date of the impacts, but I will give a few examples:

• A 2014 incident over Mexico’s importation of maize from Argentina, Brazil, Paraguay, and the United States increased maize prices by 9-20 percent.
• A 2013 case with European import of soybeans from Argentina, Brazil, and the United States caused major supply shortfalls and increased prices anywhere from 23 percent to upwards of 600 percent.
• The 2010 Viptera corn case involving the export of corn from the United Stated to China. It is estimated that , caused when China emerged as a major U.S. corn buyer after Syngenta had launched a new product with the necessary approvals in major importing countries at the time; total costs will be in the billions, but reliable numbers are pending due to ongoing litigation.

Asynchronous approvals also damage downstream industries. Much as with the Triffid example above, a 2010 incident regarding Spanish import of maize and soybeans from Argentina, Brazil, and the United States caused Spanish pork and poultry sectors to decline by as much as 35 percent.

Finally, the CAST report estimates that asynchronous approvals led to a delay of three years in adoption of new herbicide tolerant soybean varieties, leading to “a reduction in social benefits by $20 billion over a ten-year period … equally distributed between producers and consumers.” Clearly, this is not a small problem.

The potential for trade disruption due to the presence of low levels of “foreign” or “non- standard” materials is not unique to new crop varieties improved through biotechnology. Similar situations have arisen before in international agricultural trade, and in most cases, solutions have been put in place to reduce trade disruption while providing substantial levels of protection for agriculture and human health.

The World Trade Organization (WTO) “Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement)” recognizes the sovereign responsibility of nation states to protect the health of their citizens and their agricultural production. Through years of negotiations and agreements reached by consensus, the SPS has codified rules to enable the exercise of these responsibilities with minimal disruption to trade, based on the observation that such trade is mutually beneficial to all parties and economies. Measures undertaken by governments to ensure the safety of a country’s agricultural production must meet several criteria:

• Be based on science-based hazard identification and risk assessments;
• Be proportional to the hazard they seek to mitigate, and no more disruptive of trade (imports) than required to mitigate or manage the risk involved;
• Not discriminate against importing countries to the benefit of domestic producers;
• Be applied in a predictable and timely manner, and must not be allowed to disrupt trade through undue delay of required approvals.

The CAST study was commissioned by the U.S. Department of Agriculture to use in diplomatic talks to persuade China to take steps to reduce the lag between approvals in the United States and China. China is not alone in having a regulatory regime that falls short of its treaty obligations as a WTO member, but its regulatory regime has some of the most self-destructive characteristics. And to no surprise at all, recent talks between the United States and China on this issue went nowhere.

All major exporters and importers of agricultural commodities have regulatory systems for crops and foods improved through biotechnology that fall short, or miss the mark entirely, in complying with these criteria. Even countries like the United States, with a regulatory system that is, in principle, science-based and defensible, has strayed in various ways in implementing the principles on which its regulatory system is founded. And over the past two decades, the disparity between the measures imposed to ensure safety for these products and the degree of risk they present has grown from a gap to a chasm. According to data compiled by the Biotechnology Innovation Organization, in recent years things have only gotten worse, with, for example, the timeline for approval by the European Food Safety Authority doubling from 29 months in 2011 to 60 months in 2015. Indeed, against all logic, as data and experience confirming the safety and predictability of biotech-improved crops has mounted, regulatory burdens, instead of being relaxed, have only increased and timelines lengthened, almost everywhere (Brazil and Japan may be exceptions).

Fixing regulatory regimes that have gone off the rails is doable. But relegating the asynchronous approval trade disruptions to the ash heap of history is much easier. The CAST report has identified three possible solutions:

• Accelerate the pace of approvals in importing countries. Codex Alimentarius—an international food standards body—published in 2008 a guidance document to facilitate timely approvals through which importing countries could at least temporarily approve biotech varieties based on approvals already granted by an exporting country. These procedures would enable provisional findings that biotech-improved materials are “safe for food and feed at low levels” until a full scale review can be concluded by the importing country.
• Outright acceptance of an exporting country’s risk assessment and approval decisions. This is a variant of the “mutual acceptance of data” long pursued by major trading partners in a number of arenas, and Vietnam is presently leading in this area with biotech-improved food and feed grains.
• Establish non-zero thresholds for the low-level presence of “unapproved” or “non-standard” materials in shipments of commodity grains and other foods. There is a long track record of excellent quality control with such measures in the production of foundation seed, and such measures have worked well for more than a century in the global grain trade.

The Chinese regulatory system falls short of WTO/SPS compliance in additional ways that cannot be justified by data or experience. They require in-country field trials growing biotech varieties (and none others) even when the imports are intended solely for consumption as food or feed, and not for planting. China also requires in-country animal feeding studies, as if an animal’s digestive metabolism depends on its geographical location (it doesn’t). No doubt these issues will properly be the focus of future conversations between exporters and Chinese regulatory authorities, perhaps in Geneva.

But in the meantime, this entire issue could be vanquished in short order, and all the wasteful consequences done away with now and forever, simply by establishing agreed, non zero threshold levels for low level presence of new biotech varieties. Canada and Colombia have taken the lead in moving in this direction. Exporting and importing nations around the world should take note, and act with alacrity. They have nothing to lose but fruitless losses.