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IPC Technology Issue Brief: The Costs of Implementing the Biosafety Protocol - A Look at China and Brazil.

Click here for China BSP study

Click here for Brazil BSP study

 

 

IPC Technology Issue Brief: The Potential Impacts of the Biosafety Protocol on Agricultural Commodity Trade

A Study Authored by Professor Nicholas Kalaitzandonakes

Click here to read the full study.
Click here to read the study highlights.
Click here for a PowerPoint presentation on the study.
Click here for a presentation by Prof. Lucas Bergkamp
on the relationship between the BSP and the WTO.
Click here for the press release.

In 2005, signatories to the Biosafety Protocol will make critical decisions about how to regulate trade in Living Modified Organisms (LMOs or seeds) destined for use in food, feed and processing. Depending on the decisions governments make—about labeling, testing, thresholds and unapproved events—in the coming months, the additional costs of shipping maize, soybeans, canola and cottonseed could significantly increase the cost of food and feed to the world’s consumers. While most of these additional costs would be borne by a handful of large countries that import the largest volume of food and feed grains,a disproportionate share of the costs would fall on consumers in smaller developing and least developed countries, who are least able to afford higher food and feed bills.

On January 10, 2005, the IPC released a study authored by Professor Nicholas Kalaitzandonakes addressing the potential outcomes of these decisions.  Based on this study, the IPC finds:

  • If all 3,575 export cargoes of maize from the United States and Argentina were sampled and tested only once at loading, the total cost to indicate a cargo “may contain” LMOs would be $1 million dollars. If, on the other hand, exporters are required to identify and quantify individual varieties, as some countries have proposed, the labeling and testing costs for maize alone, from only these two countries of origin, could quadruple to $4.4 million annually. If more extensive sampling is required, annual testing costs for maize alone could balloon to $18 to $87 million.

  • If laboratory tests at the export origin must be confirmed at the import destination, testing costs alone would double.There would be additional costs to cover delays. Laboratory tests for LMOs generally require a five to seven day turnaround. Each day a ship waits to unload in port costs approximately $30,000. Delays would be shorter in developed countries, with nearby laboratories that can expedite test results.But,these delays would be longer for developing countries, which do not have laboratories able to perform these tests and would need to send samples overseas for testing. These delays would add millions of dollars in demurrage costs paid by developing countries.

  • Because testing is a statistical procedure, it is practically certain that tests performed at the point of export will not be confirmed by tests at the point of import, even if the same sampling procedures are used. It is therefore likely that shipments could be rejected, after arriving at their destination. If cargoes have to be re-directed if test results differ, there would be additional costs in terms of port delays, travel and insurance costs.In a recent case, these costs totaled nearly half a million dollars for a single vessel.

  • At present, the additional annual cost to consumers in Japan and Europe of acquiring non-LMO soybeans and maize approaches $100 million.If under the Protocol, the market for non-LMOs commodities expands and/or if the thresholds for adventitious presence are reduced, these costs would likely increase substantially.

These cost estimates are based on case studies of two commodities (maize and soybeans), from two major exporters (the United States and Argentina) with fairly sophisticated marketing systems. But, the Biosafety Protocol will directly affect trade in four (canola, cottonseed, maize, and soybeans) of the eight crops that dominate world commodity trade. It will affect trade among the over-100 countries that have ratified the Biosafety Protocol as well as exports from the four major exporters that dominate world commodity trade (Argentina, Australia, Canada, and the United States), none of whom have ratified the Protocol.To date only nineteen countries have established regulatory systems and have approved LMOs for import, and even then, LMO varieties approved in major exporting countries are not necessarily approved in major importing markets. Depending upon the decisions the parties to the Protocol make in the coming months, the implementation of the Protocol could require vast and costly changes in the way commodities are produced, harvested, transported and shipped.

Based on its analysis of this study, the IPC believes that it is premature for governments to make such important and far-reaching decisions without evaluating the costs of different options, without understanding the magnitude of these costs, and without knowing who will bear those costs. But, it is equally important, before such costs and disruptions are imposed on the world’s consumers, farmers and trading system to determine whether these additional costs, are in fact necessary to achieve the objectives of the Biosafety Protocol.

 

To find out more, please contact: phone: (202)328-5056 or fax: (202)328-5133 or Email: agritrade@agritrade.org
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