Falck Zepeda presentation at the FAO Technical Consultation on Low Level Presence and Trade in Rome...

Program for Biosafety Systems – http://pbs.ifpri.info/

“Low Level Presence, Trade, Biosafety and Decision Making: Issues for Developing

Countries”José Falck Zepeda

Senior Research Fellow

International Food Policy Research Institute (IFPRI)

Leader Policy Team for the Program for Biosafety Systems (IFPRI - PBS)

Contributing TeamGuillaume P. Gruère*

Patricia Zambrano

Antoine Bouet

Dedbdatta Sengupta

Daniela Horna**Departed IFPRI


IFPRI’s Mission and Expertise• IFPRI mission as an international non-governmental organization

“To Provide Research-Based Policy Solutions That Sustainably Reduce Poverty and End Hunger and Malnutrition”

• IFPRI conducts research in policy relevant topics:

– Trade related impacts• Impacts of labelling and low level presence policies

• Private contracts and standards

• Compliance ability

– Ex ante and Ex post socioeconomic impact assessments of adoption

– Regulatory issues• Effects of cost of compliance with biosafety regulations and regulatory delays

• Coexistence, segregation, identity preservation

• Regional harmonization approaches

• IFPRI provides operational and research based policy support to biosafety regulatory agencies and competent authorities in their decision making


Sources of LLP

• Asynchronous: at least one cultivating country has already authorized a GM crop while other countries have not approved for importation

• Asymmetric: a cultivating country has authorized a GM crop, but its developer does not seek approval in potential or unattractive importing countries

• Accidental admixture: a country has authorized the cultivation of a GM crop in field trials only. Traces of the commodity end up in the commercial crop supply

Source: Stein, A. and E. Rodriguez-Cerezo. 2010.


GM food trade and asynchronous approval

• Growing market shares and trade of GM commodities

• Increasing pipeline of new GM crops and events

• Lack of policies and definitions– Slow down import regulations

– 0% tolerance for imports of unapproved GM products

• Focus on implementation issues– Codex Annex: simplified procedure

– Incentives to move forward

0%10%20%30%40%50%60%70%80%90%

100%

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Percentage of imported maize with potential LLP issues

0%

20%

40%

60%

80%

100%

Po

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an

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Percentage of imported soybeans with potential LLP issues

Source: Gruere 2011


Policy options and decision making variables affecting economic welfare

Policy Options

1. 0% tolerance level for unapproved GM products

2. A threshold (t %) low level presence policy

3. 100% toleranceOptimal Policy Option

The cost of enforcing

the regulation

The potential risk of the product

The price of the

product

Source: Gruere, G. 2011.


Some issues identified for consideration on the evaluation of economic welfare of LLPs

Price

Tolerance level

Probability of rejection

Timing of approval

Premium differentials

Cost of compliance

Tolerance level

Import volumes

Cost structure enforcement

Approval delays

Enforcement capacity

Risk

Tolerance level

Trust in exporter regulations

Availability

Type of product and use


Qualitative implications for key decision parameters identified in assessment studies of economic welfare

1. Tolerance level

2. Approval delays

3. Degree of confidence in domestic and exporter’s regulation

Best outcomes with high confidence & low delays, but the optimal tolerancelevel depends on tradeoff cost versus relative risk perceptions.

Increase in Price Risk Cost of implementation

Total economic welfare

Tolerance level ↓ ↑ or → ↓ ↓ or ↑

Approval delay ↑ → ↑ ↓

Confidence → ↓ → ↑



Limitations to studies on the impact of low level presence policies

• Complex issue that requires extensive data to estimate impacts

• Data issues– Production, prices, trade volumes, shares of affected imports

– Testing costs relative to volume…

• Many available studies based on assumptions and relatively simple models

• Obtain an idea of qualitative direction and a sense of the magnitude of impacts…with known limitations


Example from Developing Countries-soybean imports in Vietnam

In average across simulations and range of assumptions, implementation cost for different tolerance levels are:• 0% $18million, • 1 % $4.1million,• 5 % $580,000 per year

Some, but not limited to, relevant question for a regulator could be:

Is maintaining a 0% tolerance level -costing an average of $14 million more-in order to address perceived safety concerns better than a 1 % presence of an unapproved event that has gone through safety authorization in the country of export?

Is the 0% level worth roughly $17+ million more than a 5 % level?


Economic welfare effects of a single unapproved GM

soybean event in the United States and Canada only

-20000

-18000

-16000

-14000

-12000

-10000

-8000

-6000

-4000

-2000

0

N(0.1,0.1) N(0.5,0.5) N(1,1) N(2.5,2.5)

Tho

usa

nd

s U

SD

τ=0% τ=1% τ=5%


Option Probability trade disruption

Price Risk Cost Conclusions

0% LLP 100% High until approval

Some variability Very high Valid if high perceived risk and no trust in export

t % LLP Moderate Moderate Some variability and possible low risk

Moderateto high

Best solution from an economic perspective

100% pass 0% 0 Larger variability and potential risk

None Valid if prices matter more than anything else

Low level presence policies (e.g. Codex Annex) are valid intermediates between 0% tolerance level and 100% pass.

Summary selected issues and policies related to economic welfare impacts of LLPs



Broader regulatory cost of compliance: Issues and Implications identified in existing studies

• Regulatory delays have a negative impact on returns to investments

• Projected trigger point is year 6 of regulatory delays for suspending a typical investment of$136 million in new R&D projects

• Average regulatory approvals of 48 months implies reaching suspension point likely

• Regulatory delays increase investment risk

• Uncertainty increases likelihood that an investment will not be made

Source: Smyth, McDonald and Falck-Zepeda, 2013


Implications increases of cost of compliance for public goods in developing countries

• Cost are not as important,

exceptions

– National research organizations

– International research systems

developing “public goods”

– Small private firms

• Impact on the number/type of

technologies

• More “higher return” products

and less public good products?

Source: Beyer, Norton and Falck-Zepeda 2010


Black Sigatoka Resistant Bananas in Uganda

Considered irreversible and reversible costs and benefits for estimation

With one year delay, forego potential annual (social) benefits of +/- US$200 million

Photos credits: Kikulwe 2009 and Edmeades 2008

Source: Kikulwe, Birol, Wesseler and Falck-Zepeda

2011.

http://www.gmo-compass.org/features/zoomimage.php?image=/data/imagescontent/grocery_shopping/017_banana-blacksigatoka_zoom.jpg&width=500&height=332

http://www.gmo-compass.org/features/zoomimage.php?image=/data/imagescontent/grocery_shopping/017_banana-blacksigatoka_zoom.jpg&width=500&height=332


Summary• LLPs are becoming an important trade issue

• Need to understand better asynchrony sources and the various (pragmatic) approaches to manage LLPs – Critical need for reliable information and data to make the best

possible judgment on the way forward

• Different thresholds have different impacts – More cost/benefit studies are needed

– Existing studies indicate that lower thresholds tend to have higher costs

• Cost of compliance with regulations can impact potential stream of technologies available to developing countries especially those of a public good nature


Potential issues for discussion

• How can we reduce asynchronicity?

– What are regulators and/or decision makers roles and responsibilities? How about developers/industry? Other stakeholders?

– Building trust in the system including regulations

• How can information sharing improve our ability to make decisions?

– Food/feed and environmental safety information sharing mechanisms and approaches

• Use of Codex Alimentarius guidelines?

• Use of FAO GM Foods Platform to share information for LLP situations? Other knowledge platforms i.e. Biosafety Clearinghouse?

– Finance additional data/information collection needed to examine relevant policy issue in more detail?

• Exploring the adoption of implementable LLP management approaches


José Benjamin Falck-Zepeda, Ph.D.

Senior Research Fellow / Leader Policy Team Program for Biosafety Systems

IFPRI 2033 K Street NW

Washington, DC 20006-1002USA

[email protected]

Brief bio/pubs: http://www.ifpri.org/staffprofile/jose-falck-zepeda

Blog: http://socioeconomicbiosafety.wordpress.com/Follow me on Twitter: @josefalck

mailto:[email protected]

http://www.ifpri.org/staffprofile/jose-falck-zepeda

http://socioeconomicbiosafety.wordpress.com/


References

• Bayer, J. C., G. W. Norton, and J. B. Falck-Zepeda. 2010. Cost of compliance with biotechnology regulation in the Philippines: Implications for developing countries. AgBioForum 13(1): 53-62. http://www.agbioforum.org/v13n1/v13n1a04-norton.htm

• Gruere, G. 2011. Asynchronous Approvals of GM Products and the Codex Annex: What Low Level Presence Policy for Vietnam?. International Food and Agricultural Trade Council Discussion Paper.

• Kikulwe, E.M., E. Birol, J. Wesseler, J. Falck-Zepeda. 2011. A latent class approach to investigating demand for genetically modified banana in Uganda. Agricultural Economics.

• Smyth, S. and J. Falck-Zepeda. 2013. Socio-economic Considerations and International Trade Agreements. Estey Centre Journal of International Law and Trade Policy by 14(1): 18-38. http://www.esteyjournal.com/j_pdfs/smythfalck14-1.pdf

• Stein, A. and E. Rodriguez-Cerezo. 2010. Low-Level Presence of New GM Crops: An Issue on the Rise for Countries Where They Lack Approval. AgBioForum. 13(2): 173-182.

http://www.agbioforum.org/v13n1/v13n1a04-norton.htm

http://www.esteyjournal.com/j_pdfs/smythfalck14-1.pdf

Falck Zepeda presentation at the FAO Technical Consultation on Low Level Presence and Trade in Rome...

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Transcript of Falck Zepeda presentation at the FAO Technical Consultation on Low Level Presence and Trade in Rome...