Science & Nutrition

GM food policy: Trade disruptions from zero thresholds may cause 'severe' economic woes

Last updated the 06-Feb-2014 at 17:38 GMT - By Nathan Gray+
Disruptions in international trade brought about by regulatory asynchronicity and zero threshold policies for GM crops could have 'severe' economic consequences, say researchers.
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The European Union (EU) zero threshold policy for unapproved  GM crops and foods could lead to 'severe' economic problems if it ever leads to a disruption in trade with major exporting countries, warn researchers.

Writing in the journal Food Policy, the team behind the economic modelling study examined the potential implications of regulatory asynchronicity and zero threshold policies on unapproved GMOs using the EU as a case study.

Led by Nicholas Kalaitzandonakes from the University of Missouri in the US, the researchers noted that the EU is 'highly dependent' on imports of soybeans and soybean meal to supply its demand for feed protein.

Given that a large share of these imports come from a few major exporters in the North and South America - many of which have embraced GM crops that are not approved in the EU - there is serious potential of future trade disruptions that could have severe economic impacts for the EU, said the research team.

"All exporting countries in the Americas have adopted biotech crops extensively," said Kalaitzandonakes and his colleagues.

"In the context of our case study, we have found that if bilateral trade with only one country is disrupted, the impacts may be modest, mainly, due to redistribution of trade in international markets," said the team. "However, if trade is disrupted with multiple large trading partners we find that the impacts may be severe."

"For instance, we find that if the EU were to stop imports from its three main suppliers the US, Brazil and Argentina, it would pay roughly 220% more for soybeans, 211% more for soybean meal and 202% more for soy oil," warned the team.

"Amid renewed interest in food security in the face of escalating commodity prices and tight supply and demand conditions in global agricultural commodity markets, trade will continue to play an important moderating role," they said. "A predictable and effective regulatory environment that minimizes the structural asynchronicity of regulatory approvals in importing countries and their suppliers and practical threshold policies are therefore desirable in order to keep trade options open and agricultural commodity prices in check."

Study details

To measure the potential economic impacts from possible trade disruptions between the EU and its major suppliers of soybeans, the team developed a model and then examined alternative scenarios where bilateral trade flows are set to zero.

"From our analysis we find that when asynchronous approvals become a systemic problem leading to trade disruptions with multiple trading partners the impacts can be severe," said Kalaitzandonakes and his colleagues.

They explained that the increased outlays projected by the study do not reflect additional economic costs from foregone value added activity in the EU, potential short term supply disruptions, quality differences in alternative supplies, and added transaction costs.

"They also do not reflect the tighter supply conditions that can occur in years of poor harvests," said the team.

"When such tight supply conditions are accounted for we find that the implied price impacts are even steeper."

An EU problem?

"While our case study has focused on the EU, regulatory asynchronicity is a broader potential problem that could affect many other market participants in any given year," commented the team.

Indeed, they noted that a new biotech soybean variety which is tolerant to the herbicide glyphosate and resistant to most leaf eating worms, named Intacta, was set to be planted for the first time in Brazil in 2012/2013. Yet, this new biotech variety has not yet secured regulatory approval for commercialization in China.

"Given the market position of China as the largest importer of soybeans in the world and the position of Brazil as the second largest producer and exporter, such asynchronicity could lead to significant trade disruptions if it persisted at harvest time, especially considering the limited alternative available supplies," they said.

Source: Food Policy
Published online ahead of print, doi: 10.1016/j.foodpol.2013.06.013
"Potential economic impacts of zero thresholds for unapproved GMOs: The EU case"
Authors: Nicholas Kalaitzandonakes, James Kaufman, Douglas Miller

Related topics: GM food, Science & Nutrition