1. BIOSAFETY PROTOCOL: IMPACTS ON GLOBAL AGRIFOOD SYSTEM Nicholas Kalaitzandonakes University of Missouri-Columbia ©

2. The Emergence of BSP 1992 Rio de Janeiro --Convention for Biodiversity (CBD) Targeting conservation and sustainable use of biodiversity Raising need for Protocol for use & movement of LMOs 1994 CBD-COP commences process for protocol 1999 Cartagena draft of the protocol 1999 Montreal – signing of a compromise protocol 2003 Biosafety Protocol enters into force Today 188 countries have signed Operational details still under consideration ©

3. Deciding the Scope of BSP for LMO-FFPs What kind of labeling should be required for LMO-FFPs ? (e.g. “may contain”, “list,” “identify”) How will “Adventitious Presence” (AP) be defined? AP considerations in GM crops only or in all crops? How will approved vs. unapproved events be treated? What should thresholds for AP be? What will be appropriate enforcement mechanisms? ©

4. The BSP will affect most of the global agricultural commodity system

5. Few crops represent large share of global land use, production & consumption ©

6. ..the same crops also dominate agricultural commodity trade ©

7. International trade of key grains & oilseeds: few key exporters – many importers Many importers – but few key exporters

8. Source : C. James, ISAAA Brief 30, 2004 2003 GLOBAL ACREAGE Soybean 61% Corn 23% Cotton 11% Canola 5% 0 0 20 40 60 80 100 120 140 1997 1998 1999 2000 2001 2002 Canola Cotton Corn Soybean 1996 160 180 2003 Global Adoption of Biotech Traits in Key Crops ©

9. Source : C. James, ISAAA Brief 30, 2004 Adoption of Biotech Traits in Key Country ©

10. US Grain and Oilseed Industry: A case study of BSP implementation ©

11. US uses a vast, fungible & efficient bulk system to move grains & oilseeds across markets Large storage capacity Efficient logistics Blending & commingling That facilitates temporal, spatial, quality equilibria A fungible and flexible efficiency-focused system ©

12. “May contain” “list” “identify” --which one?..and does it matter? ©

13. Can the US system handle exports in the presence of unapproved events? --The case of RR Corn US Production & Trade of Corn Gluten (1997-2002 average) (in MT) US Exports (volume & destination) US Imports TOTAL US 4,970,004 39,875 EU 4,771,668 MEXICO 12,561 JAPAN 3,602 CHINA & HONG KONG 108 HONG KONG 51 BRAZIL 8 CANADA 38,992 PERCENT OF TOTAL 96% 98% Source: USDA FAS FATUS ©

14. Can the US system handle IP/segregation? Soybeans ($/MT) Corn ($/MT) 20001614 20011612 20021610 200320-2210 200422-2710 Incremental delivery costs – at point of importation US non-GM exports to Japan 3.2 - 4.2 MMT of non-GM corn 1.0 – 1.5 MMT of non-GM soybeans Thresholds are at the regulatory level set by Japanese authorities -- 5% ©

15. Can the US system handle “practical zero” AP thresholds? – the case of Starlink corn MYDatesNo. testedNo. Pos.No. Neg.% Pos.% Neg. 00/01Nov ’00 – Sep ’01220,22218,844201,3788.691.4 01/02Oct ’01 – Sep ’02101,5602,26199,2992.297.8 02/03Oct ’02 – Sep ’0339,04746238,5851.298.8 03/04 Oct’03 – Aug ‘0424,83279 24,7530.399.7 ©

16. How will BSP be enforced? The troubles with testing for GM & holdup costs Sampling, the type of the test (e.g. DNA, protein), the test plan (e.g. number of kernels), the test method (e.g. quantitative) are all conditioning factors on outcome Major sources of conflict in test results come from sampling, uncertainty or error rates in test methods and non-agreement in interpreting units toward a given threshold. ©

17. What are the costs/risks of holdup and what are some implications for trade? M/V "VAKY JUNIOR“ Cargo intake basis SF 55: abt. 56.000 mt Intended discharge port: Tarragona - Deviated to: Brake Re-Delivery: Cape Finisterre 6.73 days delay Case study: Demurrage Costs 7.73 extra days @ $30,000/day IFO for 6.73 days @ $200/mt --37mt/day MDO for 7.73 days @ $500/mt – 3 mt/day Port disbursement Tarragona - $37,000 Total charge $330,327 ©

18. Some key conclusions from scenario analysis ©

19. Potential Impacts -- Costs The scope of BSP will influence the size of compliance costs – the following observations characterize these costs: Compliance costs increase exponentially as AP thresholds become lower Compliance costs are unevenly distributed across the supply chain– e.g. importers with low volumes & inefficient infrastructure bear disproportionately higher costs Compliance costs are unevenly distributed across commodities with trade and distributional effects among importers and exporters ©

20. Potential Impacts -- Risks The scope of BSP will influence the amount of incremental risks – the following observations characterize these risks: Test-based enforcement creates incremental risks. Adoption of testing standards decreases but does not eliminate incremental risks (e.g. sampling risk, testing error) Incremental risks are difficult to estimate and hence cannot be easily priced and insured Incremental risks expand disproportionately when AP thresholds become lower Uncertain status of approved/unapproved events in countries that lack on-going regulatory process amplify incremental risks ©

21. Potential Impacts – Market Dynamics Incremental risks and compliance costs resulting from BSP implementation are not static – they change with changing market conditions such as: Increasing adoption of GM crops Increasing number of GM events/traits Increasing number of GM crops Improvements in testing technology Etc. ©

22. Potential Trade & Structural Impacts Incremental risks and compliance costs will change the incentive structure in supply chain and will affect trade & economic welfare – some potential impacts are: Increased costs of commodities and ultimately of feeds and foods Changes in composition of trade, such as: shift from certain commodities to others, shift to processed & byproduct material (e.g. from soybeans to soymeal), shift to value added exports (e.g. from soybeans or soymeal to meat exports) Structural change – increased vertical integration to improve control of costs and risks ©