BuwaniBuwani DayanandaDayananda and William Kerrand William KerrBuwaniBuwani DayanandaDayananda and William Kerrand William KerrDepartment of Department of BioresourceBioresource Policy, Business and EconomicsPolicy, Business and Economics

University of SaskatchewanUniversity of SaskatchewanMay 28, 2011May 28, 2011yy

May 28, 2011 1

OUTLINE

• Introduction• Research Problem• Objectives of the Study• Results and Discussion• Conclusion

5/28/2011 2

INTRODUCTION

• Types of flax- long fibre –linen (not important in Canada)

h t fib d il d- short fibre and oilseed

• Uses of flaxseed (oilseed)• Uses of flaxseed (oilseed)* Industrial applications * Animal feed Animal feed* Human consumption

5/28/2011 3

Flaxseed Industry of Canaday

12000.00Seeded Area in 2008/2009

8000 00

10000.00

6000.00

8000.00

Thou

sand

 ha

2000.00

4000.00

T

0.00

All wheat Canola Barley Oats Corn Soybean FlaxCCrop

5/28/2011 4Source: Statistics Canada (2010)

World Flaxseed Production

1200000

800000

1000000

nes

600000

Metric Ton

CANADA

CHINA

INDIA

200000

400000ETHIOPIA

US

0

200000

2001 2002 2003 2004 2005 2006 2007 20082001 2002 2003 2004 2005 2006 2007 2008

5/28/2011 5Source: FAO (2009)

RESEARCH PROBLEM

• In September 2009, Genetically Modified (GM) flax variety - CDC Triffid was detected in the EUvariety CDC Triffid was detected in the EU.

• CDC Triffid was developed by Crop Development Centre of University of Saskatchewan in late 1980s’.

• CDC Triffid has tolerance to soil residues of sulfonylurea based herbicides.y

• The EU has a zero tolerance policy for GM crops h h b d i h EUthat have not been approved in the EU.

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In Canada, CDC Triffid received; f d d i t l f t th i ti i• feed and environmental safety authorizations in 1996; food safety authorization in1998.

• However, the EU placed a moratorium on the approval of GM crops in 1999.approval of GM crops in 1999.

• Due to the fear of losing its main market CDC gTriffid was deregistered in Canada in 2001.

• It was never released for commercial production in Canada.

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• The discovery of GM flax in September 2009 led to a ban on imports of Canadian flax into the EU.

• To meet the EU’s ‘zero tolerance’ policy for Triffid flax, a Sampling and Testing Protocol was developed bya Sampling and Testing Protocol was developed byCanada and the EU in October, 2009.

• The strict regime set out in the Protocol significantlyincreases the handling costs all along the supply chain.

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• The basis of this market restriction to Canadian flax by the EU is governed under the Agreement onby the EU is governed under the Agreement on Application of Sanitary and PhytosanitaryMeasures (SPS) of World Trade Organization (WTO)(WTO).

• The SPS Agreement considers science as the• The SPS Agreement considers science as the criterion upon which SPS measures will be evaluated.

• However, the trade restriction on Canadian flax imposed by the EU shows us a questionable useimposed by the EU shows us a questionable use of SPS rationales as a justification for a trade ban.

5/28/2011 9

OBJECTIVES OF THE STUDY

This study has two objectives.

• First objective is to estimate the total additional cost and change in revenue associated with the EU’s ‘zero tolerance’ of CDC Triffid.

• The second objective is to examine weather the EU li i d t di t C di fl t tpolicies used to disrupt Canadian flax exports to

the EU are compliant with the EU’s SPS obligationsobligations.

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Protocol developed by Canada and the EU to meet the ‘ t l ’ li‘zero tolerance’ policy

Sampling1. At the time a producer delivery into the commercial

handling systemhandling system2. At the time of loading onto the railcar3. At the time railcars are unloading into terminal

elevators

TestingTesting1. One test for five composite rail car samples2. One test for each silo

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All railcars and silos testing positive for Triffid will be removed from the EU flaxseed supply chain.

For shipments that are Triffid free, the CGC will prepare an official Letter of Analysis.p p y

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Cost of testingg

Level of the supply chain Cost ($) Sample size

Planting seed level 105.00 60 g per 10 tonnes

Producer bin level (October 2009 to 105 00 60 g per 125 tonnesProducer bin level (October 2009 to 

September 2010)

105.00 60 g per 125 tonnes

Producer bin level (From September 

2010)

240.00 4x 60 g per 125 tonnes

Rail car level 240.00 4x 60 g per 500 tonnes

Silo level 240.00 4x 60 g per 1000 tonnes

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Flaxseed plant breeders

i i i

Model of Conventional Flaxseed Supply Chain

Transport via trucks

Commercial seed multipliers

ProducersTransport via trucks

Chain

pRailcar transportation

Processors Primary elevators

Transport via trucks

Terminal elevators

Foreign consumersTransport via trucks

Domestic & Foreign consumers (Thunder Bay)

Terminal elevators

(Vancouver)

Laker vessels

Transfer elevators

(East coast)

Ocean transportation

O iImporters

Foreign consumers

Ocean transportation

5/28/2011 14

Flaxseed plant breeders***

i i i

Model of Flaxseed Supply Chain After the Triffid Event

Commercial seed multipliers***

Producers***Transport via trucks

Transport via trucks

Transport via trucks

pRailcar transportation***

Processors Primary elevators

Transport via trucks

Terminal elevators***

US consumersTransport via trucks

Domestic & US consumers(Thunder Bay)

Terminal elevators

(Vancouver)

Laker vessels

Transfer elevators

(East coast)

Ocean transportationGM +

GM free

Chinese consumers EU consumersDomestic & US

consumers5/28/2011 15

Transport via trucks*** Testing

RESULTS & DISCUSSION

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StakeholderCost

category Scenario 1 Scenario 2

Total Additional Cost and Change in Revenue of Triffid Event in Canada in 2009/2010

Exports to EU ($)Total exports

including China ($)Flaxseed Breeders CTe 28,000 28,000

COt 100 000 100 000COt 100,000 100,000Total 128,000 128,000

Certified seed suppliers CTe 165,672 165,672CSe 48,183 48,183Total 213,855 213,855

Producers CTe 740,880 740,880CSe 24,291 24,291Total 765 171 765 171Total 765,171 765,171

Grain elevator companies CTe 180,480 344,400CSe 1,940,900 4,163,900Total 2,121,380 4,508,300, , , ,

SaskFlax COt 70,900 70,900Agriculture and Agri-Food Canada COt 1,900,000 1,900,000T t l dditi l t 5 199 306 7 586 226Total additional cost 5,199,306 7,586,226

Change in revenue ‐57,798,600 +12,331,6005/28/2011 17presentation-support1.pptx

Total Additional Cost of Triffid Event in the EU in 2009/2010

Cost Category Cost  (CA$)

Decrease in profit 231 200

Recalled products 2 856 000

Destroyed products 1 768 000Destroyed products 1 768 000

Storage cost (blocked products) 176 800

Customers' claims 24 480 000

Shutting down operations 408 000

Total Additional Cost (TAC) 32 000 800

Value of forgone flaxseed imports in the EU 62 748 000

5/28/2011 18Source: COCERAL and FEDIOL (2010)

SPS Agreement  and the ‘zero tolerance’ policyg p y

• In the EU ‘zero tolerance’ policy for Triffid flax is a• In the EU, zero tolerance policy for Triffid flax is a

precautionary measure.

• Article 5.7 of the SPS Agreement createsArticle 5.7 of the SPS Agreement creates

disciplines applicable to precautionary measures.

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According to Article 5.7 of the SPS Agreement,g g ,

The precautionary measure must: (1) be imposed in respect of a situation where “relevant scientific information is insufficient”;(2) b d t d “ th b i f il bl(2) be adopted “on the basis of available pertinent information”;(3) not be maintained unless the Member(3) not be maintained unless the Member seeks to “obtain the additional information necessary or a more objective assessment of risk”; and(4) be reviewed accordingly “within a

bl i d f ti ”reasonable period of time”.5/28/2011 20

According to WTO panel on EC Biotech Products(DS 292) Article 5.7 does not permit WTO(DS 292) Article 5.7 does not permit WTOmembers to override the SPS Article 5.1.

Article 5.1 of the SPS Agreement;

“Members shall ensure that their sanitary orMembers shall ensure that their sanitary or

phytosanitary measures are based on an

assessment as appropriate to the circumstancesassessment, as appropriate to the circumstances,

of the risks to human, animal or plant life or health,

taking into account risk assessment techniques

developed by the relevant international

organizations”.5/28/2011 21

Th C d Ali t i C i i (2009)• The Codex Alimentarius Commission (2009)

introduced the guidelines for the risk analysis of g y

foods derived from modern biotechnology for the

situation of asynchronous authorisation.

• Those guidelines are applicable in the case of

Triffid flax.Triffid flax.

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Risk Assessment of Triffid Flax

• identify the adverse effects on human andidentify the adverse effects on human and

animal health (if any) arising from the presence

of the Triffid flax in food or animal feed, and

if h d ff t i t l t th• if any such adverse effect exists, evaluate the

potential or probability of occurrence of these

effects

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Violation of Article 5.1

Members shall ensure that their sanitary or phytosanitary measures are based on an assessment

No known scientific risk assessment d b th EU f T iffid flwas done by the EU for Triffid flax

EU is in violation of Article 5.1

5/28/2011 24

Violation of Article 5.7

The measure is imposed in respect of a situation where “relevant” scientific information is insufficient;scientific information is insufficient;

There is sufficient scientific information of Triffid flax used for giving approval in Canada

“seek to obtain the additional information necessary for a more objective assessment of risk”;

No evidence that EU sought to obtain information necessary for a more objective assessment of the risk of Triffid flax

“review the measure accordingly within a reasonable period of time”.

No evidence that EU reviewed or has ever initiated a review of the zero tolerance o e de ce t at U e e ed o as e e t ated a e e o t e e o to e a ceon Triffid flax within 17 months 

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Factors other than scientific risk behind the ‘zero t l ’ litolerance’ policy

• Consumer resistance• Consumer resistance

• Influential interest groups

• Disagreements in legitimacy and agenda setting with in

the EU

• Low level of trust toward available scientific information

on food safety

• Pure economic protectionism

• Inaccurate informationInaccurate information

5/28/2011 26

CONCLUSION

Operationalization of ‘zero tolerance’ policy of the EU incurred negative economic impact to both Canada and the EUCanada and the EU.

The EU has abandoned the science based regulation of trade despite its acceptance of SPSregulation of trade despite its acceptance of SPS obligations.

H th EU till l i it t lHowever, the EU can still claim its zero tolerance policy on Triffid flax is based on ‘sound science’ due to the inconclusive nature of the application of science in SPS Agreementscience in SPS Agreement.

A Dispute Panel would have to be requested to resolve the issueresolve the issue.

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REFERENCES

COCERAL and FEDIOL. 2010. Economic Impact Assessment: Low Level Presence of GMOs not Authorized in Europe. The Linseed CDC Triffid case. The E ropean Food and Feed Chain Economic StandstillEuropean Food and Feed Chain Economic Standstill.

Codex Alimentarius Commission. 2009. Foods Derived from Modern Biotechnology. Second Edition. United Nations World Health Organization and United Nations Food and Agriculture Organization .pp28-33. Available on: http://ftp.fao.org/codex/Publications/Booklets/Biotech/Biotech_2009e.pdf

Dayananda, B. 2011. The European Union Policy of Zero Tolerance: Insights from the Discovery of CDC Triffid. MSc Thesis, Department of BioresourcePolicy, Business and Economics, University of Saskatchewan, Saskatoon.

FAO. 2009. FAOSTAT, http://faostat.fao.org/site/567/DesktopDefault.aspx?PageID=567

Statistics Canada. 2010. Estimated areas, yield, average farm prices of selected field crops, Available on: http://estat.statcan.gc.ca/cgi-win/cnsmcgi.exe?Lang=E&EST-Fi=EStat/English/CII_1-eng.htm5/28/2011 28

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