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

“Socioeconomic considerations, biosafety and decision making: The view of a

practitioner”

José Falck Zepeda

Senior Research Fellow

International Food Policy Research Institute – Program for Biosafety Systems (IFPRI - PBS)

Presentation made at the Michigan State University short course on Environmental Biosafety, August 8,

2013.

Outline

• Biosafety regulations in practice

• SEC and the Cartagena Protocol on Biosafety

• Socio-economic assessments in a biosafety regulatory process

• What do we know? • Practical considerations

and options for implementation

• Concluding comments

Why regulate Living Modified Organisms (LMOs)?

• Two relevant issues

Safety: Prevent the introduction of (potentially) harmful technologies to the environment and public health.

Efficacy: Prevent the introduction of unimportant or inefficacious technologies

• Currently, most biosafety systems are science-based focused on safety only

• Science based risk evaluation approaches provide a logical framework for decision making it a preferred approach

Regulatory design implies establishing a balance between…

Societies’ democratic right to know

vs. Freedom to operate

vs. Freedom to choose

© Monsanto 2002-2011

Biosafety as a process…

Contained Use

Experiments

Confined

Field Trials

Deliberate

Release Post

Release Deregulation

Regulatory decision points

Familiarity

Learning

R&D and product development life cycle

1 – 3 yrs. 1 – 3 yrs. 1 – 3 yrs.

Product Concept

Discovery Early Product Testing & Development

Integration & Product Selection

Product Ramp Up

Market Introduction

1 2 3 4 5 6

Confined Field Trials

Author: Ramaeker-Zahn

2. Socio-economic assessments and the Cartagena Protocol on Biosafety and national

laws and regulations

Article 26.1 of the Cartagena Protocol on Biosafety

1 . The Parties, in reaching a decision on import under this Protocol or under

its domestic measures implementing the Protocol,

may take into account,

consistent with their international obligations,

socio-economic considerations arising from the impact of living modified organisms on the

conservation and sustainable use of biological diversity,

especially with regard to the value of biological diversity to indigenous and

local communities

• Applies to decision on import only, or

• National measures

• Voluntary – NOT mandatory

• Especially WTO

• Strictly a specific focus and target group

• Explicit impact indicator

What drives SEA inclusion

• International agreements

• Regional considerations

• National laws and regulations

– National Biosafety Frameworks

– Implementing regulations, directives, administrative acts

Different approaches to SEC inclusion

Issue Argentina Brazil China

Type of inclusion

Mandatory Only if an SEC identified during the scientific biosafety assessment

Not included in current guidelines and regulations

Scope / What Economic impacts on trade and/or competitiveness. Other impacts being considered.

Not clear / open Not clear

Who Minister of Finance and Trade – special unit

Two separate bodies: CTNBio = biosafety assessments, and National Biosafety Council: decision making. NBC commissions a third party

Plus institutional biosafety committee

Third parties

When Commercialization Commercialization Commercialization

Comments For a while..policy of only approving those already approved in trade sensitive markets

Rationale for dual bodies was to separate technical assessment from the “political” assessment”. Mexico has a similar approach

Use of advanced assessment methods

3. Socio-economic assessments in a biosafety regulatory process

Motivations for the assessment of socio-economic considerations

Biosafety regulatory processes are: • Time delimited • Mandated to render a decision or outcome • Moderators of technology flows • Sensitive to trade-offs between decisions and alternatives • Respondent to stakeholders • Subject to regulatory error impacts

Technology assessments

Technology assessments within a (biosafety) regulatory decision making process

Decision making and assessments

Risk Assessment

Socio-Economic

Assessments (plus others?)

Decision Making

Socio-economics and biosafety / biotechnology decision making

BEFORE RELEASE

An impact assessment during the biosafety regulatory stage to decide on the approval of a technology needs to be ex ante

AFTER RELEASE

For monitoring purposes or for standard technology evaluation purposes this is a conventional ex-post assessment

Beyond knowledge generation on biosafety and socio-economic considerations – decreasing

returns to biosafety investments? Necessary or sufficient knowledge to determine a product as “safe” or beneficial to society Food/feed safety Environmental safety Socio-Economic impacts

Other motivations • Liability • Marketing • Science and curiosity • “Excessive” precaution • Others?

• Impact assessment is a scientific process that significantly incorporates art in its implementation

• The practitioner has to in many cases subjectively address many problems with data, assumptions, models and uncertainties

4. What do we know about the socio-economic impact of GE

technologies?

What do we know from the economic impact assessment literature to date?

• A review of 187 peer reviewed studies

• Examined studies with a focus on: – Farmers,

household and community

– Industry and markets

– Consumers – Trade

Citation: Smale, Melinda; Zambrano, Patricia; Gruère, Guillaume; Falck-Zepeda, José; Matuschke, Ira; Horna, Daniela; Nagarajan, Latha;

Yerramareddy, Indira; Jones, Hannah. 2009. Measuring the economic impacts of transgenic crops in developing agriculture during the first

decade: Approaches, findings, and future directions. (Food policy review 10) Washington, D.C.: International Food Policy Research Institute

(IFPRI) 107 pages

Food Policy Review 10 conclusions • On average LMO crops have

a higher economic performance — but averages do not reflect the variability by agro-climate, host cultivar, trait, farmer

• Too few traits, too few cases/authors—generalizations should not be drawn yet...need more time to describe adoption

These conclusions are no different than those for most technologies released to date…

Food Policy Review 10 conclusions

• Address cross cutting issues for further study including impacts of poverty, gender, public health, generational

• Develop improved methods and multi-disciplinary collaborations to examine broader issues

A meta-analysis paper by Areal, Riesgo and Rodriguez-Cerezo (2012)

“GM crops perform better than their conventional counterparts in agronomic and economic (gross margin) terms”

“GM crops tend to perform better in developing countries than in developed countries, with Bt cotton being the most profitable crop grown”

How does a producer benefit? Insect resistance traits The case of Bt cotton

Producer Profit

Producer Surplus

Cost to Benefit

Additional

Cost of

Using the

Technology

Tech fee:

US$80/ha

0

+

-

Decrease

pesticide

application

cost

-Insecticide

-Machinery &

Equipment

Yield /

Reduction

in damage

-Timing

applications

-Reduced

damage bolls

Price change

due to increase

in supply

Additional

cost of

controlling

secondary

pests

Amenable to

IPM and/or

controlled

easily

Labor

Labor

Black Sigatoka Resistant Bananas in Uganda

Consider irreversible and reversible cost and benefits by using the Real Option model

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

A GM banana with tangible benefits to consumers increases their acceptance for 58% of the population

Photos credits: Kikulwe 2009 and Edmeades 2008

Kikulwe, E.M., E. Birol, J. Wesseler, J. Falck-Zepeda. A

latent class approach to investigating demand for genetically

modified banana in Uganda Agricultural Economics 2011.

Bt cotton in Uganda

Positive yield impacts and net benefits

Smaller rate of return probably explained due to low base yields

Need to improve overall cotton productivity

Probability of a negative return can be as high as 38% with a technology fee as charged elsewhere

Photos credit: © Horna 2009

Horna, et al. (2011) . “Economic Considerations in the Approval

Process of GM Cotton in Uganda: Designing an Ex-ante

Assessment to Support Decision-making. “IFPRI Policy Note,

Under review.

Bt maize in the Philippines

• Growing Bt maize significantly increases profits and yields

• Significant insecticide use reductions

• Adopters tend to be – Cultivate larger areas

– Use hired labor

– More educated

– have more positive perceptions of current and future status

Change in economic surplus

(mill pesos)

Producer Surplus 7906

Seed Innovator 703

Total Surplus 8609

Producer Share (%) 92

Innovator Share (%) 8

Bt maize studies in Philippines led by Dr. Jose

Yorobe Jr. with 466 farmers in 16 villages Isabela

Province, Luzon, South Cotabato Province,

Mindanao

Bt cotton in Colombia Evidence of yield

enhancement rather than pesticide reductions

Bt farmers benefited where the target pest is economically important

Sampling bias important: adopters were better–off farmers

Institutional context critical

Photos credit: © Zambrano 2009

Source: Zambrano, P., L. A. Fonseca, I. Cardona, and E. Magalhaes. 2009. The

socio-economic impact of transgenic cotton in Colombia. In Biotechnology and

agricultural development: Transgenic cotton, rural institutions and resource-poor

farmers, ed. R. Tripp. Routledge Explorations in Environmental Economics 19.

London: Routledge. Chapter 8. Pp. 168-199

Bt maize in Honduras

Excellent target pest control

Bt yield advantage 893-1136 Kg ha-1 yield (24-33%)

Bt maize yields preferred even by risk averse producers

100% higher seed cost than conventional hybrid

Institutional issues important

Photos credit: © Sanders and Trabanino 2008

“Small “Resource-Poor” Countries Taking Advantage of the New Bioeconomy

and Innovation: The Case of Insect Protected/Herbicide Tolerant Maize in

Honduras.” Jose Falck Zepeda, Arie Sanders, Rogelio Trabanino, Oswaldo

Medina and Rolando Batallas-Huacon. Paper presented at the 13th ICABR

Conference “The Emerging Bio-Economy”, Ravello, Italy June 17-20, 2009.

5. Practical considerations and implications for implementation

Considerations for regulatory design

Issues Options

Type of inclusion? • No inclusion vs. Mandatory vs. Voluntary

Who? • Developer vs. Dedicated unit within Government vs. third party experts

Scope? • Narrow interpretation article 26.1 • Narrow set of socio-economic issues • Broader set of assessments (SIA or SL)

Approach? • Concurrent but separate vs. Sequential vs. Embedded • Implementation entity

Assessment trigger? • Each submission vs. Event-by-event vs. class of events

When? • Laboratory/greenhouse vs. CFTs vs. Commercialization • For post release monitoring • At all stages?

How? • Choice of methods for ex ante assessments is much more limited than for ex post • Decision making rules and standards • Method integration, standards, tolerance to errors

Attributes of functional biosafety regulatory process

– Assessment hurdle proportional to risk

– Risk assessment is science based

– Predictable process

– Transparent

– Feasible

– Cost and time efficient

– Fair

– Explicit rules and decision making standards

Potential implications from SEC inclusion into decision making

• Potential for introducing uncertainty that can lead to an unworkable system if rules and standards are not clear

• Gain more and/or better information about technology impacts for decision making

• Balance gains in information, additional costs & effort, and innovation

Potential implications from the inclusion of socio-economic considerations into decision

making • Potential for a unworkable system if rules and

standards are not clear

• Cost of compliance costs will increase

• Potential regulatory delays

– Reduction in the number of technologies especially those released by the public sector and crops/traits of a public good nature

– Some public sector institutions may not be able to deploy technologies due to fixed costs necessary to enter market

Contrasting baseline net benefit levels from GE crop adoption with higher costs in the Philippines

Notes: 1) Source: Bayer, Norton and Falck Zepeda (2008), 2) Baseline values for each technology expressed in millions US$

using a discount rate for the estimation of Net Present Value = 5%, 3) Change in Net benefits defined as the total benefits

estimated using the economic surplus minus total regulatory costs.

Contrasting benefit levels from GE crop adoption with larger regulatory lags in the Philippines

Notes: 1) Source: Bayer, Norton and Falck Zepeda (2008), 2) Baseline values for each technology expressed in millions US$

using a discount rate for the estimation of Net Present Value = 5%, 3) Change in Net benefits defined as the total benefits

estimated using the economic surplus minus total regulatory costs.

Potential roadmap

• Evaluate tradeoffs with socioeconomic considerations into decision making – …even just to provide intellectual justification about the policy

decision

• Focus on the inclusion and implementation processes • Consider having a basic requirement of a standard

economic review/assessment with a defined evaluation criteria – Producers’ net income – Smallholder net income – Downside production/financial risk – Trade – Others….

Potential Roadmap (continued)

• Critical allowing completion of biosafety risk assessment/analysis process ( Brazil experience)

• Ensure there are no authority conflicts between regulatory agencies – maximize collaboration synergies

• Ensure there are no conflicts with international obligations especially WTO

• Goal is to have a transparent, feasible, fair and time/cost efficient and protective process

The way forward: implementation issues

• Prudent to have a well-defined process

– Steps

– Timelines

– Triggers

– Scope and issues

– Standard of proof / evidence for claim validation and review

• SEC assessments can be most useful for commercialization approvals, not before

The way forward: Implementation issues (2)

• If process is mandatory, minimum requirement should be an economic impact study – Prudent policy would require then that the minimum

information portfolio would include an economic impact assessment.

– Broader socio-cultural considerations would not be assessed in isolation, requiring a companion (and robust) economic study.

• Consider the assessment of macro level assessments based on broader technology groups rather than specific events

Has the country included

SEC in a binding legal

document (law or

regulation)?

YES NO

Conduct an

inward-looking of

goals and

objectives for

inclusion of

socioeconomics

José Falck-Zepeda, Ph.D.

Senior Research Fellow/Leader Policy Team, Program for Biosafety Systems International Food Policy Research Institute (IFPRI) 2033 K Street NW, Washington, DC 20006-1002, USA Tel.: +1.202.862.8158 Fax: +1.202.4674439 Cell: +1.301.787.2586 Skype: josefalck Brief bio: http://www.ifpri.org/staffprofile/jose-falck-zepeda Publications: http://josefalckzepeda.pbworks.com/w/page/9007235/FrontPage Blog: Socioeconomic, Biosafety and Decision Making http://socioeconomicbiosafety.wordpress.com/ Follow me on Twitter: @josefalck