One of the pledges in the October 2009 Revised Programme for Government is to declare Ireland a GM-free zone. The Programme promises to “declare the Republic of Ireland a GM-Free Zone, free from the cultivation of all GM plants”, and states “To optimise Ireland’s competitive advantage as a GM-Free country, we will introduce a voluntary GM-Free logo for use in all relevant product labelling and advertising, similar to a scheme recently introduced in Germany.” This followed the commitment in the 2007 Programme for Government that “the Government will seek to negotiate the establishment of an all-Ireland GMO-free [crop] zone.”
The issue has become topical because of a proposed change in EU legislation which would allow individual Member States to permit the cultivation of GM crops or not. The idea is to combine a European Union authorisation system for GMOs, based on science, with freedom for Member States to decide whether or not they wish to cultivate GM crops on their territory. Any such prohibitions or restrictions would have to be based on grounds other than those covered by the environmental and health risk assessment under the EU authorisation system. It is expected that the new legislation will enter into force by the end of this year.
Yesterday’s Irish Times reported that the Irish Organic Farmers and Growers Association has called on the government to immediately implement the Programme for Government pledge. Would it make sense to do so?
What would GM-free mean?
As GMOs enter the food chain at various points, it is important to be clear on what would be meant by a GM-free zone.
– Genetically modified microbes enter the food chain through food processing, where they play an important role as enzymes in the production of cheese, beer, whiskey, bread and fruit juices. They are developed in fermenters in contained facilities regulated by EU directive.
– Genetically-modified crops have been developed with desirable agronomic properties such as resistance to pests and diseases. In the future, GM crops will be developed with desirable attributes for flavour and nutrition. The EU regulatory process governs approvals of GM crops for cultivation and for use as food or animal feed in the EU. Worldwide, there has been a dramatic increase in the production of GM varieties of soyabeans, maize, oilseed rape and other crops, but the EU approval process has been slow in keeping up. GM crops approved for food or feed use must be labelled as GM if the GM content exceeds the 0.9% labelling threshold.
– Several animal species have been genetically modified and a number have also been cloned (cloned animals are not necessarily genetically modified, but one of the reasons for using cloned animals may be the rapid extension of inserted genetic material). Currently, no GM animals or derived products are on the EU market.
– However, most conventional livestock production now uses GM feed ingredients such as GM maize or soya. There is no requirement under EU legislation for animals fed on GM feeds to be labelled as such (a majority of the European Parliament voted against a proposal calling for compulsory labelling of food products that derive from animals raised on genetically-modified feed last month). However, a number of supermarket chains in Europe are working to remove GM feeds from some of their supply chains, such as premium own label brands.
Even among GM critics there is no apparent desire to ban the use of GM microbes. A GM-free area would obviously require a ban on the cultivation of GM crops. The Programme for Government commitment would still allow Irish livestock producers access to GM feed imports. Indeed, the government would not have the right even under the new EU legislation to prevent the import of approved GM food or feed except for cultivation. However, an official label would be created for producers who wanted to claim GM-free status which would require all such food and livestock to be produced with certified non-GM ingredients.
Costs and benefits of a ban on GM crops
The use of GM technologies in agriculture in Europe is controversial, with critics highlighting its actual and potential adverse effects on human health (the existence of toxic or allergic reactions), the environment (gene flow), biodiversity and ethical issues. Supporters of the technology point to the fact that it is highly regulated, that there have been no documented instances of injury to human health since GM crops began to be cultivated in 1995, and that there are significant benefits both to food production and the environment from their use. They also point to reputational damage to Ireland’s attempt to brand itself as an innovation society if policy is made on the basis of fears and perceptions which run counter to what science has shown.
Of relevance to readers of this blog is that there does not appear to have been any proper economic analysis of the proposal to declare Ireland a GM-free zone. It is not a foregone conclusion that such an analysis would find against the proposal. There is evidence that on the European market GM-free foodstuffs can command a price premium over GM foods. Even for those of us who support the science, there could be an economic case for banning the cultivation of GM crops if the result was to lift the overall prices received by Irish farmers by more than the additional costs they would incur by not being able to access GM varieties.
The GM varieties currently available are not of great interest to Irish agriculture, but we are starting to plant larger areas of maize and oilseed rape, and GM varieties of wheat, barley and potatoes could become available in the near future. Teagasc economists attempted to estimate the higher costs of production due to a GM ban some years ago. Apart from sugarbeet (which is no longer relevant), they took no account of any favourable yield effects. Savings accrued to farmers from lower chemical outlays, partially offset by the higher cost of seed. They did not take explicit account of coexistence or liability costs, and the costs of Identity Preservation (i.e. being able to certify that your production is GM-free) were assumed to be borne by the non-GM producer. The study recognised that the GM variety would probably sell at a discount to the non-GM variety. On this basis, they estimated that crop farmers would be worse off by between €1 and €3 million as a result of a ban.
The discount used in the study for GM varieties may be exaggerated. The bulk of Irish cereals production is sold for animal feed, which is in any case mainly supplied from GM sources. There is little evidence that Irish feed compounders would be prepared to pay a premium for non-GM supplies as long as GM imports are allowed. On the other hand, more stringent regulations on co-existence would further reduce the profitability of GM varieties. On balance, it is likely that Irish agriculture would lose out from a ban prohibiting the cultivation of GM crops.
Costs and benefits of a ban on GM feed (if it were possible)
The cost-benefit analysis would be different for a second scenario where Ireland also banned GM imports for livestock feed (recall again that this is not a legal option open to the Irish government, but could conceivably be introduced through voluntary collective action). Here, the main cost would now be the higher cost of sourcing non-GM supplies of maize and soyabean meal for livestock producers. That non-GM feeds cost more than GM feeds is not disputed, but the size of the premium is. Part of the problem is that, with the rapid spread of GM varieties in the main producing areas, the size of the premium today may underestimate the amount that would have to be paid a few years hence. The Teagasc study estimated higher feed costs of between €7 and €35 million. A more recent Teagasc estimate for pig producers suggests that higher feed costs from non-GM sources could add €60 million to production costs. On the other hand, crop producers could expect to benefit from this feed premium as compounders would now be prepared to pay a higher price for Irish non-GM supplies.
The important element here is that the bulk of Irish beef and dairy production is exported to EU and overseas markets. The unknown question is whether certifying that all Irish food and livestock products are produced with non-GM ingredients would yield a premium in the market place sufficient to cover these increased costs. GM-Free Ireland have produced extensive documentation on the search by EU supermarkets for GM-free supply chains. Another Teagasc study showed that Irish consumers were unwilling to purchase a GM yoghurt or a GM dairy spread even when they offered specific health benefits. The economic literature evaluating consumers’ willingness-to-pay suggests that quite a high premium exists for non-GM food (around 25% from a meta analysis of individual studies). However, it would be important to determine if this premium could really be extracted from the market place for Irish-produced beef and dairy products which were certified as produced with non-GM ingredients in comparison to the cost of establishing this reputation.
Impact assessment needed before decision is announced
Ireland is a high-cost agricultural producer from a global perspective, and to survive Irish farm produce has to develop a premium quality image. But it only makes sense to pursue higher quality if the market return exceeds the costs incurred. This is unlikely to be the case for a GM ban on crop production. However, a voluntary GM-free label could allow conventional producers (organic producers are already prevented from using GM seeds or feeds) to benefit from specific niche markets where a premium for non-GM products exists. In any case, the economic impact study should be done before the decision is announced.