COMMITTEE ON COMMODITY PROBLEMS
Rome, 12-15 January 1999
REPORT ON ACTIVITIES RELATED TO
II. TRADE AND ENVIRONMENT LINKAGES
III. TRADE AND BIOTECHNOLOGY APPLICATIONS IN AGRICULTURE
IV. TRADE AND SPS ISSUES IN AGRICULTURE
V. CONCLUSIONS AND RECOMMENDATIONS
1. The Committee at its Sixty-first Session examined the follow-up activities on the links between trade, environment and sustainable agricultural development and reviewed the present state of biotechnology developments and their potential impact on commodity markets and trade. The Committee encouraged the Secretariat and the various Intergovernmental Groups (IGGs) to continue to undertake commodity environmental studies and analytical assessments of the impact of biotechnology developments on trade of agricultural commodities. Most of the follow-up related to these topics has already been reviewed, or will be reviewed shortly, by the relevant IGGs. This document contains brief summaries of their conclusions as well as the result of some initial work on the impact of the Uruguay Round (UR) Agreements on Application of Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT) on trade, which may also be considered together with other technical matters related to trade.
2. Following earlier assessments on other commodities discussed by the CCP, this report covers trade and environment linkages for livestock, as well as two major annual and perennial oil crops and hides and skins.
3. Livestock production systems vary considerably in regard to their impact on the environment. Mixed farming systems appear to be the most beneficial for the environment, as integration between crops and livestock provide the basis for internalising many environmental impacts, whereas specialised intensive systems are causing a range of environment problems, mostly associated with waste. Pastoral systems are, in general, environmentally balanced, but their equilibrium is endangered by population pressure.
4. In developing countries that experience rapid income and population growth and urbanisation, increasing demand for livestock products is putting pressure on the livestock sector to intensify, while certain concerns in some developed countries are causing a de-intensification of livestock production. Policy measures that lead to the internalisation of environmental costs in livestock production are not likely to be the preferred option in many developing countries where improving the quality and variety of diets currently receives greater priority, despite the fact that such measures encourage the adoption of more environmentally-friendly production technologies.
5. The expected growth in soybean and oil palm production and processing could result in increased pressure on, or damage to the environment, if fragile lands are brought under cultivation and environmentally unsustainable farming and processing practices proliferate. The negative environmental effects of heavy use of fertilizers and pesticides as well as high effluents from oil extraction in both developed and developing countries can, however, be avoided if progress continues to be made towards the enforcement and the extended application of environmental policies and of protective measures against environmentally damaging practices.
6. Governments around the world have been hesitant to impose stringent and costly environmental policies in the oilcrop sector. Current abatement costs in cultivation are lowest for oil palm and in processing for soybeans. The difference between aggregated costs that apply to the two major annual and perennial crops is, however, minor and has not had an impact on their competitiveness to-date, nor has it altered the patterns of trade to any notable degree. The further strengthening of environmental regulations and a gradual internalisation of pollution control costs of cultivation and processing could, however, alter the competitiveness of these crops in different countries. As the comparative environmental damage for annual crops is greater in the production phase and/or perennial crops in the processing phase, the internalisation of pollution control focusing on cultivation would confer a competitive advantage on exporters of palm oil, while focusing pollution control on industrial processing of oils would benefit exporters of soybean-based products.
7. Tanning processes may cause environmental problems in several ways. Firstly, they produce a large amount of solid residue (on average over 45 percent of the weight of raw hides processed), in the form of trimmings, flaying, shaving and dust during each phase of the tanning process. Secondly, tanning results in large volumes of effluent contaminated with toxic compounds. Finally, tanning requires large amounts of water, which contains various polluting substances. If these solid and liquid wastes are not treated before discharge, they create significant pollution problems, such as contamination, blockage and stagnation of water courses and odour that causes headaches and nausea.
8. Various regulations, including those that set discharge limits to the tanning industry, have been introduced by many countries in recent decades with the objective of protecting the environment. The actual costs associated with compliance in developed countries are much higher than in developing countries because of tighter pollution limits and higher transportation, labour and waste site costs. These and other factors have contributed to altering the competitive advantages of the industry across countries so that production and processing of raw hides and skins have shifted away from developed countries to developing countries, affecting the pattern of trade in the commodities concerned.
9. The Committee at its 61st Session encouraged the Secretariat to undertake analytical work assessing biotechnology developments and their impact on international trade on a commodity-by-commodity basis. Since then the Secretariat has completed two studies reviewing the biotechnology developments in the oilseeds and the livestock and meat sectors. Other studies covering the developments in the grains, rice and cassava sectors are currently under preparation. All of this work is based on analyses of patent applications in the relevant fields.
10. The pace of the commercial application of biotechnologies in the oilseeds sector has accelerated in the nineties, with the area planted to genetically modified oilseeds in certain countries reaching a quarter of total plantings in some cases. These developments are likely to result in significant structural changes in the sector.
11. The introduction of biotechnological applications in the oilseeds sector is currently most advanced in crop breeding. Different biotechnology techniques are designed to achieve the following five goals:
· Accelerating plant breeding processes and extending breeding possibilities
· Genetically modifying the agronomic characteristics of oil crop
· Genetically modifying the fatty acid composition of oil crops and oils
· Genetically modifying oil crops to affect their meal quality
· Applying biotechnology in the extraction of oil from crops and the processing of vegetable oils.
12. Much of the research in the field to-date has concentrated on annual oilseeds grown in temperate and sub-tropical climatic zones, with the technology for genetically modifying tree crops, such as oil palm and coconut palm, lagging behind. Thus, genetically engineered varieties of many annual oilseeds are currently enjoying commercial success, while the appearance of modified tree crops on the market is not expected for many years. However, the main impact of biotechnology on the sector is expected to be the significant increase of the interchangeability of different oilcrops and oils and the consequent increased competition between the products. It is, however, too early to determine in any precise manner the impact of the changing competitive position of the individual oilcrops on international trading patterns.
13. Most of the biotechnology developments in the sector have been concentrated on improving efficiency through increases in animal productivity per unit of input and/or time and on improvements in the quality of the derived products as well as in animal health. Applications enhancing the natural reproductive processes of animals were the first to be introduced, and some have been around for many decades. More recently, molecular genetics and recombinant DNA (deoxyribonucleic acid) techniques have been applied to improve traditional dam and sire selection procedures, to develop new inputs into livestock production processes in the form of veterinary products and/or improved feeds to increase animal productivity and to clone animals.
14. However, most of these modern biotechnology developments are not as yet widely applied by livestock and dairy producers on a commercial basis. The costs of obtaining and using an improved transgenic animal are still relatively high when compared to the biotechnologies embodied in other inputs, such as feed additives, vaccines and hormones. As far as the earning potential of the new technologies is concerned, consumer acceptability and regulatory processes are likely to be the most important. Thus disease resistance obtained through vaccines or improved productivity through feed additives rather than through transgenic means may prove to be preferable from a consumer's point of view.
15. The implementation of the UR Agreements on SPS and TBT has direct implications on trade of agricultural commodities, because the agreements relate to establishing and applying food quality and safety measures, as well as measures designed for consumer protection, such as quality and composition requirements, labelling, nutrition and methods of analysis.
16. The review of the incidence of SPS and TBT measures in this sector indicated that the technically oriented trade control measures were wide ranging and growing in importance and had the potential for posing considerable difficulties for exporters. This was particularly the case for exports of the developing countries, even when they responded to legitimate concerns of an importing country about food safety, animal disease, environment and animal welfare. In this regard increased vigilance may be necessary, particularly because there is no complete record of all technical measures affecting access to livestock and meat markets and, where they are known, their impact is difficult to assess.
17. The review of SPS measures applying to the oilseeds, oils and oilmeal markets was designed as a case study applied to the EU and confirmed the broad conclusions obtained from a study of the livestock and meat sectors. There are a large number of regulations currently in place or under consideration and the product coverage and the complexity of the measures have increased over time, mainly reflecting rising public concern over food safety as well as animal and plant health. Exporters into the EU, especially those from developing countries, may face certain difficulties stemming from lack of direct access to information on SPS requirements in force and under consideration. Although there are concerns over harmonisation of SPS legislation across countries, within-the-Community legislation has been harmonised to considerable degree. There are, however, some instances where individual EU countries require a different level of SPS protection than that established by international standards or where relevant international standards are either not yet available or are under revision.
18. Although many aspects of the implementation of the SPS and TBT, especially from the perspective of the developing countries, discussed at the other IGGs were found to be applicable for trade in fresh and processed fruits, pesticide residue issues were singled out as a particularly important issue for trade in fresh tropical fruits and citrus. In this context, the application of methyl bromide as a fumigant has long been associated with ozone depletion. By 2001, its use will be phased out in developed countries and by 2010 in developing countries. This could adversely affect trade, particularly for low-volume items, unless cost-effective alternatives are found.
19. The work undertaken in the areas of trade in agricultural commodities versus the environment, biotechnology developments and SPS measures since the last session of the Committee underline the continued importance and relevance of the issues. The studies have highlighted the close interaction among the developments in each of the areas treated, and have demonstrated that the policies undertaken in one area could have significant spill-over effects on others. In other words, there are growing linkages between biotechnological developments, the environment and SPS matters.
20. More specifically, effective monitoring of global developments in agricultural commodity markets requires the collection, collation, analysis and dissemination of information on all important factors that affect the competitiveness of agriculture-based products. Thus, in this context, the Committee may wish to consider the following activities for the Secretariat's work programme:
1. By now the IGGs have examined the costs of implementing environment regulations on the competitive position of a number of commodities (grains, rice, oilseeds, meat, citrus, wine and hides and skins), as well as having undertaken a number of other commodity/environment studies on jute and hard fibres. Methodological studies have also been produced. The Committee may, therefore, wish to decide whether further commodity-by-commodity studies are to be undertaken, or whether the IGGs should rather concentrate on assessing the impact on trade of specific environmental issues, e.g., the growing importance of organic products.
2. As regards developments in biotechnology, the Committee may wish to request the IGGs to undertake further studies examining the impact of these developments on trade on a commodity-by-commodity basis, including the emerging linkages with environmental and SPS matters.
3. In view of the growing importance of SPS and TBT measures for trade, the Committee may wish to request the IGGs to examine the incidence of these measures on further commodities and to request the Secretariat to examine the possibility of developing a methodology to assess the impact of SPS and TBT measures on trade.
1 Basic Interactions between Livestock and the Environment in Different Livestock Production System, Document CCP:ME 96/4.
2 Possible Impact of Environmental Regulations on the Cultivation, Processing and Trade in the Two Major Annual and Perennial Oil Crops, Document CCP:OF 97/2.
3 Trade in Hides and Skins and Environment, FAO Document CCP:ME/HS 98/5.
4 Biotechnology Developments in the Oilseeds Sector and Possible Impact on Trade, Document CCP:OF 97/4
5 Biotechnology Developments and their potential impacts on the Livestock and Meat Sectors, Document CCP:ME 97/7.
6 Technical Barriers to Imports and Meat Products from Developing Countries and Progress in their Reduction under the Provisions of the Uruguay Round Agreements, Document CCP:ME 96/3.
7 Possible Implications of Sanitary and Phytosanitary Measures for Exporters of Oilseed-based products to the European Union, Document CCP:OF 97/3.
8 Trade in Tropical Fruit: Phytosanitary Issues Concerning Imports and Exports, Document CCP:SG TF 98/6.; Tropical Fruits: Food Safety Issues under the SPS Measures of the World Trade Organization, Document CCP:SG TF 98/7; Sanitary and Phytosanitary Measures, Citrus Industry and Trade, Document CCP:CI 98/7.