Integrating the Canadian & US Regulatory Systems for GM Crops

Presentation to the 19th ICABR ConferenceRavello, ItalyJune 16-19, 2015

Stuart Smyth, William Kerr &Richard Gray,University of Saskatchewan

Challenge:To reduce the cost of regulatory approval for new crops

Increasing Regulatory Efficiency is Crucial

Introduction

• Canada and the US are each others largest trading partners

• 75% of Canadian exports worth C$358 billion go south

• 20% of American exports worth US$300 billion go north

• Signed Canada-US Trade Agreement in 1988 (CUSTA)

• Signed North American Free Trade Agreement in 1994 (NAFTA)

The role of NAFTA

• NAFTA recognized the cost of regulatory disharmony

• Two specific articles in NAFTA to deal with this:

•Article 906 – Compatibility and Equivalence

•Article 913 – Committee on Standards-

Related Measures

• Considerable efforts taken to ensure that the potential for trade disrupting events were minimized

Institutional foresight

• Evidence of NAFTA’s shortcomings in regulatory harmonization can be found in the area of beef carcass grading

• After 20 years, there is still no harmonization

• Evidence shows that under NAFTA there is little to no consultation between Canada, the US or Mexico when one country changes regulations

• Sovereignty over regulations appears to be deeply entrenched

Lack of regulatory harmonization

• Agreement by trade negotiators doesn’t necessarily equal political willpower

• This is certainly the case when dealing with standard marketplace products but even more pronounced when dealing with food products

• Food safety failures have devastating and long lasting impacts on political careers, hence strong aversion to anything that may trigger a failure

• Regulatory harmonization could raise the risk of a food safety failure

Regulatory integration options

Option 1: Country A harmonizes with Country B’s regulations

Option 2: Country B harmonizes with Country A’s regulations

Option 3: Both countries agree to participate in the establishment of a new regulatory framework

•Political dilemma is who bears the cost of harmonization?

Regulatory harmonization obstacles

• No country is going to want to bear the full cost of regulatory integration with another country

• Each country will have argued to their political higher-ups that their regulatory system is second to none

• Faced with harmonization, suddenly one nation has to admit that its regulations are not the ‘best system’

• Canadian and US GM crop regulations are quite similar so this may be less of an issue

Example of regulatory harmonization

• NAFTA established the Technical Working Group on Pesticides, to integrate pest management

• Key objectives:

•Sharing information

•Undertaking collaborative scientific work

•Forging common data requirements

•Collaborating on risk assessments

•Carrying out joint reviews

•Developing common NAFTA standards

Reality of harmonization challenges

• Designed to collaborate on applications for new chemical use and renewals of existing chemicals

• The first five years (2003-08) seem to have been productive in terms of collaboration and outcomes

• Objectives set for second five year period (08-13)

• Process seems to have stalled during this period

• In 2011, Canada and the US established a new mechanism for regulatory harmonization

• Clearly, lack of progress triggered a failure

Economic impact of product regulation

Impact of market size on the AC of reg. compliance

MC

Demand with Reg.

AC Reg. compliance

Reg Compliance Cost

Producer Surplus

$

Price

Quantity

MC

Demand with Reg.

AC Reg. compliance

Reg Compliance Cost

Producer Surplus

$

Quantity

Small Market Large Market

Impact of regulatory harmonization

Challenges for Canada and US regulatory harmonization

• No formal super-national body to foster a bilateral agenda

• However, the US resents these types of institutions as sovereignty limitations may be placed on the US

• The ultimate key to moving towards a single regulatory agency for plant variety approvals in Canada and the US relies on developing non-partisan regulatory institutions

Conclusions

• Regulatory duplication delays ag innovation, creating forgone opportunities

• Governments are risk adverse and this is especially true when it comes to food regulation

• If two economically connected countries such as Canada and the US cannot achieve regulatory integration then the prospect that this be accomplished by other countries is greatly reduced

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