Thank you.
I hope you all have received copies of the brief I submitted two weeks ago. I'm not going to read from that. Instead, I'll give you a bit of a sense of how commodity agriculture basically works.
Most farmers, at some point, use certified seed, which is what they would buy from a certified seed grower. They plant that seed. It moves through our supply chain, and is then exported.
Now, all along the system there are thresholds. Even with certified seed, which is the purest seed that a farmer can put in the ground, there are thresholds for coexistence of other varieties. For example, if a farmer wanted to plant wheat, and let's suppose there was GM wheat on the market, the non-GM wheat would have a threshold of a quarter of a per cent for GM wheat. So even starting from day one, a non-GM wheat field could have up to a quarter of a per cent of GM wheat.
Europe has put in place a 0% threshold for GM varieties. There's no way the Canadian system, when we start with 0.25%, will ever meet a threshold of zero, based on the international standards for certified seed.
So as a farmer goes through and plants that, livestock, fowl...seeds from previous crops are in the soil bed. They will all germinate and will add to that 0.25% as it goes through, being trucked by semis, by railcar, by boat, to an export market. That 0.25% is going to increase.
Certainly in the seed trade, they know that exporting at 100% is not possible, yet it's quite easy to meet existing thresholds of 2% or 3% of commingling of other varieties. As Jim was saying, a bit of corn or soybeans in a wheat shipment would not be unexpected in bulk commodity trade.
Where we're seeing a lot of difference between the North American approach that's really focused on science-based regulation and the European approach is best understood through the approach to risk.
In Canada we have a decoupled system for most commodities between the scientific safety assessment and the variety approval. So in Canada we have the CFIA and Health Canada that do the science-based risk assessment on the dossier of information that's provided by the developer, whether it's a public or private entity. They make the safety assessment, and then the variety approval committees look at the various agronomic...in terms of disease resistance and yield. They actually are the ones that give variety approval, for canola and wheat, for example.
What we have in Canada, then, is a government component, which does the scientific safety, and then we have an industry component, which is made of breeders and stakeholders through that commodity who make the final decision on variety approval.
However, in the European system, they still have the government-based, regulatory approach to the scientific assessment, which in their case is the EFSA, the European Food Safety Authority. They make the science-based risk assessment. Yet instead of having the private sector decide which varieties will be approved, that now becomes a political decision of the European Commission. They have a committee that's set up to make the variety approval.
So they have the same decoupled process that we have, yet what we're seeing, because they've sort of politicized risk at the European level, is that decisions are simply not being made.
I've provided a list of some varieties that have been submitted for approval within the EU system and that are safe by the EFSA's assessment. By next week the variety at the top of the list will have been eight years' waiting for the commission to give a variety approval decision to that commodity.
Clearly, decoupling is an acceptable process when you have the science being done by the regulators and the commercial approval being done by the stakeholders. However, in the European system, because they've moved that decision from the stakeholders—industry, developers, and farmers—to the political level, it's not functioning the way they had hoped it would have when they set this system up nearly 10 years ago.
Probably the best example of this from a Canadian perspective, which I mention a little bit about in my brief, is the example of the detection of GM flax in 2009.
Saskatchewan grows over 60% of all the flax that's exported in Canada, so this is a story that we spent a lot of time looking at, at the University of Saskatchewan. What we found through over 10,000 tests is that the GM flax is showing up at 0.05%. So even within flax, using certified seed, which allows 0.25% of other flax varieties, this is very low.
When this was detected, to a large extent Europe broke their commitment to the World Trade Organization, and especially to the sanitary and phytosanitary agreement, because under the SPS agreement the EU would have been required to do a survey of the literature on flax to look at what degree of problem this was going to be. They were also then required to do a risk assessment, which should have been done by the EFSA. That was not done. They closed the border to Canadian flax for over two months. It cost us in the range of $12 million in lost sales, and they then forced testing on the entire Canadian industry, at a cost now approaching $20 million.
When we did this study to the end of 2011 we estimated the costs at that time to be about $30 million. Another year has passed and we've been testing all of our flaxseed again for another year, and we will for another two years, so those costs will continue to increase over the next couple of years.
These are costs that are borne by Canadian farmers. They have to test their seed prior to it being planted, and they have to test what they harvest before they sell it to an export opportunity. They're not being reimbursed for this by anybody. These are out-of-pocket costs that are being experienced by Canadian farmers because of the European approach to zero tolerance.
When Canada is faced with the opportunity to look at developing domestic LLP policy, I think the best approach is to understand that zero is not something that markets can function at. We all know that the speed limit in Canada is 100 kilometres an hour, yet I would hazard a guess that most of us have exceeded that at one point or another in our lives.
So we know that the reality of zero is not something that our export markets can function at, and that Canada has a real opportunity to be a global leader in developing a domestic LLP policy that has thresholds that can be successfully and economically met by industry so that when we import varieties from other countries and something is detected, we don't slam our borders on our trading partners, and that we have thresholds that will allow for that situation to be addressed and trade to continue to happen.
That precedent would really set Canada far ahead of our trade competitors, and would have some ability to influence developing countries that are looking at developing LLP policy as well.
Thank you for your attention.