The European Union policy of zero tolerance : insights from the discovery of CDC Triffid

Flax is one of the major cash crops in Canada. Approximately seventy percent of Canadian flaxseed was exported to European Union (EU) annually until 2009. In 2009, the EU imposed an import ban on Canadian flaxseed due to the adventitious presence of a GM flax variety - CDC Triffid was identified in Canadian flaxseed exported to the EU. The EU’s decision to apply zero tolerance on CDC Triffid flax has been based on its interpretation of the precautionary principle. According to the World Trade Organisation’s Agreement on the Application of Sanitary and Phytosanitary Measures (SPS), however, precautionary measures are subject to a scientific risk assessment. As the EU did not base its zero tolerance for CDC Triffid flax on any scientific risk assessment, the EU is in violation of the SPS Agreement. Moreover, the EU has ignored the available scientific information regarding CDC Triffid flax. The EU did not consider the possibility of following the guidelines given by Codex Alimentarius Commission in the case of CDC Triffid flax. There are non-scientific reasons behind the EU’s zero tolerance on CDC Triffid flax and they overweigh the available scientific information. The EU position would be unlikely to be supported if a complaint was brought to the World Trade Organisation Disputes Panel. A partial equilibrium model was used to provide a theoretical background to examine the changes in the flaxseed industry and the linseed oil industry due to the CDC Triffid event. A model of the supply chain of Canadian flaxseed was developed to illustrate the operationalisation of the Protocol developed by the EU and Canada to address the zero tolerance policy. Empirical estimation suggests that the operationalisation of the Protocol incurred additional cost of $7.5 million to the flax seed industry of Canada in 2009/ 2010. Out of that, cost of testing was approximately $1.2 million and cost of segregation was $4.2 million. Estimation of changes in revenue suggests that there was a loss of revenue in flaxseed trade between the EU and Canada in 2009/2010. Imports of Canadian flax by China provided an alternative market, at a considerably lower price than typically realised from the EU market. Interestingly, the EU’s zero tolerance policy on CDC Triffid flax has resulted in a larger additional cost on the EU than Canada