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Health Claims Regulation to cause significant negative economic impacts

Published on: 30th September 2010
Published By PG Economics

Press release: 30 September 2010: Brussels, Belgium

A new Economic Impact Assessment of the EU’s Nutrition and Health Claims Regulation suggests that the current way in which this Regulation is being implemented is likely to cause substantial, mostly negative, economic impacts. 

“There is widespread expectation in the EU food supplement sector that if the many negative health claim opinions, so far made by the European Food Safety Authority (EFSA), lead to decisions not to allow these claims, the EU market for food supplements may decrease significantly in size, resulting in important reductions in profitability and employment levels” said Graham Brookes, author of the report. “Barriers to entry into the sector are expected to increase, levels of innovation will fall, third country suppliers will increase their EU market share and the viability of many EU businesses (notably SMEs) would be threatened. Consumers would also lose out from reduced choice and possibly higher prices”.

Previewing the findings of the study, the key findings are: 

Current impact

1. To date, the authorisation process for health claims has not yet had a significant sector level impact mainly because none of the ‘general function’ (Article 13.1) claims on which EFSA has given opinions have yet been formally allowed or prohibited by legal decision.

2. Levels of business uncertainty have, however, already increased. Some companies have already incurred costs of adjustment associated with negative opinions/assessments by EFSA and levels of research/development and new product development are ‘on hold’ in some businesses.

3. Resources invested by the sector to compile the entries of the Article 13.1 list for submission to the European Commission amounted to a cost of between €4.51 million and €7.65 million.

4. In comparison, the cost of submitting an Article 13.5 or Article 14 health claim application (inclusive of a human clinical trial) is likely to be €0.26 million to €1 million plus per application.

Projected impact 

5. The majority of the food supplement sector expect the economic impacts to be substantial and largely negative :

  • There is expectation that the ‘other substances’ part of the EU market for food supplements may decrease in size by about 25% (€645 million at the ex-production facility level or €1,031 million at retail level) and result in a 30% loss of gross profitability (€242 million);
  • Additional costs associated with, for example, stock and packaging write offs and changes, would likely add €291 million resulting in total short term losses equal to two-thirds of annual gross profits in the ‘other substances’ market and 41% of total gross profits in the broader market, including vitamins and minerals;
  • Employment generation is expected to fall by about 13,300 full time equivalents (FTEs), equal to 18% of total employment in the ‘other substances’ part of the sector (this excludes employment impacts in the retail sector);
  • Levels of net profitability are expected to fall substantially for companies with relatively high levels of dependency on ‘other substances’ sales. This is likely to threaten the viability of a number of businesses, most of which are small-medium enterprises (SMEs);
  • There is expectation in most companies that the costs of bringing and sustaining a product in the market will increase significantly, raising the barriers to entry in the market;
  • Research and development expenditure, levels of innovation and new product development are expected by most companies to decrease;
  • The majority of companies perceive that EU consumers will lose out from decreased choice, less competition in the market and potentially higher prices;
  • The relative market share of products originating outside the EU and supplied via the internet or mail order is expected to increase, because such products would not be subject to the requirements of the EU Nutrition and Health Claims Regulation in their country of origin and therefore would be free to continue to use health claims, denied to EU suppliers, and be easily accessible to EU consumers.

Overall, if the economic impacts highlighted above occur, the Regulation will also fail to achieve most of its key economic-related objectives, notably relating to stimulating research and development, protecting innovation, encouraging SMEs, facilitating fair competition and achieving a high level of consumer protection. In addition, levels of income and employment generation within the EU would likely be lower than they might otherwise have been in the absence of this Regulation”

For additional information, contact Graham Brookes Tel +44(0) 1531 650123.

PG Economics: 30th Sep 2010 10:32:00


First Study Of Impact Of Using Biotech-gm Maize In Vietnam Highlights Substantial Economic And Environmental Benefits

First study of impact of using biotech/GM maize in Vietnam highlights substantial economic and environmental benefits. Highlights in the peer reviewed paper include: 225,000 hectares have been planted to maize containing GM traits in Vietnam since 2015 and in 2019, the technology was used on 10.2% of the total maize crop. The technology has enabled Vietnamese farmers to obtain higher yields from better pest and weed control: the GM varieties out-performed conventional varieties by +30.4% (+15.2% if the yield comparison is with only the nearest performing equivalent conventional varieties). The extra production and reduced cost of pest and weed control have provided maize farmers with higher incomes equal to an average of between US $196 per ha (relative to equivalent conventional varieties) and US $330 per ha (average of all conventional varieties). In terms of investment, for each extra US dollar invested in GM maize seed (relative to the cost of conventional seed), farmers gained an average of between US $6.84 and US $ 12.55 in extra income. These levels of return are at the higher end of the range of performance for similar maize seed GM technology in other adopting countries. Aggregate farm incomes have increased by a total of between US $43.8 million (based on the yield gains relative to the nearest equivalent conventional varieties) and US $74.1 million (based on yield gains relative to all conventional varieties). The maize seed technology has reduced insecticide and herbicide spraying. The average amount of herbicide active ingredient applied to the GM crop area was 26% lower than the average value for the conventional maize area and in terms of the associated environmental impact of the herbicide use[3], it was lower by 36% than the average value applicable to the conventional maize area. Insecticides were used on a significantly lower GM crop area and, when used, in smaller amounts. The average amount of insecticide applied to the GM maize crop was 78% lower than the average value for the conventional maize area and, in terms of the associated environmental impact of the insecticide use, it was also lower by 77%.

Crop Biotechnology Continues To Provide Higher Farmer Income And Significant Environmental Benefits

PG Economics Report 2020 - Farmers who planted genetically modified (GM) crops increased their incomes by almost $19 billion in 2018 and reduced carbon emissions by 23 billion kilograms or the equivalent of removing 15.3 million cars from the roads that year. The higher income represents $4.42 in extra income for each extra dollar invested, according to a report released today by PG Economics.

New Paper Quantifies 15 Years Of Economic And Environmental Benefits From Using Biotech-gm Crops In Colombia[1]

Highlights in the peer reviewed[2] paper include: About 1 million hectares have been planted to cotton and maize containing GM traits in Colombia since 2003 and in 2018, the technology was used on the equivalent of 90% and 36% respectively of the total cotton and (commercial) maize crops. Use of this technology has enabled Colombian farmers to obtain higher yields from better pest and weed control (+30.2% from using stacked - herbicide tolerant and insect resistant cotton and +17.4% from using stacked maize). The extra production and reduced cost of pest and weed control have provided maize farmers with higher incomes equal to an average of US $294/ha and an average return on investment equal to +US $5.25 for each extra US $1 spent on GM maize seed relative to conventional seed. For cotton farmers, the average increase in income has been + US $358/ha, with an average return on investment equal to +US $3.09 for each extra US $1 spent on GM seed relative to conventional seed. Farm incomes have increased by a total of just over US $300 million since 2003. The cotton and maize seed technology have reduced insecticide and herbicide spraying by 779,400 kg of active ingredient (-19%) and, as a result, decreased the environmental impact associated with herbicide and insecticide use on these crops (as measured by the indicator, the Environmental Impact Quotient (EIQ)) by 26%. The technology has also facilitated cuts in fuel use, resulting in a reduction in the release of greenhouse gas emissions from the GM cotton and maize cropping area and contributed to saving scarce land resources.

Asian Farmers Would See Annual Weed Control Costs Increase By $1.4 To $1.9 Billion Due To Potential Restrictions On Glyphosate Use, New Study Reports

A new paper published in the journal Agbioforum (1) points to higher weed control costs, less effective weed control, more difficult access to fields and lower yields, if farmers in seven Asian countries could no longer use glyphosate. The peer reviewed paper written by Graham Brookes of PG Economics Ltd examined the current use of glyphosate, the reasons for its use and what changes farmers would make to their weed control programs if glyphosate was no longer available for use. Seven countries were included in the study – Australia, China, India, Philippines, Indonesia, Vietnam and Thailand – as these were representative of countries where glyphosate use in agriculture is significant, countries that may be considering use restrictions for glyphosate and countries were farmers are planting glyphosate tolerant crops.