Australia's $3-billion export wool industry risks a "full-scale implosion" over animal welfare issues, according to Europe's biggest processor of raw wool.

Key points: Wool merchants sign petition calling for pain relief to be mandatory for all on-farm surgery for sheep

Wool merchants sign petition calling for pain relief to be mandatory for all on-farm surgery for sheep Former Australian Wool Innovation director says animal welfare issues compromising demand for wool

Former Australian Wool Innovation director says animal welfare issues compromising demand for wool Australian Wool Producers say petitioners fail to acknowledge huge improvements in animal welfare

Former director of Australian Wool Innovation (AWI) Laurence Modiano's family company owns Europe's biggest wool combing mill in the Czech Republic, and buys about 90,000 bales of Australian wool each year.

This week Mr Modiano released a petition co-signed by 70 per cent of the world's major early stage processers, calling for pain relief to be made a legal requirement for any on-farm surgical procedures for sheep of any age.

He said new national animal welfare guidelines released last month, which recommended that pain relief be optional for sheep under six months of age, were an invitation for radical animal rights groups such as People For Ethical Treatment of Animals (PETA) to attack the industry.

"We believe that the animal welfare issue is compromising the demand for wool," Mr Modiano said.

"On one hand, AWI is pumping millions into marketing and promotion. On the other, major brands are turning their backs on wool because of the perception of on-farm cruelty.

"And those that do use wool are worried that their products may be tainted by this association.

"I do not believe growers are cruel. But the Western world is simply incredulous that surgery takes place on-farm without pain relief."

The petition was released just days after AWI's biggest marketing event, the Woolmark Prize, was finalised as part of New York's Fashion Week.

Mr Modiano claimed the timing of the petition so close to the Woolmark Prize final was purely coincidental.

He said he had twice written to Federal Agriculture Minister Barnaby Joyce about the new animal health guidelines, but was told it was a matter for state and territory governments.

He felt a petition from processers was the best way to get their concerns across.

"Australians should sit up and take notice that the Chinese too agreed to sign the petition. It goes to show that there is a real concern that animal welfare is undermining all the investments that international processors have made in wool machinery," Mr Modiano said.

"Many of us are uncomfortable with the potential direction this may take. It is all very well demanding a premium. But the alternative is a full-scale implosion of the wool industry."

National Wool Declaration 'flawed'

Australian wool producers are now encouraged to complete a National Wool Declaration for the Australian Wool Exchange, revealing whether their flock has been mulesed — the surgical procedure where skin is cut from the breech of lambs to prevent potential blow fly strike.

This year more than 12 per cent of growers declared that they did not mules their sheep and about 21 per cent said they had used pain relief medication.

However, the industry said based on sales figures of the registered surgical spray Tri-Solfen, which was developed for post-mulesing, the number of growers administering pain relief was more likely close to 70 per cent.

Mr Modiano said the National Wool Declaration was flawed and Australian producers risked their wool being discounted unfairly without a legal requirement for pain relief.

"As the demand for 'cruelty-free' wool is rising, I expect discounting of undeclared wool to be very likely," he said.

"This is a great shame, because a great deal of undeclared wool falls into the non-mulesed, ceased-mulesed categories, and would therefore actually attract a premium."

'Major success story' for the industry

Australian Wool Producers, which represents about 14,000 growers, said the industry had spent nearly $60 million on animal health and welfare issues in the last decade, including $33 million solely on breech strike prevention.

Chief executive Jo Hall said it was disappointing the petitioners failed to acknowledge the huge improvements in animal welfare by wool producers.

"This is a major success story for the Australian wool industry," Ms Hall said.

"We find it is discouraging that the signatories are already referring to discounts for non-declared wool, as currently through the open-cry market system there has not been consistent premiums for those producers who are already providing what the customers apparently want."

She said the association was working to improve the National Wool Declaration and did not support making pain relief a legal requirement.

"WPA feels strongly that there should be less regulatory burden placed on wool growers — not more as the petition calls for," she said.

"Market forces, such as paying premiums, will be far more effective than regulatory enforcement in driving the uptake of pain relief."

A spokesman for AWI said Australia was the world leader in the development of on farm pain relief and the wool industry's global partners were actively selling this message.

"All AWI global marketing campaigns highlight the versatility, sustainability and providence of Australian wool and champion the best woolgrowers in the world," the spokesman said.

"Whilst former AWI director [Laurence] Modiano suggests AWI has the closest relationship to consumer brands, these organisations themselves decide any collaborative marketing efforts we enter. Given the current state of the wool market and our measurement of key projects, we believe these marketing efforts are effective."

Watch the story on ABC Landline, Sunday at noon.