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Genes, Trade, and Regulation
The Seeds of Conflict in Food Biotechnology
By Thomas Bernauer PRINCETON UNIVERSITY PRESS
Copyright © 2003 Princeton University Press
All rights reserved.
ISBN: 978-1-4008-8013-3
CHAPTER 1
Introduction and Summary
Agricultural (or "green") biotechnology, the most cutting-edge contemporary technology in food production, faces an uncertain future. Will it follow the example of nuclear energy, which turned out to be one of the most unpopular and uneconomical innovations in history? Or will it revolutionize food production around the world? Are prevailing public and private sector strategies for coping with the most important political, economic, and societal challenges to agri-biotechnology effective in terms of creating a long-term global market for the technology? What policies could be adopted to shape the evolution of the technology in ways that benefit humanity and the environment?
In this book I argue that global regulatory polarization and trade conflicts have exacerbated already existing domestic controversies over agricultural biotechnology and have thrown the latter into a deep crisis.
Regulatory polarization has emerged as European Union (EU) countries have imposed severe regulatory constraints on agri-biotechnology, whereas the United States has opened its market to most agri-biotech applications. Other countries have either aligned with one or the other of the world's two largest economies, or they have been struggling to find some middle ground.
The analysis in this book shows that regulatory polarization has been driven by differences across countries in public opinion, interest group politics, and institutional structures. It also shows that regulatory polarization has created strong tensions in the world trading system. International conflicts over regulatory differences, which tend to act as non-tariff barriers to trade, have been intensifying since the first genetically engineered (GE) crops appeared on international markets in 1996.
The largest part of the book concentrates on: describing how regulatory polarization has emerged (chapter 3); explaining why it has emerged (chapters 4 and 5); and assessing the likelihood of escalation of international trade tensions over regulatory differences (chapter 6).
In light of this analysis I conclude that prevailing public and private sector policies do not add up to an effective strategy for mitigating or overcoming regulatory polarization, diffusing trade tensions, and creating a long-term global market for the technology. The dominant public sector policies include: establishing ever more complex and stringent regulations that are increasingly divorced from scientific evidence and insufficiently backed by robust institutional structures for implementation (this is largely the European Union's strategy for increasing public acceptance of green biotechnology); threats of escalating trade disputes over differing regulations to force open foreign markets for the technology (a strategy favored by parts of the US government, the US biotech industry, and US farmers). The dominant private sector policies include: educating consumers about the benefits and (low) risks of the technology; highlighting consumer benefits of future GE products; ad hoc efforts to accommodate consumer demand for non-GE products through market-driven product differentiation (crop segregation and labeling); lobbying the US government to force open foreign markets via trade disputes.
Continuing regulatory polarization and trade conflict darken agri-biotechnology's prospects for three reasons.
First, regulatory polarization locks in or even increases fragmentation of international agricultural markets, and it implies reduced market access for agri-biotechnology and its products. It thus reduces scale economies and returns on investment into the technology. And it discourages further private sector investment in a new sector that could otherwise grow into a market worth several hundred billion dollars. Because of uncertainties about market access for GE products, it also exerts a chilling effect on adoption of the technology by farmers around the world.
Second, as I will show in chapter 6, trade conflicts over differing agri-biotech regulations are very difficult to solve, particularly within the World Trade Organization (WTO). Thus, they threaten to tax international institutions and impact negatively on efforts to liberalize global trade in agricultural goods and services. They exacerbate problems of global market fragmentation and uncertainties about market access caused by regulatory polarization. And they amplify already existing domestic controversies over the technology. All this, again, impacts negatively on investment, research and development, and adoption of the technology.
Third, regulatory polarization and trade conflict slow down public sector support for agri-biotechnology. This concerns in particular support by richer nations for developing countries where the technology might be needed most for increasing agricultural productivity. EU countries, Japan, and other agri-biotech adverse states have been highly reluctant to include biotechnology in their development assistance programs. So have non-governmental organizations (NGOs). Moreover, many developing countries have refused help of this nature for fear of losing agricultural export opportunities in biotech adverse markets. This situation creates a "legitimacy trap." Agri-biotech proponents have made "feeding the poor" one of their key selling points. Continuing emphasis of this legitimating argument, but failure to deliver on this account, could undermine the legitimacy of the technology in both rich and poor countries.
The book ends with suggestions for policy reforms that could help to avoid the seemingly unavoidable trajectory that leads from regulatory polarization to trade conflict to stagnation or decline of agri-biotechnology (chapter 7). These suggestions focus on establishing strong regulatory authorities backed by robust liability laws, market-driven product differentiation based on mandatory labeling of GE products, and support for developing countries.
The genie is out of the bottle. Food biotechnology and its applications are with us, and the technology is developing rapidly. Based on current knowledge about the benefits and risks of agri-biotechnology, neither blanket bans nor libertarian solutions appear warranted. As with many other new technologies, complex trade-offs between public safety concerns and private economic freedom have to be found. Whether one supports or opposes food biotechnology, the starting point for politically stable and economically and ecologically sensible trade-offs must be a sophisticated understanding of where we stand, how we got here, where we are likely to go, and what the pressures towards particular futures are. If this book can help both supporters and critics of agri-biotechnology in this process I will have achieved more than I could hope for.
Finally, I have tried to present conceptual (or theoretical) arguments and the associated evidence in a way that makes the book accessible to non-social scientists and non-experts in biotech issues. I am confident, however, that social scientists and biotech experts will also find much theoretical and empirical food for thought.
Technological Revolution
Breathtaking innovation in biotechnology has brought humankind to the doorstep of a third "green revolution" within less than a century. The first green revolution, which began in the 1930s, was initiated by three developments: large-scale application of Gregor Mendel's work, carried out in the 19th century, on inheritance in plant breeding; discovery of inexpensive methods for the production of nitrogen fertilizer; and development of high yield hybrid corn. Rapid yield increases throughout the 1970s in corn and other temperate-climate crops were, in addition, obtained through increasingly effective fertilizers, pesticides, crop species, machinery, and farm management. The average farmer in modern agriculture is thus able to feed up to 30 non-farmers. The second green revolution, which took place in the 1960s and 1970s, carried the same technologies to the developing world and crops grown in the tropics (notably, rice).
The third green revolution, which is still at an early stage, was born in the 1970s and commercialized in the 1990s. It has been led by agricultural biotechnology. According to the proponents of this technology, it will result in another massive increase in productivity, with a predicted feeding ability far beyond 1:30. It is also expected to provide qualitative improvements in the food supply (e.g., healthier food).
Controversy
The advent of agricultural biotechnology sparked a worldwide public controversy of breadth and intensity unseen since the peak of the antinuclear energy movement in the 1970s and 1980s. The controversy over green biotechnology forms part of wider ranging societal controversies over various applications of biotechnology, notably, cloning and other biotech-related reproductive technologies, stem-cell research, xenotrans-plantation, transgenic animals, and genetic testing. Debates over such biotech applications also tie in with more general issues, such as world trade and globalization, intellectual property rights and the patenting of life forms, the future of agriculture, poverty and hunger, and the role of science in society. All of these issues involve clashes between natural science paradigms and political measures designed to cope with uncertainty and ethics. They also involve disputes over how to balance economic competitiveness and politically legitimate and viable regulatory systems for new technologies.
Most analysts regard 1996–97 as the watershed years in the controversy over green biotechnology. In those years, the first agri-biotech mass commodities appeared on international markets: Roundup Ready soybeans and Bt corn. At the same time, the first successful cloning of an animal (Dolly, a sheep) from an adult cell took place at the Roslin Institute in Scotland. Ever since, regulatory authorities around the world have been struggling with the issue. Media coverage has exploded. NGO campaigns and consumer revolts have become part of the political landscape of many countries. International trade tensions over differences across countries in agri-biotech regulation have built up. And the concept of the modern life sciences firm that integrates agrochemicals, crop sciences, pharmaceuticals, and health and food products has experienced a profound crisis.
The proponents of the technology claim that it will, in the medium to long term, help in reducing hunger, public health problems, and environmental stress. It will, in their view, result in cheaper and better food and it is necessary to prevent massive food shortages and environmental degradation as the world's population approaches 9–10 billion in 2050. Consumer benefits are said to include food with less organic contaminants and microorganisms, less pesticide residues, more vitamin A and other vitamins, higher iron and protein content, less cholesterol, longer shelf-life, and better keeping quality. Future products are expected to contain more micronutrients, less toxins, edible vaccines, and less allergens. Environmental benefits are said to include increased yields, which reduces the need to convert forests and habitat into farmland, reduced use of insecticides, herbicides, and nitrogen fertilizers, improved water quality and biodiversity, and soil conservation. Benefits to farmers purportedly include higher and more stable yields, more cost efficient and convenient pest control, reduced fertilizer cost, and higher profits.
The critics of agricultural biotechnology maintain that the medium- to long-term health and environmental risks of GE (or transgenic) organisms are poorly understood, and that the technology promotes excessive corporate power through patenting of the food chain. They also invoke a range of ethical concerns, arguing, for example, that the technology involves "tampering with nature."
Stakes
Whether consumer health, the environment, and the hungry will, in the long term, benefit or suffer from agricultural biotechnology remains open and contested. If the proponents' predictions materialized at some point in the future, humanity and the environment would benefit enormously. However, the public health, environmental, and commercial risks could also be considerable. Some readers may recall the prediction by Admiral Lewis Strauss, the head of the US Atomic Energy Commission, who claimed in the 1950s that nuclear power would eventually be too cheap to meter. Nuclear power turned out to be one of the most uneconomical and unpopular technological innovations in human history. It has not collapsed entirely. But it has never reached the adoption rate and market share that its proponents originally predicted.
Will green biotechnology suffer the same fate? We will probably know in 10–20 years from now. In the meantime, a better understanding of the political, economic, and societal determinants of the future of green biotechnology can help stakeholders to make well-informed predictions. It can contribute to more accurate assessments of public and private sector strategies for coping with challenges to agri-biotechnology. And it can be helpful in devising policy solutions that promote applications of agri-biotechnology that benefit both rich and poor inhabitants of our planet in ecological, human health, and economic terms.
For proponents and opponents of green biotechnology, the public health, environmental, and ethical stakes are obviously large. So are the more narrow economic stakes for biotech firms, farmers, food processors, and retailers.
As of 2002, the world market for transgenic crops and GE food products and ingredients was estimated at around 17 billion USD. It consisted largely of insect-resistant corn and cotton and herbicide-tolerant soybeans. By 2006, this market, in which soybeans and cotton will still hold the lion's share, is predicted to reach over 20 billion USD. The potential market for "white biotechnology", i.e., the use of GE plants for the production of vaccines, renewable sources of energy (e.g. ethanol), biodegradable plastics, and other goods could be much larger, possibly up to 100–500 billion USD per year by 2020. The area planted to GE crops stood at over 58 million hectares (145 million acres) in 2002 and is likely to grow further. Investment in agri-biotech research and development is difficult to estimate, but runs into billions of USD per year. Input suppliers (agri-biotech firms), GE crop farmers, as well as food processors and retailers that support agri-biotechnology have a lot to lose if the tide turns against this technology. Finally, billions of dollars in exports of GE crops or processed foods that contain GE organisms are also at stake.
Challenges on the Demand and Supply Side
In chapter 2 I claim that, despite ongoing scientific innovation and persistent emphasis by the technology's proponents of large upcoming benefits, agricultural biotechnology is facing a profound crisis. To support this claim I discuss the most relevant demand (i.e., consumer) and supply (i.e., producer) issues in agri-biotechnology. This analysis provides the starting point for describing and explaining regulatory responses and international trade tensions that exacerbate the current crisis. Chapter 2 also equips readers less familiar with agri-biotech issues with some background knowledge that will facilitate reading of subsequent chapters.
On the demand side, consumers have so far not benefited significantly from GE crops and it is still open whether they will, on average, do so in future. Nelson et al. (1999), for example, have calculated that full adoption of GE corn and GE soy around the world would (compared to no adoption anywhere) result in no more than a 4.9 percent price reduction (and less than a 2 percent increase in output) for corn and a 1.7 percent price reduction (and 0.5 percent increase in output) for soybeans. Other agri-biotech applications may produce more impressive results in terms of more and cheaper food, but we simply do not know at this stage. Moreover, because virtually all agri-biotech applications currently on the market focus on agronomic (or input) traits, GE products have not benefited consumers in terms of superior product quality (e.g., healthier food). Again, future products may provide such benefits. But whether and when such products will appear on mass consumer markets is still guesswork. These problems on the demand side (small consumer benefits) have been exacerbated by public controversies over health, environmental, and economic effects of the technology, as well as opposition on ethical grounds.
(Continues...)
Excerpted from Genes, Trade, and Regulation by Thomas Bernauer. Copyright © 2003 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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