Biotechnology: International Diffusion, Recent Findings, and

Opportunities for China.

Carl E. Pray Agricultural, Food and Resource EconomicsRutgers, the State University of New Jersey

pray@aesop.rutgers.edu

Main points: • Spread of biotech

– Transgenic varieties (also known as genetically modified or GMs) continue to spread and have a major impact on production

– Other biotechnologies also important and less contentious, less known

• Empirical results on key issues– Industry concentration– Biosafety regulation– Health impacts– Transgenics to the poor?

• Opportunities for China

I. Spread of biotechnology

Adoption of biotechnology

• Transgenic crops – we know a lot because of controversy

• Tissue culture – extensively adopted in bananas, sweet potato, citrus, ornamentals

• Genomics and marker aided selection are increasing productivity of conventional breeding

• Livestock – few studies – BST in US, feed additives, vaccines and diagnostics (Rinderpest example)

Which crops in commercial production?

• Also small areas of potato, squash, papaya, tomato, green pepper, tobacco, chrysanthemums, and petunias

• NO MAJOR SUBSISTANCE CROP EXCEPT MAIZE

GM Area Major Crops (Millions ha.)

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101520

2530354045

Soybeans Maize Cotton Canola

1999

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2003

Which traits in commercial production?

• Also, virus resistance, increased yields, long shelf life, color, improved cooking oil.

GM Area by Trait

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Herb. Tol. Insect Resist H.T./I.R.

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Summary of economic impact studies

• Insect resistance– High input agriculture – small increase in yields, large

reduction in pesticides, profits up– Low input ag – large increases in yields, small

reduction in pesticides, profits up

• Herbicide tolerance– High input agriculture – no increase in yields, reduction

in pesticides and less toxic pesticides, profits up a little, savings in management

– Low input ag – studying South Africa now

Tissue culture and Marker Aided Selection

• Tissue culture – all commercial banana seedlings to reduce

disease and pests in early stages of growth– All citrus in Sao Paulo to reduce citrus cankor

• Marker aided selection and genomics– Cut in half breeding times in maize, soybeans,

and cotton in US – Starting to produce new traits in rice in Asia

II. Recent Empirical Results

Concentration in the US biotech industry

Concentration of Field Trial Activity and Number of Firms, 1988-2000

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1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

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Monsanto 4 Firms TotalNo.of Firms

Research output US – intermediate products – field trials

Research output US – innovations

Private Biotech/Seed Research

• Dramatic rise until late 1990s• Since 2000 R&D stagnent or

declining?– Monsanto reduced its research expenditure

which is about 85% biotech and plant breeding from U.S.$588 mil in 2000 to $510 mil in 2003 now increasing again – up 6% in 2004

• Research is focused on a few major crops

Recent econometric research and case studies of US experience

• No econometric evidence of concentration reducing research or innovation – Observed decline probably due to reduce expectations

of market size– Our data up to 2001 – may be too early

• Case studies of patents on research tools found little evidence of hold-ups

• Despite market power farmers capturing most of benefits from technology

• Special issue of Agbioforum 8(2&3) 2005 on this topic

Biosafety regulation

• For much of the developing world the absence of a biosafety regulatory framework is a major problem.

• In countries where regulations exist there are three problems:– Times lags and uncertainty about ability to obtain

approval for commercialization

– Cost to developers of technology

– Difficulties in enforcing regulations

Several new studies on costs of complying with regulations

• It cost US & European companies $7 to 15 million for the products now on market (Kalaitzandonakes 2005)

• It cost companies $2 million more to get Bt cotton approved in India

• $200,000 for Bt cotton in South Africa• It cost companies $100,000 to get Bt cotton

approved in China• This is part of the reason why companies

concentrate on a few blockbuster products

Studies also looked at enforcement of regulations

• In India 2/3rd of Bt cotton is illegal – safe but illegal

• China also has had problems with insect resistant cotton that was not approved

• Only tactic that has worked is approving superior products which will replace the illegal products

Health impacts on consumers and farmers

• Dr. Hu has shown health impacts of Bt cotton on farmers

• Current transgenic technology safe according to Academies of Science in France, US, China, etc…

• Potential health benefits from reducing natural toxins in grain

Bt white maize in South Africa

• Statistical association between the mycotoxin fumonisin in maize and esophageal cancer in South Africa and China

• Bt maize has less fungus and fumonisin in experiment stations

• Does this translate into reduced exposure to small farmers?

Spread of GM Crops S.AfricaTable 1: Percentage and estimated areas planted to transgenic crops (hectares)

Crop 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004

% Bt Cotton 50% <40% 70% 70% 81%

Bt Cotton area 13 200 12 000 25 000 18 000 30 000

% RR Cotton 0 0 <10% 12% 7%

RR Cotton area 0 0 1 500 3 500 2 500

% Bt Yellow Maize 3% 5% 14% 20% 27%

Bt Yellow Maize area 50 000 75 000 160 000 197 000 250 000

% Bt White Maize 0 0 0.4% 2.8% 8%

Bt White Maize area 0 0 6 000 55 000 175 000

% RR Soya-beans 0 0 5% 10.9% 35%

RR Soya-beans 0 0 6 000 11 000 47 000

Source: Percentages - CottonSA and SANSOR Area – author’s own estimations

Levels of Fumonisins in Bt & Non Bt Maize –Simdlangentsha

Levels of Fumonisins in Bt & Non Bt Maize – Hlabisa

Lessons for moving biotech to the poor – supply side

• Inexpensive regulations

• Strong IPRs

• Sufficiently large commercial market for original technology

• Government pressure on corporations to support poor

• Extension support

III. Opportunities for China

Opportunities for China

• Could make more use of available transgenic technologies – Many useful transgenic technologies developed by Big Ag could

be easily transferred but are not – maize, soybeans, RR cotton, RR canola

• Could use locally developed technology more extensively and produce transgenic varieties of new crops– Chinese scientists have developed technologies also – transgenic

rice– Multinationals are not working on most Chinese crops – the

potential market too small – but Chinese are – previous presentation

– Genomics and molecular breeding are starting to be used by public sector

Imported technology

• Chinese farmers can plant – transgenic cotton, tomatoes, and pepper and– choose between 100 plus varieties of transgenic cotton.

• US farmers can plant – transgenic soybeans, maize, cotton and canola to

choose from– Can choose from 1000s of transgenic varieties of these

crops

• South African farmer can choose many more crops than China

Chinese potential to export technology

• Big Ag has left the playing field open on “minor” crops from rice to millets and vegetables

• Rice – – export hybrid rice technology to US in 1980s

– export hybrid rice seed to Southeast Asia

– export opportunities for genes and transgenic seed if government approve use of transgenic rice

• Transgenic cotton – – China is exporting Bt gene to India

What is holding China back? • Quantity of public sector research is not a problem– it is China’s greatest asset

– Structure may limit production of public goods?– Technology transfer expertise limited

• Controversy over transgenic food discussed by Dr. Hu• IPR issues

– Difficulty in enforcing patents and plant breeders rights could reduce private technology development?

– Patent on research tools and genes as hold-ups in China ?– Patent elsewhere could limit exports of Chinese genes

• Biosafety regulatory issues– Uncertainty and time lags– Enforcement of regulations– Lack of harmonization with other countries affects exports

• Structure of seed/biotech industry – Restrictions on multinationals limits transfer of technology to China– Chinese firms are small –

• largest US $30 to 40 million sales (Monsanto sales $5 billion) • Ownership structure murky – most lack modern management