Biotechnology: International Diffusion, Recent Findings, and Opportunities for China.

1. Biotechnology: International Diffusion, Recent Findings, and Opportunities for China. Carl E. Pray Agricultural, Food and Resource Economics Rutgers, the State University of New Jersey pray@aesop.rutgers.edu

2. 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

3. I. Spread of biotechnology

4. 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)

8. 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

9. Which traits in commercial production? • Also, virus resistance, increased yields, long shelf life, color, improved cooking oil.

10. 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

11. 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

12. II. Recent Empirical Results

13. Concentration in the US biotech industry

14. Research output US – intermediate products – field trials

15. Research output US – innovations

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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?

23. Spread of GM Crops S.Africa

24. Levels of Fumonisins in Bt & Non Bt Maize –Simdlangentsha

25. Levels of Fumonisins in Bt & Non Bt Maize – Hlabisa

26. 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

27. III. Opportunities for China

28. 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

29. 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

30. 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

31. 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