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Perspective
World
trade rules affect horticultural biotechnology
Daniel A. Sumner, Director, UC Agricultural
Issues Center
A major promise of biotechnology
is reducing the cost of delivering higher quality fruits and
vegetables to malnourished or hungry people. Above, a
produce market in Vietnam. Photo: 1997 IFPRI/Philippe Berry
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Agricultural biotechnology and globalization seem to go hand-in-hand
in the popular press, and protesters condemn both in the same breath.
This perceived bond is puzzling to those involved in the international
agricultural trade, much of which has little connection to biotechnology.
The development and marketing of biotech-related products have no
more international linkage than any other area of agriculture.
 However,
globalization and biotechnology do affect each other. Global relationships
between businesses and governments shape markets for biotech crops,
which in turn affect rates of scientific innovation and adoption.
Agricultural biotechnology has important implications for hunger
and nutrition, intellectual property protection, food safety and
environmental quality, all with international dimensions.
Innovations
developed in one country may be adapted and applied elsewhere. In
addition to trade in biotech-related foods and inputs (such as seed),
the science itself is traded. Firms export biotech seeds and plant
materials for research, planting them where the technology will
be applied. Rules facilitate trade by protecting the intellectual
property of exporters while securing the human, agricultural and
environmental safety of importers. These rules foster widespread
benefits from research and development (R&D) investments, while
creating research incentives. Global markets are crucial to reap
the benefits from scientific investments, reduce global hunger and
improve the diets of the poor.
 
Members of the World Trade Organization
have wide latitude in specifying trade rules related to food
safety and the environment. Left, a Monsanto scientist
prepares materials for an experiment. Photo: Monsanto Right,
agricultural products are often shipped by sea. |
A major
promise of horticultural biotechnology is reducing the cost of delivering
higher quality fruits and vegetables to malnourished and hungry
people. However, today some of this research is being diverted or
delayed by international restrictions on trade or use of biotech
inputs such as seeds. Some consumers and whole parts of the world
have opted out. For example, the European Union banned imports of
all new transgenic crops and products beginning in 1998; Japan approves
such imports on a case-by-case basis. Several African countries
have refused shipments of unmilled genetically engineered grain
in spite of widespread hunger and malnutrition.
Despite
the controversy, biotech products are subject to the same international
trade rules as other agricultural products. The General Agreement
on Tariffs and Trade (GATT), administered by the World Trade Organization
(WTO), sets rules for all traded biotech goods. The WTO is a voluntary
"club" of nations, with no enforcement mechanism. It relies
on members to voluntarily comply with agreements. Three overriding
principles of the WTO are that members' regulations regarding trade
must be transparent, not discriminate among WTO members, and not
favor domestic sellers relative to imports.
The Agreement
on Sanitary and Phytosanitary (SPS) Measures of the GATT recognizes
that members establish their own rules for food safety and environmental
protection. The WTO Web site notes that SPS regulations "must
be based on science; they should be applied only to the extent necessary
to protect human, animal or plant life or health; and they should
not arbitrarily or unjustifiably discriminate between countries
where identical or similar conditions prevail." The Cartagena
Protocol also deals with some aspects of cross-border shipments
of biotech-related materials. However, major agricultural exporters,
such as the United States, Australia, Canada, Argentina and New
Zealand have not ratified the protocol and it does not exempt any
nation from GATT obligations.
Although
WTO members have wide latitude in specifying trade rules to ensure
food and environmental safety, they have nonetheless been subject
to formal dispute. The United States and other nations have filed
formal proceedings with the WTO concerning the European Communities'
"Measures Affecting the Approval and Marketing of Biotech Products."
Their argument is that the European Union has erected barriers that
are not based on the sound application of science and thereby inappropriately
block importation of safe products. Related issues concerning, for
example, specifics of product labeling, have not yet reached formal
WTO disputes, but may be on the horizon.
The dispute
has important implications for horticultural biotechnology. The
initial costs of applied biotech R&D are substantial, in part
because governments require costly procedures to assure that the
research and testing are safe. Most markets for horticultural crops
are quite small relative to major field crops, and the markets for
biotech horticultural seeds and other materials are small. When
international trade restrictions artificially limit their geographic
scope, firms are reluctant to invest in bringing new varieties to
the market.
In addition,
firms that market horticultural products internationally may be
hesitant to support biotech varieties if they believe the market
for the final products will be limited to a few countries especially
if the introduction of biotech crop products results in a loss of
international markets for conventional varieties. For example, tree
nuts and some tree fruits have substantial shares of their sales
in Europe, Japan and Korea. Maintaining access to these markets
discourages firms from using biotechnology to develop new cultivars.
If trade
restrictions and limited market prospects continue to discourage
horticultural biotech in developed countries, future investments
and planting may occur mainly in developing countries, such as China.
However, if major biotech investments were limited to poorer countries,
the pace of science would slow and technological benefits would
be limited. Further, farms and firms in developed countries, such
as the United States, would lose some of their long-held technological
edge.
Government
restrictions on trade in biotech-related products reflect political
choices and are designed to limit the choices of farmers, marketers
and consumers. So, for example, if consumers simply did not wish
to purchase biotech products or marketers simply did not wish to
sell such products no import barriers would be needed to keep the
products out of the market.
Trade regulations
for biotech products have evolved for several reasons. Policymakers
may think the products could be unsafe and believe they should therefore
restrict their availability to consumers. Domestic forces determine
such policies; however, when the policies affect trade, core WTO
principles apply. Policymakers may also believe that importation
is likely to spread diseases, weeds or other contaminants. This
environmental argument applies more to seeds or plant materials
than to food. Trade rules similar to those regulating invasive species
may apply. For example, governments concerned about potential drift
of biotech-derived seeds to native habitat must show that regulations
do not harm trade partners disproportionately.
Finally,
the pressure to insulate and protect domestic markets is pervasive.
Often these pressures come from producers of competing products,
but increasingly the pressure comes from groups claiming to oppose
globalization per se, or oppose certain technologies, per
se. Accepted trade rules, however, require that WTO members
have credible scientific evidence that imports pose a significant
potential hazard before trade may be restricted.
Labeling
is one way that governments and market participants respond to demands
for information about products, including those related to biotech.
Private labels are used to encourage consumers to buy products and
to enhance profitability. GATT principles apply only to government
regulations that surround such private labels. For example, when
governments require that label claims have an objective verifiable
basis, they must apply the same standard to claims about the safety
of imported biotech-related products. Label specifications that
are required by governments themselves are more contentious because
they can more easily discriminate against imports. In the GATT,
governments set label specifications that do not discriminate against
imports and have science-based environmental, health or safety foundations.
Nonetheless, wealthy countries apply many rules for labeling consumer
products and have wide latitude about how they are applied.
Global controversy
over agricultural biotechnology has led to a bifurcated market for
new technologies. Trade restrictions have reduced adoption and slowed
the pace of scientific investment. It is unclear if this bifurcated
market will continue or if governments will gradually allow farmers
and consumers to make their own purchasing decisions. Government
trade restrictions seem unlikely to block the long-term global spread
of biotechnology, unless new science reveals some major new concerns.
However, for horticultural biotechnology, the most immediate issue
is not trade barriers, but market acceptance by consumers and producers
in countries that are already open to agricultural biotechnology
more generally.
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