China Is Done Biding Its Time
The End of Beijing’s Foreign Policy Restraint?
BRAVE NEW WORLD?
For more than ten thousand years, farmers have improved their crops by letting nature do the breeding and then choosing the tastiest, hardiest, or most productive offspring. This ancient technique was accelerated in the last century through more systematic attempts to oversee the breeding and selection process. Today, however, new scientific techniques are making it possible to design crops with far greater precision and effect than ever before.
The most controversial and important of these techniques are called "transgenic": they allow scientists to engineer new crops by splicing together particular genes rather than relying solely on the uncertain crosses that are the hallmark of traditional crop breeding. For some, the transgenic revolution in biotechnology is a horror. Tinkering with nature's order, they argue, will backfire when engineered genes escape to the wild and disrupt delicately balanced ecosystems. For others, plant engineering is a Promethean step forward that will lead to more nutritious, productive, and disease-resistant crops, which will in turn help alleviate global hunger and reduce the amount of land and pesticides used in agriculture.
The optimists are right about the promise of biotechnology. But in their eagerness to see new crops deployed, the most zealous advocates pretend that genetic engineering is similar to prior agricultural innovations, ignoring the fact that there are indeed substantial differences that call for new types of regulatory oversight. At the other extreme, a vocal minority of detractors has hyped the risks of crop engineering all out of proportion to reality and blocked the new technology's greatest potential contribution: advancing the welfare of poor farmers and consumers around the world through publicly funded crop programs. These divergent factions have made it hard for governments to implement balanced long-term policies for biotechnology.
To break the impasse and unleash the true power of crop engineering, countries, especially the United States, must pursue a long-term strategy for managing the gene revolution in agriculture, because markets by themselves will not do the job. Such a strategy has three essential components. First, governments must sustain the incentives for private companies to invest in crop engineering, particularly by reducing the risks of international trade disputes. Avoiding unwinnable trade disputes, especially with the European Union (EU), will allow innovators to thrive in more receptive markets, such as the United States and China. Second, they must support greater investment in agricultural research to ensure that the benefits reach the world's poor. And finally, they must reform the rules governing the treatment of intellectual property, finding a way to balance protecting innovators' intellectual property with ensuring access to new crops for the poorest farmers.
Farmers in the United States, Canada, Argentina, and China are already embracing the first generation of engineered crops. These have spread rapidly because the crops are engineered to make farming more efficient. For example, soybeans and canola (also known as rapeseed) engineered to withstand the powerful herbicide glyphosate have lowered the cost of weed control; farmers who plant these hardy crops need only apply glyphosate a few times to kill weeds, when previously up to a dozen less-effective herbicides would have been required. The value created by the innovations has been substantial, but consumers have not noticed because the benefits have accrued mainly to agricultural producers. For example, agricultural economists Jose Falck-Zepeda, Greg Traxler, and Robert Nelson found that more than half the value created worldwide by the invention of glyphosate-tolerant soybeans flowed to seed and chemical companies (mainly Monsanto) and farmers (mainly in the United States). Consumers did benefit from lower soybean prices, but the effect was not dramatic, since they generally encounter soy only after it is processed into some form of prepared food, where the raw beans account for only a tiny fraction of the final cost. Nevertheless, because of the profits to producers, crop engineering has spread faster than any other major agricultural innovation.
The next generation of engineered crops will focus on the qualities of the crops themselves, such as enhanced nutrition. But this application of transgenics requires demand from consumers as well as permission from national regulators. Consumers will likely pay a premium for improved flavor or nutrients, just as farmers have been willing to pay more for agricultural efficiency. Indeed, people already favor engineered pharmaceuticals such as insulin because they are less costly and of higher quality than the natural variety. Consequently, the profitability of these products, and hence investment in them, will depend on the regulatory choices made by the United States, Europe, and the developing world.
Like most innovations, crop engineering poses some risks that require vigilance. Regulators and seed companies must screen for allergies and other threats to food safety. They must also tame environmental dangers, such as the prospect of unwanted "gene flow" from engineered crops into the environment at large. This phenomenon could, for example, transfer a resistance to herbicides from crops to weeds, creating a "superweed" that is hard to kill.
For the most part, these regulatory issues can be dealt with using existing rules on how crops are grown and marketed. Yet opponents of crop engineering have exaggerated the potential dangers by claiming, for example, that splicing certain pest-killing genes into plants elevates the risk of cancer when those plants are ingested. In public debate, the most-cited source for this claim is a series of studies by scientist Arpad Pusztai, published in the British medical journal The Lancet, that purported to show that rats fed genetically modified potatoes developed tumors. Those studies were so poorly conducted that they failed review by outside experts. Still, when word of their existence leaked and critics howled of cover-ups, The Lancet published them anyway -- under a disclaimer suggesting that the findings were scientifically unsound. In addition to exaggerating the risks of engineered crops, moreover, critics generally ignore the benefits, including those that might offset the very risks in question -- such as improvements to crops that might reduce the need to spray potentially harmful pesticides. The real problem here, which actually applies to both traditional agriculture and crop engineering, is the lack of systems that could provide good long-term monitoring of the environment and hence data that could inform a serious analysis of the tradeoffs associated with different courses of action.
The challenge in responding to the biotechnology revolution is how to adapt existing rules to the new reality of crop engineering. In doing so, governments must avoid a number of pitfalls. Developed countries that embrace genetic innovations, for example, should not pretend that engineered crops are so similar to regular crops that no new laws are necessary. Genetically engineered food is such a sensitive issue that no slip-ups can be tolerated -- and current regulatory systems are so lax that some slip-ups are inevitable. The case of a variety of genetically modified corn sold under the brand name "Starlink" is sobering. The U.S. Environmental Protection Agency, under pressure from Aventis Crop Science to rush the product to market, approved it for use in animal feed but rejected it for human consumption (because it contained a protein with characteristics that might conceivably cause allergic reactions). When Starlink corn later showed up in taco shells, some consumers in the United States and importers in Japan and South Korea panicked, cancelling orders for U.S. corn in general.
In Europe and Japan the episode was viewed as proof that inadequate regulation in one country could lead to a problem that could spread rapidly throughout the world. Imagine the scandal if other genetically modified products, such as "contraceptive corn" -- a product engineered to produce antibodies that attack human sperm -- got mixed with sweet corn on its way to dinner tables. (The San Diego biotech firm that invented this product claims that, if commercialized, it would prohibit plantings near other corn fields. That assurance is similar to the one given by the inventors of Starlink corn, who assured the U.S. government that they would require farmers to keep the animal and human crops segregated.) Even tighter control will be needed in approving genetically modified animals, not least because animals are more mobile than plants and can spread genetic alterations more quickly. Genetic innovators were lucky that the controversy over Starlink subsided after only a few months; the public will tolerate few additional failures.
Developing countries, meanwhile, are an even greater potential source of problems, because with few exceptions the regulatory systems in these nations are not very advanced. China, for example, is probably the second most active center of innovation in crop engineering after the United States. Yet despite recent improvements, the Chinese system for overseeing field trials and approving novel crops remains highly opaque. This state of affairs poses dangers to all nations, because some of the problems stemming from improperly regulated biotechnology, such as gene flow from engineered to natural organisms, might affect global biological diversity. Moreover, the entire genetic engineering industry relies on the reputations that form around the technology, and so failure anywhere in the world will harm the industry everywhere. As Joel Cohen of the International Service for National Agricultural Research has argued, enhancing the use of biotechnology for the poor involves investment not only in the research itself but also in the "biosafety" mechanisms needed to assure that the research does not go awry. Building effective regulatory mechanisms in developing countries is therefore one of the most important areas for new investment.
A DELICATE DANCE
Governments keen to promote crop engineering, notably the United States, should avoid using the dispute process of the World Trade Organization (WTO) to pry open international markets -- especially the EU, where the public is not yet confident that crop engineering is safe. A series of regulatory scandals -- including the failure to stop "mad cow" disease in the United Kingdom, the contamination of food with dioxin in Belgium, and the spread of hiv-tainted blood in France -- has made many Europeans wary of government promises of food safety. The EU's common market, which requires a free flow of goods, also makes it difficult for some European countries to embrace a controversial technology when other members of the EU are under powerful public pressure to resist it. For these reasons, efforts to force crop engineering into Europe through trade measures will fail and, in the process, will only make it harder for WTO members to cooperate on more important issues, such as the core agenda for the new Doha development round of trade talks.
This round of WTO negotiations will need to confront several issues posed by transgenic technologies. One is the distinction between products and production methods. Global trade rules allow governments to impose some controls on trade in products, but they prevent governments from discriminating between domestic and foreign producers based on their methods of production. This distinction, however, is already eroding and will be particularly difficult to uphold for transgenic crops, because, although standard scientific measures of food quality cannot distinguish between the two, some consumers already view engineered crops as different from traditional crops. Producers of genetically modified products claim that their crops are the same as conventionally bred ones and should not face special labeling requirements or import bans. Opponents, especially in Europe, insist that the crops are inherently different.
The scientific evidence strongly suggests that these crops are safe -- sometimes even safer than conventional ones -- but it would be a mistake to force a resolution of the issue at the moment. The best remedies to the transatlantic impasse lie almost entirely outside the field of trade law. The starting point should be a recognition of the enormous achievement so far: despite completely contradictory policies on genetically modified foods, the EU and the United States have not filed a single formal trade complaint on the issue. Instead, they have found ways to accommodate each other's interests. Corn growers, for example, are preparing to deliver different kinds of corn to the European market separately, so that, in effect, U.S. exports will be unaffected by the European wariness about genetically modified corn. Nor have engineered soybeans sparked a trade conflict, because most soybeans exported to Europe go into animal feed and much of the soybean oil produced in Europe is reexported. The only way to sustain this delicate dance is to keep dancing. The needed measures are too complicated to write into a formal trade agreement. Moreover, neither side would be willing to formally acknowledge this sensitive and, until now, implicit game.
A formal trade dispute would push the two sides into opposing corners. For instance, the United States launched a trade dispute in 1995 claiming (correctly) that Europe's ban on importing beef produced with hormones was not based on sound science. The United States won, but its victory may prove Pyrrhic in the long run. Belying the relatively small amounts of trade at stake, trade negotiators from Washington and Brussels have clashed repeatedly over hormones ever since. The United States has retaliated against European products and the EU has never adopted a plan to comply with the terms of the original settlement. In matters involving food safety, which often arouse strong public passions, a clear decision from the WTO does not guarantee compliance. Rather, it can often redouble public convictions that international institutions are stealing their sovereignty.
There are worrying signs, however, that Europe does not understand its dance card. The latest round of rules working their way through the European legislative process might include the requirement that meat raised on genetically modified feed, such as from U.S. soybeans, carry a label -- despite the fact that no trace of the genetically modified protein appears in the final product and despite the absence of any evidence that the protein (if present at all) might be dangerous. Rather than attacking the EU's rulemaking frontally, the United States should focus pressure on this particularly egregious provision, in the hope that the EU can implement it in a way that would let the dance continue.
The innovations of crop engineering that deliver commercial value today -- and that promise even greater benefits tomorrow -- can also help the world's poorest societies meet basic human needs. Greater quantities of more nutritious food, supplied at lower cost, can alleviate hunger. Crops engineered to grow in salty soils, where traditional crops often wither, can allow societies to make fuller use of existing, degraded cropland rather than spreading to new areas. Applied properly, technologies that help make agriculture more efficient can also promote economic development: since farming is the single largest occupation of the rural poor, lightening its load on agricultural workers can free up time for them to pursue higher-earning occupations. An example of the revolutionary potential of biotechnology occurred late last year, when Kenyan farmers harvested their first trial crop of sweet potatoes engineered for resistance to an aphid-borne disease that previously had killed up to 80 percent of their crop.
Still, without help these technologies will not march directly into the service of the world's poor. Most investment in crop engineering innovations occurs in commercial markets; it is put up by investors seeking profits. And as with much high-technology research, only a small fraction of investment is directed at innovations likely to have a general application. Some breakthroughs have occurred -- as with the creation of genes that confer herbicide resistance or produce BT pesticide. But they will not yield much of practical value without further substantial investment to breed these properties into crop varieties that farmers can grow under local conditions and that will meet regulatory approval. The factors that keep these innovations from diffusing rapidly are complex and include a tangle of problems concerning intellectual property rights, but the central obstacle is investment. The world's poorest farmers are not attractive targets for private investors, so the task of developing and spreading usable new crop varieties has fallen to the public sector.
From the 1950s through the 1980s, world investment in public agricultural research and development rose steadily. This spending led to the first "green revolution" that spread high-yield seeds to the developing world in the 1960s and 1970s, one of the most successful efforts in the otherwise checkered history of development assistance. But as Philip Pardey and Nienke Beintema of the International Food Policy Research Institute have shown, the 1990s saw publicly funded research stagnate. For example, in the last 15 years, the total budget for the Consultative Group for International Agricultural Research (CGIAR), a highly effective network of 16 agricultural research centers worldwide, has barely changed in real terms. Just when the biotechnology revolution is offering the potential for a new pulse of success in rural agricultural development, key funders -- such as the EU and the United States -- have halted the momentum of investment in agricultural research and "extension" programs that help train farmers in the latest techniques.
The United States has led the exodus from public agricultural research. After peaking in the mid-1980s, the U.S. Agency for International Development's funding for such research in developing countries has declined dramatically. And some of the key funders of international agricultural research that remain, such as Germany, are nations that are least enthusiastic about widespread application of genetic engineering.
It is not fashionable, especially in Washington, to argue for foreign aid. The common charge is that public international assistance does not work -- indeed, much of the development assistance delivered in the last five decades has been wasted. But public agricultural research has consistently delivered real benefits in terms of higher-yielding crops, higher incomes, and fewer hungry people. Studies measuring the social return from investments in public agricultural research suggest it is one of the best public investments available.
The case for increased U.S. investment in this area is particularly strong for three reasons. First, key allies as well as development organizations are rightly putting pressure on the United States to show a greater commitment to economic development for the world's poor. The Bush administration is responding and announced in March 2002 a new, broad-based program for assisting the world's poorest nations. Reversing the severe cuts in U.S. support for agricultural research offers the greatest potential, with minimal expenditure, to lift incomes in the world's poorest regions.
Second, the revolution in genetic engineering offers the opportunity to increase the efficiency of agricultural research, making it possible to do more with less. Whereas developing a new crop variety through traditional breeding can require a dozen years, more precise genetic engineering has cut that time in half for some types of improvements. A shorter innovation cycle will save resources and also make it possible to develop some crops in "real time," responding to diseases and challenges as they arise. Yet today only a small fraction of the research activity within the CGIAR network actually applies transgenic tools. It will be hard to redirect research budgets when they are stagnant (or shrinking), especially when key funders are unenthusiastic about the innovation. Increased funding from the United States could yield multiple benefits by raising the level and efficiency of innovation.
And third, the United States has a special stake in the success of this technology, because much of the relevant commercial research takes place within its borders -- even firms with headquarters overseas locate a significant part of their research activities in the United States. Demonstrating that genetically engineered foods offer benefits to consumers -- including those in the developing world -- is a crucial part of assuring continued public support and investment.
All told, the level of U.S. investment in international public agricultural research should increase by about $100 million per year over the next three to five years. A substantial fraction of that incremental increase should be earmarked for genetic engineering technologies. For comparison, total revenue for CGIAR in 2000 was $342 million. That same year, U.S. spending on all foreign aid was about $9.6 billion; the proposed spending would amount to only a one percent increase.
By itself, more money for agricultural research will not unlock the potential of transgenic technologies in the developing world. Another barrier, less formidable but still important, involves the laws governing intellectual property. Policymakers must strike a delicate balance between the interests of innovators -- who want strong protection of their research -- and the public interest in applying advances in genetic engineering to the world's development problems. Until the biotechnology revolution began, private control of intellectual property was not a significant barrier to agricultural innovation because traditional breeding worked mainly with seed stocks that were held in public gene banks and available to all. Intellectual property, where it was claimed at all, was protected through systems of "plant-breeders' rights." This allowed researchers to license their innovations but in most cases did not forbid farmers from using new seeds for the next year's planting nor prevent other breeders from using improved strains to make still further improvements. Starting in the 1980s, however, significant new patent rights began to be granted for plant innovations. Moreover, along with the biotechnology revolution in agriculture came the rise of pharmaceutical biotechnology, and both operate on similar economic principles: huge up-front costs in development and drawn-out regulatory approval have led firms to demand exclusive patent rights, rather than the less strict plant-breeders' rights, for their genetic innovations. The result has been a proliferation of patent claims and counterclaims by companies who fear losing out on potentially lucrative developments.
Clearing this intellectual property congestion requires solving two problems. One is that a growing fraction of intellectual property in crop engineering is in private hands, and thus a mechanism is needed to allow others to use these innovations -- either for free or with compensation. This is unlikely to happen without government intervention. More public research, meanwhile, is also becoming tied to patent rights. In the United States, the Bayh-Dole Act of 1980 has encouraged most universities to establish intellectual property rights on their innovations in the hope of reaping blockbuster licensing revenues. The jealous guarding of university research, often partly funded by public revenues, further ties up ideas that would otherwise be freely available.
The other problem is that modern plant varieties combine dozens or hundreds of innovations, making it practically impossible to define ownership. Modern wheat varieties, for example, are the product of several dozen distinct ancestors that date back to the late nineteenth century. Innovations from gene engineering will overlay still more complexity, because crops bred to have improved outward traits -- such as flavor -- will, in most cases, require multiple genes and therefore involve multiple patent claims. And intellectual property protections can lock up even relatively simple crop innovations.
These problems have no easy solutions. A program that could evolve over time into a durable solution would involve reducing the cost of accessing the innovations that researchers weave into new products. Efforts to build capacity in intellectual property law can also help public research institutions as well as private firms in developing countries navigate patent rights more easily. Indeed, most international assistance to developing countries on crop engineering has focused on the technology itself; very little attention has been paid to the legal infrastructure for using the technology. The new Management of Intellectual Property in Health Research and Development program recently established by the Rockefeller Foundation and other donors to ease access to modern drug innovations may offer a model. Governments should also experiment with mechanisms to allow pooling of patents so as to offer a single point of negotiation between innovators and farmers. Although most patent-holders would want to negotiate their own compensation, the CGIAR could at least nominate innovations that are especially critical for the world's poorest farmers and use those to start the pool.
The second fundamental need extends from the first: not only should it be easier to access intellectual property generally, but governments must also experiment with temporarily setting aside patents or mandating reduced costs for certain critical innovations. This topic is highly controversial and it may prove impossible to develop a general mechanism for allowing low-cost access to intellectual property. The purpose would not be to offer free blanket access, which is clearly unsustainable, but to grant partial property rights for products that are intended only for poor farmers.
It will not be easy to determine which products merit such access, but the difficulty of the task should not deter these efforts. In fact, the major crop engineering firms already grant large amounts of intellectual property to developing countries. Monsanto, for example, has made its sequence of the rice genome freely available to researchers. The firm also sells cotton engineered with BT pesticide in China and tolerates widespread illegal copying of its cottonseed because it has no alternative; an imperfect market in China is better than none at all. These actions reflect a broader understanding in the private sector that, in the real world, firms cannot charge whatever they want for their intellectual property in every market. The next step is to codify this recognition in a way that channels the concessions to those who need them most.
So far, lack of access to intellectual property has not been an impassable obstacle in the application of gene engineering on behalf of the world's poor. In part this is because the industry, reeling from public opposition to its technology, has regularly given away its intellectual property for highly visible research programs intended to benefit poor farmers and consumers, such as the creation of vitamin-enriched "golden rice." Another factor is that few engineered food crops have been planted on a commercial scale in developing countries, and none of the engineered crops developed in public agricultural research centers has spread widely. The technology is still in its infancy and therefore the prospect of patent challenges is right now hypothetical. This state of affairs will work temporarily but it is not a durable model for fostering innovation; researchers, governments, and farmers must work for a permanent solution.
The furor over food engineering not only affects the future of agriculture but is also emblematic of the fits and starts over globalization. Originating in the basic research of a few countries, crop engineering has spread rapidly through global networks of scientists and the global marketplace. Moreover, changing patterns of innovation are altering the global pecking order. The United States is the leading innovator in crop biotechnology, with China rather than Europe in second place. Agricultural biotechnology has already exposed one of globalization's greatest challenges: accommodating differences in national regulations while also opening borders to trade. That tension is most evident in the looming dispute between the United States and the EU, but it affects many other countries as well -- indeed, the first formal trade dispute over market access for engineered foods involved Egypt and Thailand. In addition, the United States and China are now wrangling over access for U.S. soybeans to the Chinese market.
As in the globalization debate generally, multinational corporations have been a lightning rod for discontent. During the 1990s, innovations in transgenic crops concentrated in the hands of three major corporations: Monsanto, DuPont, and Syngenta. These firms are still absorbing their smaller rivals and may consume one another. This concentration of power and these firms' global presence -- two sides of the same coin -- make their role controversial. Opponents of the firms focus on the large slice of the benefits from crop engineering that the firms take for their investors; supporters underscore that without these innovations there would be no benefits at all.
These tensions will not resolve themselves. Mounting pressure by innovators to ensure open markets for their products will lead to trade disputes, yet prosecuting those disputes will backfire because democratic governments respond to public fears and concerns and not only to the dictates of international institutions such as the WTO. And ever-stronger intellectual property rights could undermine rather than promote innovation. The great promise of globalization, meanwhile -- that the benefits from free markets and market-driven innovation will lift incomes everywhere -- will fail to be realized if the world's poorest and hungriest peoples do not share in the benefits of transgenic innovation.
All this means that realizing the potential of agricultural biotechnology will require activist policy reform, not a laissez faire approach. Countries must tailor their regulations so as to minimize harm to trade while also responding to consumer concerns. They must recognize the weakness of international institutions in confronting politically popular regulations. They must increase public investment in agricultural development. And they must create intellectual property rules that encourage firms to both share and expand their intellectual property.
Early in 1999, at the World Economic Forum in Davos, un Secretary-General Kofi Annan proposed the creation of a "global compact" with business to "build the social and environmental pillars required to sustain the new global economy and make globalization work for all the world's people." Firms, governments, and international organizations have enthusiastically embraced this goal in principle. Agricultural biotechnology offers an ideal test case for seeing whether all that was just empty talk.