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 2/3 rd 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