1. EEP 101-CONTAINMENT OF RISKS &THE EVOLUTION OF BIOTECHNOLOGY David Zilberman

2. State of ag biotechnology  The cup is half full=High adoption rates in major crops in U.s. Argentina,China  Half empty-  practical ban in Europe &Japan  Restrictions slowed adoption and product development  Under-development of technology in minor crops& developing countries  Concern about risk major reason for resistance

3. Presumed Points of Failure 1. Productivity: Biotechnology aims to solve problems of the North; will not make a difference in the South. 2. Access: Biotechnology is controlled by corporations; will not be accessible on feasible terms to poor peasants. 3. Risks: Damage to environment and human health, contamination of native genetic materials, and loss of crop biodiversity

4. Impacts of ag bio tech on productivity

5. Ag biotech and development  Ag biotech was developed in the north, with application to crop and varieties of developed countries  It mostly served to reduce pesticides use and improve profitability.  Is the first generation of biotech appropriate to developing countries  -will it increase yields?  How will it affect crop biodiversity?  We will address these issues here

6. Theory: Impacts of ag biotechnology vary Theory: Impacts of ag biotechnology vary  The impacts of ag biotechnology on yield depends on  where it is applied  How it is applied  What was used before  The management of the crop before and with biotech depend on  socio economic situations and  institutional arrangement associate with biotechnology  Two important factor  The extent of use of chemicals  The varieties that are being modified

7. Productivity: Yield-Increasing Potential  Yield = potential output x (1 - damage) damage = f (pest, pest control) damage = f (pest, pest control)  Combination of high pest pressure and minimal existing use of pest control  potential for yield- increasing effect  Attractive features of pest-control agricultural biotechnologies  Simplicity of use  Reduction in use of chemicals or labor  Expansion of weather conditions where crop grow

8. Technology, variety changes and yield effect  Adoption of GMO may entail a switch from local variety to generic variety  This switch may reduce yields  Yield gain =Reduction of pest damage of generic variety - Difference in net yield between traditional and generic

9. Example 1  Potential yield local variety =4 ton/ hectare  Potential Yield generic variety 3 tons/ hectare  Damage 50%  Bt reduce damage by 100%  Yield effect of modified local variety 4 - 4*(1 -.5) = 2 4 - 4*(1 -.5) = 2  Yield effect of generic variety 3 - 2 = 1

10. Productivity: Evidence for Bt Cotton Gains Bt cotton in:  United States: yield effect 0 – 15%  China: yield effect 10%  South Africa: yield effect 20%-40%  India: yield effect 60 – 80 % In every country have reduction in chemical usage

11. Some Indian Stories  Field trials in 2001-2 has yield effect of 80% with generic variety and 87% with local GMV  Pesticides use decline by 70%  No wonder yield loss can be 60%  In 2002-3 when actual cotton was planted yield effect was between -10%-30%  Law pest pressure  In some locations a wrong variety was introduced  The yield gain in 2003-4 was higher-higher pet damage

12. Robin hood and GMV  In Gujjarat a local breeder introduced illegally Bt cotton with spectacular result  A unholy alliance of environmentalists and companies wanted the cotton to be burned  Farmer demonstrated and the cotton saved and Bt legalized

13. Bt as insurance  It is meaningless tp speak about yield effect since pest damage is a random variable and yield effect varies  A switch to generic GMV may reduce yield in a good year but increase it substantially in a bad one  Bt increases mean yield but reduces variance and especially down side risk-where pesticides are costly and yield losses still may result in bankruptcy

14. Example 2 Potential yield: 6 local variety 4 generic variety Damage 25% with 50% probability 50% with 50% probability Bt eliminates pest damage Adoption of generic Bt Reduces yield from 4.5 to 4 with 50% probability Increases yield from 3.0 to 4 with 50% probability Adoption of local Bt Increases yield from 4.5 to 6 with 50% probability Increases yield from 3.0 to 6 with 50% probability

15. Biotech risk and farm size  The gain in terms of risk bearing cost is main reason for adoption even in US  Small farmers that have little access to insurance and formal credit market may be beneficial of lower risk  Seed technology has minimal economics of scale, reduce need to invest in pest control equipment and reduce monitoring time- thus may be appealing to small farmer if affordable and Modification is done with a good variety

16. Predicted yield effects of pest controlling Biotech

17. Environment: Relative to Modern Breeding Biotech Can Enhance Crop Biodiversity  Main premise: Agbiotech allows minor modification of existing varieties and under appropriate institutional setup can be adopted while preserving crop biodiversity  Conventional breeding involves often massive genetic changes, and adjustments to accommodate biodiversity are costly and  Well functioning IPR system can lead to crop biodiversity preservation  Field data support this claim

18. Ag biotech and crop bio diversity

19. Table 1. Number of available varieties for different GM technologies in selected countries (2001/2002)

20. Environment: Biodiversity scenarios in the field  Strong IPRs, strong breeding sector, and low transaction costs. (US) Private technology owner will license the innovation to different seed companies, who incorporate it into many or all crop varieties, so that crop biodiversity is preserved.  Strong IPRs, strong breeding sector, but high transaction costs. (EU) If an agreement cannot be reached, companies will bypass breeding sector, directly introduce GM crop varieties that are not locally adapted.

21. Environment: Biodiversity scenarios in the field  Weak IPRs and a strong breeding sector. (China) Many different GM varieties are available Farmers and consumers are beneficiaries. SR social optimum.  Weak IPRs and a weak breeding sector. (Africa) If foreign GM crop varieties are even introduced, are done directly without adaptation. A loss of local crop biodiversity.

22. Biotech Could Enhance Crop Biodiversity  Conventional breeding led to wholesale replacement of land races with elite line monocultures  Biotechnology could provide precise improvements to traditional land races  Could lead to reintroduction of new “technologically competitive” land races - ”Jurasic garden”

23. Access and development  Intellectual Property Rights (IPR)  Registrations

24. Access: Biotechnologies in the South  Most IP is generated by research in the North  Transfer of public sector’s rights to the private sector provides incentives for development and commercialization  Companies have little incentive to invest in applications specific to the South

25. Access: Biotechnologies in the South  Companies are willing to give technologies for use in South; good PR  Companies worry about liability, transaction costs  Universities with rights to technology will also be open to transferring to South applications  Needed institutional mediation: IP clearinghouse

26. Access: Objectives of clearinghouse for IPR  Reduce search costs to identifying set of technologies accessible  Reduce transaction cost for the commercialization of innovations  Increase transparency about ownership of IPR  Provide mechanisms to manage negotiation of access to IPR  Improve technology transfer mechanisms and practices (mostly in public sector institution)

27. Non-member organizations Member organizations Non-member IP users Pooled sub-licensing Assignment, license, or option for full or limited fields of use Single patent sub-licensing “Re-packaging” IP providers: IP users: Member organization IP users Non-member IP users Direct licensing transactions Access: Model of a clearinghouse for IPR

28. Why Under investment in ag biotech  Regulatory constraints, IPR concerns reduce investment  Size of markets lead to under investment in minor crops  Lack of investment is because of prices of ag products  Development of ag technology is cyclical depend on market condition  Crisis leads to change

29. Developing countries & minor crop  Most ag biotech is developed for major crops in the north  Private companies in developed countries hold IPR for many GMO innovations  There is a risk that Africa will miss the gene revolution as it missed the green revolution.  Specialty crops may not attract investment in agricultural biotech & under-utilize it

30. Continued investment in public research  Risk of under investing in public research and development  Public sector research complement private sector. Through technology transfer there is continuity.  Public sector research contributes to competitiveness  Public sector R&D is essential in developing countries and minor crops

31. Private & Public research  Public sector research emphasize generalized basic innovations  Private sector research is product focus  There is complementarily between sectors  Technology transfer is crucial link  Private sector under R&D and that affects minor crops 

32. Diversification of research paradigm  There is a risk of overemphasizing biotech  Need public research in alternative solutions that is not embodied in products  Need regulatory research- with international cooperation and exchange of knowledge.

33. Access: Reducing Regulatory Constraints  Registration should be efficient. Excessive requirements may be used as a source of political economic rent seeking.  Borders are arbitrary. Countries can take advantage of regulatory clearances granted elsewhere and concentrate on addressing unique local problems and risks.  Countries should develop regional alliances for regulation and establish mechanisms for easy transfer of regulatory information.

34. Regulatory design-tougher is not better  Regulation has a role risk control and screening  Post regulation monitoring can correct mistakes-irreversibility happens -but not always  Tough regulation may lead to  Concentration  Delay of introduction of technologies  Reduced research and investment and retardation of technology  Need to optimize regulation

35. Impacts of regulation strategies  For plant that reproduce sexually- once a GMV variety is developed(an event) the gene is inserted to others through back crossing  Tough regulation of each variety lead to reduce choice and switching away from local varieties- a small number of varieties will be used and much of the potential of innovation lost  Regulations of events increase choice -cost of modifying specific varieties smaller

36. Regulation and pace of change  Varieties may change rather fast with conventional breeding  Slow regulatory process may result in insertion of GMVs in older varieties and loss of benefits obtained through conventional breeding-  Slow regulatory process slow innovation as it is reducing returns to and thus investment in innovation

37. Acceptance

38. Europeans attitude to Gmo  Lack of trust in government-Bse F &mouth  Insufficient food safety regulation  Strength of environmental movement  Biotech is American technology  Barrier to trade  Scientists and society do not want to fall behind

39. Acceptance  Progress of ag biotech depends on broad acceptance  Consumers have right to discriminate according to the way products are produced.  This discrimination should not be used to form trade barriers  A global Academy of science needed for dispute resolution  Regulatory constrained needed for acceptance. Concerns may be valid.

40. Labeling  Reasonable labeling is a reasonable regulatory requirement  Product tracing will reduce cost of safety maintenance.  Labeling will benefit industry in the long run.Enable product differntiation  Should be done privately subject to government monitoring

41. Risks

42. Risk Containment Approach for Policymaking  Risk = Probability of a bad event occurring during a period of time.  risk management to design policies to 1)maximize risk reduction within a given constraint on social costs. Or 2)maximize social welfare subject to risk constraints  Risk containment can be practiced locally&globally

43. Precaution in technology development  Precaution is not avoiding risks. It means containing risks in an adaptive process of continuous learning..  There are gaping holes in scientific knowledge, but it is the best we have.  Progress requires gradual expansion of capacity containing risks as we venture to new territories.

44. Even risk averse individuals take risk  There are many risk management strategies including:  Diversification  Insurance  experimentation  Not taking risks id risky

45. Multiplicity Of Risks  Individual risks can not evaluated in isolation. There are trade-offs in risk taking  Some of the risks associated with food policies include:  Food shortages  Environmental degradation  Market concentration  Poverty  Political instability

46. The Relations between risks and time  Risks may be correlated. High likelihood of Food shortages is linked with high poverty probability.  Governance design should have a long term perspective . Dynamic processes contribute to generation or reduction of risks.  Population growth may increase food shortage risk

47. Malthusian scenario&agricultural technology  Food grew faster than population throughout most of the 20th century  Food productivity growth is sluggish-but population is expected increase and food demand to double.  Food availability can meet the challenge by:  Increased productivity  increase intensification  Expansion of agricultural land and resource base 

48. Intensification and the environment  Alternative practices were introduced to reduce damages (IPM, Low Tillage, precision farming) with varying results  Intensive use of chemicals(pesticides and fertilizers), multiple cropping and intensive plowing leads to  risks to human and animal health  Contamination of bodies of water,  Soil erosion

49. Current ag biotech practices were invented to replace chemicals  Expectation of strict pesticides regulations motivated introduction of pest control ag-biotech  Its adoption is fast because of convenience as well as profitability. Underreporting of GMO use in India Brazil, and China.

50. Environment: Sound Basis for Risk Analysis  Is the Precautionary Principle a sound basis for risk analysis?  There are always trade-offs between risks and benefits, and between risks and risks.  In Africa, does risk of “genetic contamination” exceed risk of starvation?  Agricultural biotechnology should be evaluated in comparison to pesticides and other real alternatives.  In tropics, increased productivity would reduce pressure for deforestation.

51. Gmo’s are not perfect-  Gmo’s have problems-resistance buildup, damage to secondary pests, genetic contamination.  Refugia, monitoring of impacts, restriction of use in some locations can address these problems partially-but alternatives have problems and risks that have to be considered.  Agricultural biotech is in its infancy- built up of human capital and accumulation of -will lead to eliminations of many bug and lead to better technologies

52. Current ag biotech & risks  Realized risks of agricultural biotechnology thus far is small(in spite Monarch Butterfly)  Experimentation with agricultural biotech is vast(100million acres + annually), Each year without a major incidence adds confidence to the use of the technology.  yet monitoring is needed to continue.  Loss of ag bio-diversity is reduced when a diversity of GMO varieties is introduced.

53. New ag bio-technologies  Development of current GMO provided tools for more attractive future GMO- improving nutritional contents and health.  It may use plants as labs for chemicals and medicines.That may necessitate growing genetically modified plants that are not edible in order to protect our sources of food

54. Bio tech and environment  GMO leads to gains in terms of pesticides use reduction and reduce acreage as yields increase  Gene flow is a potential problem- need to be monitored  The risk depends on the gene inserted-Bt and vitamin C producing genes may be rather benign - but genes can produce toxins-regulations should vary

55. The Price of Excessive Regulatory Caution  The regulatory process of ag chemicals and biotechnology designed to respond to concerns of environmentalists, but also benefited agribusiness  Led to concentration  Reduced solutions available for small crops & reduce diversity &specialization of farming.  Reducing environmental risks increases concentration risks

56. Farm land expansion& the environment  Without increase in yield per acre population and demand growth will lead to expansion of agricultural resource utilization-deforestation, depletion of water resources,air and water pollution  Productivity increasing innovations crucial for protection of natural resources  U.S agricultural acreage has decreased throughout the century due to innovation& intensification.

57. Conclusions Agbiotechnology has significant potential for developing countries; the challenge is to realize that potential:  Productivity: yield effect of biotechnology tends to be larger in developing countries  Access: institutions can reduce IP and regulatory costs for developing countries  Risks: crop biodiversity can be preserved and could even be restored with biotechnology

58. Ag bio tech is only part of the solution  Ag biotech is more than Gmo’s.  It will evolve- alternative molecular approaches will be developed-but  knowledge will not be accumulated without experience  Development may be dependent on public and private sector funding  Ag biotech must be pursued as part of a portfolio of technology and knowledge tools aiming to enhance productivity and environmental sustainability of agriculture.

59. Europeans attitude to Gmo  Lack of trust in government-Bse F &mouth  Insufficient food safety regulation  Strength of environmental movement  Biotech is American technology  Barrier to trade  Scientists and society do not want to fall behind

60. Acceptance  Progress of ag biotech depends on broad acceptance  Consumers have right to discriminate according to the way products are produced.  This discrimination should not be used to form trade barriers  A global Academy of science needed for dispute resolution  Regulatory constrained needed for acceptance. Concerns may be valid.

61. Labeling  Reasonable labeling is a reasonable regulatory requirement  Product tracing will reduce cost of safety maintenance.  Labeling will benefit industry in the long run.Enable product differntiation  Should be done privately subject to government monitoring

62. Consider  250 million Americans are the “guinea pigs” for agricultural biotechnology. Northern countries also took the risk with cars and with modern chemicals.  Africa missed the Green Revolution; will it also miss the Gene Revolution?

63. Epilog Differences in attitudes US vs EU- is it consumers attitudes? Epilog Differences in attitudes US vs EU- is it consumers attitudes?  U.S. relative advantage in Biotech threatens European dominance in chemical pest control markets

64. Innovative capacity: Forward citations to US agbiotech patents By nationality of lead inventor and grant date of cited patent North American European Japanese

65. Innovative capacity: Forward citations to US agrochemical patents By nationality of lead inventor and grant date of cited patent North American European Japanese

66. Market incentives: Global crop protection market, sales US $ millions European corporations US corporations Japanese corporations Others agchem agbio/ seed agbio/ seed -10.2 % -1.2 % -1.0 % +12.9 % 1 yr. % change 2000 to 2001 Data Sources: Wood Mackenzie Agrochemicals, in Chemistry & Industry, November 1993 and Phillips McDougall, AgriFutura Newsletter, March 2002

67. Innovative capacity: comparing citation based indices of patent quality

68. Behavioral evidence: Double standards for the “precautionary principle”?  Double standards applied to intra-EU trade relations and external EU trade relations (Majone, 2003)  As applied to chemicals vs. biotechnologies?  Possible metrics?  Sources?

69. Behavioral evidence: Conspicuous industry absence from policy process? “When GM products came to the market in Europe, we were faced with contradictory statements or even silence both from regulators and from industry. This contributed substantially to the lack of confidence now present.” - Dirk-Arie Toet Nestec Ltd., 2001

70. Conclusions  Regulate not ban technologies  Effective &trusted regulation essential for innovation  Reform IPR introduce clearing house.  Compensate for biogiversity  Continue support for public research