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

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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_at_aesop.rutgers.edu

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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

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I. Spread of biotechnology
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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)

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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

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Which traits in commercial production?

• Also, virus resistance, increased yields, long
  shelf life, color, improved cooking oil.

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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

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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

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II. Recent Empirical Results
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Concentration in the US biotech industry
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Research output US intermediate products
field trials
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Research output US innovations
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Private Biotech/Seed Research

• Dramatic rise until late 1990s
• Since 2000 RD 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

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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(23) 2005 on this
  topic

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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

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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

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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

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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

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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?

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Spread of GM Crops S.Africa
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Levels of Fumonisins in Bt Non Bt Maize
Simdlangentsha
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Levels of Fumonisins in Bt Non Bt Maize
Hlabisa
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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

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III. Opportunities for China
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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

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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

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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

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What is holding China back?

• Quantity of public sector research is not a
  problem it is Chinas 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