**TECHNOLOGY ADOPTION IN DEVELOPING COUNTRIES:**

**THE CASE OF GENETICALLY MODIFIED CROPS**

**Robert L. Paarlberg**

#### 10/23/03

**The views expressed in this and other papers associated with the NIC
2020 project**

**are those of individual participants. They are posted for discussion
purposes**

**only and do not represent the views of the US Government.**

TECHNOLOGY ADOPTION IN DEVELOPING COUNTRIES:

THE CASE OF GENETICALLY MODIFIED CROPS

Robert L. Paarlberg[^1]

10/23/03

The global adoption of genetically modified (GM) agricultural crops has
been presented by supporters of this technology as an example of "one of
the highest adoption rates for crop technologies."[^2] GM crop seeds
became commercially available to farmers in the United States, Europe,
and Japan in 1995-96, and since that time the global area planted to GM
crops has increased to 58.7 hectares (145 million acres), an area equal
to roughly two and a half times the total land area of the United
Kingdom. GM crops are now being grown by approximately 6 million farmers
in 16 different countries. As of 2002, more than half of all the
soybeans hectares planted world wide were GM, 20 percent of the world's
cotton hectares, 12 percent of the world's canola hectares, and 9
percent of maize hectares. The total global market value of these GM
crops by 2002, only six years after the technology had been introduced,
reached \$4.25 billion. [^3]

Beneath the surface of this apparent adoption victory lies a far more
complex picture. Most of the increased acreage planted to GM crops
remains confined to just a few countries in the Western Hemisphere. One
GM industrial crop, Bt cotton, is now being planted in some important
developing world countries (e.g., in China, India, and Indonesia) but GM
food and feed crops are not. As of 2002, 99 percent of all the world's
GM food and feed crop acreage could still be found in just four Western
Hemisphere countries: the United States, Argentina, Canada, and Brazil.
Why hasn't the GM food and feed crop revolution spread more widely?

The answer to this question is over-regulation. In most developing
countries it is not yet legal for farmers to plant any GM food or feed
crops. In all of the developing countries of Asia (including east,
southeast, and south) only one country so far -- the Philippines -- has
approved the planting of GM maize. The planting of GM rice, soybeans, or
potatoes has not been approved yet by any country in developing Asia. In
all of sub-Saharan Africa, only one country (South Africa) has yet
approved the planting of any GM crops (cotton and maize). The other 46
countries of this impoverished region are still proudly "GM free." In
all of North Africa and the Middle East, not a single country has yet
approved the planting of any GM crops -- not even cotton.

This over-regulation of GM crops in the developing world at first seems
out of character, as governments in the developing world are usually
eager to get their hands of productive new technologies, not push them
away. When regulating for health and environmental safety these
governments ordinarily err on the side of being too permissive rather
than too cautious. So why have these governments adopted an extreme
version of precaution when it comes to GM crops?

Developing countries beyond the Western Hemisphere are staying away from
GM food and feed crops because in this area they are following the
regulatory lead of Europe rather than the lead of United States.
European-style precautionary regulations (in the areas of food safety
and also crop biosafety) toward GM crops are being pushed into the
developing world through four distinct channels of influence:
Intergovernmental organizations (IGOs), bilateral development
assistance, NGOs, and commercial markets.

Leading IGOs in the fields of agricultural development that should be
promoting GM crops in the developing world (the World Bank, the CGIAR)
are not doing so for fear of losing political and financial support from
important European governments. Instead of promoting the spread of GM
crops these organizations are either studying them (the World Bank),
under-investing in them (CGIAR), or saying they are not needed (FAO).
These institutions increasingly speak with a European voice in part
because America's investments in multilateral institutions have recently
faltered. As the United States fell behind in paying its dues to FAO,
the relative influence of European governments grew within that
organization. When the U.S. cut its contributions to the core budget of
the CGIAR by 50 percent after 1992, U.S. influence within that
organization waned. EU contributions to the CG system are now twice as
large as U.S. contributions, so it should be no surprise to see Europe's
precautionary view toward GM crops blocking CG research in this area.

Meantime a parallel set of global environmental institutions that are
even more heavily dominated by European money and influence have been
busy promoting the tight regulation of GM crops in the developing world.
UNEP, an organization dominated by EU money and subject to heavy
European green party influence, is using money from the Global
Environment Facility (GEF) to persuade governments in the developing
world to ratify the highly precautionary 2000 Cartagena Protocol on
Biosafety (which took formal effect in September 2003), and to set in
place tighter biosafety laws and regulations for GM crops within their
own borders. The Cartagena Protocol empowers governments to block the
importation of living GMOs (LMOs) on grounds of precaution alone,
without any scientific evidence of risk. In this regard it has
undermined the traditional authority of the U.S.-favored SPS agreement
within the World Trade Organization.[^4]

A second channel through which European precaution is being projected
onto the developing world is bilateral assistance. When the cold war
ended the United States cut its agricultural development assistance
programs by more than 50 percent, but the European countries --
especially the Dutch, the Danes, and the Germans -- remained engaged,
and under the influence of green parties at home these European
governments have recently been using their assistance programs to help
governments in poor countries, especially in Africa, set in place highly
precautionary biosafety regulations for GM crops. The German development
assistance agency just announced a new 2 million Euro program in Africa
to set up biosafety testing labs and train lawyers and customs officials
in how to enforce the Cartagena Protocol. Instead of giving poor
countries the means to use this new technology, European development
assistance agencies are coaching poor countries in how to regulate it.

European-based environmental and developmental NGOs are a third channel
of influence. Groups such as Greenpeace, Friends of the Earth,
ActionAid, and Genetic Food Alert are active in the developing world
using demonstrations, press releases, lawsuits, and direct actions to
persuade governments to reject GM crops. Such actions blocked for 5
years the legalization of GM soybeans in Brazil, and more recently
blocked the planting of GM cotton in northern India. NGO campaigns in
southern Africa in 2002 helped persuade a number of governments in that
region, even when facing famine, to reject the importation of unmilled
GM maize from the United States as food aid.

The most important channel of European influence over GM crop regulation
in the developing world is the commercial marketplace. Europe imports
2/3 more food and farm products from the developing world than does the
United States. Europe imports more food and farm products from the
developing world than the United States, Canada, Japan, and Australia
combined. Governments in the developing world are trying to remain "GM
free" in food and feed crops today in hopes of retaining their
commercial access to this important European market. They know that
consumers in Europe would prefer not to consume GM foods, and they see
regulators in Europe setting in place increasingly onerous rules on the
labeling and tracing of GM foods through the market. The easiest way to
avoid antagonizing consumers in Europe and to avoid triggering these
onerous trade and labeling rules, is to remain GM free.

The EU Council and Parliament in 2003 enacted new regulations on the
labeling and tracing of GM foods and feeds, expected to come into effect
early in 2004, that will be highly prejudicial against exporting
countries that plant GM crops. Such exporters, if they wish to sell to
Europe, will now have to begin physically segregating GM from non-GM at
a low contamination tolerance threshold of just nine-tenths of one
percent. And when selling GM food and feed products to Europe they will
now have to provide not only a GM label (which will be stigmatizing in
the eyes of European consumers) but also an "audit trail" of legal
documentation tracing the GM product all the way back to the farmer who
planted the seed. Developing countries know they will be unable to
provide either the strict product segregation or the credible tracing
documentation required by these new EU regulations. The best way for
them to retain their access to the important European market will be to
plant no GM food or feed crops at all.

This analysis suggests that several dramatically different alternative
futures are now possible for the GM crops over the coming decade or so.
In the longer run this technology is nearly certain to become pervasive,
because of its power and growing record of safe use. Yet over the next
decade or so it is possible to imagine one scenario under which the
spread of the technology remains badly stalled. Under this scenario, the
planting of GM cotton would continue to spread in the developing world,
eventually even to the Middle East and Africa, but the planting of GM
food and feed crops would not spread significantly beyond the four
Western Hemisphere countries currently planting 99 percent of those
crops. In those four countries, moreover, the introduction of new GM
crop varieties (e.g., wheat) would be indefinitely postponed for fear of
international market rejection, and the share of U.S. soybeans and corn
grown under strictly contracted "GM free" conditions to service export
markets would begin to expand. Increasing numbers of scientists working
on GM crops would leave Europe and come to the United States, while
increasing numbers of U.S. food processing and manufacturing companies
that sell in Europe would relocate their production facilities to that
region, so as to be able to source GM-free ingredients and hence avoid
the cost and stigma of GM labels.

The big losers in this first scenario would be the U.S. biotech
companies and their shareholders who had earlier bet on the rapid global
adoption of this new technology, Poor farmers in the developing world
would also lose, as they would be denied access to the lower production
costs associated with GM seeds. Food consumer benefits (lower food
prices, and access to foods with enhanced nutrient properties) plus
significant rural health and environmental benefits (fewer applications
of insecticides and applications of fewer, less toxic, and less
persistent herbicides) would also be foregone in poor countries.

To avert such a discouraging near term future the United States
government is placing its hopes in the rules (the SPS and TBT
agreements) and enforcement powers (the Dispute Settlement Body) of the
World Trade Organization (WTO). Yet even if the DSB finds the continuing
EU moratorium on new GM crop approvals a violation of the SPS agreement,
and even if the EU consequently lifts its moratorium on new approvals
(rather than refusing to lift its ban, as it did in the beef hormone
case), exporters in the Untied States and the developing world will
still be left facing the EU's new and even more constraining regulations
on labeling and traceability. Winning a DSB case against the labeling
and traceability regulations will be far more difficult in the WTO (it
will have to be a TBT case, not a SPS case), and even if such a case is
won securing EU compliance will be even less likely, since these new
regulations are not just an informal policy of the Commission, but the
fully legitimate result of a two year democratic legislative process
between the Council and the European Parliament.

Some in the U.S. biotechnology industry may be hoping that the emergence
of a second generation of GM farm crops with attractive "food traits"
will eventually overcome consumer resistance in Europe, thereby
loosening the regulatory straightjacket. Crop scientists in the
laboratory have already been able to insert plant traits for higher
quality oils, or for reduced allergens. Yet European consumers have so
far shown no interest in using GM foods as their pathway to better
health. They will continue to favor getting vitamins and minerals either
from foods they view as "natural" or from pharmacies and drug stores,
rather than from farmers and grocery stores. Environmental and
development NGOs in Europe have shown no interest in "food trait" GM
crops; they have criticized transgenic vitamin A enriched "golden rice"
just as harshly as they have criticized agronomic trait GM crops such as
herbicide tolerant soybeans or insect resistant maize. This second
generation of GM crops with distinct food traits would have to be
regulated more strictly than the first generation of GM crops, which
were substantially equivalent to conventional crops from the consumer's
vantage point. Because the second-generation crops will be more like
drugs or medicines, they will have to be regulated more like drugs or
medicines, which is to say more tightly.

WTO actions and the second-generation crops are thus not likely to be
the key. In order to imagine an alternative future in which the rapid
spread of GM crops is not delayed by Europe's influence, on the
developing world, we must make two assumptions. First, we must assume
that farmers attracted to the new technology will defy regulators and
plant GM seeds illegally. It was the spectacular success of illegally
planted GM cotton seeds in India that eventually forced national
regulators in that country to permit the legal planting of GM cotton in
some regions in 2002. It was the wide spread of illegally planted GM
soybeans in Brazil that finally forced the government of that country to
legalize the technology in 2003. GM soybeans are now spreading illegally
into several other countries in South America, and in Asia, a black
market has emerged for GM cottonseeds from China.

Second, we must assume that China will eventually lead the way in Asia
by commercializing not only GM maize (primarily an animal feed in that
region) but also GM rice. China has been holding back on the
commercialization of GM maize since 1998, for fear of lost export sales
in the region to countries such as Korea, and it has been holding back
on GM soybeans ever since a shipment of GM soy sauce (crushed from U.S.
beans) was turned back from Europe in 1999. China has also been holding
back on GM rice, another occasionally exported food crop. But as China's
spectacular success with GM cotton spreads[^5], and as its domestic
needs for maize and rice continue to grow with population size and with
the income-driven enrichment of China's diet, officials will almost
certainly decide at some point to set international market acceptance
concerns aside, and legalize the planting of GM maize and rice. Chinese
officials will make this decision if only to avoid a continuing waste of
the substantial state investments they have long been making in
developing their own GM crop technologies.[^6] Because China has
developed its own varieties of GM rice, it will be able to commercialize
this technology without any increased dependence upon an unpopular and
mistrusted private international company such as Monsanto. It will be
able to celebrate the release as a victory for the nation's own
scientists. China could also find it easier to go first in making such a
break-through decision, compared to the countries of South or Southeast
Asia, because in the PRC environmental NGOs from Europe are given less
room to operate, and because China is less dependent on international
assistance from Europe or on European-dominated IGOs.

Once China goes ahead with the commercialization of a crop such as GM
maize or GM rice, other nations in Asia could quickly follow. India has
also made significant state investments in developing its own varieties
of GM rice, and like China it faces rapidly growing food needs in the
decades just ahead. India is currently growing its second crop of GM
cotton, and like China it could use this industrial crop success as the
foundation for approving GM food crops. Indonesia, another Asian giant
already growing GM cotton, could then take the GM rice step as well.

In this alternative scenario the developing country regions most likely
to remain resistant to GM food and feed crops will be Sub-Saharan Africa
and North Africa and the Middle East, partly because of the
preponderance of post-colonial European political influence and
commercial ties in both of these regions. The planting of GM cotton may
at some point begin to spread in Africa and the Middle East, but weak
national research programs unable to develop home-grown GM food
varieties, plus fears of lost market access in Europe, plus biosafety
fears and regulations spread by European-influenced IGOs and NGOs, may
combine to keep GM food and feed crops out of these two regions for some
years into the future. If so, this second scenario will fall short of
being an ideal scenario for poverty reduction and enlarged food
security, since sub-Saharan Africa is the one region most in need of a
farm technology upgrade to help address such problems, and since GM
crops could have been an important part of that technology upgrade.

How can U.S. policy encourage the more rapid future spread of GM crop
technologies? In the second scenario presented here, the successful
breakout of the technology in Asia is attributed in large part to the
stronger national agricultural research capacities found in countries
such as China and India. For largely political and ideological reasons,
governments in most developing countries find it easier to accept a new
farming technology if it emerges from trusted national public sector
laboratories, rather than from the mistrusted labs of profit-seeking
foreign multinational corporations. USAID assistance to national
agricultural research systems in the developing world has fallen sharply
over the past dozen years. One way to empower governments to go ahead
with GM crops, in regions such as Africa, is to reverse this decline and
begin investing more USAID money in the independent capacity of poor and
hungry countries to begin doing their own modern crop biotechnology at
the molecular level.

[^1]: Robert Paarlberg is Professor of Political Science at Wellesley
    College and Associate of the Weatherhead Center for International
    Affairs at Harvard University.

[^2]: Dr. Clive James, Chairman of Board of Directors of International
    Service for the Acquisition of Agri-biotech Applications, letter to
    "Dear Friends and Colleagues," January 2003.

[^3]: Clive James, "Preview: Global Status of Commercialized Transgenic
    Crops: 2002," ISAAA Briefs, No. 27-2002.

[^4]: The SPS agreement allows governments that lack scientific evidence
    of risk to block imports only on a "provisional" basis while seeking
    more information, not on a more open-ended "precautionary" basis.

[^5]: Nearly half of China's cotton is now GM. Farmers planting GM seeds
    have been able to reduce insecticide applications significantly,
    thus cutting chemical costs, saving labor time, and limiting
    occupational exposure to a serious health risk.

[^6]: See Robert Paarlberg, *The Politics of Precaution: Genetically
    Modified Crops in Developing Countries,* Johns Hopkins University
    Press, 2001. In China's tenth five-year plan (2001-2005) total state
    investment in agricultural biotechnology R&D is expected to reach
    \$1.5 billion, four times the amount spent in the previous 15 years.
    Economist Intelligence Unit (EIU) 21 October 2003.