Productivity, Access, and Risk: the Keys to Biotechnology in Developing Countries

1. Productivity, Access, and Risk: the Keys to Biotechnology in Developing Countries David Zilberman, University of California EEP101/econ125

2. What is biotechnology? • Biotechnology is applying tools of molecular and cell biology to problems of health, agricultural and industrial production, and the environment. • It is a derivative of the discovery of the structure of DNA in 1955 that revolutionized biology. • Techniques of biotechnology include cloning, genetically modified varieties, genetic screening, • USDA Definition: Agricultural biotechnology is a collection of scientific techniques, including genetic engineering, that are used to create, improve, or modify plants, animals, and microorganisms. Using conventional techniques, such as selective breeding, scientists have been working to improve plants and animals for human benefit for hundreds of years. Modern techniques now enable scientists to move genes (and therefore desirable traits) in ways they could not before - and with greater ease and precision.

3. Lessons of medical biotechnology • major applications in terms of drugs, diagnostics, and production of materials (like insulin). • The industry evolved around the universities. Many major technologies were developed in universities and transferred to companies. Examples: Genentech was originated by scientists in Stanford and UCSF. Amgene by scientists from UC San Diego, and Chiron by scientists at U.C. Berkeley. • Process of technology transfer from universities to the private sector sometimes evolved transfer of technology to a start-up. The startup either grew to become a major company or was taken over by Big Pharma.

4. The Promise of Biotechnology • Combating human diseases • Promoting human health - Researchers are creating ways to boost the nutritional value of foods using biotechnology. • Combating animal diseases - Biotechnology helped produce a vaccine that protects animals in the wild against rabies and a vaccine for "shipping fever" of cattle, the biggest killer of beef cattle in feedlots. • Fighting hunger by resisting plant diseases and increasing crop yields - Biotechnology can help farmers increase crop yields and feed even more people. For example, by increasing areas where crops can grow and fighting crop diseases. • Helping the environment by reducing pesticide use - Biotechnology can help farmers reduce their reliance on insecticides and herbicides.

5. Types of Agbiotech 1) pest control biotech, including resistance to pests (bT corn), and resistance to pesticides (Roundup ready soybean). • Yield-increasing varieties that are not pest-control related. For example, drought-tolerant varieties. • Quality enhancing varieties that include longer shelf life, better taste 4) Nutritionally-improved food (cholesterol free egg) 5) Fine chemicals and materials (silk, organic plastic, oils)

6. The Slow Evolution of Agbiotech • While the first application of medical biotech were in the 1980s, the commercialization of ag biotech occurred in the late 1990s. There are several reasons: •  In ag biotech, one deals with many species, in medical biotech, with one species. •  There is a much larger willingness to pay for drugs than for food. •  There is more tolerance for risk when it come to production of medical than food. Furthermore, ag biotech is produced in the field, and requires extra care. • Much more research money has been allocated to medicine than crops

8. Early Application of Agbiotech • Early application of agbiotech includes Bt and Roundup ready inserted varieties in major field crops (corn, soybeans, tobacco) Virus resistant papaya, and FlavorSaver Tomatoes. • The Bt varieties mostly reduce pesticide use in the U.S., but don’t affect yield. • There have been some drift of genetic material towards wild corn. • There are some indicators of resistance-buildup.

9. The Case for Agbiotech • Agbiotech presents opportunities for environmental quality improvement and is a source of risk. • With good management, it has an important role in the future of agriculture. • Much of the value of agbiotech is in the developing world. There is a big debate whether it is appropriate there. It will be addressed below.

10. Attitudes toward Agbiotech • There has been significant resistance for the introduction of agbiotech, especially in Europe. • Agbiotech entails perceived risks, but benefit to consumers of the early applications are non-apparent. • There is lack of confidence in government assurance, and in technology in Europe, especially after mad cow disease. • Agbiotechnology may be opposed indirectly by individuals that benefit from substitute products. E.g. pesticide manufacturers.

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

12. Productivity: Yield-Increasing Potential • Yield = potential output x (1 - damage) 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

13. 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

14. The Impact of Bt Cotton in India • Bt cotton is used to provide resistance to the American bollworm (Helicoverpa armigera). • The technology was developed by Monsanto and was introduced in collaboration with the Maharashtra Hybrid Seed Company (Mahyco). • Field trials with these Bt hybrids have been carried out since 1997 and, for the 2002/03 growing season, the technology was commercially approved by the Indian authorities.

15. Our study • For our analysis, we use data from on-farm field trials that were carried out during the 2001/02 growing season as part of the regulatory procedure. • In 2001, field trials were carried out on 395 farms in seven states of India. These trials were initiated by Mahyco and supervised by the regulatory authorities.

16. Experimental design • Three adjacent 646 m2 plots were planted: the first with a Bt cotton hybrid, the second with the same hybrid but without the Bt gene (non-Bt counterpart), and the third with a different hybrid commonly used in the particular location (popular check). • All three plots were managed by the farmers themselves, following customary practices. • This setup allows reducing the effects of differences in agroecological conditions and managerial abilities when making technological comparisons.

17. The actual data source • In addition to the regular trial records, more comprehensive information was collected for 157 farms on agronomic aspects and farm and household characteristics. • Observations from these 157 farms constitute the data basis for this analysis. • They cover 25 districts in three major cotton-producing states—Maharashtra and Madhya Pradesh in Central India and Tamil Nadu in the South. Plot-level input and output data were extrapolated to 1 hectare to facilitate comparisons.

18. Results • Bt hybrids were sprayed three times less often against bollworms than the conventional hybrids. • On average, insecticide amounts on Bt cotton plots were reduced by almost 70%, which is consistent with studies from other countries. • At average pesticide amounts of 1.6 kg/ha (active ingredients) on the conventional trial plots, crop damage in 2001/02 was about 60%. Bt does not completely eliminate pest-related yield losses.

19. Results II • Average yields of Bt hybrids exceeded those of non-Bt counterparts and local checks by 80% and 87%, respectively. • 2001/02 was a season with high bollworm pressure in India, so that average yield effects will be somewhat lower in years with less pest problems.

20. Insecticide Use and Crop Losses with and without Bt Technology

21. Yield and pesticides use comparisons

22. Predicted yield effects of pest controlling Biotech

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

28. 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.

29. Environment Risks Agricultural biodiversity

30. 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.

31. 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

32. Environment: Sound Basis for Risk Analysis • Risks and benefits should be quantified. • Sound reliability factors—i.e. confidence intervals—should be used to standardize risk estimates.

33. 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

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

35. 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. (CGIAR) If an agreement cannot be reached, companies will bypass breeding sector, directly introduce GM crop varieties that are not locally adapted.

36. 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.

37. 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”

38. 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

39. 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.

40. 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?