Biotechnology and trade
The latest biotech products will offer benefits to consumers, such as enhanced nutritional value.
Apple slices that don’t turn brown and fruits that have higher levels of antioxidants to fight cancer or improve health are some potential results of advancements in biotechnology that might help us live better, healthier lives.
The United States is the leader in the production of first-generation biotech commodities, particularly corn and soybeans, which are received with varying degrees of acceptance around the world.
The first-generation biotech products were mainly crops with enhanced agronomic traits, such as pest resistance or herbicide tolerance, that helped farmers by reducing production costs or increasing yields, but provided no perceived direct benefit to consumers.
The second-generation biotech products, currently being developed, are mostly food products that offer benefits beyond the farm gate, such as enhanced nutritional value. These improvements can be made by switching on or off a particular trait or gene, in turn affecting the inherent characteristics of plants. While these tools are complicated, imagine a railroad track between Los Angeles and New York. Think of all the railroad ties laid side by side—they are somewhat like those DNA graphs. Now, focus on one crossroad in Ohio and turn the ties in that crossroad over. That is a description of a biotech tool that is being used to reduce the browning potential of apples. There are many other examples of using the tools of biotechnology to improve the health benefits of fruits and vegetables or to reduce the costs of production.
India, the second most populous country in the world, is pushing to catch up with the use of biotechnology to increase output and reduce costs. Its one billion consumers are relatively poor, and their food demands may soon exceed the country’s ability to supply commodities, primarily because of insect and disease problems. The tools of biotechnology are seen by some as the next green revolution to increase output as specific disease and insect problems are targeted. Solving these problems will provide an enormous public benefit to India. But what about those products that provide a private benefit, such as improved health or wellness, or other desirable characteristics? Golden rice, which has increased levels of vitamin A, is a good example of an existing product.
From a trade perspective, how will consumers react to these new, enhanced products and what are the implications for exports? Will consumers in the two largest markets in the world, India and China, be willing to buy U.S. apples that help fight cancer? Will consumers in our primary markets accept these products, restrict their imports, or require labeling?
China has imposed labeling requirements on most imported biotech commodities, both to protect its nonbiotech export markets and to buy time to develop its own biotech crops. In India, domestic biotech crops that produce higher yields are being developed illegally using “borrowed” technology. Intellectual property rights in India are not well developed. Fruits and vegetables resistant to India’s specific disease and pest problems are being developed using both legitimate and illegitimate technology.
The labeling of products developed using biotechnology has been hotly debated, with some countries, including the United States, following a voluntary labeling policy and the European Union following a mandatory labeling policy. These policies are applied to products that are substantially equivalent. However, biotech products that provide a direct benefit to consumers will ultimately be labeled under either policy because producers and technology developers will want to charge more to recover the additional costs of enhancing the product, and consumers will likely be willing to pay more to receive the enhanced benefits. Labeling will allow consumers to decide if the potential benefits exceed the additional costs. If consumers perceive that apples that don’t turn brown or fruit that improves their ability to fight cancer is worth the cost, they will buy it, just as they clamor for the latest allergy or sleeping medicine.
The important trade question is how consumers will perceive these enhanced products. U.S. consumers have persistently tended to ignore the issue of the use of biotechnology in products such as corn or soybeans, which are further processed before consumption. However, in the United States, potatoes enhanced to resist insects were withdrawn from the marketplace after major fast-food retailers refused to buy products made from these potatoes for fear that their customers would reject them. Biotech wheat was also withdrawn from the marketplace after wheat producers were reluctant to plant it in fear of losing the lucrative Japanese market, which is not accepting of the use of biotechnology. In all of these cases, the technology, both accepted and rejected, involved first-generation cost-reducing or yield-enhancing biotechnology that provided no direct benefit to consumers.
Research in India and China has shown that if consumers perceive that a food product produced using the tools of biotechnology provides a clear health benefit that they are likely to buy it and may be willing to pay a premium. A study of Chinese consumers’ potential purchasing habits for enhanced products suggests that they are willing to purchase golden rice and maybe willing to pay a small premium to receive those benefits.
A study of consumers in India suggested that consumers are willing to pay more for products made from wheat that was enhanced and considered to be healthy for their heart. Indian consumer opinions of biotechnology are also affected by their knowledge of biotechnology, education, age, and the presence of children in the household. While these studies may not be representative of more than a limited number of consumers in each country, they do suggest that consumers are accepting of enhanced products if they perceive there are direct health benefits.
At the end of the day, it is how consumers perceive a product, enhanced or not, that will dictate whether the product is successful or not. Marketing lore is full of superior products that were unsuccessful because of consumer rejection. While the tools of biotechnology are becoming more sophisticated, the enhancement of plants and animals has been practiced for centuries. The tools of biotechnology are currently targeted at single specific traits. However, in the future, the tools needed to address the complex interactions of traits may be able to address more complex problems.
Biotechnology can be used to make our lives better. Nevertheless, the marketing motto, “Sell them what they want, not what you’ve got,” is now even more relevant.