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

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

• David Zilberman, University of California
• EEP101/econ125

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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.

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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.

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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.

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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)

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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

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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 dont affect yield.
• There have been some drift of genetic material
  towards wild corn.
• There are some indicators of resistance-buildup.

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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.

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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.

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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

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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

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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

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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.

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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.

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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.

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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 statesMaharashtra 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.

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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.

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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.

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Insecticide Use and Crop Losses with and without
Bt Technology
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Yield and pesticides use comparisons
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Predicted yield effects of pest controlling
Biotech
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Access

• Intellectual Property Rights (IPR)
• Registrations

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Access Biotechnologies in the South

• Most IP is generated by research in the North
• Transfer of public sectors rights to the private
  sector provides incentives for development and
  commercialization
• Companies have little incentive to invest in
  applications specific to the South

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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

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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)

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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
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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.

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Environment

• Risks
• Agricultural biodiversity

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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.

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Gmos are not perfect-

• Gmos 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

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Environment Sound Basis for Risk Analysis

• Risks and benefits should be quantified.
• Sound reliability factorsi.e. confidence
  intervalsshould be used to standardize risk
  estimates.

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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

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

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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.

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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

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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

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Ag bio tech is only part of the solution

• Ag biotech is more than Gmos.
• 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.

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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?