Agriculture Biotech Update: U.S. Boom Meets Overseas Bans

Mark Mansour
Mansour@khlaw.com

Thomas P. Redick
tpredick@gjn.com

As the 21st Century gets underway, agriculture in the United States has entered a second "Green Revolution" with the rapid adoption of commodity crops with recombinant-DNA enhancements (biotech crops). At the same time, most of the rest of the world has decided to pause and reflect upon the uncertainty and potential unknown risk associated with these new biotech crops. As long as a hypothesis of harm can be generated, and the research to test it can be funded, someone somewhere will express "uncertainty" and "concern" as to the relative safety of biotech crops. As a result, leading U.S. trading partners, including China, Japan, and the European Union (EU), have been spending an enormous amount of time scrutinizing biotech crops prior to regulatory approval and devising stringent prohibitions against the marketing of unapproved crops or products derived from such crops.

This article provides a snapshot of the continuing growth in biotech crop usage in the United States and the irreconcilable conflict between the United States and its major trading partners (especially the EU) over the safety of these crops. When the unstoppable flow of innovative biotech crops meets the immovable object of overseas refusals to accept them, the conflict will create a variety of challenges for lawyers involved in agricultural management.

The Boom: Biotech Crops Continue to Grow in Usage in the U.S. and Worldwide
For anyone wondering whether most growers prefer biotech crops, the answer continues to be a resounding "yes" among commercial growers (and a legally mandated "no" among organic growers). The International Service for the Acquisition of Agri-Biotech Applications (ISAAA), a non-profit organization promoting the international transfer of biotech crops, reported an annual increase in global acreage of biotech crops of 19% in 2001, with 5.5 million farmers growing 52.6 million hectares of biotech crops in 2001 (nearly 130 million acres). See "Global GM Crop Area Continues to Grow and Exceeds 50 Million Hectare for First Time in 2001", Jan. 10, 2002, Press Release (http://www.isaaa.org). The 50 million hectare mark is a milestone confirming that the second "Green Revolution" in agriculture is well underway.

As for public perception and consumer acceptance, the biotech boom should benefit considerably from growing awareness of the increased yields per acre in production and decreased use of certain agrichemicals promised by biotechnology. More than 3,000 scientists (including 19 Nobel Prize winners) have signed the Declaration in Support of Agricultural Biotechnology since it was drafted in January 2000. Notable signatories include Patrick Moore, former director of Greenpeace International, now an outspoken critic of that organization's opposition to biotechnology despite its environmental benefits.

The ISAAA report reveals that biotech crops are concentrating in the United States, Argentina, Canada, and China (68 percent, 22 percent, 6 percent, and 3 percent of global crop acreage, respectively), while regulatory precaution has slowed the adoption of such crops in other nations. China, India, and Brazil are expected to expand biotech crop use, with China giving notice of its need to use biotech crops to feed its billions. China has also asserted inchoate intellectual property rights to the genes of the soybean, which originated in China and still has wild relatives there.

The Bans: Concerns Over Environmental and Food Safety Risks
Although the use of biotech crops is projected to continue expanding internationally, U.S. exports are being hampered by the emergence of bans on biotech crops by certain key trading partners. When China threatened to close its doors to U.S. biotech soybean shipments in June 2001, exports kept flowing thanks to quick action by the American Soybean Association and President Bush. Nevertheless, China's Ministry of Agriculture issued regulations requiring safety certificates from the Ministry that confirm that imported biotech crops are harmless to humans, animals, and the environment. In addition, China will require labels for biotech content in soybeans, corn, rapeseed, cottonseed, and tomatoes.

In the EU, no new biotech crops have gained approval for the past several years, despite their widespread use in the United States and a near-consensus in the scientific community on the relative safety of these crops. Raising both ecological concerns (e.g., insect resistance) and food safety risks (e.g., unknown allergens), the EU applies its "precautionary principle" to require extensive testing amounting to a virtual ban on biotech crop approvals. As the "slowest common denominator" in a thoroughly commingled global grain marketplace, the EU can drive its trading partners to abandon biotech crops, against their better judgment, to protect their EU exports.

The EU also is moving toward adoption of stringent labeling and "traceability" requirements for biotech crops and the foods containing them. Proposed requirements would impose a "farm-to-fork" system for tracing crops as well as food ingredients and other products derived from biotech crops to facilitate potential future recalls. If EU governments and the European Parliament were to adopt such a system (which is several years from finalization), U.S. shipments of biotech crops and food products would have to include details regarding the biotech makeup of the crop (e.g., the type of biotech genes) and the path of the product through the production chain.

U.S. producers have grave concerns about the high cost of such traceability requirements and the feasibility of a strict identity preservation system. A single 60,000-ton shipment of soybeans may contain 7,000,000 individual beans per metric ton from as many as 100 different growers. Under the EU's currently proposed "zero tolerance" traceability scheme, just one unapproved biotech soybean could trigger a positive genetic test and send an entire freighter back home with the unwanted commingled grain. U.S. producers fear any such system is destined to fail and vulnerable to sabotage by anti-biotech activists. Accordingly, U.S. Undersecretary of State Alan Larson has repeatedly urged the EU to allow the marketplace to provide "non-GMO" labeled food to consumers who want to avoid food produced with biotech crops. With the market for "non-GMO" food growing, the U.S. hopes to persuade EU member states to lift the moratorium and allow the marketplace to meet this consumer demand.

EU representatives reason, however, that strict traceability and labeling rules are needed to keep the onus and cost on the producers of biotech, rather than non-biotech, crops. They also argue that such requirements may persuade some member states to drop their fervent opposition to new biotech imports. Such rules are not justified, however, on the basis of the relative risks of biotech crops to food safety. Moreover, most common food safety risks, such as allergens, are handled through public awareness and avoidance, not a ban on particular foods.

Nevertheless, at present, there is no sign that the EU will lift its ongoing de facto ban or retreat from the call for strict traceability. As recently as July 3, European Parliament deputies voted in favor of labeling and traceability requirements even more stringent than those originally proposed by the European Commission. In particular, the vote endorsed an amendment rejecting the European Commission's proposal for a one percent tolerance for unauthorized biotech material in food or feed, instead endorsing the strict zero tolerance approach. Other amendments supported by the Parliament would require labeling and traceability of food and feed products derived from or using genetically modified organisms even if the products themselves do not contain the altered DNA/protein. The European Commission has stated its commitment to oppose some of the more extreme positions endorsed by the Parliament, but that is small comfort to U.S. producers who find even the Commission's proposed restrictions intolerable.

Farming States Respond to the Brewing Trade War
The continuing regulatory discord among nations poses a significant problem for U.S. traders dealing with overseas markets. They risk criminal charges under Japanese, South Korean, and British law if a shipment contains even traces of biotech material that lacks regulatory approval. See GMOs Create a Stir, ICTSD News, July 18, 2000 (http://www.ictsd.org/html/weekly/story5.25-07-00.htm). The risks associated with inadvertent commingling have led key players interested in export markets to take their problems to state courts and legislatures in the United States, hoping to create a local solution to intractable international problems.

The soybean industry has sought to protect its exports by threatening litigation to enjoin even domestic marketing of any seed that lacks regulatory approval in major export markets. This approach helped to persuade Aventis (now infamous for its Starlink™ corn) to refrain from selling "Liberty Link" soybean, which was not approved in the EU. Other sectors have been the focus of state-specific legislation to control the domestic use of biotech crops that lack overseas approval. In California, for example, biotech rice cannot be grown commercially without the prior consent of the California Rice Commissioner, who seeks to exclude varieties that are not approved in key overseas markets. See Dale Kasler, Biotech Backers Feel Targeted by Rice Bill, Sacramento Bee, Sept. 2, 2000 (available at http://www.biotech-info.net/rice_bill.html). See also press release at http://www.calrice.org/media/ab_2622.html. Interestingly enough, biotechnology trade associations based in California did not oppose this measure, recognizing the potential export losses that could result from inadvertent commingling. In light of these potential economic impacts, some states may legislate "biotech-free" zones comparable to the California's quiet decision to create a no-biotech rice zone.

To protect and foster the benefits that biotech crops provide, U.S. producers and consumers would also be well served by the creation of "industrial biotech zones" and other mechanisms to facilitate the segregated production of certain biotech crops, including non-food crops. New biotech crops continually enter the product pipeline for use in pharmaceuticals, fuels, plastics, and other industrial applications. Because such crops will not be submitted to the EU for export approval as commodity grain, each must be carefully segregated from the export stream of commerce.

The Role of Agricultural and Environmental Lawyers
As the boom in biotech crop use collides with the extreme reluctance of some nations to accept them, the result will be a complex web of domestic and international regulatory requirements and contractual relationships. The legal profession will have a role in developing the tools to support trade in biotech crops and in guiding clients through the maze. The foreign side of the regulatory equation will require trade lawyers to challenge EU restrictions based on World Trade Organization (WTO) rules that require a sound, scientific basis for trade restrictions. Environmental regulatory lawyers will seek biotech crop approvals in federal, foreign, and state arenas, challenging the "slowest common denominators" to speed up.

Meanwhile, the intractable situation with the EU will lead many chains of commerce to develop mechanisms to adapt to the requirements of that market. While the United States may challenge the EU restrictions before the WTO, U.S. commodity shipments cannot await the conclusion of that long process. U.S. lawyers will increasingly be asked to assist in documenting complex contractual chains of production to meet traceability and labeling requirements. Lawyers will work with state and local regulators and legislators to create biotech, non-biotech, industrial biotech, and other designated zones to prevent unwanted commingling. Particularly given the immovable position of the EU, and the potential for its approach to spread to other nations, U.S. producers will need sophisticated legal tools to participate in global markets.

Mark Mansour is a partner in Keller & Heckman LLP in Washington, D.C. and Thomas P. Redick is a member in the St. Louis law firm of Gallop, Johnson & Neuman, L.C.