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GM-free private standards and their effects on biosafety decision-making in developing countries
Food Policy 34 (2009) 399–406
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GM-free private standards and their effects on biosafety decision-making in developing countries Guillaume Gruère *, Debdatta Sengupta 1 Environment and Production Technology Division, International Food Policy Research Institute, 2033 K Street, Washington, DC 20006-1002, USA
a r t i c l e
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Article history: Received 1 October 2008 Received in revised form 16 March 2009 Accepted 9 April 2009
Keywords: Genetically modified food Private standards Biosafety International trade
a b s t r a c t We provide a comprehensive review of international cases where GM-free private standards set up by food companies in developed countries have influenced biosafety policymaking in developing countries. We find 29 cases where private importers have directly or indirectly affected policy decisions in 21 countries. Most of the cases relate irrational fear of export losses to excessively precautionary decisions. These cases are based on two generally misleading premises: the belief that Europe or Japan represents the only market for exports, and the perception that non-GM segregation is infeasible or prohibitively costly in all situations. Our study also demonstrates the importance of information asymmetries across countries and agents and the role of risk aversion in seemingly irrational decision-making. The combination of these four factors helps us explain why presumed but unproven expected commercial losses still represents a significant impediment to biosafety policymaking in developing countries. Ó 2009 Elsevier Ltd. All rights reserved.
Introduction Over a decade after their introduction, genetically modified (GM) crops have been adopted by millions of farmers in 25 countries (James, 2008), demonstrating their commercial and agronomic success. Yet, among these, only a few countries do cultivate GM crops at a large scale, only a few GM crops are on the market, and many other countries have stayed away from even considering the use of GM crops. In particular, many developing countries have avoided the debate on GM crops, observing conflicting views among developed countries between exporters promoting the use of the technology, and importers regulating them strictly. Generally lacking functional biosafety systems, these countries have adopted a wait-and-see position, notably because of the uncertainties they perceive on the potential risks associated with the use of transgenic crops and their derived products. Policy specialists have identified several factors playing a role in the reluctance of developing countries to adopt biosafety policies and regulations. Among these, the fear of losing agricultural exports to Europe has been advanced as a significant reason (Paarlberg, 2002; Knight et al., 2008). In particular, this fear has been manifested through decisions taken by African and Asian policy makers on the approval of GM crops for field trial, commercial release, or import authorization. * Corresponding author. Tel.: +1 202 862 8156; fax: +1 202 467 4439. E-mail addresses: [email protected] (G. Gruère), [email protected] (D. Sengupta). 1 Tel.: +1 202 862 6486; fax: +1 202 467 4439. 0306-9192/$ - see front matter Ó 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.foodpol.2009.04.002
At the same time, despite contradicting claims by various opposition groups, applied research conducted in the area of GM products and international trade has consistently shown that alleged commercial risks on currently approved GM crops have been largely exaggerated. For instance, Paarlberg (2006) showed that Eastern and Southern African countries have very low export volumes towards GM – averse markets of Europe. Several studies using international trade simulations have also demonstrated that developing countries have not much to lose and a lot to gain if they adopted productivity enhancing GM crops even with import barriers (e.g., Anderson and Jackson, 2005; Gruere et al., 2007). This observed discrepancy between perceived and actual commercial risks, while puzzling, and of considerable importance, has largely been left out of the GM food and trade debate. Assuming policy makers are at least partially rational when assessing commercial interests, it suggests a distortion between perceived and real commercial risks, supporting a bias towards a precautionary stand, putting any possible – even unproven – export consideration before domestic interests. Investigating this issue requires diving into the political economy of national biosafety decisionmaking on the one hand, and the governance of modern international food supply chains on the other. A closer look at the evolving global food governance points towards the determinant role of private standards. In recent years, modern value chains for exported commodities have been dominated by the demand and specific requirements of retailers in developed countries. In particular, many food retailers and manufacturers in Europe, Japan, and a few other developed countries have been requesting their providers to keep away from GM
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ingredients in order to respond to consumer preference, minimize reputation risks and avoid labeling their products as GM (Carter and Gruere, 2003; Knight et al., 2008).2 While these ‘‘GM-free” standards are not specifically different from others, enforcing them in exporting developing countries that are considering the introduction of GM crops (or biosafety systems to allow field trials of GM crops) was bound to create conflicts of interest between regulators or developers and traders. This paper analyzes observed interactions between importing food companies and their GM-free private standards and biotechnology decision-making in developing countries. Our review of evidence is based on field visits in South Africa, Namibia, and Kenya in 2007, and on the collection of secondary information on these and other countries. Our objective is to identify the critical factors explaining the observed disconnect between perceived and real commercial risk in biosafety decision-making, in order to provide suggestions to policy makers facing allegations of commercial risks. Although the private standard literature analyze a large range of standards and study their effects on the industry, consumers, suppliers and farmers, we are not aware of any specific article on the effects they may have had on domestic public policies. Vandenbergh (2007) demonstrates the growing role of private standards as a substitute or alternative to public policies in global environmental governance. Swinnen and Maertens (2007) consider the implications of private standards on global governance institutions. A few articles have reported the observed strategy of avoidance of GM in supermarkets especially in Europe (e.g., Bernauer, 2003; Kalaitzandonakes and Bijman, 2003), and several others have analyzed the effects of importing company’s choices of ingredients on suppliers (e.g., Knight et al., 2005). But to our knowledge no published study has focused specifically on the political implications GM-free standards may have on developing exporting countries. The rest of the paper is arranged in five sections. We first present the evidence on GM-free standards in developed countries. We then propose a set of hypothetical links between private and public actors, subject to evaluation. The third section provides a global review of available evidence on interactions between GM-free private standards and policy makers globally. Based on this review, the fourth section identifies critical factors contributing to these cases. We close the paper with some conclusions. GM-free private standards Private standards started in the area of food safety, with supermarkets and importers setting up high standards and traceability systems, responding to food safety scares in the 1990s in the meat and vegetable sectors (Graffham, 2006). With a decreasing consumer confidence in public regulations, private companies decided to self-regulate with private standards (Cordon et al. 2005; Henson, 2006). But private standards have extended to other application areas including non-safety considerations such as environmental, ethical, or labor standards. Traders in African countries have been particularly affected by private standards of European companies in the horticultural sector. Overall theses countries’ exports are not very important for Europe (Brown, 2005), but they are significant in their total export value (Jaffe and Masakure, 2005) and therefore compliance with specific import requirements on production is seen as a necessity for exporters. In the mid-1990s, with the growing development of transgenic crops and the increasing wariness among European consumers to-
2 In fact, their GM-free policy may not be grounded in actual consumer behaviour – many European consumers do buy GM food when offered the opportunity (King’s College London, 2008).
wards these technologies, GM-free private standards made their apparition. GM-free policies were first introduced in 1996 in Europe with media and activist campaign against the import of GM soybeans (Livermore, 2007). The Iceland supermarket chain in the United Kingdom was one of the first to take this decision, but many other chains followed. Soon, this phenomenon caught on and became the norm for supermarkets in Europe on most food products, including those sourced from developing countries. The marketing decision of avoiding GM ingredients in food items rapidly became a quality attribute employed in the competition among retails chains of Europe, Japan and South Korea. A report by Greenpeace provides evidence of the widespread adoption of such practices in Europe (Greenpeace, 2006): 27 of the top 30 retailers have a non-GM policy in Europe; 22 out of the top 30 European food and drink producers have a non-GM commitment in Europe. Some companies have even gone beyond processed products from GM ingredients, to include requirement on GM-free animal feed in animal products (meat and dairy) despite the lack of safety related or labeling requirements on these products in Europe or anywhere else. A conceptual framework for evaluation Fig. 1 presents a conceptual framework of possible links between private and trade related interests and biosafety policy making. The framework is based on a two-country example. At the top of the figure, the importing country is a developed country with some specific import and marketing regulations on GM food. In the lower part of the figure, the second country is a developing country that exports certain food or feed products to one or more companies in the importing country, and who is facing policy decisions on biosafety or the use of GM crops. In the importing country, a large share of consumers tends to be averse to the use of GM food. Confronted with this situation and facing the requirement to label their product as GM in the presence of any targeted ingredient by opponent groups that could affect their brand image, food companies decide to take a stand and avoid any GM ingredient in their product formulation. In the exporting country, this GM-free private standard or clause is transmitted to the local traders, and down to the producers. The supermarket company may also have a retail partner in the country subject to the same standard. Two other groups are bound to be participating in the debate: the anti-GM non-governmental organisations (NGOs) – usually sublets of international environmental NGOs based in western countries (Aerni and Bernauer, 2006) – and associations of organic or fair trade exporters, whose regulating principles forbid the use of GM crops, seeds, or elements thereof. At the same time, after the introduction of the private standard, we assume that the government of the exporting country is considering a biosafety decision. It may be discussing the adoption of a biosafety bill or may be about to take a discrete regulatory decision, such as the approval of an application for confined field trial, or the authorization of import of a GM seed, a shipment that may contain GM food or feed, or a shipment of food aid that may contain GM grains. Fig. 1 identifies five possible influential links (numbered 1–5) between the different players and policy decisions that we wish to evaluate in our review of evidence.
From importers to biosafety decision-making: reviewing the evidence Our global review is based on a synthesis of several sources of data. First, we documented reported cases of interactions of importers with policymaking in exporting countries, obtained via
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Consumers
Individual supermarket or retail group
+ GM-free = high quality
+
Anti-GM NGOs
Risks of reputation loss GM -FREE Private standard or contract Potentially GM crop
Meat or animal product
IMPORTING COUNTRY EXPORTING COUNTRY
Non-GM crop
Government representatives 1
Exporters or trader 2 association, producers + Locally owned supermarkets Anti-GM NGOs
+
3
+
Organic/fair trade exporters
-
Biosafety policy
-
GM field trial Other crop
4
Labeling regulation
GM imports
GM food aid
Food Crop
Feed crop
5 Targeted by standard
Organic/FT crop
Not targeted by standard
LEGEND
Decision/ consequence Direct influence
-
Negative indirect influence/ lobbying
+
Positive indirect influence /lobbying Type of products possibly affected Borderline
Consumers
Major actors
Labeling regulation
Key policies
Targeted by standard
Type of product affected
GM free
Marketing factor Fig. 1. A framework of hypothetical links between actors.
internet research among publications, journals or other news clips. Secondly, we conducted interviews with researchers or experts within the targeted countries and internationally. Thirdly, we visited South Africa, Namibia, and Kenya in the summer of 2007 and conducted semi-structured interviews with traders, regulators, and experts to substantiate the evidence.3 As shown in Table 1, we found at least 29 cases of reported interaction between private commercial interests and biosafety policy decisions in 21 countries. However, the actors involved, the scope of the interaction, its policy implication, and/or the possible causality largely vary from case to case. In addition, the type and strength of the evidence supporting each case also varies: from word of mouth or personal conversation to newspaper article, pub-
3 We planned to interview representatives from food retailers in Europe (Carrefour, Tesco, and Iceland), but they either ignored or rejected our request for interviews. Only Marks and Spencer replied, by sending a short message explaining their policy, which excludes all GM products (except in cotton), adding that the group would only express concern to foreign suppliers if there was no ‘‘appropriate segregation and control” to ensure that their GM-free policy would be maintained (personal email November 2007).
lication or technical report. In what follows, we summarize the cases in each region in three tables. Table 2 shows the cases observed in Africa. The table reports the products targeted, alleged commercial risks, involvement of private interest and policy implications. The table also divides cases into three categories: the dark shaded rows regroup cases where the risks are largely unfounded and the resulting decision appears unjustified, if not irrational; the light shaded rows gather cases where the export risks and policy decisions are debatable, and the remaining rows show cases either based on supported commercial risks or without political implications. Many of the African cases stand in the first category with unproven commercial risks. For instance, the rejection of Egypt of a GM potato variety that was explicitly not used for exports on the basis of the fear of export loss to Greece is quite dubious. The rejection of food aid with GM maize in Zambia, which was attributed by a number of different sources to the lobbying effort of organic trading companies exporting vegetables to Europe also seems largely unjustified. Other cases, such as that relating to wine in South Africa seems to make sense from a commercial standpoint. Similarly, Tables 3 and 4 show the cases we found in Asia and elsewhere. Interestingly there are fewer cases with unjustified
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Table 1 List of reported cases by country, crop, year, and types of source of information. Country
Product(s) targeted
Year
Australia Brazil Canada Canada Egypt India Indonesia Kenya Kenya Malawi Malawi Namibia New Zealand Qatar South Africa South Africa South Africa Thailand Thailand UAE Uganda USA USA USA USA Vietnam Zambia Zambia Zimbabwe
GM canola GM soybeans GM potato GM wheat GM potato GM rice GM cocoa GM crops Non-GM tea GM food aid Groundnut GM maize fed beef GM yeast GM rice GM maize/animal products GM yeast/vine GM potato GM papaya GM rice GM rice GM cotton GM potato GM sugarbeet GM rice GM wheat GM rice GM food aid GM food ban GM food aid
2007 2007 n.a. 2004 2001–2002 2006/08 2007 2005-7 2007 2005 2005 2006 2007 2007 2004–5 2007 2006/08 2005 2006/08 2007
Sources of information Word of mouth
n.a. 1998 2004 2004 2006/07 2005 2007 2006
n.a. means not available or uncertain. Source: authors.
Table 2 Cases in Africa – the most shaded cells represent the most unjustified risks.
Source: authors compiled from various sources.
Personal conversation
Newspaper
Report/article X
X X X
X X X X
X X X X X X X X X X
X X
X X X X
X X X X X
X X
X
X X X X
X X X X
X X X X
X
X
X X X
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403
Table 3 Cases in Asia – the most shaded cells represent the most unjustified risks.
Source: authors compiled from various sources. (see above mentioned references for further information.)
export risks in Asia or in other countries. More cases lie in the intermediate category, presenting likely but potentially manageable risks. For instance the lobbying of basmati rice exporters against GM rice in India may appear justified in view of the potential export risk they face. But this presumed risk is based on the assumption that segregation is infeasible, which is likely to be incorrect. Basmati exports to Europe are already subject to a very sophisticated marketing process that separates it from any other type of rice, and it is likely that setting up an identity preservation system for non-GM would be possible, even if it would incur an adjustment (identity preservation) cost. From that standpoint, the real issue may be that traders do not want to pay for nonGM segregation and therefore lobby the government to ban any experiment or use of GM rice (Gruere et al., 2007). The case of Thai papayas also lies in this intermediate risk category. The escape of GM papayas from field trials, if not controlled in 2004, would have resulted in export losses of papaya products from Thailand, but not of other products as claimed by certain groups. The policy response (a moratorium of GM field trials) was also probably excessive given the interest and investment of Thailand in biotechnology and the likely benefits of GM papayas for domestic growers. To complete our overview we will now turn to a brief analysis of specific case studies in Namibia and Kenya, based on our field visits. From traders’ interest to a government position: the case of Namibia Namibia exports high value grass-fed beef both within the Southern Africa region and to Europe.4 Other animal products are also important but do not generate as much export value. All has been done to make the Namibian beef qualify with the highest standards of safety and quality to satisfy high income consumers in Europe. First, the commercial meat industry has set up a full traceability system. Second, a number of practices have been adopted to make the beef comply with EU consumers’ preferences; in particular, the
4 On average between 1990 and 2005, 92% of all cattle-based products in Namibia were exported and 19% of cattle were used for European exports (Mendelsohn, 2006).
production does not allow the use of hormones or antibiotics, feed is mostly coming from grass, etc. Third, the government has set up an East–West fence that literally divides the country, to control the possible spread of cattle diseases from the North to the South. No livestock or meat from the North is allowed to cross to the South of the fence unless it has been through quarantine procedures (Mendelsohn, 2006). Cattle produced in the North of the fence have to remain there and cannot be used for exports. In view of the importance of the beef’s ‘‘green” image, adding a standard requiring the exclusion of GM maize in cattle feed appears to be a justifiable marketing decision from exporters in view of European consumers’ preferences. This decision may have been driven by Tesco, a retail chain based in the United Kingdom, and a large buyer of Namibian beef, or by other companies in the UK or Norway. According to Paarlberg (2008, p. 135), in 2000, one or more private European companies stopped imports of beef from Namibia because they realized the animals had been fed with yellow GM maize. This event may have been the trigger for the import ban. But neither our meetings with local stakeholders, nor the lack of clear policy on beef by Tesco confirmed that buyer requirements remained the one and only reason to ban imports of GM maize. Although it was recognized that EU retailers prefer GM-free fed beef, there was no explicit evidence of a major rent with keeping cattle feed free of GM maize. In all likelihood, the basis of the GM-free policy is driven by supply and demand considerations; it is probably intended to satisfy the preference of Tesco and other European retail chains, but it has also been extended to help Namibian beef keep its high quality reputation in the eye of European buyers. However, looking deeper into the issue, the policy consequence of this marketing decision makes this case more intriguing. Namibia has enforced a strict moratorium on GM maize (Graig, 2001), banning GM maize imports from neighboring South Africa. Although part of this decision is due to the fact that the GM food regulations are still not in place, all information we gathered point towards the role of the Namibian Meat Board, the governmental agency representing the meat sector in supporting this position, even to the point of pushing for this moratorium to become the official Namibian policy beyond the adoption of a regulatory framework.
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Table 4 Cases in other countries – the most shaded cells represent the most unjustified risks.
. .
Source: authors compiled from various sources. (see above mentioned references for further information.)
If all the industry and population was supporting this ban, such a decision would appear publicly legitimate (even if potentially WTO inconsistent). But several elements provide arguments showing that this is not the case. First, a representative from the feeding industry explicitly said that it would welcome imports of cheaper mixed GM and non-GM maize, especially with the recent surge in maize prices leading to an even higher price of pure non-GM maize. Second, although maize is used in cattle feeding in Namibia, the share of yellow maize in total animal feed is extremely low and used as a complement (Namibian cattle are grass-fed). Third, banning GM maize imports to avoid the risk of it being fed to export bound cattle presumes that segregation of imports is infeasible, and thus that all exports would be lost with maize imports. However, there is evidence from a consultant report (ordered by the government) that these two presumptions are not correct (Namibia Resource Consultants, 2002): the consultants found that there was a maximum threat of losing 1% of the sale revenues due to export value loss, should Namibian cattle use GM maize for feed. Fourth, it should be noted that a very large share of all meat sold in the EU has been fed with GM feed (Knight et al., 2008, p. 741), notably because of the political exception in the EU GM food labeling policy on meat and animal products. Even with GM feed, beef could be sold in Europe. To sum up, if the avoidance of GM feed by the cattle industry may be legitimate from their marketing standpoint, the use of this argument as a support to the Namibian strategy appears politically and economically unjustified.
It is the main supplier of industrial tea in Great Britain. Although the imposition of a GM-free certification requirement by European buyers (Lipton etc), does not have any implication on policies, the fact that it is applied on a product (tea) which has not been genetically engineered anywhere demonstrates the spread of standards above and beyond any regulation. In a rational sense, it may have been introduced to prevent the use of GM tea in the future. But no company or research institute would ever invest in research and development in Kenya in a GM variety of a major export crop going to countries opposed to GM. This preemptive measure shows the political power of importing companies to avoid facing future adjustment costs (e.g. segregation or changing supplier) with the possible testing or use of GM products. The export loss arguments used by the Kenyan Organic Association Network (KOAN) and its associates also do not seem to be completely justifiable. These groups have been vocal about their fears of GM and feel that if GM maize or cotton was allowed it would pave the way for other GM crops to be adopted, which is a possibility in the long run. But they also fear that the possible introduction or GM maize or cotton would affect organic producers and their access to the EU organic market for fresh vegetables (green beans, etc.),6 which is biologically impossible. Put together with the tea case, this shows how a discussion of commercial risks has gone from real risks to non-existent and completely hypothetical (and sometimes irrational) risks.
Traders and fears of irrelevant products: the case of Kenya
In our global review, we find a number of common features across cases. First they directly or indirectly link the possibility of commercial risk to private based efforts in influencing policy decisions. In particular, we find that the five types of actors identified in Fig. 1 (supermarkets in importing countries, traders, organic producers, NGOs, and local supermarkets) have had a partial
Perhaps the most striking feature common to the Kenya cases is the disconnect between the GM crops targeted for trials and potential commercialization and the object of the fears of export losses. The case of tea is remarkable. Kenya is the largest exporter of tea.5
5
Personal conversation with a representative of the Kenyan Tea Board.
Disentangling irrational fears from real commercial risks
6
Personal conversation with KOAN representatives.
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influence on decision-making in at least one case, which validates our conceptual framework overall. However, importing companies in Europe or Asia do not appear to interact directly with policy makers. Instead, in most cases, they do it via the prominent roles of local trader groups. Organic groups and anti-GM NGOs have had similar roles, and share views and sometimes campaigns in opposing GM. These three groups do represent the large majority of reported cases. Secondly, we find that unjustified or seemingly irrational decisions to avoid GM are generally based on two misleading presumptions. The first is that segregation between GM and non-GM is infeasible. Assuming that segregation is absolutely infeasible prompts the fear that there will be no more conventional products, should a GM variety get approved. However, the segregation of non-GM products that are already subject to multiple quality and safety checks can be a distinct possibility (as done in Brazil, South Africa, Spain, Canada, and the United States or for organic products worldwide).7 The second assumption is that current markets in Europe (and Japan) are the only markets for exports. Under this rationale, because these markets are largely opposed to GM, there is very limited scope for trade if GM products are grown in a country. On the contrary, there are a number of countries in Asia as well as some emerging markets in the middle-east which do not discriminate between GM and non-GM products (in particular animal products), or that do not have as high marketing standards as Europe (i.e. do not discriminate highly processed products). Third, we find that two additional factors play a significant role in irrational cases: information asymmetries and risk aversion. We found two types of information asymmetries: those between the importer and local actors (traders) and those between the policy makers and local or outside (traders or other stakeholders) actors. Although both can result in confusions, misunderstandings, and bad decisions, the second type of asymmetry can prove to be more damageable to a country, potentially pushing policy makers to support irrational and likely detrimental decisions. During our interviews, we also found evidence that certain traders, particularly in developing countries, tend to be risk averse in their relationship with buyers, unquestioningly complying with standards required by the buyers, often despite the costs these standards may imply. The perceived or actual market power of buyers accentuates this phenomenon: losing a buyer appears as a risky gamble. Risk aversion behaviors can also be found among policy makers that do not want to lose popularity. Conclusion In this paper, we investigate the observed discrepancy between real and perceived commercial risks with the use of GM products by diving into the political economy of GM food and international trade. We focus particularly on the effects of GM-free private standards set up by food companies in Europe and other food importing countries on biotechnology and biosafety policy decisions in exporting developing countries. Overall, we found 29 cases where GM-free private standards may have interacted directly or indirectly with biosafety policy decisions in 21 countries. Because many of the cases rely on unpublicized lobbying activities, and because of the lack of comprehensive evidence, many cases do not provide straightforward evidence of causality links between importers or traders and policy decisions. But by assembling various pieces of evidence, we are still able to obtain a consistent framework of observed influential links among major actors at the confluence of policy makers and the supply chain.
7 Besides, segregation of non-GM products completely unrelated to their GM counterparts is clearly feasible.
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Although GM-free private standards or policies are set up by importing food companies, there is insufficient evidence to support their direct involvement in policy processes in African or Asian countries. However, these actors are indirectly influential in policy making via their local traders who face the possibility of exclusion if they do not comply with their standards. Apart from the traders and associated producer groups in the exporting countries, organic farming groups and anti-GM nongovernmental organization vocally use the fear of export losses to support their case. The prominence of private standards in food trade and their capacity to dictate what products can access developed countries is neither new nor specific to GM products. Neither is the observed political power of exporting producers in exerting influence over domestic policy decisions to satisfy their economic self-interest. But it is the combination of the two phenomena in the complex, often poorly informed, and highly politicized debate around the use of GM products that makes this situation particularly unique and the source of unexpected and often seemingly irrational decisions. Rejecting a discrete decision on a trial of an agricultural technology can be detrimental to a country in the long run, especially if this technology addresses critical agronomic constraints and proves to be successful in other countries. Rejecting food aid that may contain GM elements for fear of export losses of a completely different and unrelated crop is an even more worrisome decision that can directly affect the lives of population at risk. In both cases, we feel that the use of basic information can provide guidance to policymakers in order to avoid regrettable and costly decisions. While commercial risks are legitimate concerns for countries largely depending on agriculture, they still differ considerably from health and environmental risks associated with the use of GM products and should therefore be managed in a different way. In particular, commercial risks do not have the same direct consequences, they are not as uncertain, and they are not irreversible. With this in mind, a strict ‘‘precautionary approach” to managing commercial risk is irrelevant and can prove detrimental. Managing commercial risks can be done carefully, by gathering more and better market and regulatory information and by accounting for market uncertainties, without prescribing a simple blanket ban on any decision that could hypothetically have long term effects on possible future exports. Acknowledgments The authors would like to thank all the persons they interviewed. They are particularly grateful to J. Webster, M. KandawaSchulz, D. Wafula, and M. Karembu for their assistance in Kenya, Namibia, and South Africa. This study was supported by the Program for Biosafety Systems, a project managed by the International Food Policy Research Institute and funded by United States Agency for International Development. Views expressed in this paper are the authors’ alone. References Aerni, P., Bernauer, T., 2006. Stakeholders attitudes toward GMOs in the Philippines, Mexico, and South Africa: the issues of public trust. World Development 34 (3), 557–575. Africa News, 2005. Have GMOs Infiltrated Namibia’s Borders? (accessed October 2006). Amungo, R., 2007. Protests Over Biosafety Bill. Kenya Broadcasting Corporation, October 16, 2007 (Newspaper Article). (accessed December 2007). Anderson, K., Jackson, L.A., 2005. Some implications of GM food technology policies for Sub Saharan Africa. Journal of African Economies 14 (3), 385–410. Australia Broadcasting Corporation (ABC), 2007. Lamb Exporter Backs GM Ban, November 13, 2007. . Bangkok Post, 2006a. Indian Traders Warn Against GM Rice, November 1, 2006. Bangkok Post, 2006b. Agreement on Non-GE Policy, November 28, 2006.
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Knight, J.G., Holdsworth, D., Mather, D.W., 2008. GM food and neophobia: connecting with the gate keepers of consumer choice. Journal of the Science of Food and Agriculture 88, 739–744. Kumar, S., 2005. Gene contamination may affect organic exports. The Deccan Herald. Available from:. Landais, E., 2007. Genetically Modified Food Imports Raise Concerns. Gulf News (published on 07.10.07, newspaper article). . Lewis, D., 2007. Weird Science or a Lifeline. Sydney Morning Herald. Available from: . Linden, A., 2008. Unrest Grows Over Canola. Small Business.com, February 11, 2008. . Livermore, M., 2007. Politically modified. Wall Street Journal, November 7, 2007. . Masava, M., 2005. Group Threatens KARI With Court Action Over GMOs. The Kenya Times. Mendelsohn, J., 2006. Farming Systems in Namibia. Research and Information Service of Namibia (RAISON), Windhoek, Namibia. Namibia Resource Consultants, 2002. A Cost–Benefit Analysis of the Utilisation of GMOs in the Production of Namibian Agricultural Products for Local and International Consumption. Final Report. December 2002. Ministry of Agriculture, Water and Rural Development, Meat Board of Namibia, and Namibian Agronomic Board, Windhoek, Namibia. North Queensland Register, 2007. Australia: Coles speaks out against GM crops. Available from: . Paarlberg, R.L., 2002. The real threat to GM crops in poor countries: consumer and policy resistance in rich countries. Food Policy 27, 247–250. Paarlberg, R., 2006. Are genetically modified a commercial risk for Africa? International Journal for Technology and Globalization 2 (1–2), 81–92. Paarlberg, R., 2008. Starved for Science. How Biotechnology is Being Kept out of Africa. Harvard University Press, Cambridge, MA/London, England. Pollack, A., 2008. In Lean Times, Biotech Grains are Less Taboo. The International Herald Tribune, Monday, April 21, 2008 (newspaper article). Reuters, 2008. Australia Eyes Big Gains From GMO Crops, May 12, 2008. Robinson, G., 2003. In: Communiqué to Zambia Agricultural Investment Promotion Conference. Zambian National Farmers Union, November, Lusaka, Zambia. Samabuddhi, K., 2004. Processed Papaya Exports Rejected After GM Rumors. Bangkok Post, September 4, 2004. Serageldin, I., Juma, C., 2007. Continent Warms up to Biotechnology. The Business Daily (Nairobi), November 14, 2007. Sharma, A., 2006. Moratorium on GM Crops Sought. The Financial Express, December 2, 2006. . Sukin, K., Sirisunthorn S., 2004. Europeans Shun Thai Papaya. The Nation, September 3, 2004. Swinnen, J.F.M., Maertens, M., 2007. Global supply chains, standards and the poor: implications for government policy and international organizations. In: Swinnen, J.F.M. (Eds.), Global Supply Chains, Standards and the Poor: How the Globalization of Food Systems and Standards Affects Rural Development and Poverty. CABI. Thai News Agency, 2008. Thai Jasmine Rice Free of GMOs: Says Foreign Trade Chief, March 13, 2008, Bangkok. The Hindu, 2006. GM Variety May Spell Trouble for Indian Rice. United States Department of Agriculture (USDA) Foreign Agricultural Service, 2006. Egypt: Annual Agricultural Biotechnology Report. GAIN Report Number EG6020. United States Department of Agriculture, Washington, DC. Vandenbergh, M.P., 2007. The new walmart effect: the role of private contracting in global governance. UCLA Law Review 54, 913–969.
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GM-free private standards and their effects on biosafety decision-making in developing countries Guillaume Gruère *, Debdatta Sengupta 1 Environment and Production Technology Division, International Food Policy Research Institute, 2033 K Street, Washington, DC 20006-1002, USA
a r t i c l e
i n f o
Article history: Received 1 October 2008 Received in revised form 16 March 2009 Accepted 9 April 2009
Keywords: Genetically modified food Private standards Biosafety International trade
a b s t r a c t We provide a comprehensive review of international cases where GM-free private standards set up by food companies in developed countries have influenced biosafety policymaking in developing countries. We find 29 cases where private importers have directly or indirectly affected policy decisions in 21 countries. Most of the cases relate irrational fear of export losses to excessively precautionary decisions. These cases are based on two generally misleading premises: the belief that Europe or Japan represents the only market for exports, and the perception that non-GM segregation is infeasible or prohibitively costly in all situations. Our study also demonstrates the importance of information asymmetries across countries and agents and the role of risk aversion in seemingly irrational decision-making. The combination of these four factors helps us explain why presumed but unproven expected commercial losses still represents a significant impediment to biosafety policymaking in developing countries. Ó 2009 Elsevier Ltd. All rights reserved.
Introduction Over a decade after their introduction, genetically modified (GM) crops have been adopted by millions of farmers in 25 countries (James, 2008), demonstrating their commercial and agronomic success. Yet, among these, only a few countries do cultivate GM crops at a large scale, only a few GM crops are on the market, and many other countries have stayed away from even considering the use of GM crops. In particular, many developing countries have avoided the debate on GM crops, observing conflicting views among developed countries between exporters promoting the use of the technology, and importers regulating them strictly. Generally lacking functional biosafety systems, these countries have adopted a wait-and-see position, notably because of the uncertainties they perceive on the potential risks associated with the use of transgenic crops and their derived products. Policy specialists have identified several factors playing a role in the reluctance of developing countries to adopt biosafety policies and regulations. Among these, the fear of losing agricultural exports to Europe has been advanced as a significant reason (Paarlberg, 2002; Knight et al., 2008). In particular, this fear has been manifested through decisions taken by African and Asian policy makers on the approval of GM crops for field trial, commercial release, or import authorization. * Corresponding author. Tel.: +1 202 862 8156; fax: +1 202 467 4439. E-mail addresses: [email protected] (G. Gruère), [email protected] (D. Sengupta). 1 Tel.: +1 202 862 6486; fax: +1 202 467 4439. 0306-9192/$ - see front matter Ó 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.foodpol.2009.04.002
At the same time, despite contradicting claims by various opposition groups, applied research conducted in the area of GM products and international trade has consistently shown that alleged commercial risks on currently approved GM crops have been largely exaggerated. For instance, Paarlberg (2006) showed that Eastern and Southern African countries have very low export volumes towards GM – averse markets of Europe. Several studies using international trade simulations have also demonstrated that developing countries have not much to lose and a lot to gain if they adopted productivity enhancing GM crops even with import barriers (e.g., Anderson and Jackson, 2005; Gruere et al., 2007). This observed discrepancy between perceived and actual commercial risks, while puzzling, and of considerable importance, has largely been left out of the GM food and trade debate. Assuming policy makers are at least partially rational when assessing commercial interests, it suggests a distortion between perceived and real commercial risks, supporting a bias towards a precautionary stand, putting any possible – even unproven – export consideration before domestic interests. Investigating this issue requires diving into the political economy of national biosafety decisionmaking on the one hand, and the governance of modern international food supply chains on the other. A closer look at the evolving global food governance points towards the determinant role of private standards. In recent years, modern value chains for exported commodities have been dominated by the demand and specific requirements of retailers in developed countries. In particular, many food retailers and manufacturers in Europe, Japan, and a few other developed countries have been requesting their providers to keep away from GM
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ingredients in order to respond to consumer preference, minimize reputation risks and avoid labeling their products as GM (Carter and Gruere, 2003; Knight et al., 2008).2 While these ‘‘GM-free” standards are not specifically different from others, enforcing them in exporting developing countries that are considering the introduction of GM crops (or biosafety systems to allow field trials of GM crops) was bound to create conflicts of interest between regulators or developers and traders. This paper analyzes observed interactions between importing food companies and their GM-free private standards and biotechnology decision-making in developing countries. Our review of evidence is based on field visits in South Africa, Namibia, and Kenya in 2007, and on the collection of secondary information on these and other countries. Our objective is to identify the critical factors explaining the observed disconnect between perceived and real commercial risk in biosafety decision-making, in order to provide suggestions to policy makers facing allegations of commercial risks. Although the private standard literature analyze a large range of standards and study their effects on the industry, consumers, suppliers and farmers, we are not aware of any specific article on the effects they may have had on domestic public policies. Vandenbergh (2007) demonstrates the growing role of private standards as a substitute or alternative to public policies in global environmental governance. Swinnen and Maertens (2007) consider the implications of private standards on global governance institutions. A few articles have reported the observed strategy of avoidance of GM in supermarkets especially in Europe (e.g., Bernauer, 2003; Kalaitzandonakes and Bijman, 2003), and several others have analyzed the effects of importing company’s choices of ingredients on suppliers (e.g., Knight et al., 2005). But to our knowledge no published study has focused specifically on the political implications GM-free standards may have on developing exporting countries. The rest of the paper is arranged in five sections. We first present the evidence on GM-free standards in developed countries. We then propose a set of hypothetical links between private and public actors, subject to evaluation. The third section provides a global review of available evidence on interactions between GM-free private standards and policy makers globally. Based on this review, the fourth section identifies critical factors contributing to these cases. We close the paper with some conclusions. GM-free private standards Private standards started in the area of food safety, with supermarkets and importers setting up high standards and traceability systems, responding to food safety scares in the 1990s in the meat and vegetable sectors (Graffham, 2006). With a decreasing consumer confidence in public regulations, private companies decided to self-regulate with private standards (Cordon et al. 2005; Henson, 2006). But private standards have extended to other application areas including non-safety considerations such as environmental, ethical, or labor standards. Traders in African countries have been particularly affected by private standards of European companies in the horticultural sector. Overall theses countries’ exports are not very important for Europe (Brown, 2005), but they are significant in their total export value (Jaffe and Masakure, 2005) and therefore compliance with specific import requirements on production is seen as a necessity for exporters. In the mid-1990s, with the growing development of transgenic crops and the increasing wariness among European consumers to-
2 In fact, their GM-free policy may not be grounded in actual consumer behaviour – many European consumers do buy GM food when offered the opportunity (King’s College London, 2008).
wards these technologies, GM-free private standards made their apparition. GM-free policies were first introduced in 1996 in Europe with media and activist campaign against the import of GM soybeans (Livermore, 2007). The Iceland supermarket chain in the United Kingdom was one of the first to take this decision, but many other chains followed. Soon, this phenomenon caught on and became the norm for supermarkets in Europe on most food products, including those sourced from developing countries. The marketing decision of avoiding GM ingredients in food items rapidly became a quality attribute employed in the competition among retails chains of Europe, Japan and South Korea. A report by Greenpeace provides evidence of the widespread adoption of such practices in Europe (Greenpeace, 2006): 27 of the top 30 retailers have a non-GM policy in Europe; 22 out of the top 30 European food and drink producers have a non-GM commitment in Europe. Some companies have even gone beyond processed products from GM ingredients, to include requirement on GM-free animal feed in animal products (meat and dairy) despite the lack of safety related or labeling requirements on these products in Europe or anywhere else. A conceptual framework for evaluation Fig. 1 presents a conceptual framework of possible links between private and trade related interests and biosafety policy making. The framework is based on a two-country example. At the top of the figure, the importing country is a developed country with some specific import and marketing regulations on GM food. In the lower part of the figure, the second country is a developing country that exports certain food or feed products to one or more companies in the importing country, and who is facing policy decisions on biosafety or the use of GM crops. In the importing country, a large share of consumers tends to be averse to the use of GM food. Confronted with this situation and facing the requirement to label their product as GM in the presence of any targeted ingredient by opponent groups that could affect their brand image, food companies decide to take a stand and avoid any GM ingredient in their product formulation. In the exporting country, this GM-free private standard or clause is transmitted to the local traders, and down to the producers. The supermarket company may also have a retail partner in the country subject to the same standard. Two other groups are bound to be participating in the debate: the anti-GM non-governmental organisations (NGOs) – usually sublets of international environmental NGOs based in western countries (Aerni and Bernauer, 2006) – and associations of organic or fair trade exporters, whose regulating principles forbid the use of GM crops, seeds, or elements thereof. At the same time, after the introduction of the private standard, we assume that the government of the exporting country is considering a biosafety decision. It may be discussing the adoption of a biosafety bill or may be about to take a discrete regulatory decision, such as the approval of an application for confined field trial, or the authorization of import of a GM seed, a shipment that may contain GM food or feed, or a shipment of food aid that may contain GM grains. Fig. 1 identifies five possible influential links (numbered 1–5) between the different players and policy decisions that we wish to evaluate in our review of evidence.
From importers to biosafety decision-making: reviewing the evidence Our global review is based on a synthesis of several sources of data. First, we documented reported cases of interactions of importers with policymaking in exporting countries, obtained via
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Consumers
Individual supermarket or retail group
+ GM-free = high quality
+
Anti-GM NGOs
Risks of reputation loss GM -FREE Private standard or contract Potentially GM crop
Meat or animal product
IMPORTING COUNTRY EXPORTING COUNTRY
Non-GM crop
Government representatives 1
Exporters or trader 2 association, producers + Locally owned supermarkets Anti-GM NGOs
+
3
+
Organic/fair trade exporters
-
Biosafety policy
-
GM field trial Other crop
4
Labeling regulation
GM imports
GM food aid
Food Crop
Feed crop
5 Targeted by standard
Organic/FT crop
Not targeted by standard
LEGEND
Decision/ consequence Direct influence
-
Negative indirect influence/ lobbying
+
Positive indirect influence /lobbying Type of products possibly affected Borderline
Consumers
Major actors
Labeling regulation
Key policies
Targeted by standard
Type of product affected
GM free
Marketing factor Fig. 1. A framework of hypothetical links between actors.
internet research among publications, journals or other news clips. Secondly, we conducted interviews with researchers or experts within the targeted countries and internationally. Thirdly, we visited South Africa, Namibia, and Kenya in the summer of 2007 and conducted semi-structured interviews with traders, regulators, and experts to substantiate the evidence.3 As shown in Table 1, we found at least 29 cases of reported interaction between private commercial interests and biosafety policy decisions in 21 countries. However, the actors involved, the scope of the interaction, its policy implication, and/or the possible causality largely vary from case to case. In addition, the type and strength of the evidence supporting each case also varies: from word of mouth or personal conversation to newspaper article, pub-
3 We planned to interview representatives from food retailers in Europe (Carrefour, Tesco, and Iceland), but they either ignored or rejected our request for interviews. Only Marks and Spencer replied, by sending a short message explaining their policy, which excludes all GM products (except in cotton), adding that the group would only express concern to foreign suppliers if there was no ‘‘appropriate segregation and control” to ensure that their GM-free policy would be maintained (personal email November 2007).
lication or technical report. In what follows, we summarize the cases in each region in three tables. Table 2 shows the cases observed in Africa. The table reports the products targeted, alleged commercial risks, involvement of private interest and policy implications. The table also divides cases into three categories: the dark shaded rows regroup cases where the risks are largely unfounded and the resulting decision appears unjustified, if not irrational; the light shaded rows gather cases where the export risks and policy decisions are debatable, and the remaining rows show cases either based on supported commercial risks or without political implications. Many of the African cases stand in the first category with unproven commercial risks. For instance, the rejection of Egypt of a GM potato variety that was explicitly not used for exports on the basis of the fear of export loss to Greece is quite dubious. The rejection of food aid with GM maize in Zambia, which was attributed by a number of different sources to the lobbying effort of organic trading companies exporting vegetables to Europe also seems largely unjustified. Other cases, such as that relating to wine in South Africa seems to make sense from a commercial standpoint. Similarly, Tables 3 and 4 show the cases we found in Asia and elsewhere. Interestingly there are fewer cases with unjustified
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Table 1 List of reported cases by country, crop, year, and types of source of information. Country
Product(s) targeted
Year
Australia Brazil Canada Canada Egypt India Indonesia Kenya Kenya Malawi Malawi Namibia New Zealand Qatar South Africa South Africa South Africa Thailand Thailand UAE Uganda USA USA USA USA Vietnam Zambia Zambia Zimbabwe
GM canola GM soybeans GM potato GM wheat GM potato GM rice GM cocoa GM crops Non-GM tea GM food aid Groundnut GM maize fed beef GM yeast GM rice GM maize/animal products GM yeast/vine GM potato GM papaya GM rice GM rice GM cotton GM potato GM sugarbeet GM rice GM wheat GM rice GM food aid GM food ban GM food aid
2007 2007 n.a. 2004 2001–2002 2006/08 2007 2005-7 2007 2005 2005 2006 2007 2007 2004–5 2007 2006/08 2005 2006/08 2007
Sources of information Word of mouth
n.a. 1998 2004 2004 2006/07 2005 2007 2006
n.a. means not available or uncertain. Source: authors.
Table 2 Cases in Africa – the most shaded cells represent the most unjustified risks.
Source: authors compiled from various sources.
Personal conversation
Newspaper
Report/article X
X X X
X X X X
X X X X X X X X X X
X X
X X X X
X X X X X
X X
X
X X X X
X X X X
X X X X
X
X
X X X
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Table 3 Cases in Asia – the most shaded cells represent the most unjustified risks.
Source: authors compiled from various sources. (see above mentioned references for further information.)
export risks in Asia or in other countries. More cases lie in the intermediate category, presenting likely but potentially manageable risks. For instance the lobbying of basmati rice exporters against GM rice in India may appear justified in view of the potential export risk they face. But this presumed risk is based on the assumption that segregation is infeasible, which is likely to be incorrect. Basmati exports to Europe are already subject to a very sophisticated marketing process that separates it from any other type of rice, and it is likely that setting up an identity preservation system for non-GM would be possible, even if it would incur an adjustment (identity preservation) cost. From that standpoint, the real issue may be that traders do not want to pay for nonGM segregation and therefore lobby the government to ban any experiment or use of GM rice (Gruere et al., 2007). The case of Thai papayas also lies in this intermediate risk category. The escape of GM papayas from field trials, if not controlled in 2004, would have resulted in export losses of papaya products from Thailand, but not of other products as claimed by certain groups. The policy response (a moratorium of GM field trials) was also probably excessive given the interest and investment of Thailand in biotechnology and the likely benefits of GM papayas for domestic growers. To complete our overview we will now turn to a brief analysis of specific case studies in Namibia and Kenya, based on our field visits. From traders’ interest to a government position: the case of Namibia Namibia exports high value grass-fed beef both within the Southern Africa region and to Europe.4 Other animal products are also important but do not generate as much export value. All has been done to make the Namibian beef qualify with the highest standards of safety and quality to satisfy high income consumers in Europe. First, the commercial meat industry has set up a full traceability system. Second, a number of practices have been adopted to make the beef comply with EU consumers’ preferences; in particular, the
4 On average between 1990 and 2005, 92% of all cattle-based products in Namibia were exported and 19% of cattle were used for European exports (Mendelsohn, 2006).
production does not allow the use of hormones or antibiotics, feed is mostly coming from grass, etc. Third, the government has set up an East–West fence that literally divides the country, to control the possible spread of cattle diseases from the North to the South. No livestock or meat from the North is allowed to cross to the South of the fence unless it has been through quarantine procedures (Mendelsohn, 2006). Cattle produced in the North of the fence have to remain there and cannot be used for exports. In view of the importance of the beef’s ‘‘green” image, adding a standard requiring the exclusion of GM maize in cattle feed appears to be a justifiable marketing decision from exporters in view of European consumers’ preferences. This decision may have been driven by Tesco, a retail chain based in the United Kingdom, and a large buyer of Namibian beef, or by other companies in the UK or Norway. According to Paarlberg (2008, p. 135), in 2000, one or more private European companies stopped imports of beef from Namibia because they realized the animals had been fed with yellow GM maize. This event may have been the trigger for the import ban. But neither our meetings with local stakeholders, nor the lack of clear policy on beef by Tesco confirmed that buyer requirements remained the one and only reason to ban imports of GM maize. Although it was recognized that EU retailers prefer GM-free fed beef, there was no explicit evidence of a major rent with keeping cattle feed free of GM maize. In all likelihood, the basis of the GM-free policy is driven by supply and demand considerations; it is probably intended to satisfy the preference of Tesco and other European retail chains, but it has also been extended to help Namibian beef keep its high quality reputation in the eye of European buyers. However, looking deeper into the issue, the policy consequence of this marketing decision makes this case more intriguing. Namibia has enforced a strict moratorium on GM maize (Graig, 2001), banning GM maize imports from neighboring South Africa. Although part of this decision is due to the fact that the GM food regulations are still not in place, all information we gathered point towards the role of the Namibian Meat Board, the governmental agency representing the meat sector in supporting this position, even to the point of pushing for this moratorium to become the official Namibian policy beyond the adoption of a regulatory framework.
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Table 4 Cases in other countries – the most shaded cells represent the most unjustified risks.
. .
Source: authors compiled from various sources. (see above mentioned references for further information.)
If all the industry and population was supporting this ban, such a decision would appear publicly legitimate (even if potentially WTO inconsistent). But several elements provide arguments showing that this is not the case. First, a representative from the feeding industry explicitly said that it would welcome imports of cheaper mixed GM and non-GM maize, especially with the recent surge in maize prices leading to an even higher price of pure non-GM maize. Second, although maize is used in cattle feeding in Namibia, the share of yellow maize in total animal feed is extremely low and used as a complement (Namibian cattle are grass-fed). Third, banning GM maize imports to avoid the risk of it being fed to export bound cattle presumes that segregation of imports is infeasible, and thus that all exports would be lost with maize imports. However, there is evidence from a consultant report (ordered by the government) that these two presumptions are not correct (Namibia Resource Consultants, 2002): the consultants found that there was a maximum threat of losing 1% of the sale revenues due to export value loss, should Namibian cattle use GM maize for feed. Fourth, it should be noted that a very large share of all meat sold in the EU has been fed with GM feed (Knight et al., 2008, p. 741), notably because of the political exception in the EU GM food labeling policy on meat and animal products. Even with GM feed, beef could be sold in Europe. To sum up, if the avoidance of GM feed by the cattle industry may be legitimate from their marketing standpoint, the use of this argument as a support to the Namibian strategy appears politically and economically unjustified.
It is the main supplier of industrial tea in Great Britain. Although the imposition of a GM-free certification requirement by European buyers (Lipton etc), does not have any implication on policies, the fact that it is applied on a product (tea) which has not been genetically engineered anywhere demonstrates the spread of standards above and beyond any regulation. In a rational sense, it may have been introduced to prevent the use of GM tea in the future. But no company or research institute would ever invest in research and development in Kenya in a GM variety of a major export crop going to countries opposed to GM. This preemptive measure shows the political power of importing companies to avoid facing future adjustment costs (e.g. segregation or changing supplier) with the possible testing or use of GM products. The export loss arguments used by the Kenyan Organic Association Network (KOAN) and its associates also do not seem to be completely justifiable. These groups have been vocal about their fears of GM and feel that if GM maize or cotton was allowed it would pave the way for other GM crops to be adopted, which is a possibility in the long run. But they also fear that the possible introduction or GM maize or cotton would affect organic producers and their access to the EU organic market for fresh vegetables (green beans, etc.),6 which is biologically impossible. Put together with the tea case, this shows how a discussion of commercial risks has gone from real risks to non-existent and completely hypothetical (and sometimes irrational) risks.
Traders and fears of irrelevant products: the case of Kenya
In our global review, we find a number of common features across cases. First they directly or indirectly link the possibility of commercial risk to private based efforts in influencing policy decisions. In particular, we find that the five types of actors identified in Fig. 1 (supermarkets in importing countries, traders, organic producers, NGOs, and local supermarkets) have had a partial
Perhaps the most striking feature common to the Kenya cases is the disconnect between the GM crops targeted for trials and potential commercialization and the object of the fears of export losses. The case of tea is remarkable. Kenya is the largest exporter of tea.5
5
Personal conversation with a representative of the Kenyan Tea Board.
Disentangling irrational fears from real commercial risks
6
Personal conversation with KOAN representatives.
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influence on decision-making in at least one case, which validates our conceptual framework overall. However, importing companies in Europe or Asia do not appear to interact directly with policy makers. Instead, in most cases, they do it via the prominent roles of local trader groups. Organic groups and anti-GM NGOs have had similar roles, and share views and sometimes campaigns in opposing GM. These three groups do represent the large majority of reported cases. Secondly, we find that unjustified or seemingly irrational decisions to avoid GM are generally based on two misleading presumptions. The first is that segregation between GM and non-GM is infeasible. Assuming that segregation is absolutely infeasible prompts the fear that there will be no more conventional products, should a GM variety get approved. However, the segregation of non-GM products that are already subject to multiple quality and safety checks can be a distinct possibility (as done in Brazil, South Africa, Spain, Canada, and the United States or for organic products worldwide).7 The second assumption is that current markets in Europe (and Japan) are the only markets for exports. Under this rationale, because these markets are largely opposed to GM, there is very limited scope for trade if GM products are grown in a country. On the contrary, there are a number of countries in Asia as well as some emerging markets in the middle-east which do not discriminate between GM and non-GM products (in particular animal products), or that do not have as high marketing standards as Europe (i.e. do not discriminate highly processed products). Third, we find that two additional factors play a significant role in irrational cases: information asymmetries and risk aversion. We found two types of information asymmetries: those between the importer and local actors (traders) and those between the policy makers and local or outside (traders or other stakeholders) actors. Although both can result in confusions, misunderstandings, and bad decisions, the second type of asymmetry can prove to be more damageable to a country, potentially pushing policy makers to support irrational and likely detrimental decisions. During our interviews, we also found evidence that certain traders, particularly in developing countries, tend to be risk averse in their relationship with buyers, unquestioningly complying with standards required by the buyers, often despite the costs these standards may imply. The perceived or actual market power of buyers accentuates this phenomenon: losing a buyer appears as a risky gamble. Risk aversion behaviors can also be found among policy makers that do not want to lose popularity. Conclusion In this paper, we investigate the observed discrepancy between real and perceived commercial risks with the use of GM products by diving into the political economy of GM food and international trade. We focus particularly on the effects of GM-free private standards set up by food companies in Europe and other food importing countries on biotechnology and biosafety policy decisions in exporting developing countries. Overall, we found 29 cases where GM-free private standards may have interacted directly or indirectly with biosafety policy decisions in 21 countries. Because many of the cases rely on unpublicized lobbying activities, and because of the lack of comprehensive evidence, many cases do not provide straightforward evidence of causality links between importers or traders and policy decisions. But by assembling various pieces of evidence, we are still able to obtain a consistent framework of observed influential links among major actors at the confluence of policy makers and the supply chain.
7 Besides, segregation of non-GM products completely unrelated to their GM counterparts is clearly feasible.
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Although GM-free private standards or policies are set up by importing food companies, there is insufficient evidence to support their direct involvement in policy processes in African or Asian countries. However, these actors are indirectly influential in policy making via their local traders who face the possibility of exclusion if they do not comply with their standards. Apart from the traders and associated producer groups in the exporting countries, organic farming groups and anti-GM nongovernmental organization vocally use the fear of export losses to support their case. The prominence of private standards in food trade and their capacity to dictate what products can access developed countries is neither new nor specific to GM products. Neither is the observed political power of exporting producers in exerting influence over domestic policy decisions to satisfy their economic self-interest. But it is the combination of the two phenomena in the complex, often poorly informed, and highly politicized debate around the use of GM products that makes this situation particularly unique and the source of unexpected and often seemingly irrational decisions. Rejecting a discrete decision on a trial of an agricultural technology can be detrimental to a country in the long run, especially if this technology addresses critical agronomic constraints and proves to be successful in other countries. Rejecting food aid that may contain GM elements for fear of export losses of a completely different and unrelated crop is an even more worrisome decision that can directly affect the lives of population at risk. In both cases, we feel that the use of basic information can provide guidance to policymakers in order to avoid regrettable and costly decisions. While commercial risks are legitimate concerns for countries largely depending on agriculture, they still differ considerably from health and environmental risks associated with the use of GM products and should therefore be managed in a different way. In particular, commercial risks do not have the same direct consequences, they are not as uncertain, and they are not irreversible. With this in mind, a strict ‘‘precautionary approach” to managing commercial risk is irrelevant and can prove detrimental. Managing commercial risks can be done carefully, by gathering more and better market and regulatory information and by accounting for market uncertainties, without prescribing a simple blanket ban on any decision that could hypothetically have long term effects on possible future exports. Acknowledgments The authors would like to thank all the persons they interviewed. They are particularly grateful to J. Webster, M. KandawaSchulz, D. Wafula, and M. Karembu for their assistance in Kenya, Namibia, and South Africa. This study was supported by the Program for Biosafety Systems, a project managed by the International Food Policy Research Institute and funded by United States Agency for International Development. Views expressed in this paper are the authors’ alone. References Aerni, P., Bernauer, T., 2006. Stakeholders attitudes toward GMOs in the Philippines, Mexico, and South Africa: the issues of public trust. World Development 34 (3), 557–575. Africa News, 2005. Have GMOs Infiltrated Namibia’s Borders? (accessed October 2006). Amungo, R., 2007. Protests Over Biosafety Bill. Kenya Broadcasting Corporation, October 16, 2007 (Newspaper Article).
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