Hoover Daily Report

China's Threat to American Farm Exports

via Wall Street Journal
Tuesday, March 18, 2014

In November, China suddenly announced that it would block corn shipments from the U.S. that contain Viptera, a genetically engineered trait that offers superior insect-resistance and the reduction of potentially harmful mycotoxins. Since then Beijing has rejected nearly a million tons of U.S. corn, throwing U.S. agriculture into disarray and imperiling future innovations.

Viptera was approved for cultivation in the U.S. in 2010 and subsequently in several other nations, including Canada. The European Union approved its importation in 2012 as have another dozen countries world-wide.

But China's approval process for genetically engineered plants and seeds (sometimes called "genetically modified organisms," or GMOs) doesn't begin until an exporting nation has completed its own. In the best of circumstances, this puts China two years behind. For Viptera, that two-year lag time has extended to four, with no end in sight.

China's action has nothing to do with safety. Its cryptic November announcement mentioned only that Viptera was not approved for import—yet earlier in 2013 China had imported nearly a million tons of corn that included the Viptera trait from the U.S. It also accepted corn from Argentina that included Viptera.

China bears no animus toward genetic engineering. Its farmers grow a larger number of genetically engineered plants—cotton, papaya, poplar, tomato and sweet pepper—than any other nation except the U.S.

Why did China block Viptera? Some speculate it is buying time to copy and steal the technology by "reverse engineering" the genetic trait. Others think Beijing wants to back out of contracts it signed last year when the price of corn was higher. According to a Bloomberg story earlier this month, Peng Yufa, the chief scientist of China's biotechnology safety committee, admitted that trade issues play a role in its approval process.

Whatever the motivation, the effects have convulsed U.S. agriculture. The North American Export Grain Association and the National Grain and Feed Association, the two major grain-industry trade groups, have demanded that agribusiness giant Syngenta SYNN.VX +0.62% immediately stop selling Viptera and another genetically engineered corn, Duracade, which was approved in the U.S. last year.

Their position makes no sense: Viptera has been grown since 2011 and it would take years to remove it from the supply chain. Worse, it would be a prescription for paralysis, effectively giving Beijing a veto on new plant technologies.

Without a predictable path to commercialization, no company will spend the $100 million it takes to develop a new genetically engineered variety and shepherd it through burdensome regulation. Keeping hardier, higher-yield and more profitable plants out of the hands of U.S. farmers will put them at a disadvantage with competitors abroad.

The danger of the U.S. industry's' position was highlighted when another grain handler, CGB, announced it would not accept crops containing Duracade until the trait had been approved not only by China but by Egypt and Turkey as well. Turkey's biosafety regime is so uncertain that agbiotech companies are not seeking approval there. Egypt is in turmoil and the government has long lacked a functioning regulatory system for import approvals.

Gavilon, another grain dealer, has entered into an agreement with Syngenta, promising to buy Duracade from growers and keep it segregated so it only reaches markets that have approved it. The other traders, however, appear committed to a bulk distribution model in which all grain is mixed indiscriminately. And specialty distribution channels can only go so far. Countries that want to buy commodity grain at commodity prices ultimately will have to cooperate in bringing predictability and rationality to the approval process. China, as a large and growing importer, will be critical.

U.S. Agriculture Secretary Tom Vilsack raised the impasse over Viptera on a visit to China in December, without apparent effect. Now the U.S. Trade Representative and the White House need to treat this issue as a top priority and exert maximum pressure on Beijing. "Innovation must go forward," as former Agriculture Secretary John Block wrote in the Des Moines Register, and "innovators can't allow the bad actions of one nation to hold back progress for the rest of the world."

Dr. Miller, a physician and molecular biologist, is a fellow at Stanford University's Hoover Institution. He was the founding director of the FDA's Office of Biotechnology.