The Economic and Marketing Challenges of Horticultural Biotechnology - Transgenic Horticultural Crops: Challenges and Opportunities - page 180

Americans.consumed.products.with.GM.traits.that.either.reduced.chemical.appli-
cations.on.crops.or.increased.the.nutritional.value.of.foods..Golden.rice—fortiied.
with. beta-carotene—elicits. a. positive. willingness. to. pay. (WTP).. Any. WTP. for.
reduced.pesticide.residual.in.food,.however,.is.offset.by.the.perceived.risks.associ-
ated.with.GM.technology.
Low. consumer. acceptance. of. crop. biotechnology. reverberates. up. the. supply.
chain,.providing.a.disincentive.for.innovation..Food.processors.have.dificulty.in.
marketing.products.made.with.GM.ingredients,.so.they.contract.with.farmers.for.
non-GM.crops..Without.contracts.for.GM.crop.output,.farmers.are.disinclined.to.
plant.GM.seeds..And.if.farmers.will.not.purchase.the.seed,.seed.companies.and.
biotechnology.irms.will.not.invest.in.the.substantial.R&D.costs.necessary.to.pro-
duce.the.seeds.
The.backlash.against.the.GM.potato.serves.as.a.cautionary.tale.about.the.limits.
of.consumer.willingness.to.accept.GM.foods..McDonald's,.the.largest.consumer.of.
potatoes. in. the. United. States,. began. using. an. insect-resistant. potato. in. its. French.
fries.in.order.to.reduce.costs..Consumer. opposition.was. intense,. however,. and.the.
company. and. other.major.food. processors.stopped.sourcing.GM.potatoes.in. early.
2000..One.year.later,.Monsanto,.which.had.developed.the.insect-resistant.potato.
6.years.before,.stopped.marketing.it.altogether.
The.extent.to.which.the.experience.of.the.GM.potato.slowed.innovation.in.horti-
cultural.biotechnology.is.not.clear,.but.it.is.likely.no.coincidence.that.R&D.directed.
toward.food.crops.declined.sharply.after.Monsanto.withdrew.its.GM.potato..In.1999,.
374.ield.test.notiications.were.submitted.for.GM.horticultural.crops..By.2003,.that.
number.had.fallen.to.97. 2 .In.contrast,.the.number.of.ield-test.notiications.for.major.
GM. ield. crops. rose. from. 506. in. 1999. to. 520. in. 2003.. Consumers. have. generally.
been.more.tolerant. of. GM.crops.destined.for.animal.feed. rather.than.human. con-
sumption,. which. may. explain. why. the. most. rapid. innovation. is. occurring. in. the.
development.of.drought-tolerant.varieties.for.major.crops.
REGULATION
Consumer.acceptance.of.GM.foods.certainly.limits.the.returns.to.agricultural.and.
horticultural. R&D.. But. government. regulation. further. constrains. the. market. and.
deters. commercialization. of. GM. horticultural. crops. that. would. be. demanded,. at.
least.in.niche.markets..Ex.ante.testing.and.registration.requirements.for.new.trans-
genic.events.increase.the.ixed.costs.of.commercialization.and.create.a.disincentive.
for.investment.in.horticultural.biotechnology.research,.as.was.discussed.previously..
However,. two. other. elements. of. government. policy. also. limit. the. proitability. of.
GM.horticulture.throughout.the.supply.chain..First,.some.governments.ban.imports.
of. foods. containing. GM. ingredients.and. deny. registrations. for. domestic. GM. crop.
production.. These. policies. not. only. restrict. market. access. for. GM. output. but. also.
limit. demand. for. seed. technologies. themselves.. Second,. where. GM. products. are.
commercialized,.processors.often.face.strict.rules.for.segregating.and.labeling.GM.
foods.and.derivatives.of.GM.ingredients..Liability.associated.with.adventitious.com-
ingling.of.GM.and.non-GM.ingredients.creates.a.deterrent.to.GM-food.provision.by.
food.processors.