The Economic and Marketing Challenges of Horticultural Biotechnology - Transgenic Horticultural Crops: Challenges and Opportunities - page 183

To.avoid.comingling,.GM.and.non-GM.crops.must.be.separated.on.the.farm.by.
a.suficient.distance.to.prevent.cross-pollination..They.must.also.be.kept.separate.in.
transportation.to.grain.elevators.and.from.elevators.to.processors..The.challenge.of.
isolating.crop.varieties.within.the.grain.marketing.system.and.preventing.unwanted.
comingling.is.illustrated.by.the.2000.discovery.in.the.human.food.supply.of.a.GM.
corn.variety.approved.only.for.animal.and.industrial.uses..The.StarLink.corn.was.
discovered.irst.in.taco.shells.marketed.at.retail.grocery.outlets,.including.the.Taco.
Bell.brand.marketed.by.Kraft..The.discovery.ultimately.led.to.the.recall.of.200.food.
products.and.a.temporary.ban.on.U.S..corn.imports.in.Japan.until.corn.purity.could.
be.veriied.
The.incident.was.estimated.to. cost.U.S..producers.as.much.as. $290.million. 58 .
Aventis,. the. maker. of. StarLink. corn,. reportedly. budgeted. $1. billion. for. costs.
associated.with.recalling.contaminated.corn.and.food.and.for.compensating.farmers. 59 .
A. number. of. lawsuits. were. also. iled. against. Aventis,. which. inally. settled. for.
$125. million.. It. took. nearly. half. a. decade. for. the. contaminated. corn. to. exit. the.
food. supply. chain. despite. efforts. to. destroy. it. quickly.. The. contamination. likely.
occurred.via.gene.low.across.buffer.crops.to.conventional.crops.destined.for.human.
consumption.
The.StarLink.episode.demonstrates.that.without.reasonable.thresholds.in.label-
ing.and.trade.import.regulations.for.the.adventitious.presence.of.GM.DNA.or.pro-
teins,.the.risk.to.food.processors.is.high.while.the.beneits.are.low,.particularly.in.
small.markets..Given.low.consumer.acceptance.and.strict.and.heterogeneous.label-
ing.requirements,.irms.face.considerable.risk.to.serve. available.markets..Adverse.
events.could.not.only.impose.signiicant.liability.but.also.jeopardize.brand.reputa-
tion,.which.could.spread.to.non-GM.operations.of.the.irm..Niche.markets.for.GM.
food. will.be. underserved.by.risk-averse. irms,.further.constraining.the.market.for.
biotechnology.in.horticultural.crops.
DIRECTED R&D AND ROLE FOR PUBLIC
SECTOR: PUBLIC-PRIVATE PARTNERSHIPS
Funding. for. horticultural. biotechnology. research. has. lagged. investment. in. trans-
genic.research.for.major.ield.crops,.even.controlling.for.relative.market.size. 23 .
By.2004,.investment.in.horticultural.biotechnology.had.all.but.died.off,.with.leading.
innovators.focusing.their.horticultural.R&D.efforts.on.conventional.plant.breeding.
instead.of.genetic.engineering..Theory.predicts.that.the.investment.in.R&D.is.sub-
optimally.low.because.of.free-rider.problems,.except.where.strong.IPRs.are.vigor-
ously.enforced..Where.IPRs.are.strong,.however,.innovating.irms.are.rewarded.with.
monopoly.power.for.the.terms.of.their.patents..Monopoly.power.permits.patent.hold-
ers.to.earn.supra-normal.proits,.but.high.technology.prices.lead.to.adoption.rates.
that.are.suboptimally.low.from.a.social.welfare.perspective..The.traditional.response.
to.underprovision.of.agricultural.innovation.is.to.invest.public.dollars.in.research..
Historically,.the.government.has.been.a.leader.in.agricultural.research,.and.horticul-
ture.has.been.more.dependent.on.public.support.than.major.crops..Since.the.1990s,.
however,.public.research.has.begun.to.decline.as.new.R&D.paradigms.emerge.