1.The Issue:

This case study will examine the production of genetically modified (GMO) soybeans in the US and the effect that they have on trade and the environment in the European Union (EU) . Since the late 1980's the US corporation Monsanto has been working on soybeans, which are resistant to Monsanto's herbicide Roundup. The benefit of this GMO soybean is a lower production cost through reduced tillage and increased yields through the elimination of competitive weeds. After a ban on the GMO soybean, the EU has allowed the beans to enter its market; however, individual members within the EU have not allowed the entrance of the soybean across their borders. The EU itself has also enacted a "novel food" law requiring all GMO soy to be labeled.

The US position on the GMO soy is that the new crop is no different from its original form. The US contends that scientific tests have generally not shown harmful side effects in the production and consumption of Roundup Ready soybeans. Despite the EU ban and labeling laws, some EU officials have conceded that the Roundup Ready soybeans are scientifically sound. For instance, EU environmental spokesman, Peter Joergensen, told reporters that three EU scientific committees had not found any new information to counter the Commission's decision of GMO maize and soybean approval. (Reuters June 18, '97) Despite the relative lack of scientific information or evidence supporting a ban on GMO soy and the US pressures to lift the labeling requirement, the EU has held firm in its requirement of soybean segregation. The following will examine the claims from both sides of the Atlantic, looking at uses of soybeans and the effect that GMO soybeans have on the environment and trade.

2. Description

iotechnology Background

In the broadest sense, biotechnology includes, "any technique that uses living organisms, or parts of such organisms, to make or modify products, to improve plants or animals for human needs, or to develop microorganisms for specific use." (OTA '88) Biotechnology is a broad term that includes traditional methods of agriculture industry and food processing that have been preformed throughout human history. Biotechnology can also refer to modern scientific techniques characterized by genetic engineering. (Doyle and Persley)

Biotechnology history involves three phases. The first generation of biotechnology is based on empirical practice and minimal scientific or technical inputs. These techniques date back to the stone age, and use biological organisms such as bacteria, yeasts, enzymes, and traditional methods of fermentation to produce food and drink such as bread and wine. (Avramovic)

The long history of biotechnology has its roots in the brewers of Babylon and ancient Egypt. As history progressed, the process of alcohol production became a standard industry that nations developed. This fermentation process is known as zymotechnology, and it was eventually applied to alternative industries outside the realm of beer and wine. (Bud) By the year 1900, the zymotechnology processes had progressed to include a wide variety of applications including leather curing and citric acid production. (Bud) These zymotechnical methods constitute a bridge between the biotechnology's traditional heritage and its modern associations.

The second generation of biotechnology began during the inter war period when developments in fermentation technology using pure cell culture and sterile manufacturing facilities began to yield new products. Examples of the Phase II innovations are acetane, butanol, glycerol, Vitamin B2, citric acid, and lactic acid, but perhaps the most important discovery was that of penicillin in 1928. These discoveries led to the interest in, and subsequent development of, large-scale production of fermentation products for the pharmaceutical industry. The ability to innovate biotechnically, and produce new products for mass market, spurred a rapid increase in life sciences research. This research spawned the production of new antibiotics such as cephalosporines, as well as an increasing range of enzymes, vitamins and steroid like hydrocortisomes. (Avramovic)

In the 1930's the US agriculture industry began to use hybrid crop varieties which increased crop yields dramatically. By the late 1950's increases in biotech research led to the use of amino acid preparation for agricultural products such as glutamate in food flavoring and polysaccharides used as stabilizing/filling agents in food manufacturing. Due to the tremendous economic significance of the products developed this stage became known as the "Green Revolution." The Green Revolution can be viewed as a predecessor to the biotechnical revolution except that biotechnology encompasses a greater number of affected areas with a heightened impact. (Avramovic)

The turning point leading to a third generation, or modern biotechnology, is the discovery at Cambridge University of the structure of Deoxyribonucleic acid (DNA). The subsequent research linking four related chemicals called bases to their related DNA sequence led to product developments signifying the beginning of modern biotechnology. (Rudolph)

The advances of modern biotechnology techniques have exponentially increased over the past two decades. The applications developed from these methods are consistent with those used throughout human history. Thus, the powerful new tools provided by modern biotechnology generate products that fill essentially the same role as those produced with more traditional methods. The major difference between traditional biotechnology and modern biotechnology is that modern biotech production is far more intensive than its predecessor. However, this production intensity allows for a more precise and less time consuming production process.(Doyle & Persley)

Modern biotechniques are varied, but three broad classes of basic biological techniques are of particularly prominent in industry use. First, tissue cell culture technology is used to establish cell lines used for medical diagnosis and treatments. Next, Hybridoma technology is used in various reproductions of human monoclonal antibodies. These antibodies can then be used as a supplement to natural human antibodies in medical treatments. (OTA '91) Finally, Recombinant DNA, also referred to as genetic engineering, is the most prominent biotechnique. This technique involves the direct manipulation of genetic materials of organic cells. Its application covers all industries that include organic cells such as agriculture, medical, and the environment. (OTA '91)

The soybean is the world's foremost provider of protein and oil. The soybean plant is a legume related to clover, peas and alfalfa. Soybeans, similar to maize and sugar beats, are planted in late spring and flower in the summer. These flowers produce 60-80 pods, each holding three pea-sized beans. The crop is then harvested in early fall. (American Soybean Association)

The history of soybeans can be traced to China where as early as 5,000 years ago, Chinese farmers grew soybeans. Soybeans history in the US; however, is relatively recent. The US involvement with soybeans is believed to be dated back to 1804, when a Yankee dipper ship brought soybeans to the US. The ship was loaded with soybeans because while leaving China, sailors loaded the ship with soybeans as an inexpensive ballast. Upon the ships arrival in the US the sailors dumped the soybeans to make room for cargo.(American Soybean Association)

In 1829, U.S. farmers took the Chinese soybeans and began to grow them commercially. The uses of soybeans are varied and can be historically seen through some interesting examples. For instance, the first popular use of the soybeans was for the making of soy sauce. Also, during the Civil War, soldiers used soybeans as "coffee berries" to brew "coffee" when real coffee was scarce. Another use of the soybean was as a cheap forage for cattle which began to be used by farmers in the late 1800's. This usage of soybeans as forage was altered after 1904 when George Washington Carver began to study the legume at the Tuskegee Institute in Tuskegee, Ala. Carver's showed that the beans provided valuable protein and oil. The results of Carver's studies sparked US soy production which had grown to 9 million bushels by 1929.(American Soybean Association)

Another significant contribution to the growth of the US soy crop came from William J. "Bill" Morse. In 1929 Morse left on a two-year odyssey to China during which he gathered more than 10,000 soybean varieties for U.S. researchers to study. The significance of US soybean production was further enhanced during World War II. At this time the availability and supply of imported edible fats and oils was reduced in the US. Prior to World War II, the United States imported 40 percent of its edible fats and oil, but during the war processors turned to US grown soybean oil. As a consequence of US industry reliance on the soybean, the US developed a trade surplus in the soybean throughout the 1940's. (American Soybean Association)

During the economic boom in the US in the 1950's the soybean producers began to look for further international markets for US soy. This led the American Soybean Association to begin to promote U.S. soybeans in Japan in 1956. The success that the American Soybean Association had in promoting US exports in Japan is evidenced by the fact that today, 50 percent of the US soy exports go to Japan. The European Union is the second largest market for US soy. This large export market drives the production of US soybeans which are currently the second largest US crop when measured in cash sales.(American Soybean Association)

The US, Missouri based Monsanto Corporation has taken a leading role in the US agriculture biotechnology industry. Last fall marked the newest wave of genetically engineered crops that included a strain of glyphosate-tolerant soybean labeled as "Roundup Ready." Roundup is a popular herbicide, which is also manufactured by Monsanto. The benefit of Roundup Ready soybeans is that fields can be sprayed with Roundup anytime from pre-plant to canopy stage. This form of weed control is beneficial because Roundup is effective against most annual and perennial weeds. Additionally, this form of weed control has earned high marks from some environmental groups because it saves valuable topsoil from erosion due to the elimination of tillage. Also, Roundup begins to bread down when it first hits the soil. This lack of "residual" is healthy for the environment; however, it may cause the grower to mix herbicides to attain a soil residual that will eliminate weeds for a longer period of time. (Asgrow Seed Co.)

Additional advantages that Roundup Ready soybeans afford the grower are the ability to circumvent the weather in the weed control process by applying a postemergence program if the preplant weather is to wet. Yields should fair better also due to the assurance that crop stress arising from herbicide residue is eliminated. Economically, the grower only need apply one or two over the top applications, which will lower overhead costs associated with combining herbicide mixes and tillage programs. (Asgrow Seed Co.)

In the spring of 1996, the EU allowing the importation and processing of Roundup Ready soybeans into food and feed granted regulatory approval. This approval was followed by a storm of activity by European Consumer and Environmental groups who opposed the approval of genetically modified soy. Greenpeace and other activist groups have mounted an opposition campaign in an effort to raise concerns among the European public about genetically modified (GMO) soybeans. The campaign is based on the "right to know" principle. The "right to know" advocates call for a segregation and labeling of all GMO soybeans, which enter the European Union. These groups are threatening a possible boycott of all US soybeans if their demands are not met. (Foundations of Economic Trends)

The EU has responded to the growing public pressures with new initiatives meant to limit the amount of GMO soybeans that are imported into the EU. These new regulation are cause for concern in the US agriculture industry who see moves such as these as laying the potential framework for an EU ban of US GMO products.

One of the difficulties faced by US exporters is that the EU Commission is the main body regulating the importation of GMO products. Despite the Union's primacy in trade issues, individual members may invoke controversial Article 16 (of the EU GMO directive 90/220) to ban soybeans, going against the directives of the EU. Members such as Austria, and Luxembourg have used this Article to ban GMO maize and are currently debating invoking the Article to ban GMO soy. (Reuters June 18, '97)