STATEMENT OF

ALAN BOWSER

DEPUTY ASSISTANT SECRETARY

FOR BASIC INDUSTRIES

INTERNATIONAL TRADE ADMINISTRATION

DEPARTMENT OF COMMERCE

BEFORE THE

U.S. HOUSE OF REPRESENTATIVES

COMMITTEE ON INTERNATIONAL RELATIONS

SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY AND TRADE

October 27, 1999

Introduction

Madame Chair, Congressman Menendez and other members of the subcommittee, I am pleased to submit this statement for the record on the international issues involved with the trade of agricultural biotechnology products.

New technologies, including biotechnology, will be the locomotives of trade in the new millennium. Biotechnology could help us meet a host of challenges in the 21st century, including feeding the world's soaring population, bringing new medicines to our sick, and finding better ways to protect our ecosystems. U.S. industry is at the forefront of efforts to develop this promising and increasingly important new field. The U.S. biotech sector is forecasted by industry sources to achieve annual revenues of over $45 billion by 2010, up from the $14 billion in sales forecasted for 1999. In my statement, I will briefly address the importance of agricultural biotechnology and summarize our current regulatory framework before focusing on current market access issues for agricultural biotechnology products.

Agricultural Biotechnology

Modern biotechnology has already become an important part of U.S. agriculture and U.S. agricultural exports. Significant percentages of this year's corn, soybean, and cotton crops were planted with biotechnology-enhanced seeds. Farmers have adopted new biotechnologies because they allow them to grow higher quality products, improve yields, and reduce input costs. New biotech products that have direct benefits for consumers will soon become available; for example, rice supplemented with Vitamin A and soybeans with lower fat content are currently under development.

Wide acceptance of new biotech products by U.S. farmers and agribusiness has occurred in a context of declining agricultural exports and lower prices. U.S. agricultural exports have dropped from a high of $60 billion in 1996 to the current level of $49 billion, pushing farm prices down and increasing stress on many U.S. farm communities. It is abundantly clear that the continued survival of many U.S. farms depends upon a resumption of growth in our agricultural exports. Agriculture exports should benefit from improving economic conditions. However, without an open and fair trading system that facilitates the free trade of agricultural products, including those enhanced by biotechnology, U.S. agricultural exports may not improve as they should.

Current Safety Regulations

Over forty biotechnology-enhanced foods have gone through the U.S. regulatory process. Each of these foods has been approved only after reviews by the relevant agencies, including USDA, EPA, and FDA, to ensure that the new seeds are environmentally safe. FDA evaluates each biotech food for its health, nutritional and allergenic characteristics, rather than on distinctions based on whether the food was produced with or without the use of biotechnology. FDA also has labeling requirements if the biotech food contains an allergen, or its nutrition or cooking requirements are different from its conventional counterpart. The FDA requires food labels to be truthful and not misleading. Thirteen years of U.S. experience with biotech products have exposed no known ill effects and have borne out conclusions reached by the National Research Council in 1987 that biotech foods developed and commercialized in the United States present no food safety risk beyond those of their traditionally produced counterparts.

Market Access Problems for Biotech Products

The Administration is increasingly concerned over the issue of market access for U.S. agricultural exports derived from bio-engineering, particularly in Europe. The problems of market access in the EU are two-fold. First, the EU's process for approving new agriculture biotech products, long slow and non-transparent, appears to have broken down completely. Second, the EU's Novel Foods Law now requires labeling to indicate whether a crop or food was produced with biotechnology, even when the biotech food is otherwise equivalent to its counterparts. Moreover, the EU is actively working to internationalize these labeling requirements in the Codex Alimentarius and Biosafety Protocol, and more and more countries are following the EU's lead by enacting regulations of their own.

No U.S. biotech product has been approved in the EU since early 1998. The EU is using the "precautionary principle" as a rationale for requiring extremely high levels of proof about the absence of any harmful effects. In addition, the EU is considering strict identification and traceability requirements for each biotech characteristic throughout the commercial stream, a lengthy approval process with reviews by the Ethics Committee, EU Parliament, and, where requested, consumer groups. Finally, the EU has suspended any new approvals until the EU's Directive on approvals is revised-which is scheduled to be completed in 2002. This de facto moratorium on approvals translates to the loss of U.S. exports for any biotech seed or crop that was approved in the U.S. after 1998.

The lack of clear EU guidelines and fears of shipment rejection due to improper testing or inadvertent commingling with unapproved varieties have practically eliminated U.S. bulk exports of corn to the EU. The $200 million in annual corn sales quotas for Spain and Portugal, established to compensate the United States at the time of the accession of those two countries into the EU, have been particularly affected. We lost those sales in 1998, when France refused to approve a U.S. approved corn variety, and we are likely to lose the sales in 1999 if the EU insists on biotech free corn. Moreover, until the EU's approval process is functioning again, our farmers will continue to lose these sales.

Additional market access concerns for U.S. products arose when the European Union passed new legislation this year requiring the labeling of biotech crops and foods. The EU recently announced an unrealistic threshold of 1% content of genetically modified material-any food which contains a higher percentage will have to be labeled. The EU, however, has not yet completed implementing regulations for their labeling or testing requirements. Moreover, responsibilities and liabilities are not set for the shipment of foods that may have been genetically altered, nor is there a system for resolving disputes resulting from false positives of tests for the presence of genetically modified material. This lack of clarity is causing serious uncertainties for U.S. farmers and food processors and a potentially serious disruption of trade.

European officials blame their slow progress in creating a transparent regulatory process on public fears, fueled by the Mad Cow disease and Dioxin poisoning food scares. The fact remains, however, that U.S. biotech products and their potential benefits are being held in limbo by the lack of a functioning EU approval process and by EU labeling regulations that do not work. Safe American products should not be penalized by European regulatory failures.

Increasing agitation against biotech foods that started in Europe is beginning to spread to other foreign markets. Japan, Korea, Australia and New Zealand have decided to impose mandatory labeling on genetically modified foods. Many additional countries are considering whether or not to develop new labeling and approval process regulations of their own. We are closely monitoring the emerging new regulations to ensure that they are transparent, predictable, and not unnecessarily restrictive. This is one of the most serious and complex trade problems to emerge in recent years. U.S. industry is justifiably concerned about the proliferation of trade barriers related to agbiotech products. The future of our agriculture and biotech industries will be affected by how well we ensure that new regulations on agricultural biotech products do not pose trade barriers and by how well we address consumer concerns.

U.S. Response and Initiatives

Last month, Under Secretary of Commerce David Aaron visited Europe and challenged European leaders to develop forthrightly a comprehensive, science-based policy on biotechnology. We are hopeful that the new European Commission will respond to this challenge and turn a fresh eye to this problem. They have the opportunity to put a science-based policy in place that protects human health and the environment and that recognizes that both can be advanced through biotechnology. Such a policy would allow biotech to realize its potential by creating processes and institutions that reassure the public. We wholeheartedly support EU efforts to organize and consolidate food and health protection, and we strongly urge all of the EU Member States and their citizens to encourage the new Commission to undertake this important responsibility in an expeditious manner.

While the United States is committed to continued dialogue with Europe and other concerned countries to dispel public concerns about the safety of biotechnology, our patience is not inexhaustible. This issue is ripe for exploitation by protectionists in Europe and elsewhere, and we will insist on our trading rights. Accordingly, the United States plans to address biotechnology at the new WTO round by focusing on two goals: (1) ensuring that the current WTO agreements, particularly the Agreement on Sanitary and Phytosanitary measures and Agreement on Technical Barriers to Trade, are understood and continue to apply to agricultural biotechnology products (without the need to "re-open" the Agreement texts); and (2) ensuring that trade in agricultural biotechnology products is based on transparent, predictable, and timely processes.

The United States is also working to address biotechnology concerns with the EU and other trading partners through a number of initiatives. We have offered to help the EU Commission address the safety concerns the European public has regarding biotech foods by inviting them to work with us in such fora as the OECD, the Transatlantic Economic Partnership and the Transatlantic Business Dialogue. We are also requesting that the EU Commission and Member States develop a public education program, including broadcasts and public conferences, such as the one we are undertaking next January at The Hague. At the Bonn Summit in June, the United States floated the idea of a U.S.-EU scientific exchange on biotech issues. The EU has expressed a willingness to at least entertain the idea. The OECD Secretariat is also planning on holding a public conference on biotech issues later this year.

Other initiatives with our trading partners include:

• •Developing agreed international standards and guidelines on bio engineered foods in the Codex Alimentarius and encouraging their use by WTO members;
• •Technical discussions with other countries and assistance aimed at fostering science-based food regulatory processes that approve new products in a transparent and timely manner; and
• •Urging countries in Africa, Asia, and Latin America to refrain from mandatory labeling requirements that are misleading and unnecessary obstacles to trade.

Finally, the Administration is working to develop outreach activities-conferences, media events, and government consultations, in key countries-in order to help assure consumers and officials abroad of the thoroughness of our regulatory processes, the safety of biotech foods consumed in the United States, and the environmental and nutritional benefits of bio-engineered foods.

Conclusion

We will work energetically with the EU and all other countries to encourage them to take a fresh look at resolving this immensely important issue. And, of course, the Department of Commerce will continue to work in partnership with key industries and trade associations that have a stake in this critical debate. We must find a solution as the stakes are so high for the United States and for all nations who stand to benefit so much from this important new technology.