Thanks for inviting me to come.
I've been an academic for over 40 years and I've spent my career at the University of California, Berkeley. I am currently at the University of Florida and also at the University of Saskatchewan. I've done extensive work in agricultural technological change, including work on hybrid corn and mechanized agriculture, especially mechanization in California. Also, I've done extensive work in some of the biotech areas.
I'm going to make the comment that I'm not paid to come here to give one side of any story. I find these days that so many consultants also partly give you the answer they want you to hear because they're paid for part of the answer. So I'm not paid by any Monsanto group or any Canadian Wheat Board or anybody in my testimony.
My points will be fairly clear. What I'm going to say is actually in a new book we just published at the University of Toronto. It's called Agricultural Policy, Agribusiness, and Rent-Seeking Behaviour. So in addition to agricultural policy, we also bring in sections on technological change, and also on genetically modified organisms in a chapter.
The literature on biotechnology has grown rapidly, and there are many studies now that have examined GMOs and other biotech products. One of the reasons that the results aren't necessarily consistent is that we sometimes do economics from a different perspective. I've always done economics from what we call “welfare economics”, which is a fancy way to do benefit-cost analysis. And this is a standard approach that's agreed to by most academic economists. I don't know about other fields, but I know it's accepted in economics, in which I have my degree, a PhD.
With that, I'm just going to make a couple of comments from our book and one of the papers we wrote. Actually, I'll leave with you a paper that's written for non-technical people on an overview of the biotech industry.
The first point we make in here is on this whole question about consumer acceptability, and this is where part of the debate comes in about what the impact of biotech is. My colleagues from the University of Saskatchewan—Peter Phillips testified in this group, and I know Peter very well, and apparently this gentleman is part of that group. His assessment is maybe somewhat different from one of his colleagues in economics, Richard Gray, and how he might actually conduct and do benefit-cost analysis for GMOs.
In addition, for example, Colin Carter was my student at the University of California, Davis. He seemed to be a strong supporter of GMO wheats, for example, and he comes out with a totally different conclusion about the benefits and costs of GMO wheats from what Richard Gray and Hartley Furtan do, from the University of Saskatchewan, in terms of the payoffs. Colin is very positive on GMO wheats. Hartley Furtan and Richard Gray and others are fairly negative on GMO wheats.
The big key issue here is consumer acceptability of GMOs. I'd have to agree with the point that it can't be all based on science, whether we're going to make profitability from GMOs. Science only plays a role, but you have to also bring in consumer acceptability for GMOs.
For example, in the wheat business at the present time, committees have evaluated different varieties of wheat. The eight different varieties of bread wheats are actually based on science. But so are the consumer acceptability attributes of wheat based on science. As a result, they have a formal way of actually determining what is consumer acceptability in addition to the scientific aspects of it. So wheat is a good example also about consumer acceptability.
Now, apparently Monsanto did a study, and I think Colin and other people were involved. They make this conclusion, and I think it's well known, that there are big payoff owes to GMO wheats. And we've done this consumer acceptability part of it, but my only question with that is if somebody else did the same study, I can guarantee you that I could show you a benefit-cost ratio of anywhere from 1.0 to 6.0, depending on what assumptions I'm going to make about consumer acceptability.
We could use one of our international trade models, like we do on wheat and other grains, to actually show that. Then it comes back to this question of who did the study, where did they get the numbers from, and who did they talk to. That's the same question as.... At the present time we're evaluating the oil spill in the gulf and we're doing this work on the costs of the oil spill. But the same argument would apply to this sort of thing when you get into willingness-to-pay measures of consumer acceptability from GMO products.
This is the last point I make here in this first paper on consumer acceptability. I've been involved in several lawsuits related to biotechnology and not related to biotechnology. But this issue comes up also with respect to the impact of a power line crossing somebody's property or the transportation of nuclear equipment, etc., in the country.
What happens is the judges always rule that it isn't science that determines whether the electric power lines are necessarily harmful for you living there, it's consumer perception of what determines the damages from the power line. So the whole first part of this paper is devoted to this debate on consumer acceptability.
Then we actually discuss in here the whole notion of producer profitability. Now, it's always been stated that technological change, whether it's hybrid corn, whether it's due to new canola varieties, etc., always results in these huge benefits to producers. That is not true. I can show you models where I can show a negative impact on producers, not a positive impact to producers. That's not being negative or a supporter or non-supporter of the GMOs. It's also part of the market and the dynamics of economics. So it's difficult to generalize.
Now, I enjoyed Peter Phillips' excellent presentation on canola, but I have the problem of trying to generalize from canola across all commodities. For example, canola is specific to the fact that it generated huge human benefits, and I think even his estimates or your estimates might even be low from the standpoint of the benefits from GMOs. Richard Gray and others did some studies on the health impact of the new canola varieties. So that case is very clear.
But one of the cases you likely ask, then, is why does Europe accept oils of a GMO quality and they won't accept other products necessarily from GMO quality? But as he knows from biotechnology, it's the nature of your consuming in wheat, etc., so you'd be consuming the trait directly; but with oil you don't, because it's a residual protein. So that's a huge issue there in terms of why one commodity might be accepted and why another commodity won't be accepted. So we spend most of the time debating this question about producer acceptability.
Then the other point we raise in here is this StarLink case. I was involved as an expert witness against Aventis on the U.S. StarLink case. In that particular case, I guess the Greenpeace movement or someone else discovered the StarLink gene in Taco Bell. The corn growers sued Aventis for releasing a GMO corn that wasn't really acceptable or licensed. What we found in this case and what you really have to recognize is sometimes the transaction costs, the segregation cost, when you introduce GMO varieties and mix it with non-GMOs can be huge. That's especially true when these countries have zero tolerance for GMO products.
Japan, at the moment, is a large buyer of Canadian wheat. I'll guarantee you that Japan would never buy GMO wheat from Canada. That's well stated by them, and it's also well stated in some studies we reference in our book that have studied consumer acceptability in Japan, India, and other countries. Other countries in the world likely will accept GMO wheats, etc., but Japan certainly won't.
So when the StarLink corn got mingled in with the other commodities, what happened was the Japanese were involved too. So the Japanese then requested that a testing be done not only in the U.S. about StarLink corn, but also they tested loads in Japan and they turned down huge amounts of corn actually going into that market. They have zero tolerance, and when you have zero tolerance on a commodity it's going to be very costly to keep these markets segmented so that you don't end up with GMO corn and non-GMO corn all mixed together--or GMO wheats, or whatever commodity you're talking about.
I can go on with a whole host of comments. My comment is that I think products have to be treated separately when you talk about GMOs. And I think you have to engage in a process where in fact you have to be necessarily almost guaranteed that you have an end product that's going to be consumer-accepted.
To have that, you also have to tell me what exactly you're breeding in a GMO trait to even do a study on consumer acceptability. You just can't go and ask a buyer in Japan and say, “Do you accept GMOs or not?” You have to be much more specific of what this product is and what you're actually trying to do with it.
I'm over ten minutes. Sorry.