Chinese Regulation of Agricultural Biotechnology: Overview and Impact on Global Agro Trade

Evan Nichols Vol. 37 Production Editor Vol. 36 Associate Editor

Chinese regulators hold the keys to a market populated by nearly 1.4 billion people, 400 million of which are expected to be mainstream consumers by 2020.[1] This economic weight grants the power to shape the future of emerging industries. Agricultural Biotechnology (Ag-Biotech) is one such industry dependent on Beijing’s favorable regulatory treatment. Understanding China’s regulatory position vis-a-vis Ag-Biotech is vital to any assessment of this growing industry’s past, present, and future. Despite continued controversy and public concern,[2] the Ag-Biotech industry has matured significantly since the 1986 release of the first Genetically Modified Organism (GMOs) into the environment.[3] By 2005, imported GMO varieties constituted 40% (27 million tons) of China’s soybean consumption.[4] Bt cotton, a GMO that was designed to reduce the need for pesticides, accounted for 60% of nationwide cotton production in 2005 and 100% of the production in the fertile Yangtze River Valley region.[5] While one would not expect to see these figures coming out of a country that was hostile to the presence of Ag-Biotech, the rigor of the Chinese regulatory structure paints a more complicated picture. The State Council of the PRC, China’s supreme Executive Branch organ, promulgated the chief law governing Ag-Biotech, the Regulations on Administration of Agricultural Genetically Modified Organisms Safety (“the Regulation”), on May 23, 2001. The law distinguishes between domestic and imported Ag-Biotech products, but both are subjected to a similarly grueling gauntlet of testing and agency review. Domestically produced Genetically Modified (GM) products in China begin the permitting process with the powerful Central Agriculture Ministry. The Ministry itself runs the product through a round of three testing periods known as Restricted Field, Enlarged Field, and Productive testing. Restricted Field testing scrutinizes the GMO in a small-scale controlled environment. If the GMO passes this round, it moves to the Enlarged Field where it is introduced on a greater scale into natural environmental conditions. Should the GMO again pass muster, it is replicated on a large scale and scrutinized to ensure that safety is maintained under the conditions of mass production. Once the GMO has cleared the three rounds of safety and quality testing, it is eligible for permitting by the designated Ministerial committee.[6] However, this is by no means the last step for producers hoping to take a GMO to market. Chapter III of the regulation mandates that any facility wishing to produce, process, or package GM products (only those that have made it through the three rounds of testing) must receive a separate permit from the Agriculture Ministry, agree to plant or raise crops or livestock only in designated areas, and provide proof that they have developed adequate safety and accident response protocols.[7] According to Chapter IV, marketers of GM products must also obtain a permit and maintain their own records of sale, production, transportation, and genetic identity of the product. These products are also subject to strict labeling requirements, and any advertisements for the GM products can only be released to the public after the Agriculture Ministry has reviewed and approved it.[8] All tolled, it usually takes two to three years for GM products to reach the market.[9] The rules affecting GM imports are included in a separate section of the Regulation in which imports are given even more hurdles to clear. Namely, an imported Ag-Biotech product must already be approved in the country of origin for its suggested use in the PRC before the Agriculture Ministry will even begin to process a permit request.[10] For example, the Agriculture Ministry would not entertain a request from a European producer seeking to have their GMO approved for import and sale for human consumption in the PRC if that product had not yet been approved for that purpose in the EU. After verifying that a permit applicant meets this requirement, the GM import must make it through the same schedule of tests that scrutinize Chinese-produced GM products. All approved GM imports are quarantined upon reaching Chinese territory where they sit in port until Chinese officials have verified that the product’s genetic signature matches that of a permitted substance. Such a demanding regulatory scheme puts China philosophically at odds with the relatively lax American approach to GMOs.[11] This disparity has implications reaching far beyond the philosophical realm, in fact recently resulting in significant losses for American companies seeking to do business in China. A recent series of events spurred more than 300 lawsuits against the GMO seed producer Syngenta. In one of these suits, Trans Coastal was one of many U.S. companies exporting corn to China alleging that Syngenta’s negligence caused between 1 and 3 billion in damages.[12] After an unapproved strain of Syngenta-engineered GMO corn was detected in a U.S. shipment, the Chinese began turning away massive shipments of corn. Syngenta submitted the strain, MR162, for Chinese regulatory review in 2010.[13] Before receiving approval, Syngenta then began widely distributing MR162 in the U.S. market. MR162’s wide distribution and the nature of cross pollination meant that some trace of MR162 could soon be found in all U.S. corn shipments to China. Running afoul of the strict testing procedures for imported Ag-Biotech products, the Chinese regulators slammed the door in the faces of American corn producers, sending the price of corn into a death spiral.[14] The MR162 corn boycott was resolved between U.S. and Chinese trade officials in December 2014, but not after between 1 and 3 billion in losses affected the U.S. market. The Syngenta corn disaster underscores the important role that Chinese Ag-Biotech plays in the global market for GMOs. Those that forget or undervalue this importance, like Syngenta, do so at the risk of being held responsible for massive market losses. Despite the stringent Chinese regulation, history has shown that Beijing is not unwilling to make concessions. Whether or not the Chinese approach will trend more along this more pragmatic trajectory or adhere to its daunting regulatory process remains to be seen.

[1] Yuval Atsmon and Max Magni, Meet the Chinese Consumer of 2020, McKinsey Quarterly (Mar.  2012), http://www.mckinsey.com/insights/asia-pacific/meet_the_chinese_consumer_of_2020. [2] See, e.g., ‘March Against Monsanto’ Protestors Rally Against See Giant and GMO Products, The Huffington Post (Sept. 25, 2013), http://www.huffingtonpost.com/2013/05/25/march-against-monsanto-gmo-protest_n_3336627.html; Joachim Scholderer, The GM foods debate in Europe: history, regulatory solutions, and consumer response research, 5 J.  Publ. Aff. 263, 267 (2005). [3] Id. at 165. [4] Zhangliang Chen, Chinese Agricultural Biotechnology in the Field, in 18 Nat’l Agricultural Biotechnology Council Report, Economic Growth through New Products, Partnerships and Workforce Development 85, 85-88 (Allan Eaglesham and Ralph W.F. Hardy, eds. 2006), available at http://nabc.cals.cornell.edu/Publications/Reports/nabc_18/18_complete.pdf. [5] Id. [6]Nongye Zhuanjjiyin Shengwy Anquan Guanli Tiaoli (农业转基因生物安全管理条例) [Regulations on Administration of Agricultural Genetically Modified Organisms Safety] (promulgated by State Council May 23, 2001, revised Jan. 8, 2011), 2001 Fagui Huibian 1072 [hereinafter PRC GMO Regulations], English translation available at http://apps.fas.usda.gov/gainfiles/200106/110681034.pdf. [7] Id. [8] Id. [9] Huang Jikun, and Jun Yang, China’s Agricultural Biotechnology Regulations—Export and Import Considerations. (2011), available at http://www.agritrade.org/Publications/documents/LLPChina.pdf [10] PRC GMO Regulations, supra note 6. [11] Diahanna Lynch and David Vogel, The Regulation of GMOs in Europe and the United States: A Case-Study of Contemporary European Regulatory Politics (2001), available at <http://www.cfr.org/genetically-modified-organisms/regulation-gmos-europe-united-states-case-study-contemporary-european-regulatory-politics/p8688>. [12] Trans Coastal Supply Co. v. Syngenta AG, No. 14-2221 (C.D. Ill.) [13] Farm Futures, Dec. 17, 2014, available at  http://farmfutures.com/story-vilsack-china-lift-ban-syngentas-gmo-corn-trait-mir-162-0-121682. [14] China is Withholding Biotech Approvals, Groups Say, Michigan Farmer, Nov. 4, 2013, available at http://farmprogress.com/story-china-withholding-biotech-approvals-groups-0-104218.