Latest Trade Insights

Study estimates economic impact of China’s biotech approval delays

June 17, 2019

While there may be a seemingly endless list of bilateral trade topics between the United States and China, arguably the most important focuses are agriculture and intellectual property. At the crossroads of these issues is China’s sluggish approval of agricultural biotechnology.

A report commissioned by CropLife International (CLI)—The Impact of Delays in Chinese Approvals of Biotech Crops—examines the economic impact of these delays on the corn and soybean markets for the United States, Brazil, Argentina and China. The report, which was done by Informa’s Agribusiness Consulting Group, uses a “functional regulatory system” as a baseline, against which China’s current system for biotechnology approval is assessed. Generally speaking, a functional regulatory system refers to a system that is predictable, science-based, and not subject to undue influence or delays. The study took a two-pronged approach by estimating historic losses over the six-year period from 2010-2016 and projecting future losses during the five-year period of 2017-2022.

China’s system for approving new biotechnology traits is considered sluggish for several reasons. First, China will not approve a biotech event until that event has been approved in the country of production. Second, China frequently will stop the approval process to request additional information. While it is not unusual for a regulatory body to request additional information from a petitioner, these requests happen far more frequently with Chinese regulators and the requests do not always appear necessary, nor are they clear and transparent. Third, the petitioner has no clear timeframe under which these approvals take place, making it difficult to project future gains or losses.

The study suggests heavy losses for U.S. corn of nearly $3.3 billion during the period of 2010-2016. Moreover, the study predicts that the value of U.S. corn production would be $1.8 billion to $5 billion higher during the period of 2017-2022 if China’s approval system would have been functional. Despite sluggish approvals, there was relatively little impact on soy approval from 2010-2018. However, the report’s analysis of future U.S. soy markets yielded a far more impactful result of $875 million to more than $2 billion for the period 2017-2022. To make its case, the study looks at approval dates for 17 biotech events across several countries and compared them to China’s approval dates.

Brazil and Argentina experienced similar stunting of their corn exports due to China’s approval regime. However, the calculated losses to the Latin American countries’ soy markets were far more significant than that of the United States—roughly $1.1 billion to $3.2 billion during 2010-2016, and $1.5 billion to $4.8 billion from 2017-2022.

The study does not limit itself to merely evaluating crop losses. It also calculates losses of U.S. employment, wages and GDP. In sum, the study estimates that the U.S. economy lost close to $15 billion during a five-year period. During the same period, the Canadian economy lost more than $271 million, while Brazil’s economy lost more than $4.9 billion and Argentina lost more than $2.1 billion.

Studies providing economic impact assessments of trade barriers, such as the one commissioned by CLI, are a critical tool for governments in taking remedial enforcement actions on trade barriers.

Author Daniella Taveau is Principal with Bold Text Strategies. She is a former International Policy Analyst with the U.S. Food and Drug Administration, and a Trade Negotiator with the U.S. Environmental Protection Agency, where she represented the United States in the World Trade Organization SPS and TBT Committees, and in U.S. free trade agreements.