With U.S. approval for Dow AgroSciences' package of chemicals and new genetically engineered crops now in hand, the Dow Chemical Co (DOW.N) unit faces a major obstacle to a $1 billion market opportunity: Chinese import barriers.
The Asian nation has become a major buyer of U.S. corn and soybeans in recent years, but has also shown mounting reluctance to accept some genetically modified crops grown by U.S. farmers. China for the last year has been rejecting U.S. corn shipments containing traces of a type of GMO corn developed by Syngenta AG (SYNN.VX).
Now Dow, which, like Syngenta has yet to receive Chinese import approval for its new crops, faces the ire of the U.S. farm sector if traces of its new GMOs make their way into exports to China.
U.S. corn and soybean farmers have largely embraced the genetically modified specialty crops that can tolerate treatments of herbicide and fight off harmful pests, citing enhanced ease of production of critical food, feed and energy crops.
But while GMO crop developers and other GMO crop backers say many scientific studies show the crops are safe, and the USDA promotes the crops as a means to enhancing global food security, many other countries, and environmental and consumer groups say the crops contribute to health and environmental problems.
Chinese consumer wariness over GMO safety has mounted recently, and at the same time, Chinese regulatory approvals there have ground to a near halt. The last import approval for a GMO grain was granted in June 2013.
Reluctance by Chinese regulators to approve some types of genetically engineered U.S. grain is a significant problem for the entire U.S. agricultural sector, limiting access to a big export market. And those involved in the effort say there is no solution in sight.
Over the last year, the U.S. Trade Representative and the U.S. Agriculture Department have joined with U.S. agribusiness companies to increase pressure on the Chinese government to ease its stance against GMO grains. But with each step forward comes at least one step back, U.S. industry players say.
The industry also is taking its message directly to Chinese consumers, backing a push to combat GMO wariness in the country.
Darci Vetter, chief agricultural negotiator in the office of the United States Trade Representative, said the GMO imports issue is a "high priority" for U.S. trade negotiators. "Trade is being blocked now. We have reached out at very high levels to China on this issue," she said.
The industry is pushing for President Barack Obama to raise the issue with Chinese President Xi Jingping when they meet in Beijing on Nov. 11. And U.S. Agriculture Secretary Tom Vilsack is slated to hold talks on agricultural trade issues with China at a meeting of the U.S.-China Joint Commission on Commerce and Trade in Chicago in December.
Industry officials were planning to discuss GMOs at a highly-anticipated meeting of the newly formed U.S.-China Agriculture and Food Partnership (AFP) in November. But the broad-based meeting of government and private-sector representatives from the two countries has been postponed until sometime in 2015, organizers said.
The Obama administration and the U.S. agribusiness industry want China to change a number of measures that they see as blocking or delaying approval of genetically modified agricultural products. One requires a product to be approved from an exporting country before Chinese regulators will begin reviewing an application.
Dow's application has been languishing before Chinese regulators since after Canada approved Enlist crops in 2012. The company said Chinese regulators have not indicated when a decision might be granted.
While Chinese authorities used to issue regulatory decisions multiple times a year, they have indicated they now will issue decisions on applications only once a year, according to those who have been working on the issue. Beijing issued the last import approval for a GMO grain in June 2013, said Matthew O'Mara, director of international affairs at the Biotechnology Industry Organization, whose members include Monsanto and Syngenta.
The U.S. also wants China to change a zero-tolerance approach for even low levels of an unapproved GMO strain in a shipment of grain from the United States.
Cargill Inc sued Syngenta last month, alleging that China's rejections of U.S. crops contaminated with the seed-maker's unapproved GMO corn had cost the exporter at least $90 million.
Dow, meanwhile, says it is designing a strategy to minimize disruption to export channels until China approves Enlist. The company declined to be more specific. Industry experts warn there is a high risk that more U.S. grain sales could be in jeopardy of Chinese rejection if farmers begin harvesting Enlist grains before China improves Enlist for import.
Appeal to public
China already is a large producer of genetically engineered cotton, and the country imports millions of tonnes of GMO soybeans annually for pig feed. But consumer concern about the health risks of GMO crops has grown over the issue of human consumption of GMO grain.
In response, the industry has deployed CropLife International. The industry-funded group that promotes public acceptance of biotechnology has met with Chinese journalists, teachers and others seen as opinion influencers to promote biotech crops. The group, which includes Dow, Syngenta and Monsanto Co (MON.N) among its backers, is planning a China social media campaign next year.
“The Chinese government is under huge pressure because of the public perception on biotech crops,” said Michelle Chang, executive director of CropLife China's biotech committee. "There is a lot of negative news on biotech.