EU GMO Regulations and Industry Impact

Introduction

The past two decades have seen the development of a huge debate regarding genetically modified (GM) foods. According to the World health Organisation (WHO, 2017), genetically modified foods are “foods derived from organisms whose genetic material has been modified artificially.” Originally, it seemed as if only major crop types such as maize would have the GM characteristics due to research costs. However, advanced technologies have allowed for the lowering of costs which has seen increased investments in smaller crop varieties (European Commission, 2009). Moreover, patents in seed production in many companies are now expiring hence providing opportunities for generics into the market. GM foods have received mixed reception from the contemporary society where two main factions disagree on whether to introduce the products into the market (Gerry, 2015). The argument has also put national, regional and international regulators in high alerts regarding the benefits and risks associated with GM organisms. The European Union (EU) already has a legal framework in place to regulate the production of GMOs and the consequent consumption of the products in their member states. Bayer AG, as one of the largest chemical and health companies, is currently engaging in a multi-billion merger with Monsanto, one of the largest GM seeds distributor globally (Kresge et al., 2016). The deal will see the diversification of Bayer’s business in the European countries; however, there are still noteworthy hurdles in legislation that must be tended to before the deal materialises. More specifically, what will be the direction of the company regarding EU regulation on GMO production in member states? Will the EU members reconsider their decisions on their conventionally restrictive GMO policies? This paper provides a review of literature, methodology and data analysis to investigate the role of EU directives in adopting the use of GMOs in their member states. Afterwards, it presents a set of recommendations indicating the future of the Bayer-Monsanto merger with regards to EU policy.

Literature Review

Genetically Modified Foods

The development of genetically engineered foods was mainly as a means for meeting the demands of the modern society. According to the European Commission (2003), a genetically engineered food labels food which is in itself a genetically modified organism or one which has been generated using a GMO. Genetic engineering of plants and animals is a concept rooted within the 1970s owing to the accomplishments of Stanley Cohen and Herbert Boyer in genetic engineering (WHO, 2017). However, the first real commercial success occurred two decades later in the introduction of a modified tomato plant (Gerry, 2015). Since then, more varieties of GMOs, tailored to suit specific conditions were developed. The World health Organisation reports that the current assortment of the modified organisms includes a wide range of plants and a narrow selection of animal as well as microbe species (WHO, 2017). It is key to note that GMs been constantly regarded by several scientists as foods of the future as they are developed with several benefits in mind. To begin with, these crops require fewer inputs in terms of the necessary conditions and chemicals needed to improve yield (International Service for the Acquisition of Agri-Biotech Applications, 2016). This is well illustrated b strains of drought resistant crops or Bt crops use less chemicals. Secondly, GM are engineered to resist pests and diseases hence increasing the general food availability economies as well as farmer returns (Kramkowska et al., 2013). Thirdly, GMO’s have been argued to aid in environmental protection with soil conservation due to less irrigation in the modern tilling methods available (Ramjoue, 2008). Fourth, some GMO modifications have seen some foods last longer hence lowering of transport costs in highly perishable foods; these primarily include tomatoes and potatoes (Lau, 2015). Finally, scientists have been able to increase the nutritional profile of conventionally less nutritious foods. (Gerry, 2015)

On the other hand, there are numerous concerns regarding the use of GM foods. Firstly, the modified genetic makeup increased the risk of food allergy. In a systematic review by Kramkowska et al. (2013), there was considerable evidence that there were significant that GMOs sequentially cause skin reactions, variations in the respiratory system and the circulatory system, up to stimulation of an anaphylactic shock, generating serious adverse effects for health. Secondly, there is the proposal that businesses engage in the production of GMOs for their profitable nature (Lau, 2015). In this sense, the argument asserts that GMs are used as cash cows for the business and companies only compete for market share. Thirdly, the organisms are presumed to be the cause of new diseases related to natural incompatibilities of the genetic makeup of the foods and the human digestive system (Kramkowska et al., 2013). Finally, GMs interfere with nature, hence are viewed by some parties as ethically wrong. In the light of the above views, regulatory institutions highly rely on research data to make decisions about the usability of GMO foods within their borders. In most cases, government regulations either promote or contest transgenic foods on various bases. Typically, there are some rules and regulations establishing the eligibility criteria of inclusion of GM foods into the market. The European Commission possesses an elaborate plan for either rejecting GM foods. These are discussed in detail in the section below.

Influence of EU Directives

The EU has in the past acquired a strong reputation regarding the regulations on GM foods. These regulatory practices are carried out by the organisation’s executive cabinet – the European Commission (European Commission, 2009). It began food regulation in the 1990s after several food crises in European countries. More specifically, GMO regulation in the bloc was initiated in 2002 owing to deliberation on the increasing use of science in food production. As a conventionally risk-averse education, it was proposed that regulatory decisions be established to ascertain the absolute safety of the GMO products for consumption as seen in Directive 2001/18/EC of the European Parliament and of the Council and Regulation (EC) No 1829/2003 of the European Parliament and of the Council (European Union, 2015), regulating the release of GMOs into the environment. More specifically, GM food must pass through a consolidated pre-approval process to attain certification. This activity involves the fulfillment of several guidelines for the food to be accepted within a member state (Lau, 2015). The first step of the process occurs after the submission of applications for GM food approval to the relevant authorities in member states. The EU via the European Food Safety Authority (EFSA), conducts individual scientific risk assessments to evaluate the environmental and human risks presented by the food in question (European Union, 2011). Consequently, the body provides scientific advice that informs the available decisions to the EU. Thereafter, approved decisions are then voted by a board of the EU members to reach a majority decision. If consensus cannot be reached, the European Commission is tasked with the final task for approval. A uniform high level of safety is maintained through the decisions for the ultimate interests of the sake of the stakeholders. In this case, the EU put a guideline that foods containing more than 0.9% GM material be labelled as transgenic foods (European Union, 2011). It is imperative to note that although the EU has the hegemony in the food approval process, individual members of the EU have in the past refused to side with their decisions. One of the most notable cases is a disagreement between the EU and France in 2008 regarding a MON810, a genetically engineered form of corn made by Monsanto (Lau, 2015). Although the EFSA had approved the organism as safe for the environment, France refused to allow the crop within its country. The EU high court ruled the ban as unlawful due to the lack of scientific proof but the French continued with their earlier decision. This case proved showed that although the EU may serve the purpose of approving GMOs, individual countries till have the propensity to make the final decisions.

There has been significant concern concerning the differences in legislation between the US and the EU. In the past, the US has been more lenient to GMO producers and has made significant progress in promoting genetic modifications in food. In 2013, over 70 million hectares of GMO crops were cultivated in the US in comparison to 0.1 million hectares in EU member states (International Service for the Acquisition of Agri-Biotech Applications, 2016). The gap is significant and highlights the differences in regulatory practices despite utilising the same scientific data as proof. In 2015, newer legislation in the EU allowed countries greater individual freedom in making the final decisions (Lynas, 2015). Under the law, the inclusion criteria for GM foods was expanded; countries were given increased autonomy in determining the foods they allow based on traditional land-use and element of social-economic policy. Individual members such as Spain and Sweden welcomed the move; the UK - then in the EU, also lobbied for easing of the rules (Plume, 2016). The move is said to have been instigated by talks between the EU and US in the development of trading deals. Opponents of the policy have argued that the policy allows huge biotech companies to negotiate with governments.

The Case of Bayer-Monsanto and Challenges in Operating in the EU

Bayer AG is an international firm engaging in the production of industrial and specialty chemicals. It was founded in 1863 and has since grown to become an internationally recognised company with its presence in 160 countries worldwide (#165 in the Fortune 500) (Fortune Magazine, 2015). As at 2015, the company had over 113, 000 employees and a total sales value of £ 39. 7 billion (Bayer, 2015). The group’s principal activities are principally concerned in Europe, North America and the Far East. Over the decade, the firm has made momentous steps in diversifying its operations while expanding in a sustainable manner. In the year 2016, the company proposed a deal to buy Monsanto Company (#197 in the Fortune 500), an American biotech agricultural company engaging in the manufacture of genetically modified seeds and chemicals for crop protection (Fortune Magazine, 2015). The organisation has been termed as the world’s most vilified company and remains a target for numerous lobbyists campaigning against GM. The $66 billion deal is already signed but is yet to be finalised to enable the merging companies to operate under the same roof in the global market (Kresge et al., 2016). The Bayer-Monsanto merger been one of the leading causes of concern for consumers and governments alike given the previous strategies adopted by the German multinational in profit maximisation. According to a report compiled by a journalist from the Bloomberg weekly, the companies asserted that the merger will allow the companies higher negotiating power, increased strength in research and development as well as more efficiency (Cowen, 2016). However, implications for the contentious nature of GMO-production is among the key factors to be considered within the merger. Already, the European Commission approved the importation of transgenic soya beans from Monsanto’s plant in America, shedding positive prospects for the merging partners (European Union, 2015). Nevertheless, there is significant concern if the anti-GMO agenda that has always been dominant in the European Union will prevail in the next coming years. It is also imperative note that the approval arrived without expectation from the parties and therefore came as a boost for the merging partners.

The modification of laws regarding GMOs in 2015 paved new opportunities for organisations dealing with genetically modified foods in Europe. This meant positive outlooks for Monsanto’s products in Europe despite being among the most loathed companies in Europe (Business Insider, 2017). On July 22, 2016, the EU approved imports of a genetically modified soybean variety manufactured by Monsanto. This happened after a long delay happening as a result of deliberations between the member states on whether to introduce the product into the marketplace. Reuters report that the move opened doors for stakeholders in the sector, especially farmers who had seen historic drops in prices as a result of low demand (Plume, 2016). Given that Europe is the second largest importer of Soybeans after China, there is consensus among analysts that the approval played a huge role in sealing the multi-billion dollar merger between Bayer and Monsanto (Business Insider, 2017). Bayer AG has also achieved significant success in the past year regarding its GM varieties. The approval of its CropScience soybean variety came as a vital victory in the long battle for use of advanced technologies in food development (Capital Press, 2016). However, the food is currently used for animal consumption and has not been approved for humans. Supporters and critics of the merger have proposed several outcomes for the future of the mega-firm. To begin with, it is believed that Bayer’s influence in Europe could aid the acceptability of GMO products within EU territory (Capital Press, 2016). This would be attributed to the increase in the capital base for further research and development, as well as influences of the company in the socio-economic context of the member countries. According to Monsanto’s chief technology officer, Robb Fraley, the merger could shorten the period taken for new research and development due to combined resources (Business Insider, 2017). Farmers would see an increase in their revenues. Additionally, there is the possibility of Monsanto engaging in the production of crops of pharmaceutical value. These include medical marijuana; a sector that has been considered as profitable for pharmaceutical companies in the near future (Capital Press, 2016). Secondly, there exists the possibility that the merger may see the companies divest from GMO manufacturing due to Europe’s anti-GMO agenda (Lynas, 2015). This move would potentially see a flop in the North American agricultural sector. Moreover, it would significantly reduce Monsanto’s earnings as the top agricultural producer in the US.

Methodology

According to Brannick and Roche (1996), the research methodology is essentially a course of decision-making. Choices made have a collective effect on already existing decisions. Therefore, the research methodology forms an imperative part of this study and must involve rigorous planning. The research will utilise a qualitative research methodology - one that does not rely on mathematical or statistical calculations to solve a problem (Hennink, Hutter, & Bailey, 2011). The study utilises an exploratory research to predict the future of Bayer-Monsanto in the highly regulated European environment. According to Manerikar & Manerikar (2014), exploratory research is one carried out when the researcher has rather limited knowledge about the issue. In this case, the use of the approach would ensure an in-depth and comprehensive understanding of the problem at hand. It is also considered as resourceful when analysing case studies. It will utilise both primary and secondary sources of data. The primary data includes the original policy documents drafted and passed by the EU while the secondary sources include scholarly articles, reports and books. Inductive methods of analysis are used to process the data obtained from the research. Inductive data analysis uses methods that utilise detailed readings to derive basic models, themes or concepts through interpretations by the researcher (Thomas, 2006). It begins with an analysis of the subject of study and allows ideas to emanate as one continues. It is a reliable approach in qualitative research.

Findings

From the literature reviewed, several findings were made:

The Regulatory Process is the Bottleneck in GMO Production

The analysis reveals that although numerous innovations in biotech have been produced, only a few of them have been accepted. Most of the failed products do not meet the criteria proposed by the regulatory commissions. In Europe, the European Commission uses a centralised regulatory system pass laws. On the other hand, the US uses a decentralised system to arrive at decisions using similar research data.

There is Potential for Growth in EU’s GMO Market

The literature reviewed revealed that the EU is gradually easing its stance on GM consumption in their member states. Adjustments made to Directive 2001/18/EC and No 1829/2003 of the European Parliament and of the Council in 2015 showed the potential of European Legislation offering a leeway in GMO consumption. With this fact in mind, the reason of the Bayer-Monsanto merger may be conceptualised as due to the progressive acceptability of GMO foods in Europe.

There is the potential for continued resistance in the GM agenda in EU member states

Although the EU made the decision to make the laws controlling GMO more accommodative, it is imperative to note that the views did not represent a majority decision. This implies that the decision to allow certain forms of GMO in member countries is still contentious. Moreover, the review clearly showed that decisions of the EU and member nations may conflict. Mega GMO producers including Monsanto have engaged in negotiations with scientific regulatory bodies such as the EFSA.

Recommendations

From the findings above, several recommendations can be made:

Bayer-Monsanto Should Plan to Influence Policies regarding GMOs at National Level

An analysis of the policy environment in Europe shows that a faction of EU member supports GMO. Bayer-Monsanto should focus on these countries at the national level since regulations at the regional level have additional constraints. Additionally, setting an agenda at local level may also have regional influence due to diplomatic relationships among nations with the subsidiaries of the company within their borders.

The company should seek to educate the public about GMOs

European publics have been made to believe that GMOs are always laced with harmful substances that may affect their health. This perception creates a pervasive stereotype that affects the company’s performance within the European sector. Educating individuals about the role of GMOs in meeting food demand would serve to progressively eliminate negative views transgenic foods. Public views may also influence policies set by a country since the administrations represent the general views of their respective citizens.

Conclusion

The controversy around GMO foods has an ingrained disadvantage of vilification by some members of the society. Moreover, companies engaged in the trade are also surrounded by intense pressure from regulatory authorities. The EU, conventionally characterised by tough anti-GM policies relative to America, seems to have softened its stance recently. However, this move could be short-lived and still plagued in uncertainty, at least for the moment. In the light of these developments, Bayer-Monsanto is advised to seek to influence European markets at the national level to enhance the acceptability of GM foods. Additionally, the company is urged to engage in activities to educate the public about transgenic foods.

References

Bayer, 2015. Bayer Annual Report. Annual Report. Leverkusen: Bayer AG Bayer AG.

European Union, 2015. Directive (EU) 2015/412 of the European Parliament and of the Council of 11 March 2015. Official Journal of the European Union, 68, pp.1-8.

Hennink, M., Hutter, I. & Bailey, A., 2011. Qualitative Research Methods. London: SAGE Publications.

Kramkowska, M., Grzelak, T. & Czyżewska, K., 2013. Benefits and risks associated with genetically modified food products. Annals of Agricultural and Environmental Medicine, 20(3), pp.413-19.

Manerikar, V. & Manerikar, S., 2014. A Note on Exploratory Research. aWEshkar, XVII(1), pp.95-96.

Ramjoue, C., 2008. A review of regulatory issues raised by genetically modified organisms in agriculture. CAB Reviews: Perspectives in Agriculture, Veterinary Science, Nutrition and Natural Resources, 3(096), pp.1-10.

Søgaard, V., 2001. Bayer AG- Chemicals and Life Sciences. AgBioForum, 4(1), pp.68-73.