Hello Dolly, it would be so nice to have you back where you belong. (GW)
Serving Up Dolly: Implications Of An FDA Ruling
By Bart Mongoven
STRATFOR Policy Intelligence Report
December 28, 2006
The U.S. Food and Drug Administration (FDA) has announced that it has no safety concerns about food products made from cloned animals. The announcement, which was telegraphed at an FDA public hearing notice in October but announced Dec. 28, was delayed for years as various interest groups fought to slow or stop the entry of such products to market. However, with growing evidence that food from cloned animals was virtually indistinguishable from that made from non-cloned animals, the delay became more difficult for the FDA to justify.
The decision puts the FDA at odds with a number of special interests and in line with only a few. Favoring the approval are some livestock industries that see possible benefits for their operations down the road. Also supportive are those involved in the cloning of animals: research organizations, laboratories and corporations that specialize in various biotechnologies. Opposing the decision, for a variety of reasons, are many dairy farmers, dairy marketing associations, multinational consumer product companies, consumer protection organizations, some religious groups and animal welfare activists.
On its own merits, the issue facing the FDA was fairly simple: The agency's job is to certify whether a food product is safe, and FDA scientists have said there are no health concerns associated with the products -- food from clones, unsurprisingly, is identical to food from non-cloned animals. Of course, the approval of foods from cloned animals for U.S. consumption could cause significant problems for U.S.-based consumer product companies, lead to concerns about animal welfare or eventually hurt a domestic company's global market share, but all of this is irrelevant to the safety issue itself. In other words, this is a political question rather than a scientific one.
Given the state of party politics in the United States and the current configuration in Congress, the next phase of the debate over cloned animals and food will be difficult -- and for a number of reasons, neither Congress nor the Bush administration is likely to keep food made from cloned animals from moving to market. As a result, such food products soon will be placed on store shelves around the world. Consumers in the United States are unlikely to notice or care a great deal, but in much of the rest of the world, trade barriers might be erected or consumer campaigns against American food products could emerge. In the end, it is likely that the consumer product companies will reluctantly undertake a public education campaign on cloning and the safety of food from cloned animals.
Examining the Opposition
To understand the commercial implications that likely will stem from the FDA's announcement, one must consider the positions of the various actors arrayed in the "against food from cloned animals" camp. And the opposition is quite varied indeed.
The most powerful opponents are multinational food companies, which worry that consumers in Europe and Japan will recoil at the idea of eating "cloned food" and eventually might come to view American food products generally as being unsafe, unhealthy, or simply unsavory. These companies see their brands -- the most valuable asset they possess -- as being placed at risk by the emergence of food from cloned animals.
Companies with carefully built and maintained brands, such as Kraft and Nestle, fear that their products will be perceived as "contaminated" due to their use of ingredients from cloned animals. These companies currently monitor developments in cloning carefully as they attempt to stay ahead of the issue, but they tacitly acknowledge that -- legal prohibitions notwithstanding -- ingredients from cloned animals have entered the U.S. food supply. Even without the cloning issue on the table, market research has shown that Europeans consider European-grown and -processed foods to be "purer" and "more wholesome" than American foods, which they view as more likely to be "artificial." Major food product companies anticipate that the FDA's decision on the issue will only strengthen these perceptions.
And in fact, these perceptions have posed a hurdle for American consumer product companies and livestock marketing associations for years. The U.S. beef industry embarked on a years-long campaign to re-enter Asian markets -- and is still trying to fully break back into Taiwan and South Korea -- after cows in the United States were found to be infected with bovine spongiform encephalopathy (BSE, or "mad cow disease") in 2003 and 2005. Other commodity groups likewise took a hit when shipments of food products to Europe or Japan were found to contain genetically modified organisms (GMOs) that were not approved at that time for consumption in those markets.
Even the industry that is most likely to bring cloned food to market, the dairy industry, is ambivalent at best about the FDA approval. For some dairy farmers, the move will lead to more efficient operations, as the most productive cows will be cloned and then bred. Still, the impact on the whole could be negative if foreign markets close themselves to the milk products these farmers will be exporting. Further, many small farms and family farm groups oppose the decision because the efficiencies will be realized mainly by the larger operations, placing small farms at a competitive disadvantage. Nevertheless, once one operation starts using cloned animals for increased dairy production, it will be incumbent on others to follow suit, simply in order to keep up.
Opposition from consumer protection and food safety organizations derives from another source. These groups stringently oppose approval of food from clones because they claim the science the FDA has relied upon is not nearly as conclusive as cloning proponents or the FDA make it out to be. These groups are likely to build arguments designed to stoke fears among European and Japanese consumers, in an attempt to keep up the pressure on U.S. food companies and, through them, regulators. While activist claims about the science relating to food from cloned animals have little to back them up, they reflect the broadly precautionary approach to regulation and product safety that consumer groups increasingly advocate. These activists simply argue that it is not known conclusively that food from clones is safe. Further, they argue that the public should not assume the risks on policy matters in which reward accrues primarily to major corporations, with few benefits trickling down to the consumer.
Animal welfare groups, led by the Humane Society, oppose the FDA decision because they fear the approval will lead to increased suffering for animals; cloning operations routinely have produced many deformed or chronically ill animals.
Various religious groups, meanwhile, have warned that the approval of food from cloned animals will encourage advances in cloning generally and will whittle away at public resistance to the practice. In this way, they argue, the FDA's announcement indirectly could encourage the pursuit of human cloning and erode values pertaining to the sanctity of human life.
The Political Backdrop
In approving food from cloned animals, the FDA has fulfilled its mission: The agency's science boards have determined that the products are safe for consumers, and the way has been cleared for these products to enter the market. And despite objections from various quarters, the U.S. political establishment is not likely to intervene -- either to slow the pace of the market entry or to mitigate any ill commercial effects that the country may suffer as a result.
Those who want Congress to step in and address the clone issue find themselves in a difficult crossruff. Many of the same individuals and organizations who oppose the approval of food from cloned animals have led in calls for Congress to exert greater oversight of the FDA. Congress is indeed preparing a number of oversight hearings, including a series that will focus on how the FDA has been run under the Bush administration. The hearings will focused on questions of whether drug approvals (or denials) were influenced by politicians and whether drug companies exerted influence in the approval process. The hearings will be designed to portray Republicans as politicizing the FDA's scientific mission or, worse, as corrupting food and drug safety.
Democrats will step into controversies about political interference in the FDA's apolitical mission with relish, but the cloned food debate touches on none of these issues. For Congress to halt the introduction of food from cloned animals, Democrats in Congress would have to do precisely what they are accusing Republicans of doing: overriding the scientific findings of the FDA in order to make a political point. Thus, by stepping into the debate on food from cloned animals, the Democrats not only would be taking action that runs counter to the position they want to stake out, but they would run the risk of obscuring the very issues they want to emphasize in the coming year.
For its part, the Bush administration needs no new controversies involving the FDA or the scientific establishment, particularly after the Democrats used the administration's support for a continued ban on federal funding of stem cell research as a bludgeon in this year's congressional election campaigns. The Democrats used the White House's position on the issue to portray the GOP as a small-minded and overly religious party -- one that holds back scientific progress on health issues on the basis of a narrow religious interpretation. At this point, the administration and the GOP generally are unlikely to venture into another such battle.
For those who will have to sell food around the globe after this decision, product labeling would seem to offer the surest protection against a consumer backlash overseas. However, the issues surrounding labeling processes are quite complex and could create more headaches than conveniences for the industry.
In the United States, food labels are very strictly regulated: Only certain attributes are listed on labels, and then only under certain circumstances. For instance, the United States has resisted following the example of Europe and Japan in labeling foods that contain GMOs. The FDA argues that such a label would imply there is a problem or concern about GMOs, which its scientists have not found to be the case. The FDA has found that food from cloned animals is no different from food from non-cloned animals; therefore, the agency is highly unlikely to enforce a mandate that food from cloned animals should be labeled that way.
It is permissible, under U.S. regulations, to label products as being free of GMOs, and consumer product companies will likely be able to do the same with food from cloned animals. So long as regulators do not consider the phrasing of the label to be misleading or cast aspersions on competitor products, it would be permitted by law. (In other words, a product -- say, "Stratfor Cola" -- could not be given a label such as "the cola without polonium," since that would imply that competing products indeed contain polonium. But "Stratfor Cola: Does not contain polonium" would be accepted.)
Consumer product companies themselves, however, would not be eager to pursue the labeling option, which from a corporate perspective amounts to tremendous expense, onerous oversight requirements and waste. To label a food as "clone-free" would require that the company monitor its entire supply chain. And even using the most modern technology, this is not an easy task in cases involving milk or meat from dozens of suppliers who ship to numerous processors. In the GMO example, consumer product companies have pushed this expense onto processors, who in turn police their suppliers. But the cloning issues would add yet another layer of supply chain monitoring for the processors, at a cost that would borne by the consumer product companies. This, in turn, would place consumer product companies sourcing from the United States at a cost disadvantage and drive up prices for U.S. consumers.
Thus, multinational food companies are at a crucial juncture in this issue. Their options are either to ensure that food from cloned animals never enters their supply chain, or else attempt to reverse negative public perceptions about food from cloned animals. They cannot achieve the first objective on their own, and the federal government is not going to use its power to assist any efforts on this front. Therefore, corporations will be drawn to the second option: a campaign to convince consumers that food from cloned animals is perfectly safe, indistinguishable from food from non-clones. This is not a task the industry wanted -- and it is still lobbying to slow the introduction of food from cloned animals into the U.S. market -- but it appears increasingly likely that this will be a task the industry cannot avoid.
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