The life science industries need a new prescription. ­Phar­maceutical makers, who say their high drug prices are necessitated by the huge cost of developing new medicines, are on the defensive as U.S. politicians talk about price controls and even patent reforms favoring makers of generic drugs. But if there is one group feeling particularly besieged, it’s the biotechnology companies applying genetic engineering to crops and farm animals. Trade conflicts between Europe and the United States over genetically modified organisms (GMOs) are now spreading to Brazil, India, and China. Despite the potential of so-called agbio technology to produce new medicines and conquer malnutrition, rules governing firms developing GMOs are frequently ill defined, difficult to implement, and hotly contested. For most, wooing investors has become exceedingly difficult.

It’s not a lack of promise that’s getting in the way. Production of genetically modi­fied crops jumped 20 percent between 2003 and 2004. Genetically modified plants, which include corn, wheat, cotton, tobacco, rapeseed, soybeans, tomatoes, rice, potatoes, and poplar trees, are engineered to produce higher yields, grow in harsher soil conditions, and require fewer herbicide and pesticide treatments. The milk from genetically modified cows, goats, sheep, and rabbits is being used to produce therapeutic proteins for hard-to-treat conditions such as antithrombin deficiency, which leaves sufferers vulnerable to deep-vein thrombosis. But given the chaotic state of regulation and public opinion, developing a new agbio product has become a gamble.

New Zealand, of all places, may have found a solution, proving once again that the best ideas pop up where they are least expected. This nation’s four million inhabitants form arguably the most politically and environmentally correct society on the planet—and one might think, therefore, among the most staunchly anti-GMO. New Zealand is a nuclear-free zone. Its two main islands have a small but politically powerful population of indigenous Maori, who are newly emboldened and empowered after generations of repression, and who consider plants and animals to be their kinfolk. The Green Party enjoys enormous influence in government. The country is as famous for the verdant, rolling hills of the north island and the rugged alps of the south island as it is for its high-quality, disease-free farm products—chiefly dairy, beef, and lamb. New Zealand’s economy is far more dependent on agriculture than those of its Western peers; farming accounts for 4.8 percent of the country’s gross domestic product, compared to .9 percent in the United Kingdom and 1.4 percent in the United States. So it’s not surprising that until recently, New Zealand was on its guard against anything that might sully its pristine image. Only four years ago, the country essentially told Monsanto that its biotech wheat was not welcome there.

But against long political odds and at considerable risk to the country’s clean-green image, New Zealand’s parliament concluded just over a year ago that the potential rewards from GMOs outweigh the risks. To keep its economy growing, lawmakers reasoned, the nation would need to find ways to produce more (and more valuable) dairy and forest products on less and less acreage. The key would be, not to turn away from GMO technologies, but rather to manage them wisely with a transparent, enforceable, publicly access­ible, and scientifically robust regulatory framework. This framework, enacted in October 2003, gives New Zealanders more power to participate in the approval process for local GMO research and development projects than any other people in the world. At the same time, the laws protect biotech firms that meet the new standards against litigation, a problem that has been a major damper on GMO projects in other countries. Environmentalists still worry that New Zealand’s protocols aren’t fail-safe, and biotech firms complain that they are too costly and time consuming. But both sides agree that the country has made a start. In fact, New Zealand’s GMO regulations are now considered among the world’s most functional. Says one veteran biotech investor in San Francisco, “Now anybody who is investing in agbio* is paying attention to New Zealand.”

“Pressing On, but with Care”
By some accounts, trade disputes between the United States and Europe over genetically modified organisms have cost Ameri­can farmers, packaged-food processors, and life science companies billions of dollars over the past five years. New Zealand’s early experiences with the genetic engineering of crops and animals were no less tumultuous. One of the country’s first responses to the prospect of genetically engineered crops and animals was the 1996 Haz­ardous Substances and New Organisms Act, which established a new regulatory agency called the Environmental Risk Management Authority (ERMA).

A “public storm” had erupted as soon as the government began to accept ap­plications for field trials of genetically modified organisms in the mid-1990s, ­according to Bas Walker, ERMA’s chief executive. But the new regulations’ me­chanisms for public input doubled the volume of the criticisms. “Every proposal became a cause célèbre,” says Walker. By 2000, groups such as the Green Party and the Sustainability Council of New Zealand and Maori activists and politicians were calling for a moratorium on GMO research, development, and field releases until the government could be sure it was managing the technology properly.

The government and the biotech industry agreed to a voluntary moratorium and Parliament convened a royal commission to study GMOs. In late 2001, the commission came back with its answer: genetically modifying animals and plants would be fraught with risks, but could also be vital to New Zealand’s economic future, which, the commission noted, will depend heavily on agricultural innovation. The message was “Press on, but with care,” says one commission member who preferred not to be named because of the political sensitivity still surrounding the issue.
In October 2003, Parliament allowed a moratorium on GMO commercial releases to expire. But at the same time, it amended regulations to include an array of new checks and balances designed to ensure that GMO research was done safely but also openly, and with respect for Maori cultural traditions.

—For the biotechnology industry, one attractive aspect of the new regulations is their unique civil-liability provisions. In many countries, anti-biotech groups have stalled field tests of genetically engineered crops by filing lawsuits or winning injunctions based on claims of possible harm to the environment. In New Zealand, legal action doesn’t paralyze GMO research and development. But government protection must be earned: the public is invited to voice its concerns about a GMO research or development project before a company’s application is accepted, and the government must address these concerns before an application is granted. Government examiners make spot checks, and companies must file annual updates to ensure compliance. General descriptions of these projects and status reports are publicly available on the ERMA website. No other country ensures comparable levels of public input, government oversight, or transparency.

Life with ERMA
Several field trials of genetically modified trees, onions, and dairy cows have been approved, and the reaction from the country’s traditional GMO critics has been re­la­tive silence. One issue flaring up in other countries—the potential threat to com­munities located near waste disposal sites for genetically engineered animals and plants—has not become an issue in New Zealand. That’s partly because ERMA’s regulations call for agbio companies to observe local traditions. For example, near Mangakino, in the South Waikato region of New Zealand’s northern island, Whakamaru Farms destroyed 3,000 genetically engineered sheep left by PPL Therapeutics, which had sold its land and buildings to Whakamaru. (PPL had gone out of business, and destroying the sheep was the only way to avoid the risk of ­losing track of which animals were genetically engineered.) Whakamaru incinerated the sheep, as Maori tradition demanded, rather than burying them. “We live in a small community where everybody knows their neighbor,” says company director George Mitchell. “If you look at GMO protests around the world, you’ll see that most of them are very grass roots and community based. Nobody in the community is protesting our presence. That, and the fact that, long-term, we think this technology and protocol put us in a very nice competitive position, was what led us to buy this operation ourselves.”

In Mosgiel, the heart of New Zealand’s dairy region, Maoris follow a very different ritual around the death of animals. “We have to bury [cow carcasses] in keeping with local Maori custom,” says Jimmy Suttie, general manager of applied biotechnologies at AgResearch. “It’s these kind of things in our regulatory regime that are arduous for companies, but ultimately allow us to move forward without worry of lawsuits or other interruptions created by those who might want to stall our operations.”

Few New Zealanders consider the regu­lations perfect, and they will likely undergo more revisions. The official position of the Sustainability Council of New Zealand is that New Zealand should be GMO-free for at least the next few years. Now that the government has decided otherwise, however, Simon Terry, director of the council, says the regulations are an acceptable starting point for passing better laws in the future. The council’s assessments, he notes, take into account a full range of potential effects—health, environmental, economic, and social. “In the end, [regulators] can only approve an application if there is considered to be a net benefit to the nation.”

One weakness of ERMA, say some in the biotech industry, is the lack of a standardized procedure for applications and compliance reviews. The law gives ERMA great flexibility to seek outside advice in complex cases. But that confounds companies trying to create predictable and efficient regulatory and compliance systems. “We’ve been doing field trials on radiata pine, which is a very important plant to this country’s future,” says Christian Walter of Forest Research, an agbio company in Rotorua. “It hasn’t been easy. Neither our funding agents nor our anti-GMO opponents realize just what we have to do now before we can even think about research outside of the lab.” Walter has excellent environmentalist credentials: he was a cofounder of Greenpeace in Germany. But old notions, he says, die hard. “I don’t know when we’ll get to a point where we decide to ­apply for a [full open-space] release application. There’s still a lot of public ambivalence to this because nobody has ever created a plantation of [GM trees] in a New Zealand forest before.

“The only way the world will ever learn the real risks and rewards [of GM trees] is to put them out into a real-world setting, with precautions and oversight. We’ve got a lot of new safety mechanisms and a history of forestry innovation in New Zealand. The world is going to be looking at us to deliver a lot of [GM forest] insights soon. If we don’t deliver, we’ve got nobody to blame but ourselves.”

The Kiwi Gold Standard
It’s too soon to know whether New Zealand’s new regulations will pay long-term dividends. In the short run, at least, the feared international backlash against exports from New Zealand—now that the country has cleared the way for GM dairy, meats, and forest products—has not materialized. New Zealand expects continuing growth in global demand for its leading exports, forest and dairy products.

Consultants to government regulators in Europe, Canada, Australia, and Brazil say New Zealand’s GMO protocol will likely be imitated to buttress the evolving regulations in these countries in the near future. “New Zealand’s [GMO] approach is clearly the gold standard now,” says one government consultant who wished to remain anonymous.

That could eventually bring business and jobs to New Zealand and, which after years in the shadows of Australia and Singapore, is starting to gain a reputation as a regional biotechnology haven. “It was only a couple of years ago that we were all ready to write off New Zealand,” says to the San Francisco agbio investor who requested anonymity. But leading New Zealand agbio firms like Forest Research, AgResearch, and Whakamaru Farms are pushing forward with long bottled-up plans for R&D projects. And European and American investors say they have noticed a distinct increase in business proposals from New Zealand.

At the same time, many foreign companies developing GMOs will establish branch operations in New Zealand, predicts Jeffrey Turner, CEO of Canadian biotech company Nexia. “There could be a huge advantage for some companies to develop their technologies in New Zealand now, because the country’s regulatory protocol is seen as extremely robust and politically legitimate.”

That suits the population of New Zealand just fine. Pete Hodgson, a member of the country’s parliament from Dunedin North, feels the mere existence of ERMA and the new GMO regulations should prove to the world that industrial biotech and concern for the environment, society, and indigenous cultures need not be fundamentally incompatible. New Zealand’s recent effort, says Hodgson, “is proof that there is no such thing as irreconcilable differences.”