Monthly Archives: February 2010

Breaking Waves

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Power Struggles

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Everybody is talking about spats between the United States and China, but I am more worried about India’s reaction to China’s growth.  I have posted before about trade fights between the two, but things seem to be taking on more of an edge.

Several years ago India stepped up construction of new power plants, recognizing the needs of a growing economy and trying to alleviate tenuous electricity supplies.  The plan was to increase electricity production 60% between 2007 and 2012.  India did not have the domestic capacity to build all those power plants and, not liking the higher prices of other builders, they awarded many of the new contracts to Chinese firms.  As a result, China is building about 25% of India’s new power capacity.  Thousands of skilled Chinese workers and engineers have fanned out across the subcontinent and Indian imports of Chinese power generation equipment has surged.  So New Delhi is having second thoughts.

The Wall Street Journal reports that India’s Central Electricity Authority has decreed that Indian equipment will be purchased for all future power plants built by government-controlled utilities.  New Delhi is said to be considering new taxes on imports from China and has warned power companies to stock up on spare parts for their Chinese-origin equipment.  And India has tightened visa requirements for foreign workers, forcing some 3,000 workers back to China last fall.  That wasn’t enough, so in December 2009 it was decided that no more than 1% of the workers on a power project can be foreign nationals (or forty people, whichever is less).  Predictably, all these restrictions have drastically slowed progress on the new power plants and has caused consternation in Beijing.  The Indian government says it is only trying to give India’s power generation equipment manufacturers time to build up their own production capacity.  Hmmm … could this be protectionism?

China has given India something else to think about with its expansion into ports in South Asia, says the New York Times.  Not since the fleets of Zheng He has the Indian ocean seen so much Chinese maritime activity.  This time China is building ports, not just visiting them and trading.  New ports are  being built by Chinese companies at Hambantota in Sri Lanka, Chittagong in Bangladesh, Kyaukpyu in Myanmar and Gwadar in Pakistan.  China says the new ports are part of a strategy to pursue new business in a growing region, but India sees it as a potential threat to India’s security and economy, giving China bases to cover India’s shipping routes.  It’s an expensive strategy for China.  Hambantota alone is said to cost $1 billion.  Interestingly, Sri Lanka approached India first about taking on the project, but New Delhi turned them down.

Both China and India say their intentions are peaceful, but they keep getting in each others’ way as they grow.  China has downplayed conflict with India, but India has been more aggressive in taking trade actions against China and its own neighbors, driving the latter towards closer ties with China.  There is a price for ticking off one’s neighbors.

Coming between India and China?

The United States may be an unlikely beneficiary.  Sikorsky Aircraft may win up to $12 billion in Indian defense procurements in the next eight years.  They already have enough business to warrant investment in a plant in India to build Black Hawk helicopters on the spot.  The Indian military has ordered 16 Black Hawks and another twenty will be leased to the Indian coast guard.

Would You Like Curry with Your GMOs?

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Testing Eggplant (USDA photo)

Frankenfoods are back, and in a surprising place: India, one of the countries that has benefited the most from genetically-modified crops.  The Green Revolution, the forerunner of today’s genetic modification science, saved India from mass starvation fifty years back, but last week Jairam Ramesh, India’s Minister of Environment and Forestry, resurrected the Frankenfood arguments of a decade ago.  Mr. Ramesh has stopped commercial cultivation of a GMO eggplant that has been tested for ten years and approved by a commission of Indian scientists.

Mr. Ramesh says he wants to “build a broader consensus” so that India “can harness the full potential of GMO technology“.  India is already the world’s second largest producer of eggplant and could produce even more if farmers weren’t losing 40% of their crop to pests the new strain is designed to control.

It is hard to know what is actually happening.  Bucking the advice of his own scientists, there seems little evidence that Mr. Ramesh has scientific backing for his position.  I have seen politicians give in to populism and use “safety” as an argument to limit participation by foreign companies.  I think both are in play now in India.  You see, the new strain of eggplant was developed by Monsanto with its Indian partner, Mahyco.  Monsanto is the world’s top producer of GMO seeds and, as such, it automatically attracts suspicion.  It doesn’t help that Monsanto is a big American company.  Monsanto and the Indian scientists say that the new GMO eggplant is safe, and that increased production will lower prices on Indian markets where eggplant is often a food for the poor.

India’s Centre for Science and the Environment, an NGO in New Delhi, has rallied to Mr. Ramesh, announcing that this is “a question of public health, which can’t be compromised at any cost.“  Nice sentiment, but pity the Centre staff never took Econ 101.  Amazing how many people don’t realize that perfect public health (or security, or anything) requires infinite cost.  Even the BBC falls for such arguments; their radio report of the eggplant controversy included only one interview – with a British anti-GMO organization.  Talk about one-sided.  Now Greenpeace has jumped on board, calling for India to ban 41 other GMO crops.  Mr. Ramesh has expressed fears about “Monsanto controlling our food chain“.  I wonder if he would have said this if an Indian firm had developed the new seeds independently.  Doubt it.

There is another side of the story – and probably several sides I’m not aware of.   The Indian scientists who approved the GMO eggplant, the Genetically Engineered Approvals Committee, issued their approval last fall, an event that launched a coalition of consumers, farmers, state governments, medical groups, Hindu nationalists and Communist parties to stop the nefarious plant.  They say that India’s biosafety regulations are insufficient and that studies about the new eggplant’s long-term effects had been ignored.   That could be; I’m not in a position to know.  The Economist reports that Monsanto organized a farmers’ demonstration against banning the GMO eggplant – only they weren’t farmers.  They were landless workers who had been bussed in for the day, likely without a clue as to what they were protesting.  Foolish.

So where does that leave us?  Ten years of scientific research and testing down the tubes.  Opposition that may or may not have a scientific basis.  Foreign companies more reluctant than ever to invest in India.  Consumers suspicious of all new developments.  All due to a question that can never be answered.  Mr. Ramesh has set a standard that requires that developers of a new variety be able to prove absolutely that there is no potential for damage to human health or the environment.  Much as we might like to have such assurance, this is impossible to guarantee, because perfect (you fill in the blank) requires infinite cost.