The Multinational Monitor


May/June 2004 - VOLUME 25 - NUMBERS 5 & 6

T H E    F R O N T

Grim Day for Monsanto

Bowing to a worldwide pressure campaign, the Monsanto Company announced in May that it would abandon plans to place genetically engineered wheat on the market.

Monsanto's efforts to obtain marketing approval for genetically engineered wheat in the United States and Canada generated massive protests from consumers and environmentalists around the world, and from U.S. and Canadian wheat farmers -- some who oppose genetically engineered wheat in principle, others who want the product off the market until consumer resistance is eliminated.

Monsanto announced in May that it was "realigning" its research and development investments, and abandoning efforts to introduce genetically engineered wheat.

The company has already introduced a variety of "Roundup Ready" products, including corn, soy and canola. These products are genetically engineered to withstand application of Monsanto's Roundup (glyphosate) herbicide. The engineered resistance to the herbicide is designed to enable farmers to spray strategically, including when plants are just emerging. The cost is they must buy the biotech seeds from Monsanto, every year.

Monsanto began development of Roundup Ready wheat in 1997. The company claimed that the product would increase yields by 5 percent to 15 percent.

But these purported benefits notwithstanding, the company concluded that market prospects for its genetically engineered wheat prospect were weak.

"As a result of our portfolio review and dialogue with wheat industry leaders," said Carl Casale, executive vice president of Monsanto, in announcing the company's decision, "we recognize the business opportunities with Roundup Ready spring wheat are less attractive relative to Monsanto's other commercial priorities."

In June, the company followed up by announcing that it was withdrawing all of its applications for genetically modified wheat, except to the U.S. Food and Drug Administration (FDA). Approval by the FDA would not be sufficient to permit Monsanto to market its biotech wheat, but might remove a regulatory hurdle should the company decide to try later to get the product to market.

Wheat farmers had been hostile to Monsanto's plans.

"Introduction of genetically modified wheat would have been a commercial disaster," says Gail Wiley, a farmer from Montpelier, North Dakota. "Monsanto's announcement is a victory for farmers in the United States and Canada and our consumers overseas. After five years of effort, we have finally convinced Monsanto to face the reality that our markets do not want Roundup Ready wheat."

In the United States, family farm groups, including the Dakota Resource Council, the National Family Farm Coalition and the Western Organization of Resource Councils, in 2003 petitioned the U.S. Department of Agriculture, demanding the department conduct an environmental impact statement before issuing approvals for Monsanto's genetically engineered wheat. Gail Wiley was a party to that suit in her personal capacity. Dozens of consumer and farm groups endorsed the petition.

The Department of Agriculture has not issued environmental impact statements -- which involve detailed investigations of potential ecological impacts from government actions, including approvals of new technologies -- for previous approvals of biotech products. But the family farm groups' petition argued that the severe risks posed by genetically engineered wheat mandated such a review under environmental laws. The groups emphasized the danger that genetically engineered wheat would contaminate existing wheat crops, as seed blew in the wind, was carried by rodents or otherwise transported. They also focused attention on the likely development of Roundup-resistant weeds.

The family farm groups were not alone in opposing introduction of Roundup Ready wheat. The larger wheat growers' groups were opposed also, though less vociferously. A number of state wheat growers associations passed resolutions opposing introduction of biotech wheat until consumers worldwide had adequate assurances of safety -- and until consumers worldwide had indicated their willingness to consume foods made with genetically engineered wheat.

The Idaho Wheat Commission, for example, declared, "We support delaying the commercial release of genetically enhanced wheat varieties until customer acceptance can be assured."

Resistance was even stronger among Canadian farmers.

The Canadian Wheat Board, which controls exports of most Canadian wheat, had threatened to sue should Monsanto gain marketing approval in the country. Canadian agriculture experts had forcefully emphasized the environmental hazards of genetically engineered wheat, noting the near certainty of contamination based on prior experience with Roundup Ready canola.

The board's official position is that "transgenic wheat and barley varieties should not be available for production in western Canada until proven technologies and associated protocols and procedures are in place to efficiently and effectively segregate transgenic from non-transgenic varieties in order to satisfy customer requirements."

Segregation is a key issue for farmers. If consumers cannot be certain that wheat from a country that permits genetically engineered wheat does not contain genetically modified material, they may simply boycott all wheat from the country.

These are not idle concerns. Consumers outside of North America, especially in Europe and Japan, have rejected biotech products from the United States and Canada on a massive scale.

A study by the Western Organization of Resource Councils concluded that European and Asian grain buyers would refuse to buy wheat from states or regions growing genetically modified wheat. As a result, the report predicted, prices would plummet by at least one third in the two-to-six year period following introduction of the biotech wheat.

In Japan, more than 400 organizations representing more than a million consumers signed a petition demanding that genetically modified wheat be rejected. Japanese consumer groups also elicited pledges from leading Japanese flour milling associations that they would not process genetically modified wheat.

Monsanto's decision to withdraw its genetically engineered wheat applications "is a worldwide victory for consumers and farmers," commented Juan Lopez of Friends of the Earth International.

"Virtually every major wheat user in the world had already rejected this product before it even was allowed on the market. This must be one of the most rejected products ever developed. This is another major financial blow to Monsanto and the corporation should get out of this unwanted genetically modified crops business once and for all."

-- Robert Weissman

Wal-Mart's Subsidy Shopping

Wal-Mart, the world's largest retailer, has benefited from more than $1 billion in economic development subsidies from state and local governments across the United States, according to a new study by Good Jobs First, a Washington, D.C.-based research group.

"Wal-Mart presents itself as an entrepreneurial success story, yet it has made extensive use of tax breaks, free land, cash grants and other forms of public assistance," says Philip Mattera, research director of Good Jobs First and principal author of the study.

The study, the first comprehensive national examination of subsidies received by the giant retailer, found more than 240 cases in which the construction of new Wal-Mart facilities was assisted by public resources.

In addition to 160 retail outlets, the study found subsidies at 84 of Wal-Mart's distribution centers, representing more than 90 percent of the network of huge warehouses the company has built to facilitate its rapid expansion.

The publicly evident value of subsidy deals for individual distribution centers ranged as high as $46 million (with an average of more than $7 million), while for retail outlets the largest was $12 million (with an average of $2.8 million). Wal-Mart subsidy deals were found in 35 states, with the largest number in California, Illinois, Missouri, Texas and Mississippi.

In total dollar terms, Louisiana, Florida and New York also ranked high. Although comparative data are not available, the study says it is likely that Wal-Mart, given the extent of its operations, receives state and local subsidies from more jurisdictions than any other corporation in the United States.

"That a company with $9 billion in profits can wrest job subsidies from state and local governments shows that the candy store game has gotten out of control," said Greg LeRoy, executive director of Good Jobs First.

Wal-Mart's annual revenues top $256 billion. It has more than 5,000 stores worldwide, roughly two thirds in the United States. The company has doubled its number of U.S. stores since 1990, and plans to open 300 new or expanded stores in the United States in 2004.

The subsidies to Wal-Mart are particularly troubling, the report argues, given that the company uses taxpayer dollars to create jobs that tend to be poverty-wage, part-time and lacking in adequate healthcare benefits. The report notes as well that retail jobs do not have an economic impact comparable to manufacturing -- where new manufacturing creates new jobs, retail openings do little more than take revenues from existing merchants, since the store opening does not increase the disposable income of shoppers.

Mattera stresses that the $1 billion figure is an understatement, since disclosure of economic development subsidies is poor in most states.

"We had to track down subsidy deals using sources such as archives of local newspapers," Mattera says. "Then we had to interview hundreds of public officials to confirm the facts and seek additional details, which sometimes were not available. While it was not practical to contact officials in all of the more than 3,000 U.S. communities in which Wal-Mart has stores, we did contact officials in every one of the 91 places in which the company has its distribution centers. The fact that we found subsidies in more than 90 percent of the distribution centers suggests that the true extent of subsidies for stores is much higher than the rate we could find with our indirect methods."

The types of subsidies given to Wal-Mart projects included:

  • Free or reduced-price land. More common for Wal-Mart distribution centers -- some of which require more than 100 acres -- land giveaways have been worth as much as $10 million for a single project.
  • Tax increment financing, a diversion of property (and/or sales) tax generated by a new development;
  • Property tax abatements. In some cases, Wal-Mart avoids property taxes indefinitely by letting ownership of the facility remain with public authorities, making it tax exempt.

Other categories of subsidies included: infrastructure assistance, including access roads and water/sewer lines; state corporate income tax credits; sales tax rebates or exemptions; enterprise zone status, which typically provides for a menu of subsidies such as property tax abatements, state tax credits, sales tax exemptions and reduced utility rates; job training and worker recruitment funds; tax-exempt bond financing; and general grants, including outright cash payments to the company.

The study points out that Wal-Mart proceeded in many instances to open stores without subsidies. "The fact that Wal-Mart often proceeded with such projects without subsidies suggests that the company did not seek the assistance out of financial need," Mattera says.

Good Jobs First urges that states and localities generally deny subsidies to Wal-Mart. "Given the poor quality of the jobs that tend to be created and the role that big-box stores play in contributing to sprawl, we suggest that states prohibit subsidies to retailers such as Wal-Mart unless strict conditions are met," LeRoy says. "First, the subsidies should be available only in economically distressed areas that are demonstrably underserved by retail outlets for necessities such as food. Second, any retailer receiving subsidies should be required to pay its employees a living wage."

Local opposition to Wal-Mart's expansion has blocked some of the subsidy deals the company has sought, the study recounts.

In 1998, the California Supreme Court affirmed a lower court decision striking down a $1.9 million subsidy in Chula Vista, California. The courts ruled the subsidy violated a 1993 anti-big box store amendment to a state development law that prohibits taxpayer subsidies for retail projects on five or more acres of land previously undeveloped for urban use.

In some cases, Wal-Mart has proceeded with development after losing subsidy packages.

In other cases, it has dropped plans. In Chicago in 2002, for example, the company sought $18 million in subsidies in connection with a project for the Near South Side of Chicago. Chicago Mayor Richard Daley rejected the request and Wal-Mart abandoned the project. And in March 2004, Scottsdale, Arizona voters rejected a plan to give up to $36 million in sales-tax rebates to a developer for a project that would have included a Wal-Mart Supercenter and a Sam's Club. The development project now appears defunct.

The Good Jobs First study was funded in part by the United Food and Commercial Workers union, but the union played no role in the research or analysis. n
10 Largest Wal-Mart Subsidy Deals
1. Sharon Springs, New York distribution cente $46.0 million
2. Opelousas, Louisiana distribution cente $33.0 million
3. Pageland, South Carolina distribution cente $28.2 million
4. Arcadia, Florida distribution cente $23.8 million
5. Robert, Louisiana distribution cente $21.0 million
6. New Braunfels, Texas distribution cente $20.0 million
7. Ottawa, Kansas distribution cente $19.0 million
7. Grove City, Ohio distribution cente $19.0 million
7. Baytown, Texas distribution cente $19.0 million
10. Bartlesville, Oklahoma distribution cente $15.9 million
Source: “Shopping for Subsidies: How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth,” Good Jobs First, 2004.