The Political Economy of Regulation of Biotechnology in Agriculture - The Oxford Topic of Food, Politics, and Society - page 680

13 percent. Yet, to break that out by nationality of the major companies, sales of genetics
by major U.S. companies, at $3.8 billion, made up the bulk of the agbiotech side of the
crop-protection market and were the portion that experienced such high growth. Sales
of genetics by major European companies, at $1.1 billion, were much smaller and had
grown by just 2 percent from the previous year. In contrast, in 2001, sales of agrochemi-
cal pest-control products declined globally by 7.4 percent, whereas the sales of the domi-
nant European companies declined 2.9 percent (Phillips McDougall, 2002).
Taken together, it becomes clear that the U.S. pest-control industry has a comparative
innovative advantage in a new technology that is gaining market share, and the incum-
bent European industry has a comparative innovative advantage in an older technology
where market share is being displaced. To the extent that this is an accurate description,
we would expect the ascendant biobased U.S. industry to advocate for regulations that
would help it to maintain its newfound comparative advantage, in particular against its
larger but slower rivals in the European chemicals sector. Similarly, we would expect
the major European chemical firms to favor a regulatory regime that would, at the very
least, slow the rate at which they are losing market share to biotechnology, if not halt
those losses altogether.
Next, let us consider European farmers and GM crops. It would be expected that, all
else being equal, some European farmers would prefer to plant GM varieties because of
their cost-saving characteristics. However, supporting the ban on biotech crops is pre-
sumed to have helped a large proportion of European farmers in other ways, primar-
ily as a nontariff barrier to trade that protects prices for domestic producers. European
farmers may also support more stringent regulations on biotech crops as they create
an opportunity for systematic price differentiation of their commodity outputs, allow-
ing them to collect an additional price premium while maintaining existing produc-
tion practices of growing conventional crops. Furthermore, since a large proportion of
European farmers are at least partially supported under the crop subsidy programs of
the Common Agricultural Policy (CAP), any policy that tends to support farm incomes
through other means was likely to be favored politically for alleviating some of the bud-
get demands of the CAP.
The relationship between European consumers and GM foods may simply be inter-
preted as one of straightforward rejection—a case in which the benefits of biotech for
consumers simply do not outweigh the costs and risks. It is estimated that European
consumers pay 3 to 5 billion euros more per year in food costs as a result of the ban on
biotech agricultural products (Anderson and Jackson, 2004). This indicates the extent
to which European consumers' perceived welfare diverges from a typical economic wel-
fare analysis of their consumer surplus. Such a divergence can result from two instances.
First, food consumers are arguably less well organized as an interest group than are the
European agrochemical industry or European farmers and, following Stigler (1971),
some of the excess cost may be a result of more concentrated interests prevailing against
the less concentrated in the policy process. Consumers as individuals may each be pay-
ing a few euros more per year on food, but the cost to organize an opposition to the
prevailing policy might cost individuals more than it would save. Thus, inaction on this