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Impact Of Agricultural Biotechnology In The European Union'S Sugar Industry

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Author Info
Demont, Matty
Tollens, Eric
Abstract

We develop a welfare framework, which explicitly recognizes that research protected by intellectual property rights generates monopoly profits. The result is a simulation model, shaped to the European sugar sector, and enabling to assess the size and distribution of the benefits of transgenic sugar beet adoption in the European Union (EU) and the Rest of the World (ROW). Our model results suggest that the ROW captures the largest share of the benefits (53 % of total welfare increase). The EU sugar industry absorbs the next largest share of the benefits (30 %), with the smallest share (17 %) accruing to seed suppliers and gene developers. Since EU intervention prices are exogenously fixed each year, EU consumers do not take part in the distribution of the gains from the innovation. However, consumers outside the EU necessarily gain due to the depressing effect of the technology on world sugar prices. The latter is costly for the cane growers in the ROW, while beet producers gain. Our results reveal an apparent contradiction. When modern (bio)technologies are introduced in commodity markets subject to obsolete trade policies, the natural flow of domestic benefits from the input industry, via farmers, to consumers is hampered and biased towards the producing sector (input industry, farmers, and processors), leaving domestic consumers unaffected. Remarkably, given the current Common Market Organization for sugar, consumers outside the EU gain while EU citizens continue to subsidize EU sugar production trough high sugar prices, despite the innovation.

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Paper provided by Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics in its series Working Papers with number 31854.

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Date of creation: 2002
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Handle: RePEc:ags:kucawp:31854

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Web page: http://www.agr.kuleuven.ac.be/aee/clo/clohomee.htm
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Keywords: Industrial Organization; Research and Development/Tech Change/Emerging Technologies;

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  1. Devadoss, Stephen & Kropf, Jurgen, 1996. "Impacts of trade liberalizations under the Uruguay round on the world sugar market," Agricultural Economics, Blackwell, vol. 15(2), pages 83-96, November. [Downloadable!] (restricted)
  2. Kennedy, P. Lynn & Harrison, R. Wes, 1999. "Competitiveness In The World Sugar Industry: A Comparison Of The Eu And U.S. Sugar Sectors," 1999 Annual meeting, August 8-11, Nashville, TN 21649, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  3. Moschini, Giancarlo & Lapan, Harvey & Sobolevsky, Andrei, 2000. "Roundup Ready Soybeans and Welfare Effects in the Soybean Complex," Staff General Research Papers 1799, Iowa State University, Department of Economics.
  4. Demont, Matty & Tollens, Eric, 2001. "Welfare Effects Of Transgenic Sugarbeets In The European Union: A Theoretical Ex-Ante Framework," Working Papers 31852, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics. [Downloadable!]
  5. Moschini, GianCarlo & Lapan, Harvey, 2002. "Intellectual Property Rights and the Welfare Effects of Agricultural R & D," Staff General Research Papers 5048, Iowa State University, Department of Economics.
  6. Davis, George C & Espinoza, M Cristina, 2000. " A Unified Approach to Sensitivity Analysis in Equilibrium Displacement Models: Reply," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 82(1), pages 241-43, February. [Downloadable!] (restricted)
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