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

Listed author(s):
  • Demont, Matty
  • Tollens, Eric

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
Handle: RePEc:ags:kucawp:31854
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  1. José Benjamin Falck-Zepeda & Greg Traxler & Robert G. Nelson, 2000. "Surplus Distribution from the Introduction of a Biotechnology Innovation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 360-369.
  2. Devadoss, Stephen & Kropf, Jurgen, 1996. "Impacts of trade liberalizations under the Uruguay Round on the world sugar market," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 15(2), November.
  3. Moschini, GianCarlo & Lapan, Harvey E. & Sobolevsky, Andrei, 2000. "Roundup Ready Soybeans and Welfare Effects in the Soybean Complex," Staff General Research Papers Archive 1799, Iowa State University, Department of Economics.
  4. Poonyth, Daneswar & Westhoff, Patrick & Womack, Abner & Adams, Gary, 2000. "Impacts of WTO restrictions on subsidized EU sugar exports," Agricultural Economics, Blackwell, vol. 22(3), pages 233-245, April.
  5. Moschini, GianCarlo & Lapan, Harvey E., 1999. "Intellectual Property Rights and the Welfare Effects of Agricultural R&D," Staff General Research Papers Archive 1735, Iowa State University, Department of Economics.
  6. Colin Thirtle, 1999. "Productivity and the Returns to Levy-Funded R&D for Sugar Production in the Eastern Counties of England," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(3), pages 450-467.
  7. Eric Tollens, 2004. "Biodiversity versus transgenic sugar beet: the one euro question," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(1), pages 1-18, March.
  8. Jose B. Falck-Zepeda & Greg Traxler & Robert G. Nelson, 2000. "Rent creation and distribution from biotechnology innovations: The case of bt cotton and Herbicide-Tolerant soybeans in 1997," Agribusiness, John Wiley & Sons, Ltd., vol. 16(1), pages 21-32.
  9. Patricia Combette & Éric Giraud-Héraud & Vincent Réquillart, 1997. "La politique sucrière européenne après les accords du Gatt," Économie et Prévision, Programme National Persée, vol. 127(1), pages 1-13.
  10. 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).
  11. 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.
  12. 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.
  13. George C. Davis & Maria Cristina Espinoza, 1998. "A Unified Approach to Sensitivity Analysis in Equilibrium Displacement Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 868-879.
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