Economic Impact of GM Sugar Beets in the EU: The EUWAB-project

Since 1995, genetically modified organisms (GMOs) have been introduced commercially into US agriculture by a handful of vertically coordinated “life science” firms who have fundamentally altered the structure of the seed industry. Enforcement of intellectual property rights (IPRs) for biological innovations has been the major incentive for a concentration tendency in the upstream sector. On the one hand, this monopolisation may increase long-run social welfare through an increased rate of investment in R&D. On the other hand, due to their monopoly power, these firms are capable of charging a “monopoly rent”, extracting a part of the total social welfare. A popular argument used by the opponents of agricultural biotechnology (AgBiotech) is the idea of an input industry extracting all benefits generated by these innovations. Are life science firms able to appropriate all benefits or is there a limit to their monopoly power? In the US, the first ex post welfare studies reveal that farmers are receiving the largest part of the benefits followed by the gene developers who receive the next largest share. However, up to now no parallel ex ante study has been published for the European Union (EU). Hence, the EUWAB-project (European Union Welfare effects of Agricultural Biotechnology) aims at calculating the total benefits of selected AgBiotech innovations (GM sugar beets, maize and oilseed rape) in the EU and their distribution among member countries, producers, consumers, input suppliers and government.