Study Highlights Economic Loss Caused by Barriers of GM Crop Commercialization

When discussion about genetically modified (GM) crops is brought up, their benefits often highlight their impact on the environment, animal welfare, human health, and food security. However, their economic impact is often less understood by people who have little knowledge of economics. Two researchers from Canada explain the potential economic losses caused by the delay in GM crop commercialization and the factors that promote them.

Using existing literature, the researchers outlined the economic advantages of GM crop production and usage and investigated the current inefficiencies in GM regulation. Various literature states that GM crops have the potential to increase farming efficiency, cost-effectiveness, and raise the income of developing countries by planting and using GM crops. However, these potential benefits are unrealized due to the following reasons:

• Excessive market power is given to GM seed producers – Imposing a GM seed price ceiling in the GM seed market would result in lower prices at a higher quantity and increase consumer surplus and reduction of market power.
• Barred entry into the GM market due to biosafety procedures - The high opportunity cost in complying with regulations can instead be used by farmers as capital to conduct profit-generating activities like growing more crops instead.
• Barred entry into the GM market due to utility patents – Lifting utility patents may be effective in reducing market power while preventing monopolies from having full ownership over GMO genetics.
• Barred entry into the GM market due to international trade asymmetries – Establishment of harmonized and international trade and approval of GM crops can help expand customer and consumer bases lowered business production costs and the reduction of government interference in businesses.

The researchers suggested that further research and economic analyses must be conducted to determine the health repercussions of GM crops and the potential biosafety externalities.

Read the full paper from Journal of Student Research.