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GMOs: Impacts on the French economy

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The use of GMOs in France would have a strong impact on the French economy, but the real consequences are not easy to predict. Speak to  Stéphane Le Bouler, General Plan Commissariat.

In April 2000, the French ministers responsible for agriculture and the environment asked the Commissariat général du Plan to study the medium and long term consequences of the use in agriculture of genetically modified plants (GMP). ”  The analysis of the questions of legitimacy and acceptability of these technologies ” and ”  the study of the socio-economic impacts of the use or non-use of these innovations  ” were the two major themes.

To evaluate the impact of an innovation such as GMOs on an economy presupposes in advance to specify the object (are we interested in so-called GMOs of first generation or GMOs of the future?) And the target (which are actors, areas concerned?).

Obviously, one can not reduce the analysis to the chronicle of the industrial and commercial failure of so-called first-generation GMOs in France and in a large part of Europe. At the same time, we need to understand the economic issues of the controversy and the results we have seen in judging the promises of future GMOs.

Pretending to measure the impacts on the French economy is also a bit presumptuous. We will try to classify four types of issues:

  • industrial issues;
  • issues relating to agricultural production and trade on the markets;
  • stakes in terms of consumption and well-being;
  • finally, stakes in terms of valued collective resources.

We will therefore “mirror” these different facets of the analysis, in particular around three fundamental themes: the constitution of the surplus and its distribution, the effects of a shock on demand, the underlying agricultural model and the cost of regulation.

The constitution of the surplus and its distribution

1.) From which data to work?

The absence of commercial cultivation of GMOs currently in France leads to a lot of circumspection regarding the measurement of impacts. This requires a detour to countries where culture is effective. One of the challenges is to appreciate the gap between the potential of an innovation and the results observed, a gap linked to the concrete conditions of culture, to the behavior of actors in production and consumption situations. We therefore need this comparative reality test and, at the same time, we must avoid any abusive extrapolation.

Analysis of the recorded results, conducted using data from the United States and Canada focused on four plants ( soy , corn , canola, cotton ) and two characters ( resistance to insects and tolerance to herbicides total), this set constituting 99% of currently grown PGM.

The study of the French situation took into account these elements, without hasty transposition; it relied on the results of the experimental platforms of the technical institutes concerned and on simulations. She also referred to a number of surveys and experimental studies on consumption.

2.)  What is the record at the farm level?

The agricultural model in which GMOs participate values ​​a certain number of objectives and evaluation criteria: yields per hectare, factor productivity, use of inputs considered in monetary terms, safety, time saving. It is first at this level that we located the analysis.

In the report, rather than accrediting this or that partial study, we focused on answering two central questions: why did the surface area of ​​GM crops grown on the North American continent reach 64 million? hectares, which is six times the French area of ​​arable crops?

Although the results appear variable according to the authors, the study methods used and the regions concerned, it can be argued that:

  • yield gains are quite cyclical, even sometimes negative, and only occur if the reference situation is strongly disturbed (strong attack of insects, weed control difficulties);
  • savings in phytosanitary products, especially herbicides, appear in monetary terms much more systematic and consistent, even if the increase in the price of seeds absorbs part of the sums saved;
  • Finally, the simplification and greater flexibility of agricultural practices permitted by the use of GMPs, in particular those resistant to total herbicides (direct seeding, post-emergence weed control …), seem to have been a powerful factor of adoption.

In the French case, we find, particularly for rapeseed and beet, the importance of the “herbicide saving” factor, which can reduce the amount of this expenditure by 30 to 50%, and the very secondary nature of performance. The issue of simplification of agricultural practices is more difficult to anticipate, but rates of significant adoption of these GMPs are conceivable, maize remaining significantly behind.

The heterogeneity of the technical results (according to the plants and the genetically modified characteristics, according to the regions, according to the criteria of appreciation) and the importance of the price variables and the behaviors of the producers (to pass from the potential of such a technology to real) explain diffusion rates very disparate on the territory and augur of contrasting economic results.

3.)  Do GMOs generate an overall income supplement and how is it distributed?

The study of the evolution of the surplus created by the use of GMPs has drawn on empirical results and various simulations. It shows that in the case of fixed prices of harvests (and therefore no price gain for consumers), a significant part of the farmers’ gains would be transferred to the input suppliers, these transfers being quite variable according to the crops (approximately 50% for US cotton, rapeseed and beetroot in France, much more for maize in the United States and France). In addition, there is a strong transfer between the phytosanitary sector and the seed sector.

Compared to this simple situation, if we introduce a possible decline in agricultural prices linked to the increase in factor productivity, this decline can absorb the entire gain and transfer it to consumers.

In total, the collective surplus linked to the introduction of so-called “first generation” GMOs seems limited – when it exists – and the significant redistribution within these narrow margins.

Controversy or the effects of a shock on demand

1.)  How to measure the impact of the controversy on the economic record of this innovation?

The public debate that has developed in Europe since 1996 has progressively led the various food chain operators to pay much more attention to consumer-consumer expectations than to the proposals of innovators. The lack of tangible benefits of current GMPs for consumers (unlike biomedical applications) has indeed played an important role in the observed reluctance. Distributors, transformers, then agricultural producers and now seed companies and research organizations have reviewed their strategies, which has resulted in large-scale industrial restructuring; the insurers’ prudence and the already real possibilities of legal action reinforce them in this attitude. The industrial front broke out during the controversy.

The controversy profoundly modifies the economic balance sheet of this innovation from two points of view: the terms of the global economic balance sheet considered from a few aggregated variables (price, incomes of the actors, collective gain) change; we are in the presence of a shock on the demand, price of the uncertainty on the quality. In addition, an analysis in terms of collective well-being justifies widening the criteria to be considered and looking at production processes to take into account externalities.

2.)  What vision do operators have of this innovation for the years to come?

The future GMOs obviously do not have the same importance for the various actors according to whether this innovation touches the heart of their business, represents an opportunity or allows to release a competitive advantage (in favor or against the innovation) ; the industrial stakes (in terms of profitability, jobs or competitiveness) are also very disparate.

For research, the use of these methods will be an extremely useful tool to improve the understanding of the functioning of plants.

For seed companies, choice is crucial, since biotechnologies offer new and diversified tools for varietal creation and are likely to create strong differences in competitiveness between firms depending on the strategies chosen.

For the agronomists, this new potential could make it possible to tackle more effectively the problems of pest control , reduction of environmental impacts or adaptation to difficult conditions. This eventuality should not be considered as an alternative but as a component that can be integrated into strategies combining various approaches.

For the agrifood industries, if the possible objectives are not lacking, whether to modify the properties of the raw materials or those of the finished products, these technologies do not appear unavoidable.

For the distributors, the competitive strategy, attentive to the movements of opinion, could have integrated GMOs; she will be able tomorrow to take them into account; the fact is that, in recent years, most of the major European groups have built their commercial arguments on the ban on GMOs.

Finally, non-food issues, whether contributing to more efficient and sustainable production of bioenergy or biomaterials or the production of molecules of pharmaceutical interest, are undoubtedly important but are not devoid of criticism. potential.

Obviously, the foregoing arguments must be weighted by the respective weight, the power of the various operators within the sector: the turnaround of food manufacturers, following the distributors, was, we said, a very powerful brake on the spread of GMOs in Europe.

3.)  Do you have to pay for innovation and how?

This subject has crystallized the critics. To wonder about the forms of protection of innovation leads to distinguishing the question of ends and that of modalities.

In terms of aims, the report recalls that recognition of the principle of protection of intellectual property is an essential condition for the investment of private firms in these areas of innovation.

In terms of modalities, the question of whether the patent in its different forms (American or European) is, for the creation of plant varieties, the best tool to stimulate innovation and equitably reward all those who have contributed to it, deserve a further critical review. The modalities of its use by public research should be clarified.

Beyond the principles, the distribution of the surplus made in a production situation seems to indicate significant redistributions. As for the promises of rapid return on investment, they have emerged as the condition for a sustainable commitment by firms, financial markets giving the signal for retirement in case of default.

What options for public action?

1.)  A transient crisis?

The public debate around GMOs can not be considered as a temporary and localized crisis of neophobia or even irrationalism. On the contrary, it must be read as carrying substantive questions on the management of innovation, questions that must be answered, except to risk the same crises from period to period.

GMOs have been introduced according to the usual model of diffusion of agricultural innovation based on the cooperation of a small number of actors: technical institutes, agricultural professional associations, public research establishments, agricultural administration, industrialists. Controversy has shattered this orderly device.

Three “models” of diffusion of the innovation are in fact today in competition:

  • the “corporatist standard” model;
  • a “liberal secure” model: we put on the market evaluated products leaving the care to the individual operators to make the arbitrations;
  • a deliberative “regulated” model: multi-criteria evaluation, deliberation, decision committing the community.

These developments are in fact very destabilizing for innovators: in the standard model , the presumption of interest of the innovation for operators considered as important or dominant in the game is a sufficient reason for introduction.

Introducing a much broader evaluation and having to debate it in front of public opinion alters the situation considerably:

  • the interests considered are no longer necessarily those of the dominant or deemed strategic players: we can not invoke the only competitiveness to win the decision; other actors in the sector have equally valid economic arguments to make;
  • externalities must be taken into account from the outset;
  • health and environmental risks are re-evaluated when considering the interest of the global society.

2.)  Is the hypothesis of segregation economically realistic?

If some consumers are reluctant to set up separate channels, the cost of this organization can, in turn, absorb a significant portion of the savings and result in a much more diffuse and uncertain distribution of gains and losses. along the die.

We therefore sought to refine the reflection on the precise content of the notion of segregation proposed in France and to analyze its future. On this point, the report considers that “marginal” segregations, leading either to eliminate GMO crops in fact (the case of maize), or to organize a “non-GMO niche” in a market heavily invested by GMOs (soya), can actually be built between operators at moderate costs. On the other hand, the setting up of mixed situations, in which both types of production would represent volumessignificant, will undoubtedly require a strong involvement of the public power to organize it effectively, non-adversely and at non-prohibitive and equitably distributed costs. This public action could be supported by the trend of differentiation that manifests itself in certain sectors of crop plants – or commodities ( cereals , oilseeds, etc.) – but presumably, in order to be sustainable, will require that GMOs concerned have a character that justifies segregation to end-users. In the opposite case, it is likely that for a given production and in a given region, only one of the two production modes, conventional or GMO, will remain in the long term.

In addition, in an open international system, segregation may lead to at least partial relocation of non-GMO products, as in the case of organic products , unless they are linked to the terroir. considerations similar to those of the appellations of origin controlled (AOC), which would be quite new for conveniences.

3.)  Which option concerning GMOs for which agricultural policy?

The report has examined in broad terms the compatibility between the various possible developments in European agricultural policy and the possible options for GMOs, from banalisation to ban.

These options fit into wider choices that concern the European agriculture model.
We have grossly identified three extreme trajectories for the evolution of the Common Agricultural Policy ( CAP ):

  • continuity, with a quest for price competitiveness on the major agricultural markets, the maintenance of an export ambition for commodities and support mechanisms for these exports;
  • the reorientation towards support for a multifunctional agriculture, through a decoupling of aid in relation to volumes produced and a policy highlighting the cultural or environmental issues of agriculture. In this case, Europe is confined to feeding its domestic market, with a penetration rate of imported products dependent on the maintenance of Community preference systems;
  • the disengagement, with a considerable reduction of the support of all kinds to agriculture (related or not to the volumes produced) and correlatively a great opening of the food markets. This would of course result in a significant reduction of agricultural activities in the European Union, but major restructuring (concentration of holdings) could enable some farmers in the enlarged Europe to compete in a competitive manner in world markets.

By combining these developments with the possible strategies for GMOs, we were able to indicate in the report:

  • whereas the continuity scenario is unlikely to be compatible with a total ban on GMOs for production in Europe, which could eventually widen the competitiveness gap between the European Union and its competitors in the markets;
  • that the reorientation, if it is necessary, will certainly be the result of a political and social will unfavorable to trivialization and promoting traceability and, at least, segregation;
  • that a policy of disengagement and opening up of the internal markets (but also of competitiveness of certain farmers) appears contradictory with the implementation of prohibition measures, which can have a non-negligible cost in terms of well-being. .

Organized segregation is today the most adaptive strategy in relation to uncertainties about the evolution of agricultural policy. This is the main reason that led us in the report to preserve this option, compared to a pure and simple ban. Costly, complicated to implement, segregation, considered in itself and in isolation, appears as a place of ephemeral convergence between the actors. It makes sense only in a larger whole, which values ​​the notion of reversibility in the presence of uncertainties, of the technology in question and of agricultural policy. For these reasons, therefore, it is not an option to keep indefinitely.

In the same way as an analysis of the health or environmental risks, we will constantly need an update of the economic expertise to judge the costs and the benefits that attach to the various options of the public action: the promotion innovation or its banishment, the implementation of a specific regulatory action or the respect of the principles of freedom of trade.

Dr. Kanika Singla

Ph.D., IARI Postdoctoral Scholar, UC Berkeley

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