The International Consortium on Agricultural Biotechnology Research (ICABR)

Non technical abstract

 

Regulations and Market

 Segmentation of Biotech Crops: 

Implications for


Agricultural Trade 1

Aziz Elbehri

Economic Research Service, USDA

 

Agricultural biotechnology is increasingly recognized as a major potential source of technical change and productivity growth in agriculture. However,considerable variation has emerged between countries in consumers’ attitudes toward agricultural biotechnology. In response, many countries, particularly in Europe and Japan have introduced regulations specific to bio-engineered products. The private sector also responded by initiating product segregation through private labeling and certification. Thus, demand-driven market segmentation has emerged and it has the potential to transform commodity trade patterns and create additional uncertainty in world food and agricultural markets.

In this paper, we thorough examine how the current biotech policies in the E.U., Japan, and the U.S. are influencing biotech market segmentation, and how the food industry in Europe and Japan is responding to both government policies and consumers differentiated demand.

The European Union and Japan are two large markets where the demand-driven market segmentation processes are strongest. Both the EU and Japan have introduced mandatory labeling on selected food products derived from bio-engineered corn and soybeans. However, there are significant differences in the two countries’ approach to biotechnology. Japan has approved most commercialized biotech-derived crops and products, while the EU continues to maintain a moratorium on biotech approval since 1997. Also the EU has set de minimis threshold for food labeling at 1 percent while Japan require 5 percent. By comparison, the US regulatory approach to biotech-derived products follows the same procedure as for non-biotech products. The substantial equivalency is the guiding principle for risk assessment of new

products while labeling is required only in cases of allergenicity or if the biotech-derived products is compositionally different from the conventional counterpart.

The divergent biotech policies have different implications for market developments and segmentation both in domestic and foreign markets. In the area of biotech labeling, the stated claim in the EU and Japan is to provide consumer’s choice; however, in practice mandatory labeling may have resulted in just the opposite effect. The private firms responses to these

labeling regulations in food products has been to avoid labeling all together and, therefore, avoid biotech-based products whenever feasible. From consumer welfare perspective this seems to be

a sub-optimal outcome since consumers’ choice has narrowed. The practical consequence has been the setting in motion of a market segmentation process in products derived from bio-engineered crops.


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