Genome Editing, R&D, and Heterogeneous Regulatory Regimes: Implications for Innovation and Agricultural Trade
July 2024 [24-WP 662]
John C. Beghin, Patrice This, Keithly JonesSuggested citation:
Beghin, J.C., P. This, and K. Jones. 2024. "Genome Editing, R&D, and Heterogeneous Regulatory Regimes: Implications for Innovation and Agricultural Trade." Working paper 24-WP 662. Center for Agricultural and Rural Development, Iowa State University.
Abstract
We provide an economic analysis comparing the Research and Development (R&D) cost of innovations based on genome-editing techniques with SDN1 and SDN2 alterations under two alternative regulatory regimes (GMO or conventional hybrid) using a discounted present value approach, including the cost of delays and for three case studies. The three cases rely on most recent cost information from experts opinion, summary data of R&D expenditure from dominant global biotechnology companies, and current research on grape genetics from INRAE in France. Despite the great heterogeneity of R&D cost across these three case studies, we find that GMO regulated R&D faces higher costs than under conventional-hybrid regulation. However, the range of relative costs of approvals between the two regulatory regimes is much smaller. The cost of GenEd R&D under GMO regulatory approval relative to that of being under conventional-hybrid regulation makes it 63% to 76% more expensive. This occurs despite the different commodities considered, their different industry organization and funding model of the R&D process. We further estimate the breakeven value of annual benefit from the innovation under the two regulatory regimes. A wide range is obtained across the three cases. Yet, the ratios of breakeven values under the alternative regulatory regimes (GMO v conventional-hybrid) exhibit a narrow range from 2.48 to 2.76 for the three cases. Required revenues to break even more than double under the GMO-like regulation. We draw some implications for the rate of innovation and international trade.