Over-regulation Kills Innovation

European regulation has driven innovation away for 20 years

In 2003, the European Union (EU) revised its functioning risk assessment system for GM crops. Dating back to the mid-1990s, EU Member States had competently managed their own GM crop field trials and risk assessments, with approval of GM corn in Portugal and Spain. With political propaganda from eNGOs increasing, the EU was under environmental pressure to find a way to ensure the regulatory system could be revised to ensure no future GM crops were commercialized. The solution devised was to decouple the risk assessment process for GM crop varieties, from the variety approval process. In 2003, the European Food Safety Authority (EFSA) was established to undertake risk assessments of new GM crop varieties for all Member States. Since its inception, EFSA has consistently delivered rulings showing no difference in risks from GM crops as compared to non-GM crops, recommending GM crops be approved for commercial production. EFSA’s use of science to determine risk has always been in opposition to the politically-based variety approval process.

While the assessment of the potential risk of a new GM crop variety is scientifically determined by EFSA, the approval of new crop varieties resides with a committee of the European Commission. The mandate for variety approval lies with the Standing Committee on the Food Chain and approval for a new GM variety, requires a ‘super majority’ whereby 55% of the EU Member States containing 65% of the total EU population have to vote to support approval. Allocating variety approval decisions to the politically-based Standing Committee on the Food Chain, has become an efficient means of killing crop innovation in Europe as I see it. This approval process based on political clout rather than EFSA’s scientific assessments has approved only a single GM crop variety for production in the EU since 2003. This was a GM potato variety that required 13 years to receive approval, with the developer, BASF, announcing it was relocating all of its agbiotech-related research to other jurisdictions more favourable to biotech innovation. The GM potato was grown on a small number of acres for 2 years, before being withdrawn due to regulatory delays, resulting in the GM variety not being competitive with current varieties.

The exclusivity of a rich EU

While the regulation of GM crops has been particularly draconian, the regulation on chemicals has been equally harsh. Not only has the EU been extremely exclusive in what types of crops can be grown, in 2006 new chemical regulations were passed which furthered the exclusivity of EU crop production and sales, resulting in EU farmers being less competitive. A 2013 report by Phillips McDougall highlights just how significant the R&D crop protection product losses have been. Comparing the cost to bring a new chemical active ingredient to market between 1995 and 2005 found a research cost increase of 18%, yet a development cost increase of a staggering 118%. Development costs are classified as the risk assessment studies that need to be conducted to receive registration and approval for use. The total cost to bring a new active ingredient to market in 1995 was $152 million, compared to $256 million in 2005.

Demand for chemical crop protection products rose by 6% per year between 2002 and 2012, indicating a strong level of demand. Despite the rising demand, the increased regulatory burden is contributing to the shrinking chemical industry in the EU. Between 1995 and 2012, the number of firms involved in the development of new chemical active ingredients was halved, dropping from 8 to 4. During the 1990s, 40 new chemical active ingredients were either approved or in development in the EU, compared to just 12 for the period from 2005-2014. Fewer chemical weed control options cause environmental concerns as frequent use of the same chemical for weed control contributes to the development of chemical resistance in weeds.

Lost innovation lead to lost EU investments

Comparing the innovation investment in new active ingredient chemical R&D, the EU accounted for one-third of global investments in the 1980s, which has dropped to a mere 7.7% between 2005-2014. Based on this reduction, the EU has lost nearly $250 million in R&D investment, when the period of 2005-2014 is compared to the 1990-1999 period. A total of $766 million was invested in the period of 1990-1999, compared to $520 million between 2005-2014. The economic losses in terms of EU GDP growth and jobs are substantial.

For innovation to flourish, regulations need to be risk proportionate, that is the level of regulation needs to correspond to the level of risk. The riskier a product or technology, the more regulation that may be required to ensure public and environmental safety. The EU’s risk assessment process is at odds with other leading agricultural producing nations, such as Argentina, Australia, Brazil, Canada and the USA. Products and technologies that are available to farmers in these countries are not available to farmers in the EU. Regrettably, the EU has moved to a risk aversion regulatory framework, whereby even the most infinitesimal degree of risk is required to be politically avoided at all costs. The EU regulatory system is presently designed to provide Europeans with the false reality that zero risk is an economically attainable outcome for products, regardless of the economic costs this creates.

With reduced investment into the development of both new chemicals and new crop varieties, the EU is well on its way to restricting access to innovations available to farmers in other countries, resulting in EU farmers being less competitive. This puts upward pressure on commodity prices in developing countries, making food security improvements even more challenging. Were the EU to return to science-based regulation, it could commercialize innovative crop varieties that would contribute to Europe being capable of ensuring its farmers are competitive with farmers in other countries. Instead, it shuns innovation. In short, the EU’s regulatory burden is in direct opposition to global efforts to reduce food insecurity.