Some Firms Seek Regulation to Squeeze Out Their Rivals

Some Firms Seek Regulation to Squeeze Out Their Rivals

Conko and Miller Op-ed in Investor's Business Daily
May 28, 2004

VIEWPONT America learned long ago that what's good for General Motors isn't necessarily good for the country. This axiom applies equally to the biotechnology industry, which has lobbied for - and gotten - stultifying regulation that constrains R&D, inflates prices, and deprives consumers of new agricultural and food products. Long before the first gene-spliced plants were ready for commercialization, a few agrochemical and biotechnology companies, led by Monsanto and Calgene, approached policy-makers in the administration of President Reagan and requested that the EPA, USDA, and FDA create a regulatory framework specific to gene-spliced products. The policies recommended by the industry, that were predicated on the myth that there's something fundamentally novel and worrisome about gene-splicing techniques, were far more restrictive than could be justified on scientific grounds. Often they were even more burdensome than those proposed by regulators. Looking For Protection Ostensibly, the goal of these policies was to placate anti-biotech activists and provide reassurance to consumers that government regulators had evaluated and cleared gene-spliced products, but the real motives were less benign.  The companies wanted excessive regulatory requirements to make biotech R&D too expensive for possible competitors such as startups and seed companies; in other words, regulatory expenses and delays would serve as a market-entry barrier. This is not a new phenomenon.  In the 18th century, the patron saint of capitalism, Adam Smith, was wary of the motives of some capitalists. Acutely aware of the potential conflict between self-interest and the public interest, he warned that any policy advocated by businessmen should be viewed with the greatest suspicion and that, seeking unfair advantage, businesses often urge the government to interfere with free markets. Past examples include tariffs on steel and limits on imports of Japanese automobiles, lending support to Smith's observation, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." The over-regulation sought by the big agribusiness/biotech companies in the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />U.S. and abroad also served to placate the packaged food industry. Food companies see great potential value in gene-spliced food crops, but cognizant of anti-biotech consumer sentiment in Europe, they are willing to pay a high price to obtain what would amount to a federal government endorsement - although conventional products neither need nor receive any such stamp of approval. Because competition in the food industry is intense and profit margins are very small, individual companies and their trade associations fear the effects of anti-biotechnology activism and its resulting negative publicity. In the end, these companies, too, supported stultifying regulation in order to pre-empt activists' condemnation of foods that contain gene-spliced ingredients. The USDA and EPA were glad to oblige industry, with draconian new policies that focused specifically on and discriminated against plants and microorganisms crafted with gene-splicing techniques. As a result, performing a field trial with a gene-spliced organism today costs 10 to 20 times as much as the same trial with a plant that has virtually identical traits, but has been modified with less precise and predictable conventional techniques. Didn't Work Out This strategy of the biotechnology and packaged food industries has backfired horribly. Unrealistic and unnecessary regulatory requirements have created the foundation for various kinds of pseudo-crises that are precipitated whenever the inevitable but inconsequential transgressions of the overly stringent rules occur, and also for a variety of non-events that, nevertheless, have been public relations debacles: For example, the alleged killing of Monarch butterflies by pollen from gene-spliced corn, and supposed "contamination" of native corn varieties in Mexico. All of this has given rise to a disastrous domino effect. Earlier this month, Monsanto announced that it was shelving plans to sell a gene-spliced wheat variety, attributing the decision to changed market conditions. However, that decision was forced upon the company by the reluctance of farmers to plant the variety and of food processors to use it as an ingredient, factors that are directly related to the over-regulation of the new biotechnology in important export markets. Monsanto also announced this month that it has abandoned plans to introduce its gene-spliced canola into Australia, after consumer skepticism and environmental concerns led individual Australian states to effectively ban field trials and eventual commercialization. Other companies have acknowledged giving up plans to work on certain applications of the technology because of excessive regulations.  After receiving tentative approval from the British government for a gene-spliced variety of corn, Bayer CropScience decided not to sell it because additional regulatory hurdles would delay commercialization for several more years. The anti-biotech activists have been right about one thing: the ag-biotech industry did create a Frankenstein's monster - a regulatory one of its own making.