Pure Economic Loss and Agricultural Biotechnology: Comparing Australia, Canada and the Unites States

Social responses to innovations have varied across time. Regulations have been used in an attempt to limit the uptake of innovations (e.g. coffee), violence has been used (e.g. Luddites), experts have tried to convince individuals that an innovation is dangerous to their health (e.g. train travel) and courts have been used to attempt to control or reduce the market share of an innovation (e.g. Microsoft). In the case of agricultural biotechnology, all of these responses have been employed to varying degrees of success: regulations have been put in place in numerous countries that ban the production of genetically modified (GM) crops; violence has been a tool of NGOs opposed to GM crops as they have destroyed field trials; experts have argued in select instances that the consumption of food products derived from GM crops are dangerous to human health; and those opposed to GM crops in the United States are using the courts to seek injunctions against commercial release of new GM varieties and to argue that regulatory protocols were not properly followed. The most common responses by far, and the focus of this paper, is the employment of regulations and the use of courts. The concept of economic loss in relation to innovation posits that those negatively impacted by the innovation of GM crops are entitled to compensation that offsets the externality. For example, Denmark has established a compensation fund that taxes GM crop adopters, creating a revenue pool to compensate those farmers adversely impacted by the adoption of GM crops in Denmark. In undertaking a thorough assessment of applying economic loss to GM crops, this paper will evaluate the efficiencies of having compensation funded via government efforts versus the use of the court system. The paper will compare and contrast the situation in Australia, Canada and the United States.