The Effects of Biotechnology Policy on Trade and Growth

Despite the clear influence of European Union biotechnology restrictions on trade patterns, very little work has been done to model these influences or their long-run effects. This paper presents an economic trade theory model of biotechnology, biotechnology research and development (R&D), and biotechnology regulation. The model analyzes the impact of European Union consumer preferences on production and consumption of biotechnology products, the level and national origin of biotechnology R&D, trade patterns, and growth. The results indicate that developing countries may become the major producers of biotechnology agricultural products if they can establish the necessary legal infrastructure; and that European biotechnology regulations effectively act as a capital subsidy to developing countries.