The Economic Impacts of Regulatory Delays on Trade and Innovation

A nation's regulatory apparatus and decisions can have effects that reach far beyond its borders. We examine how regulatory decisions and their timing, as transmitted through trade relationships, can affect innovation. By changing the temporal path of biotechnology innovations and their adoption, regulatory asynchronies can have profound effects on social welfare. We use a global partial equilibrium model of world agricultural markets to examine the trade and welfare effects of delayed adoption of new biotech crop varieties due to the timing of regulatory decisions. We,find that a three-year delay in the adoption of new biotech crop varieties significantly decreases overall welfare in agricultural markets and also results in a substantial redistribution of economic surplus from consumers to producers. We additionally find that consumers in major importing countries, where the regulatory decisions in question characteristically originate, pay a particularly high price in terms of foregone benefits.