Designing India’s new GM regulatory system from first principles
In a previous article, I showed why India’s GM regulatory system needs a complete overhaul. In particular, the precautionary principle must be rejected and elements of the American model considered.
But even the American approach is excessive, given the safety evidence of the past thirty years. And in 2016 the USA badly regressed by enacting laws to require foods with GM ingredients to be labelled. Such laws are unjustified, as I demonstrate below.
The first step in any policy question is to always adopt the no-government stance. Our default position must be that free peoples, in their free interactions, must remain free to engage in trade and barter in any way they wish unless in doing so (a) they cause serious (proven, physical) harms, and (b) the government can reduce these harms through actions the benefits of which exceed costs.
This is the standard policy-making approach in the developed West (by which I mean the USA and Anglo-Saxon countries, and a few others like Singapore and Hong Kong), based on ideas of a cost-benefit test first popularized by Benjamin Franklin, later extrapolated to the entire society by Jeremy Bentham, and institutionalised by Ronald Reagan in 1980.
On the other hand, the default position in the undeveloped West (which includes most European nations and all socialist nations) is to impose regulation regardless of costs. This approach originated from Rousseau’s 1762 Social Contract under which the State represents the “general will”. “Rulers” of these societies imagine they are sovereign and their whim represents the people’s will. That is antithetical to the Anglo-Saxon position that people are sovereign and the government is our servant. Further, these European and socialist societies believe in positive liberty (rights to material claims) and reject negative liberty (right to equal treatment under the law) which underpins the Anglo-Saxon nations.
Ambedkar was a powerful student of the Anglo-Saxon tradition and drafted a rights-based constitution but Nehru’s socialist goals and Sardar Patel’s support for the colonial bureaucracy (which loves nothing more than power over the people) have made us a socialist nation. We did not adopt the Reagan cost-benefit requirement. Instead, our policies are dictated by hacks from the United Nations who come from the socialist (European) tradition. All policies in India, therefore, fail the most basic cost-benefit test.
The Government of India has admitted in Parliament that GM crops cause no harm but continues, nevertheless, to impose a massive regulatory regime copied from statist Europe. This regime imposes huge costs on society without any benefits whatsoever – a disaster for farmers and consumers.
Our party is committed to the rigorous cost-benefit analysis of all government interventions. In the GM market the cost-benefit test will need to begin by asking: what precisely is the market failure?
First, we can rule out entirely any public health justification for intervention in the GM market.
Second, there is no information asymmetry. Early research papers on GM regulation (in the 1980s and 1990s) argued that producers might know more about a particular GM crop than consumers. But it turns out that there was nothing to hide. Proofs from thirty years of commercialised crops confirm that the producers were right in claiming these crops to be safe.
The incentives in the system also preclude moral hazard arising from information asymmetry. Scientists and company employees are themselves consumers of GM crops. They will not want to release a seed unless they are satisfied with its characteristics. There are also strong reputational incentives to not put out any unsafe product. To the contrary, if the market is left free, there will be strong incentives for companies to publish their safety research to signal that they are “good citizens”. Finally, ongoing agricultural research will publish its own studies. So there can never be anything to hide.
At most, the government could consider a co-regulatory approach by which the industry agrees to a research and publication standard. Such standards can be based on existing approaches without requiring regulators to dabble their nose into any stage of the research.
Third, is there a market structure issue? Are GM seed producers so dominant that they charge an undue premium?
The cost of developing GM seeds is basically quite low, and with CRISPER it will get even lower. That means more companies should be able to enter the market. But regulatory approval costs are exceptionally high. It is possible that the large companies themselves would want heavy-handed regulation to block agile and innovative competitors. The intellectual property rights (IPR) regime is also undoubtedly excessive – because it has to take account of the high regulatory approval costs.
Given these perverse incentives, the real problem could well be the risk of regulatory capture and corruption. The elimination of regulatory licensing would significantly improve market structure. The IPR regime could then be drastically curtailed, thus reducing prices dramatically.
Fourth, what about externalities in which GM crops infiltrate non-GM crops through bees or the wind? This problem can be solved in two ways: through better allocation of property rights (which will allow contracting among affected parties) or through light-handed regulation of refugia.
Finally, is it necessary to label GM foods? Obviously, there is no public health justification. Instead, as the economist, Cass Sunstein wrote, “GMO labels might well lead people to think that the relevant foods are harmful and thus affirmatively mislead them.”
And so, the USDA’s mandatory requirement that all foods in the USA containing GM products be labelled as “Derived from Bioengineering” by 1 January 2022 is really bad policy. It indicates that the USDA has been captured by Europe-leaning socialists and anti-science organic food lobby groups. Such a labelling requirement fail the basic cost-benefit test. President Trump must ask the USDA to revert to the policy standards established by Reagan.
Hong Kong, the country Milton Friedman praised most for its good policies and freedoms, has been the beacon for good GM policy with a voluntary labelling regime in place since 2006. Australia had copied the Europeans with a mandatory GM labelling regime since 2001, but is now mending its socialist ways after its Productivity Commission rejected this approach in its 2016 report.
In fact, the markets have worked out a solution – to put a “non-GMO” label. If rich and ignorant consumers want to pay more for the fictitious benefits of such products, we should let them do so. Ultimately, the markets for such meaningless labels will die out.
In sum, India’s new “regulatory” model would be co-regulatory with publication requirements on research that underpins the release of seeds, almost no IPR protections, some refugia requirements and no licensing or labelling requirements.
DISCLAIMER : Views expressed above are the author’s own.