GMO’s, trade policy, and welfare in rich and poor countries

Abstract

The new agricultural biotechnologies that are generating genetically modified organisms (GMOs) are seen as exciting and valuable developments by some people, while others are objecting strongly to their use. Both environmental and food safety concerns have been raised by opponents of GM crops. That in turn is causing consumers and policy makers in numerous countries around the world to react and in some cases to over-react. A majority of people want at least to have labels on products that may contain GMOs, while the most extreme opponents (particularly in Western Europe) want to see GM crops totally excluded from production and consumption in their country. This paper first examines the ways in which the emergence of GMOs is generating policy reactions which, in extreme cases, may lead to trade disputes in the WTO. It then uses an empirical model of the global economy (the GTAP model) to quantify the effects on global production and trade patterns and national welfare of certain (non-European) countries adopting the new GMO technology in the context of different policy reactions in Western Europe. Specifically, the effects of an assumed degree of productivity growth in the maize and soybean sectors in selected countries are explored, and those results are the