The International Consortium on Agricultural Biotechnology Research (ICABR)



GMOs, Trade Policy, and Welfare in Rich and Poor Countries


Chantal Nielsen, Danish Institute of Agricultural and Fisheries Economics and University of Copenhagen, Denmark.
Kym Anderson, Centre for International Economic Studies, University of Adelaide, Australia and Centre for Economic Policy Research, London.





Virtually all new technologies, even when they unambiguously benefit the vast majority of society, are opposed by at least a few people. The new agricultural biotechnologies that are generating genetically modified organisms (GMOs), however, are attracting an exceptionally large degree of opposition to their production and trade. Both environmental and food safety concerns have been raised by opponents to the development of transgenic or genetically modified crops. The vast majority apparently want at least to have labels on products that may contain GMOs, while the most extreme of them (particularly in Western Europe) want to see GM crops totally excluded from production and consumption in their country. This extreme view contrasts with the more relaxed attitude towards the use of GMOs in pharmaceuticals, and swamps discussions of the positive attributes of the new technology.

The right for a country to set its own environmental and food safety regulations at the national level is provided for in Article XX of the GATT. But members of WTO have trade obligations under other GATT Articles (MFN, national treatment, customs transparency), and under other WTO agreements (most notably the SPS and TBT Agreements) that restrict the extent to which trade measures can be used against GMOs without risking a case coming before the WTO's Dispute Settlement Understanding (DSU).

This paper first examines the ways in which the emergence of GMOs could raise difficulties and potentially DSU disputes in the WTO, notwithstanding the newly agreed Biosafety Protocol. A major point of contention could be the requirement that scientific justification is needed under the SPS Agreement to justify a trade restriction, since many in Europe argue that the precautionary principle should operate where there is uncertainty as to the effects on health and/or the environment.

The paper then uses an empirical model of the global economy (the GTAP model) to examine what the effects of some (non-European) countries adopting the new GMO technology might be without and then with some policy responses. Specifically, the effects of an assumed degree of productivity growth in selected countries for maize and soybean are explored, and those results are then compared with what they would be if Western Europe chose to ban consumption and hence imports of those products from countries adopting GM technology.

GMO-driven rice and cotton productivity growth in selected countries also is explored empirically. In these cases there is less likelihood of import bans being imposed. But it is of interest to know how much greater and how differently distributed the welfare gains from the new GMO technology would be if the huge distortions to agricultural and textile markets were absent. Hence calculations showing that arereported as well.

The final section of the paper discusses the areas where future analytical work of this sort might focus. One obvious improvement would be to explore the effects of GM labelling in lieu of import bans. That is very much more complex in practice, and also to model, as it involves segregating product groups (both primary and processed) into GM-free and GM-inclusive sets within each country.



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