This story briefly reports an interesting investigation of the consequences of a trade ban on GMO products for eonomic welfare globally and in different regions of the world. The results contain some surprises: the biggest losers from banning GMOs are the countries that maintain the ban. The bans do appear, incidentally, to offer some advantage to developing country regions - such as Sub-Saharan Africa - were GMOs have not been adopted. But the size of these 'benefits' is so small compared to the global benefits of free trade that the rest of the world could easily afford to compensate the 'losing' regions and still be better off than with trade restrictions.
More than one third of all US maize (corn) and more than half of all US soybean production is based on genetially modified varieties. Only a very small proportion of these crops can be 'segregated' from non-GMO crops for e.g. the purposes of labelling. Under the Cartegena BioSecurity Protocol, this would require most US exports of these products to be labelled: "may contain GMOs".
The table summarizes results from an economic experiment that compared the impact of GMO restrictions on the key traded products grown with GMOs -- maize and soybeans.
(*) EU bans imports of food that 'may contain GMO'
(**) No import restrictions, but 25% of EU consumers choose not to buy grains or oilseeds that 'may contain GMOs' from any source
Source: "GMO's, Trade Policy and Welfare...", Nielsen and Anderson
Three 'scenarios' are presented in this experiment. The experiment assumes an approximate 5% productivity boost from the use of the modified varieties and considers the impact on world trade and prices.
The first scenario assumes that GMO maize and soybean crops are widely planted -- but not in the EU or Sub-Saharan Africa -- and traded. There are widespread benefits (an increase in consumer welfare or 'buying power') due to increased grains and oilseeds production. World prices drop (by about 4 - 4.5%) as a result of the increased volumes (competition) on world markets benefitting consumers in importing countries. This worsens the terms-of-trade for exporting countries, but still leaves them with benefits from the production boost. This scenario shows that developing countries as a group secure about half the gains, with those adopting the new technologiesg gaining most. Sub-Saharan Africa, which is assumed not to implement the new technologies, sees no expansion of production but loses in this scenario as prices fall and other suppliers displace its exports to Europe.
A Western European ban on imports in the second scenario results in dramatically different results. Both exports and production in North America fall (oilseed exports by almsot 30% and a somewhat smaller amount for grains). The exclusion of other competitors from the EU market, however, sees gains by Sub-Saharan Africa which is assumed not to adopt the new technology. African access to the EU market is dampened by an increase in the EU's own production of oil-seeds (and to a small extent, cereals) to replace import supplies but the prices it receives for its exports to the EU is boosted. The higher prices for grains and oilseeds needed to bring about an increase in EU production reduces aggregate welfare in Europe (by $4.3billion per year), with the price effect 'cascading' through the animal-feed industry into livestock and processing industries.
Two-thirds of the fall in global welfare between Senario 1 and Senario 2 is due to the domestic impacts in Europe of its bans on GM imports.
In the third scenario it is assumed that there is no import ban but that some Western European consumers have a strong bias against genetically modified crops. Given the essentially incomplete information embodied in the _May contain GMOs_ label these consumers are assumed to shift their demand away from imported cereal grains and oilseeds in general, not only from declared GMO-producing regions.
The results are similar to those in Scenario 1. The major difference is that the economic inefficiencies introduced in Western Europe as the result of a government ban on imports (the misallocation of resources, due to protection, to higher levels of domestic production of oilseeds and grains) disappear. The exercise of a consumer preference (assumed to be a 25% shift away from imported grains and oilseeds) has much less impact on domestic or global welafare although GMO-free Sub-Saharan Africa cannot benefit from the same 'preferred' access as in the case where GMOs were banned completeley. Sub-Saharan Africa suffers a terms-of-trade loss which is not offset by the additional productivity available as a result of use of GM technologies.