Economic Impacts of Policies Affecting Crop Biotechnology and Trade
– Kym Anderson, New Biotechnology (in Press), full paper at
Agricultural biotechnologies, and especially transgenic crops, have the potential to boost food security in developing countries by offering higher incomes for farmers and lower priced and better quality food for consumers. That potential is being heavily compromised, however, because the European Union and some other countries have implemented strict regulatory systems to govern their production and consumption of genetically modified (GM) food and feed crops, and to prevent imports of foods and feedstuffs that do not meet these strict standards.
This paper analyses empirically the potential economic effects of adopting transgenic crops in Asia and Sub-Saharan Africa. It does so using a multi-country, multi-product model of the global economy. The results suggest the economic welfare gains from crop biotechnology adoption are potentially very large, and that those benefits are diminished only very slightly by the presence of the European Union’s restriction on imports of GM foods.
That is, if developing countries retain bans on GM crop production in an attempt to maintain access to EU markets for non-GM products, the loss to their food consumers as well as to farmers in those developing countries is huge relative to the slight loss that could be incurred from not retaining EU market access.
From the above results it is clear that the new agricultural biotechnologies promise much to the countries willing to adopt GM crop varieties. Moreover, the gains from farm-productivity enhancing GM varieties could be multiplied – perhaps many fold – if 2nd generation biofortified GM varieties such as Golden Rice were also to be embraced. The estimated gains to developing countries are only slightly lower if the EU’s policies continue to effectively restrict imports of affected crop products from adopting countries. Importantly, developing countries would not gain if they imposed bans on GM crop imports even in the presence of policies restricting imports from GM-adopting countries: the consumer loss net of that protectionism boost to Asian and Sub-Saharan African farmers is far more than the small gain in terms of greater market access to the EU.8
The stakes in this issue are thus very high, with welfare gains that could alleviate poverty directly and substantially in those countries willing and able to adopt this new biotechnology. Developing countries need to assess whether they share the food safety and environmental concerns of Europeans regarding GMOs. If not, their citizens in general, and their poor in particular, have much to gain from adopting GM crop varieties – and those gains will increase as climate change proceeds and requires adaptation by farmers to changes in weather patterns and in particular to increased weather volatility and higher costs of water for irrigation.
Unlike for North America and Argentina, who are heavily dependent on exports of maize and oilseeds, the welfare gains from GM crop adoption by Asian and Sub-Saharan African countries would not be greatly jeopardized by rich countries banning imports of those crop products from the adopting countries.
(George Gollin Professor of Economics, University of Adelaide, Australia)