Economic Impacts of Policies Affecting Crop Biotechnology and Trade

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.