EU and US Regulations for Handling and Transporting Genetically Modified Grains: Are Both Positions Correct?

Differences in the way GM grains are treated in the US and the EU motivate the question of whether there is a single correct policy towards identification of such products. This issue is addressed here, based on a mathematical model that assumes that the cost of maintaining identity on non-GM markets is borne by the non-GM industry. The economic welfare impacts of introducing GM technology depend on the levels of consumer concern and production cost savings, and the cost of maintaining non-GM grain identity. The introduction of a new cost-reducing GM technology often increases total welfare as one might expect. However, society loses when GM production cost-savings are small and consumers are highly concerned about GM grain because introducing GM technology creates a need to preserve the identity of non-GM grain. Taken together, the results suggest that the US may have maximized welfare by not requiring labeling of GM corn and soybeans, and that the recently approved EU legislation enforcing labeling of GM crops also makes sense in the EU. The reason for this is that consumer concern in the EU appears to be greater than in the US, and fewer EU producers stand to benefit from cost savings in GM corn and soybean production.