Potential economic impacts of zero thresholds for unapproved GMOs: The EU case

As the pipeline of new biotech crops has continued to expand, regulatory approvals of such crops across different countries have become less synchronized. As a result, some biotech crops can be cultivated in one or more countries but may not be approved for use in others. Under such circumstances, small amounts of unapproved biotech crops can be found in the food/feed supplies of some countries and under zero threshold policies they must be withdrawn and can lead to market disruptions. In this paper we examine the potential economic implications of regulatory asynchronicity and zero threshold policies for unapproved GMOs using the EU as a case study. To measure the potential economic impacts from possible trade disruptions between the EU and its major suppliers of soybeans, we develop a spatial equilibrium model and examine alternative scenarios where bilateral trade flows are set to zero. From our analysis we find that when asynchronous approvals become a systemic problem leading to trade disruptions with multiple trading partners the impacts can be severe. For instance, we find that if the EU were to stop imports from its three main suppliers the US, Brazil and Argentina, it would pay roughly 220% more for soybeans, 211% more for soybean meal and 202% more for soy oil.