07/04/2003 1

Carter Seminar at INEA 19/6Carter Seminar at INEA 19/6Carter Seminar at INEA 19/6Carter Seminar at INEA 19/6

ISSUES FOR DISCUSSIONISSUES FOR DISCUSSION

1. How to fit complex (EU) regulation into the model

2. The analytical model: regulations and scenarios

3. What do we miss: non-pecuniary externalities on GM-free production

4. International agreements: trade effects and harmonization

2

Carter Seminar at INEA 19/6Carter Seminar at INEA 19/6

A GENERAL INTRODUCTORY COMMENT:

There is a well-established set of models on GMOs trade and labeling scheme/regulations

EU-Italian research is lagging behind in using these tools in analysing the GMOs debate in EU

However: is this modelling approach generally able to take into account most critical issues on the agenda?

Put in another way: are these models missing (ruling out) something which is, indeed, crucial for the EU position/policy and EU-USA controversy?

3

Carter Seminar at INEA 19/6Carter Seminar at INEA 19/6

1 - Fitting the EU regulation:The model depicts EU regulation as: mandatory labeling upon approval It is also stated that welfare effects (labeling/harmonization) are not so

relevant for (mainly) feed crops (soybean-corn) However:

EU regulation imposes labeling on both food and non-food products, on both GMOs and products containing GMOs

This regulation (dir 2001/18) is recent and still uncertain (e.g., tolerance threshold): For wheat For soybean and maize: meat and labeling+traceability

For the moment we know: there is a specific regime for soyabean and corn; but: Not all varieties are approved Some countries are still banning approved varieties (e.g Italy) GM-free productions using soybean-corn (organic, typical products)

4

Carter Seminar at INEA 19/6Carter Seminar at INEA 19/6

2 - Regulations and labeling scenarios (table 2):A labeling scenario is a set of regulations and consumers/producers

behaviour: trade and welfare effects derivedWho really knows which is the behaviour upon regulation? Should we

need a model deriving behaviours from regulations? The No-labeling scenario:

Why no-labeling instead of No (approved) GM production?Why USA (Country A) should not produce GM food under no-labeling

while they do under current regulations (the internal regulations is the same)?

EU producers and consumers:Why EU farmers-food sector never produce GM food?Why EU consumers do not use GM food under mandatory labeling?

Is the signal so strong also for (not so) tolerant consumers?

5

Carter Seminar at INEA 19/6Carter Seminar at INEA 19/6

3 - Costs of labeling/segregation:Marginal cost of labeling and segregation are fixed (independent

on labeling scheme) but the former is greater (<K)?What happens if not? What happens if =f(K) (e.g. the greater K,

due to strong controls and segregation, the smaller is )?

GM-free productions (organic, typical-quality products): Introduction of GM crops create a negative (non-pecuniary)

extenality in any labeling scheme (segregation costs; 0 tolerance)The costs are higher with voluntary labeling and no labeling (but

with GMOs production): +K.Why the polluter pays principle does not apply?

6

Carter Seminar at INEA 19/6Carter Seminar at INEA 19/6

4 – International agreement on harmonization:Can be reached in a technical/scientific context (e.g. Codex Alimentarius).

But: It is not based on the scientific ground It can not deal with trade effects of regulation

WTO has to be involved (no dispute): Can this harmonization be admitted within SPS (or TBT)?

Harmonization or compensation: If we look for general welfare gains (Pareto enhancing solutions), why,

within WTO, we do not accept different regulations (TBT) and compensate trade effects?

Bagwell-Staiger modelling How much these modelling approaches differ? Which is the “best” (most affordable) approach for reaching an international

agreement?