The Genetically Engineered Organism Trade Game: To What Extent will the US be Hurt?

The objective of improving trade liberalization while minimizing dumping under the auspices of the World Trade Organization (WTO) has evolved like the "liver and bile" relationship for the agency. In the agricultural sector where high productivity and efficiency has led to some countries producing and exporting at cheaper prices than their destination countries, several issues have emerged. Some may be genuine issues on food safety while some are obviously hidden behind dubious protectionist agendas.

Based on the WTO regulations, countries can implement policies within the “Agreements on the Application of Sanitary and Phytosanitary Measures” framework (SPS Agreements). This deals with the application of food safety, animal and plant health regulations. The agreement gives countries the full mandate of ensuring that food is safe for their consumers and prevent the spread of diseases or pests among plants and animals. In general, these measures were deemed to restrict trade to some extent. Hence, governments have been urged by the WTO to establish measures consistent with international standards.

However, the emergence of genetically engineered foods (GE foods) in 1994 sparked persistent disagreements among countries and scientists. As at now, there is no conclusive consensus on the health hazards of GE foods. Countries that favor GE foods include the United States, Brazil, Argentina, India, Canada, China, Paraguay, Australia, Uruguay and South Africa. On the contrary, almost all or majority of the European Union do not support GE foods. In recent past, countries that have banned GE (either imports or domestic production) include but not limited to Peru, Russia, Switzerland, Egypt, Japan, France and Ireland. That notwithstanding, those that have not banned GE foods place tight restrictions on their imports, particularly among the European countries such as Germany and Italy. This animosity towards GE foods among certain countries place some extent of restriction on the trade of those who cultivate it (FAO, 2014).

Meanwhile, corn and soybean that constitute the major grain exports of the U.S are dominated by GE varieties. The USDA ERS[1] indicated that GE corn covered about 90% of domestic corn produced in the country. This high proportion implies that the impact of GE restrictions and bans by trade partners is expected to have an effect on the country's exports. (Figure 1 shows the percentages of GE corn and soybean produced in the US from 2000 to 2017). Another important grain export crop in the US is wheat. However, the USDA ERS indicated that there is no commercial production of GE wheat in the United States[2].

Hence, I only desire to ask these three questions:

What is the Short-run Impact of these Restrictions on the United States Exports of these commodities?

How long will it take for a trade-equilibrium to be established between Advocates and Non-Advocates of Genetically Engineered Organisms?

Who will Eventually Win the GE game? The Advocates or Non-Advocates?

These questions set the stage for a Cournot-Stackelberg Game in a Competitive Equilibrium

Figure 1: Percentage Production of Corn and Soybean in U.S.

Source: USDA Economic Research Service

[1] A report on the trends in GE adoption and cultivation can be found on the USDA ERS web page through this link https://www.ers.usda.gov/data-products/adoption-of-genetically-engineered-crops-in-the-us/recent-trends-in-ge-adoption.aspx

[2]Further reading on non-commercial production of GE wheat in US can be found on https://www.ers.usda.gov/topics/crops/wheat/background.aspx