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Kym Anderson, University of Adelaide,Cheryl McRae, Department of Agriculture, Fisheries and Forestry in Canberra, Australia,David Wilson, Department of Agriculture, Fisheries and Forestry in Canberra, Australia
This chapter addresses the question: how might a new quarantine issue, namely genetically modified organisms (GMOs), impact on the World Trade Organization's rules and their interpretation by its Dispute Settlement Body. It suggests that the GMO issue is almost certain to affect the way the WTO's Sanitary and Phytosanitary (SPS) Agreement is interpreted and, should it come under sufficient pressure, re-negotiated. Since national quarantine policy officials are involved in both dispute settlement and rules-negotiating at the WTO, this chapter provides a glimpse of what might be in store for them in those capacities as well as in their work as quarantine decision-makers in the future. The chapter also includes an empirical analysis of the trade and welfare effects that could be involved in GMO cases. This has two purposes. First, it provides some idea of the potential trade and welfare effects of SPS policy reactions to the GMO issue. Second, it illustrates a methodological approach that, to the authors' knowledge, is more comprehensive than any used by previous analysts for estimating the market effects of quarantine policies. The methodology would be inappropriate for cases involving just one small product in a small country. However, for across-the-board reviews of quarantine measures, and for cases involving major products and major traders -(as with GMOs) the economy-wide, general equilibrium approach used here is very relevant. And it will become even more so as and when economic assessment becomes more of a mainstream activity in quarantine analysis in the future (if not by quarantine officers, then certainly by agricultural policy advisors and trade negotiators concerned with the domestic and trade effects of SPS measures both at home and abroad).
The current debate about the use of genetic engineering in agricultural production reveals substantial differences in perception of the risks and benefits associated with this new biotechnology. Farmers in North America and a few large developing countries such as Argentina, Mexico, and China are rapidly adopting the new genetically modified (GM) crop varieties as they become available, and citizens in these countries are generally accepting this development. Growing GM crop varieties provides farmers with a range of agronomic benefits, mainly in terms of lower input requirements and hence lower costs to consumers. However, in other parts of the world, especially Western Europe, people are concerned about the environmental impact of widespread cultivation of GM crops and the safety of foods containing genetically modified organisms (GMOs). In response to the strong consumer reaction against GM foods in Western Europe, and to a certain extent also in Japan, separate production systems for GM and non-GM crops are emerging in the maize and soybean sectors. To the extent that GM-critical consumers are willing to pay a price premium for non-GM varieties there may be a viable market for these products alongside the new GM varieties.
Developing countries – regardless of whether they are exporters or importers of agricultural crops – will be affected by changing consumer attitudes toward genetic modification in the developed world. Some developing countries are highly dependent on exporting particular primary agricultural products to GM-critical regions.
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