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GTAP Resource #1456

"An Economy-wide Analysis of GM Food Labeling Policies in Taiwan"
by Hsu, Shih-Hsun, Ching-Cheng Chang and Chia-Hsuan Wu


Abstract
The introduction and adoption of agricultural biotechnology offers the opportunity to create cost saving, productivity increases or quality improvement. The introduction of genetically modified (GM) product requires modifications to the traditional analysis of technological changes to account for the market power of the private innovating firms that made the investments in GM technology and to address the demand response to the introduction of this technology.
Recently Fulton and Giannakas (2004) develop a framework where these modifications are introduced and where their feedback on the rest of the system is captured. They examine the system-wide effects of the introduction of GM products with and without labeling. However, many sectors have been affected by the use of GM products through vertical (or backward) and horizontal (or forward) linkages. The purpose of this paper is to develop an economy-wide quantitative assessment of the economic impacts of the introduction of GM products with and without labeling. The modeling framework used in this analysis is TAIGEM (Taiwan General Equilibrium Model), a multi-sectoral computable general equilibrium (CGE) model of the Taiwan¡¦s economy which is derived from ORANI model (Dixon, Parmenter, Sutton and Vincent, 1982). The input-output database was compiled from the 160-sector Input-Output tables of 1999. The model distinguishes 160 sectors, 6 types of labor, 8 types of margins and 160 commodities.
This model is amended by splitting corn and soybeans into GM and non-GM varieties. It also endogenizes the decision of producers and consumers to use GM vs. non-GM corn and soybeans in their intermediate uses and consumption, respectively. We also consider the consumers¡¦ acceptance of GM food so that the mandatory labeling policy can be examined. Specifically, TAIGEM is amended in three steps. First, we separate soybeans and corn from other crops sectors. Next, we split the soybeans, corn, and their corresponding processing sectors into GM and non-GM foods. Thereby, we allow for a choice between GM and non-GM in production and consumption.
In the model we endogenize the decision of producers and consumers in adopting GM vs. non-GM varieties in their production and final demand. Intermediate demands for each composite commodities (i.e., GM plus non-GM) are held fixed as proportions of outputs by using a Leontief production function specification. By doing so, the initial input-output coefficients remain fixed, but for GM-potential varieties, a choice is introduced between GM and non-GM varieties. The choice between GM and non-GM varieties is determined by a CES function with a certain degree of substitution possibilities. Other intermediate input demands remain in fixed proportions in relating to their output. In our empirical analysis, the input-output choice is endogenized for four sectors, i.e., ¡§Edible oil and fat¡¨; ¡§Feeds¡¨; ¡§Processing foods¡¨, and ¡§Livestock¡¨.
Similarly, final consumption of each composite good will be an endogenous choice between GM and non-GM varieties for GM-potential commodities. We allow for substitutions among different goods. The GM-potential goods are composted under a two-layer system. The first layer is a composition of domestic and imported goods and the second one a CES aggregation of GM goods and non-GM goods. Non-GM goods have a simpler aggregation structure and are composed of imported and domestic goods.
We use Taiwan¡¦s import of GM products as an example to provide an economy-wide assessment of the impacts of labeling policy. As for the GM product consumption, a voluntary labeling of GM product has been introduced by Department of Health in Taiwan from 1 January 2001, while mandatory labeling of designated foods will be introduced in three stages according to the degree of processing of the food products starting from January 2003. Under the new labeling requirement, food containing more than 5% of GM soybean or corn in the finished product has to be labeled. On the other hand, food containing less than 5% of GM soybean or corn is regarded as "non-GM ingredient". Thus, Taiwan¡¦s labeling policy only designates toward food containing GM ingredients. Our simulation results indicate that the most extreme import ban on GM crops would be very costly in terms of total production values, ranging from NT$ 40 to 90 billions per year.


Resource Details (Export Citation) GTAP Keywords
Category: 2004 Conference Paper
Status: Published
By/In: Presented at the 7th Annual Conference on Global Economic Analysis, Washington DC, USA
Date: 2004
Version: 1
Created: Hsu, S. (4/28/2004)
Updated: Hsu, S. (4/28/2004)
Visits: 3,448
No keywords have been specified.


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