Is Regulatory Harmonization Efficient? The Case of Agricultural Biotechnology Labelling

This research uses a general equilibrium framework to examine the impacts of labeling policies on genetically modified (GM) agricultural products in the international trading system. The research focuses on the case of the policy debate between the United States and the European Union. Numerical calibrations of the general equilibrium model using 1998 data are used to examine four scenarios: both countries labeling, neither country labeling and the two cases when countries pursue mixed strategies. Results indicate that the benefits of countries pursuing mixed strategies outweigh the benefits of harmonized labeling policies. Countries that introduce labeling regulations restrict access to their agricultural markets. However, the benefits consumers obtain from having access to information about GM content compensate for the trade inefficiencies introduced by differing national labeling regulations.