An Economy-wide Analysis of GM Food Labeling Policies in Taiwan

The development of agricultural biotechnology offers the opportunity to increase crop production, lowers farming costs, improves food quality and could reduce costs to consumers. Until now Taiwan haven’t commercialized any genetically modified (GM) crops. However, Taiwan imports a large amount of grain products for human consumption and animal feed processing from the world market annually. The import quantities as well as prices will be affected through world market as the production technology of GM crops is adopted by the exporting countries. Many sectors have been affected by the use of these crops through vertical (or backward) and horizontal (or forward) linkages. This paper offers a quantitative assessment of the economic impacts of importing GM crops on Taiwan’s economy. A multi-sectoral computable general equilibrium model is used. 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. The choice between GM and non-GM varieties is determined by a CES function. We also consider the consumers’ acceptance of GM food so that the mandatory labeling policy can be examined. 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.