Economic analysis of issues surrounding commercial release of GM food products in New Zealand

This paper concentrates upon the market impact of commercially releasing current generation genetically modified (GM) food and food production in New Zealand (NZ). It evaluates the producer benefits of growing GM food and consumer attitudes towards GM food. Current commercially released GM products affect the type of production rather than the nature of the product itself and include herbicide resistant soybean and canola as well as insect resistant corn. Evidence of producer benefits from growing GM products is mixed, with some reports of increases in producer returns. However, there has been a definite shift in consumer preference away from GM food. This is seen both in the development of price premiums for GM-free food; trade diversion away from GM sources to GM-free sources, particularly in the Japanese market; and the positioning of key retail outlets in Europe as GM-free. However, issues remain as to how preferences will develop and whether current trends are short term or not. Of relevance to NZ is what would impact be of different preferences and impact of GM technology on key commodities for NZ. Therefore in this paper the impact of GM food on producers, consumers and trade in NZ is simulated under various scenarios using the LTEM (Lincoln Trade and Environment Model). The model simulates, against various assumptions of proportions of GM/GM-free production, the impact of various scenarios relating to preference for or against GM production. The results from this preliminary analysis show that the greatest positive impact on NZ income is the GM-free strategy where it is assumed such markets as the EU and Japan have a large switch in preference away from GM food, followed by a 20 percent preference for GM-free. In conclusion the analysis shows that the preferred option for NZ would be to delay the commercial release of GM food until the extent of the negative consumer attitude can be seen and the producer benefits become more apparent. This would enable NZ to position itself as being GM-free and obtain current price premiums and preferential market access.