Regulatory harmonization in international trading systems: The case of agricultural biotechnology labeling

While many countries are requiring the segregation and labeling of genetically modified (GM) products from traditional agricultural imports, others have adopted regulatory strategies that treat GM products the same as traditional agricultural products. These divergent approaches threaten to lead to trade disputes within the World Trade Organization (WTO). The WTO's legal structure supports countries' rights to restrict access to their markets due to health and safety. However, the WTO also acknowledges the need to control the use of these regulations as non-tariff barriers. This tension between supporting sovereignty and limiting trade distorting regulatory behavior fuels the contentious international debate about GM labeling policies.; This research uses a general equilibrium framework to examine the impacts of labeling and segregation policies on GM agricultural products in the international trading system. The research focuses in particular on the case of the policy debate concerning GM products in the European Union (EU) and the US. 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. The simulation results indicate the scale and direction of the price, output and trade impacts for each country.; Results indicate that the benefits of countries pursuing mixed strategies outweigh the benefits of countries matching their labeling policies. Countries that introduce labeling regulations to address consumer concerns about food safety are restricting access to their agricultural markets for countries that do not require labeling. However, the trade inefficiencies that are introduced by differing national labeling regulations are compensated for by the benefits consumers obtain from having access to information about GM content.