Trade, GMOs, and Environmental Risk: Are Policies Likely to Improve Welfare?

Food with inputs from genetically modified organisms (GMOs) has met considerable skepticism among European Union (EU) consumers. The EU import ban on GM food has triggered a great deal of controversy and has been replaced by a mandatory labeling scheme. This study had two foci. First, we examined how different policies for the production and use of GMOs might influence the market outcome in consumer food markets. Second, we evaluated the welfare effects of the policy measures. We found that mandatory labeling often increases domestic welfare and, moreover, that in most cases it increases global welfare. On the other hand, a trade ban is more likely to decrease global welfare.