Abstract
Genetically modified (GM) crops have been largely adopted in major exporting countries
thereby representing a dominant share of a few key agricultural commodities that are
traded in international markets. Regulatory reviews and approvals for the cultivation and
marketing of GM crops, however, are country-specific and significant discrepancies in the
amount of time required to review and approve new GM crops between importing and
exporting countries has led to “asynchronous approvals”. Trade disruptions created by
asynchronous approvals of GM crops are expected and can quickly deteriorate into
effective trade bans because perfect segregation between approved and unapproved GM
crops is difficult. The issues we examine in this paper are the potential market and welfare
impacts from trade disruptions that might be caused by asynchronous regulatory approvals
of new GM crops. We develop a trade model consisting of two composite importing
countries and one exporting country. We first derive a baseline equilibrium where no
unapproved events exists. When then derive a second equilibrium so that the market and
welfare impacts of asynchronous approval on consumers and producers in each composite
country can be analyze and discussed. We found that asynchronous approvals tend to
increase prices, reduce consumer surplus and increase profits of producers of identity
preserved commodities in all countries. However, we found that the aggregate quantities
consumed and the profits of commodity producers are depend on the relative size of the
export market in the countries where event are not approved.