Modeling the economic impact for Chile of an import ban on genetically modified maize

ABSTRACT

We estimate producer and consumer surplus changes due to a possible GM maize import ban in Chile, which produces only non-GM grains for internal use. Without foreign non-GM sources, the ban’s effect on domestic maize prices would be so significant as to induce Chile to switch from net exporter to net importer of animal products. Fixed factor owners in farm production would benefit significantly, although non-GM maize imports would moderate gains. Total social welfare measures would decline considerably, requiring large offsetting noneconomic benefits for a ban’s political viability. Without non-GM imports, internal maize prices would likely eliminate domestic animal product industries; with possible imports, industries and final consumers would suffer, but much less. Currently, the country is a net importer of grain and a net exporter of pork and poultry, and so most welfare losses on the demand side of the market for maize would be in terms of the economic rents generated by the pork and poultry sectors. International competition would protect final consumers to the extent that animal product imports based on GM feed were permitted.

KEYWORDS:

• Chile
• consumer and producer surplus
• domestic pork and poultry industries
• GM maize import ban

Disclosure statement

Although this work is purely academic, the authors wish to make it clear that the research was undertaken at the request of (and supported financially by) ChileBio, an association of firms in the field of the development of biotechnology applied to Chilean agriculture. Members of the ChileBio association can be found at https://www.chilebio.cl/miembros/.

Notes

¹ See, for example, https://www.camara.cl/cms/destacado/2018/09/03/solicitan-medidas-concretas-para-proteger-a-los-agricultores-productores-de-trigo-y-maiz/. Legislators overwhelmingly voted to ask the executive branch to protect wheat and maize farmers and to examine Chile’s free-trade agreement with Argentina, Brazil and other countries (i.e., MERCOSUR).

² Data for internal production, consumption and international trade are taken from the easily accessible data banks maintained by ODEPA: https://www.odepa.gob.cl/estadisticas-del-sector/estadisticas-productivas and https://www.odepa.gob.cl/estadisticas-del-sector/comercio-exterior.

³ If an average conversion rate of 100 grams of maize per egg is considered (Personal communication with Jaime Fernández, Production Manager of Ecoterra), the total consumption of maize would be approximately 0.45 million tons in 2020, which is equivalent to 13% of total maize consumption.

⁴ See ^21–24

⁵ In the case of the constant price elasticities of supply and demand used in the present study, in equilibrium without imports, $\mathit{A}{p}_d^{\epsilon }=\mathit{B}{p}_d^{\eta }$, which implies $p_d={\left(\frac{B}{A}\right)}^{\frac{1}{\mathit{\epsilon }-\mathit{\eta }}}$ and $q_1=A^{\frac{-\mathit{\eta }}{\mathit{\epsilon }-\mathit{\eta }}}{B}^{\frac{\mathit{\epsilon }}{\mathit{\epsilon }-\mathit{\eta }}}$.

⁶ See, for example, “Mexico plans to buy non-GMO corn from the U.S., other countries as it moves ahead with GMO ban” by ²⁵

⁷ Defining total production, $q_t$, as the product of hectares, $H_t$, and yields, $y_t$, one notes that $\ln q_t=\ln H_t+\ln y_t$, and so, with yields being sensitive to scale but not to price, the supply elasticity would be $\frac{\mathrm{\partial }\ln q_t}{\mathrm{\partial }\ln p_t}=\frac{\mathrm{\partial }\ln H_t}{\mathrm{\partial }\ln p_t}+\frac{\mathrm{\partial }\ln y_t}{\mathrm{\partial }\ln H_t}\frac{\mathrm{\partial }\ln H_t}{\mathrm{\partial }\ln p_t}$.

⁸ Chilean Central Bank data can be found at https://www.bcentral.cl/inicio, and https://si3.bcentral.cl/siete; World Bank data can be found at https://datatopics.worldbank.org/world-development-indicators/.

⁹ Climate data are found at https://climateknowledgeportal.worldbank.org/.

¹⁰ We also take a first quarter 2023 approximate exchange rate of 850 Chilean pesos per dollar as the reference point in calculating final consumer (supermarket level) meat prices.

Additional information

Funding

This study was supported by Asociación Gremial ChileBIO CropLife (https://www.chilebio.cl/). The work presented here extends and updates a final report presented to ChileBio in May 2023.