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2-Plants: New Zealand economic report forecasts little GE benefits

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                                  PART I
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TITLE:  GE releases could lift farm returns 5pc or slash them 43pc
SOURCE: New Zealand Press Agency/The New Zealand Herald, by Kent Atkinson

DATE:   Apr 17, 2003

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GE releases could lift farm returns 5pc or slash them 43pc 

The release of genetically engineered crops, animals and other organisms could 
offer New Zealand farmers a 5 per cent boost in earnings over the next decade -- 
or slash their earnings by 43 per cent, according to a cabinet paper released 
today. The economic study of the costs and benefits of releasing genetically 
engineered organisms, was drawn up by Business and Economic Research Ltd (Berl) 
as one of the last studies commissioned by the Government before the moratorium 
on GE releases is lifted in October. Environment Minister Marian Hobbs said 
today the report confirmed the Government's case-by-case approach based on the 
Royal Commission's call to preserve opportunities. "The most likely economic 
impact from the careful and considered release of genetically modified organisms 
would be a small increase in GDP over 10 years, compared to a small decrease 
from forgoing...releases," she said. The study canvassed three specific examples 
of GE releases in pastoral agriculture, pest control, and human therapeutics, 
and tested them on two computerised economic models: an agricultural trade model 
and an economy-wide model. It investigates the costs and benefits of releasing 
the GE organisms, and of not releasing them. From the agricultural model, the 
release of a GE crop or animal that boosts annual productivity 2.5 per cent for 
10 years with no change in market demand led to a 5.1 per cent rise in returns 
for farmers. But a scenario where such a release drove down the prices available 
to New Zealand dairy, meat and fruit exports, cut farmer earnings by 43 per 
cent. In the economy-wide model, the impacts of productivity changes were 
relatively greater and the impact on export returns more muted. Assuming that 
the GE release provided no productivity increase, the economy-wide model found 
that GDP in 10 years time would be 2.4 per cent lower than it otherwise would 
have been, with dairy and meat export returns 8.2 per cent lower. On the other 
hand, a GE release which generated an assumed annual 2.5 per cent higher 
productivity in pastoral agriculture would leave GDP 2.5 per cent higher in 10 
years, with dairy and meat export returns 8.9 per cent higher, the paper said. 
Berl said that in any particular case a GE organism was likely to cause both 
some reduction in demand for some products in some markets, and some increase in 
productivity. This mean the effects on GDP in 10 years time would be between a 
drop of 2.4 per cent and a lift of 2.5 per cent, compared with if the GE release 
had not been allowed. The economy-wide impact of a New Zealand withholding GE 
releases showed an international shift in preference to New Zealand-labelled 
dairy and meat, as well as a shift to all New Zealand fruit and holidays, which 
together led to 7.5 per cent higher annual GDP in 10 years time -- with dairy 
and meat export returns were 14.5 per cent higher. But if other competitor 
countries adopted GE crops or animals which boosted productivity improvements, 
New Zealand GDP would then be 6.4 per cent lower, and dairy and meat export 
returns over 40 per cent lower. Numerous experiments on different scenarios 
using the economy-wide model found the level of GDP in 10 years time ranged from 
3 per cent higher to 3 per cent lower. The impact of releasing a GE organism in 
New Zealand or not using GE organisms in agriculture and horticulture could 
result in both negative and positive overall economic outcomes.


                                  PART II
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TITLE:  Treasury Report: Briefing on Genetic Modification
        Economic Analysis - Cabinet Paper
SOURCE: New Zealand Treasury, Press Release
DATE:   Apr 17, 2003

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Treasury Report: Briefing on Genetic Modification
Economic Analysis
Cabinet Paper

Executive Summary

This report recommends you and the Minister for the Environment submit the 
attached joint Cabinet paper on the results of the economic analysis of the 
opportunities and risks of the use of genetic modification (GM) and non-GM 
organisms in New Zealand. The Cabinet paper also recommends that the results of 
this analysis be publicly released. A copy of the executive summary of the 
results is attached to the Cabinet paper; the full research study is still being 
readied for publication, and will be presented to Ministers prior to POL.

Results of Economic Analysis

The results of the economic analysis predict a range of possible outcomes for 
both GM and non-GM scenarios. The results from individual uses of GM organisms 
range from a potential increase of 2.5% in GDP (over 10 years) in the best-case 
scenario, to a potential decrease of 1.3% for the worst-case scenario. In terms 
of the GM-free scenarios, the predicted outcomes range from a decrease in GDP of 
0.1% for the likely best-case scenario to a decrease of 6.4% for the worst-case 
scenario. The reasons the ranges are so large is because of the uncertainties 
around the assumptions that are fed into the modelling. These uncertainties are 
unlikely to be clarified for several years, until the technology matures.

Interpretation of Results

Given the large range of potential results, we recommend that you focus on the 
more likely outcomes, rather than the relatively less likely outcomes that have 
been included to ensure all possible outcomes have been modelled. Based on the 
assumptions underlying each scenario, we consider that the most likely outcome 
of the GM-use scenarios will be a small positive movement in GDP (between 1.2% 
and 2.5% over 10 years), while the most likely outcome of the non-GM scenarios 
will be a small negative movement in GDP (between 0.1% and 3.2% over the 10 year 

The predictions at very high or very low ends of the possible range of results 
are considered unlikely, as they represent "ideal" or "worst-case" sets of 
assumptions. For example, it is unlikely that there will be no productivity 
improvement from the use of GM organisms, as otherwise rational users of the 
technology would not adopt it. It is also considered unlikely that negative 
price impacts will be as high as suggested by the survey results, although, some 
negative price impact is possible.

Key Themes of the Analysis

The key issues that the analysis raises are:

- New Zealand does have a "clean-green" environmental image in our key export 
markets, and a majority of consumers surveyed in these countries indicate that 
this has an impact on the prices they are prepared to pay for New Zealand 

Maintenance of this "clean-green" image is important so as to minimise the 
impact the release of a GM organism may have on the prices received for New 
Zealand exports in these markets;

- The impact of releasing a GM organism in New Zealand or not using GM organisms 
in production can result in both negative or positive overall economic outcomes, 
depending on the assumptions made;

- price impacts are one of the key determinants of the size of the movement in 
Gross Domestic Product (GDP). Price impacts are the size of any decrease in 
price of New Zealand non-GM exports as a result of a GM organism release. 
Officials advise that the likely price impacts are likely to be lower than those 
used in the modelling and therefore the results for GM organism release 
scenarios are more likely to be a positive rather than a negative movement in 

- the size of productivity gains from GM releases are the other