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

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                                  PART I
-------------------------------- GENET-news --------------------------------

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
-------------------------------- GENET-news --------------------------------

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 period).

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 key
determinant of the size of the movement in GDP. Government policy interventions can
have a significant impact on maximising the gains from the use of GM organisms
in terms of promoting biotechnology research;

- the Government's current GM regulatory framework should minimise the
negative price impacts through a robust regulatory regime (including the proposed
conditional release category), a case-by-case approach to applications, and
encouraging successful coexistence.

The Environmental Risk Management Authority (ERMA) is currently required to
consider the economic impacts of an application, including likely spillover
effects and price impacts;

- the productivity gains to be derived from the use of GM organisms are also
a key determinant of the overall economic impact. Promoting biotechnology
through the Growth and Innovation Framework will help develop domestic research
into possible innovations. The results indicate that the bigger gains from
GM organisms come from domestic development of technology rather than imported

- the potential negative price impacts were lowest where the proposed GM
organism release was for medical purposes. The potential negative price impact
increased as the proposed release got closer to the human food chain;

- the best producer returns are generated where there is successful
co-existence between GM and non-GM production methods;

- a conservative estimate of the cumulative impact on GDP of several GM
releases is a gain of at least 1% in GDP, but this may well be higher; and

- given that officials consider that international price premiums for non-GM
goods are likely to reduce over time, the GM-free scenarios are more likely
to be negative for GDP.

Recommended Action

We recommend that you:

a note the results of the economic analysis and the key themes identified
from these results;

b refer copies of this report and the attached Cabinet paper to the Prime
Minister, and the Ministers of Economic Development, Agriculture, Research,
Science and Technology, and Maori Affairs, and the Minister for the Environment
for their information;

c sign the attached Cabinet paper, and refer the paper to the Minister for
the Environment for her co-signature and submission to the Cabinet Office; and

d refer this report and the attached Cabinet paper to your media staff.

Prime Minister

Minister of Economic Development

Minister of Agriculture

Minister of Research, Science and Technology

Minister of Maori Affairs

Minister for the Environment

Media Staff

Referred: Yes/No

Hon Dr Michael Cullen

Minister of Finance

[check web page to read the whole document]


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