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

11.45am - By KENT ATKINSON

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.

- NZPA