The Determinants of the EU Import Demand for Soybean and Maize: What Role for GMOs?

Abstract

Abstract In this work, we analyse EU soybean and maize imports using a demand system borrowed from the differential approach to firm theory. Alongside providing own-price and cross-price (i. e. cross-country) elasticities for these two products, we test whether source-specific characteristics exert any influence on complementarity and substitution patterns between international exporters. Specifically, we look at country differences stemming from supply chain efficiency and the asynchronous approval of Genetically Modified (GM) varieties. We do so by introducing two measurements for such features into a linear demand model specified by Laitinen and Theil (1978). Estimation results suggest that the EU import structure is not affected by differences in supply chain efficiency between overseas suppliers while, depending on the product, asynchronous approval does seem to have an influence. We find that imports of maize are more sensitive than those of soybeans to differences in approval statuses between international exporters and the EU. Since soybean availability is a limiting factor for the EU feed industry, avoiding stock shortages may be a priority for European importers, hence the weaker effect of asynchronous approval. On the other hand, the substantial EU self-sufficiency for maize places more emphasis on product characteristics and prices.