Decomposing the impact of genetically modified organism regulation on bilateral trade: An application to corn trade

Our study investigates the impact of genetically modified organism (GMO) regulations on international agricultural trade, with a specific focus on GMO approvals. We analyse the effects of GMO regulations on bilateral trade through three main pathways: productivity enhancements in the exporting country, regulatory dissimilarities between trading partners and the influence of GMO approvals on demand in the importing country. Using a panel data set on corn trade and employing advanced econometric techniques, our findings reveal that GMO cultivation approvals in exporting countries have the most substantial and consistent positive effect on trade. Conversely, the impact of GMO demand approvals in importing countries is relatively smaller and negative. Additionally, regulatory dissimilarities between any two countries become negligible when accounting for the effects of cultivation and demand approvals. Thus, GMO approval regulations exert more significant multilateral effects on trade than bilateral ones.