Workpackage 3: Economic Costs And Benefits Of Traceability And Coexistence

Workpackage leader

Morten Gylling
Danish Research Institute of Food Economics
Frederiksberg C, Denmark


For about five years, the EU has upheld a de facto moratorium on the authorisation of new releases of genetically modified (GM) organisms in order to have time to study the issue more carefully and to develop a system of traceability and labelling. Guidelines for such a production system have now been established with the aim of developing strategies and best practices to ensure the co-existence of GM crops with conventional and organic farming. This new legislation also includes mandatory labelling of food and food ingredients containing or made from genetically engineered DNA/proteins above a specific tolerance level. Such traceability and labelling requirements will impose costs on producers. The size of these costs will of course diminish as more producers choose to produce GM foods and systems are set up to handle larger volumes. In the longer run, however, the viability of the various segments of the market (GM and non GM) will depend on consumer responses to GM food per se and how the new labelling rules affect this response.
Over the last decade focus on GM food commodities has increased dramatically especially in the EU. The food market has seen an enhancement in consumers' interest in the origin of the food and feed production. Not only when it comes to the raw materials used but also how and where the food is produced (origin and process traceability). This also reflects an increasing consumers' demand for information and security concerning the origin and production methods of food commodities. This demand causes extra costs and benefits that may vary significantly according to the food product and production system. The costs and benefits may also differ between primary producers, processors, distributors and retailers. These potential benefits, additional costs and additional risks, will all be considered in this WP. The EU has published a directive (2001/18/EEC) and two regulations on "genetically modified Food and Feed" (European Parliament and council regulation 1829/2003) and "Traceability and Labelling of genetically Modified Organisms" (European Parliament and Council regulation 1830/2003). The new regulations entered into force on April 18, 2004, after a transitional period of six and three months for applying the requirements, respectively.
The EU regulation and agreements on traceability and labelling standards indicates that focus is now going from individual companies and national concerns to today's demand for a European agreement on how to trace and label GM and non GM food commodities.
Compliance to the above mention regulations will have an impact on the costs and benefits of a combined GMO and non GMO production and food and feed supply chains in Europe.


The objective of this workpackage is to describe the value chain of selected food and feed commodities and hereby to estimate the additional costs and expected benefits of traceability and coexistence between GMO, non-GMO, and derived commodities in the food and feed supply/processing chain. In addition this workpackage analyses the consumers' propensity to pay an extra premium for non GM labelled products. Finally, the wide-economy trade and market implications of traceability and co-existence schemes for GM and non GM products will be assessed.

Specific objectives of this work package are as follow:

  • Description of selected value chain structure in existing food and feed commodity systems in the EU and third countries exporting towards the EU
  • Identification of additional cost and benefits related to co-existence and traceability
  • Describe the consumer's attitudes to GM labelling
  • Estimate coexistence costs and benefits for selected food and feed commodities in the EU
  • Identify economy-wide impact of consumers' reactions to the new GM labelling and traceability requirements in the EU.

A number of commodities will be investigated based upon dialogue will stakeholders. The study will base its results on systems analysis, case studies on specific food and feed production chains, consumer surveys and a global trade model on specific food production chains. Some of the indicators and data will be based on results from other ongoing and previous projects The case studies, which will be carried out for selected regions and countries of the enlarged EU, will be chosen and developed in order to generalise methods for assessing the economic impact of traceability and labelling for other commodities and production systems.

In this matter a distinction between different food and feed product characteristics is made, with the following subdivision:

  • fresh food (e.g. fresh tomatoes)
  • short stored commodities (e.g. table potatoes and onions)
  • long stored commodities (e.g. grain and oil seed crops)

The case studies will be selected in cooperation with WP2 and validated by the EC.
The project will emphasize on both SMEs as well as large enterprises to assess any scale advantages from implementing the new EU labelling and traceability rules.
It is the aim to setup national stakeholder groups with consumer associations, farm associations, organic farmers and food and feed industries.