China’s Strategic Labeling Of GM Food

With booming of life science, biotechnology become mature and reliable. It modifies genetic traits by introducing exogenous gene into crops. These genetically modified crops(GM crops) is cosmically commercialized because of its strong stress resistance against the harsh environment, which reshaped the modern agricultural industry. Although China started studying biotechnology later than developed countries, in terms of the scale of commercialization of GM crops, it catches up the pace. Besides that, considering the fierce competition of agricultural products and china’s food security strategy in the background of international trade, economists should focus on the theme "how to regulate" instead of "whether to regulate".In terms of policy framework of GM food in representative countries and regions, the main regulatory policy tool is GM labeling, with the goal of full information disclosure. United States adopted voluntarily labeling strategy based on the substantial equivalence principle. Correspondingly, European Union adopted mandatory labeling strategy based on precautionary principle. As its multi-purpose policy constraint, China has employed mandatory labeling of GM ingredients as its regulatory framework. Although over ten years has past since China’s launch of labeling policy, Chinese economists haven’t introduced international trade into analysis of GM regulation and evaluated China’s labeling strategy on the perspective of consumption and production model. As a result, our goal is to explore the equilibrium strategy between countries and then to test and evaluate China’s strategic labeling on GM food.This paper develops the model created by Fulton et al. (2004) based on consumption and production theory in GM food industry, treating the GM food as credence good. On the production side, heterogeneous producers decide cultivate GM or non-GM crops fully upon the relative profit level per unit. Similarly, on the consumer side, heterogeneous consumers’ decision is based on the relative utility level per unit when consuming GM or non-GM food. And this paper introduces two production regions in which biotechnology can be adopted. Correspondingly, the rest of the world only produces non-GM food. Then with condition of world market equilibrium, the equilibrium price and quantity is solved by combing the production side and consumption side under different labeling strategy scenarios. These two countries sequentially choose their own labeling strategy based the maximization of producer’s welfare. And this decision-making process is simulated by a two-stage perfect and complete dynamic game model. The different Nash Equilibriums under different scenarios are determined by the payoffs of first-mover and the late-comer in dynamic game model. The formation of each Nash Equilibrium is influenced by the relative scale of different factors, whose mechanism is the main goal for this paper to study. In other words, the main purpose of this paper is to study the mechanism behind the mutual influence of market characteristics (factors) and a labeling strategy (Nash Equilibrium).The main conclusions are such as follows:First, the relative scale of factors in two countries affect the two countries’ labeling strategies. These factors include consumer’s relative aversion towards GM food, relative segregation cost and labeling cost, relative productivity of biotech, relative market power of life science companies, enforcement of intellectual property rights. Second, the essence of competition between countries is the maximization of its own market share in world agricultural product market, based on which the labeling strategy is the best respond strategy. Last, according to this model, we can conclude that China’s current labeling strategy is suitable.