Transgenic Cotton and Crop Productivity: A General Equilibrium Analysis for West and Central Africa

Since the 1960's much of the world's cotton production has relied on pesticides. Average yields trended upwards in 1970's and 1980's as pesticide use expanded, but stagnated thereafter, with rising production costs, resulting in steady erosion of cotton productivity in many cotton-growing regions. Beginning in 1996, the commercialization of transgenic insect-resistant cotton (Bt cotton) in the United States represented a technological breakthrough and the first serious alternative to insecticides. Within 3 years, Bt cotton occupied 20% of world cotton acreage and was grown in several countries including the US, Australia, Mexico, China, Argentina, and South Africa. In many cases, the adoption was rapid, driven by a pressing need for a viable alternative to chemical methods, which have become either less effective or inaccessible through regulatory actions. There is strong evidence that Bt cotton generates significant economic benefits to farmers, in addition to the beneficial effects on the environment, biodiversity and farmers' health. In this paper we examine the economic impact of Bt cotton adoption by West and Central Africa (WCA)- a region where cotton plays a critical role in the national economy, with a share of total GDP ranging from 1.3% in Cameroon up to 8.8% in Togo. Cotton also forms a significant share of total exports and contributes substantially to employment, providing a direct source of living for 2 million people in Burkina Faso (16 % of total population) and Mali (18 % of total population). While the WCA region produces 5% of world cotton, it accounts for 15% of world cotton trade, and most cotton produced in the region (95%) is exported. This makes WCA vulnerable to world cotton price fluctuations and to global factors that depress export prices. Consequently, the long run economic performance of the cotton sector depends critically on improving sectoral efficiency, through institutional reforms, and sustained productivity through adoption of cost-effective and yield-enhancing technologies. The objective of this analysis is to examine ex ante the economy-wide impact of Bt cotton adoption in WCA and the productivity-enhancing effects on the cotton sector. Given the significant implications for the global cotton sector, we apply a multi-regional computable general equilibrium model of production and trade. A special feature of the analysis was the careful estimation of productivity gains from Bt cotton adoption using several farm-level impact studies and a 2001 multi-country cost of production survey for cotton by the International Cotton Advisory Council. Two no-adoption scenarios for WCA (with cotton productivity loss from recent trends and without) are contrasted with a partial Bt cotton adoption case, under an international environment where Bt cotton is also adopted elsewhere. The analysis shows that under the no Bt cotton adoption and current declining productivity trends, the cotton sector in WCA shows lower output and declining export shares compared to other regions. Even without TFP loss, the pesticide-based cotton production system also results in eroding relative performance as other Bt adopting countries improve their world market positions. When WCA adopts Bt cotton, the cotton sector performs substantially better than under the status quo, and compares favorably with other regions.