Bt cotton adoption in the United States and China: International trade and welfare effects

Many studies report that Bt cotton has led to significant yield gains, reduced insecticide use, or both in different countries. With rare exception, these studies examine adoption in one region in isolation from adoption in others. This article summarizes the global impacts of Bt cotton adoption in the United States and China based on results from a three-region model of the world cotton market. In 2001, adoption of Bt cotton in China and the United States increased world cotton production by 0.7% and reduced the world cotton price by 1.4 cents per pound. Global economic benefits were $836 million. Consumer surplus increased $63 million. Chinese producers gained by $428 million and US producers by $179 million. The fall in world price reduced rest-of-world (ROW) producer surplus by $349 million. Net rest-of-world benefits were $69 million, however, because purchaser gains outweighed producer losses.