Agricultural economist measures impact of forthcoming federal GMO labeling law

John Bovay
John Bovay

A new label on food packaging could soon alter the purchasing habits of American shoppers and significantly affect producer operations. A federal law will take effect in July 2018 that informs consumers about the genetic science that may be at work behind their favorite foods. This designation may lead to price increases and other far-reaching consequences in the grocery industry and beyond, says Assistant Professor John Bovay of the Department of Agricultural and Resource Economics, UConn Extension, and the College’s GMO Working Group. Bovay has started investigating how the execution of the legislation might take shape and the ways it could reverberate through the national economy.

The National Bioengineered Food Disclosure Standard (NBFDS) law introduces labeling standards that require companies to disclose if genetically modified organisms (GMOs) are present in their products. Although many consumers and non-government organizations (NGOs), such as the Non-GMO Project, champion greater transparency and increased awareness about the foods we eat and drink, Bovay cautions that it could further perpetuate misconceptions about the safety of genetic engineering (GE) technology in food production. These factors could drive customers and producers to respond in ways legislators may not have intended or foreseen. These reactions also largely depend on how the government decides to implement and regulate the law, but they have thus far offered few details on their plans. Despite these challenges, Bovay is drawing from prior examples of labeling initiatives and consulting other relevant studies to project the outcomes and costs of the new law. Bovay is completing his research with Julian Alston, a distinguished professor in the Department of Agriculture and Resource Economics at the University of California, Davis.

“In appraising the potential costs of the new labeling law, we examined the economic and political histories of GE labeling in food production,” says Bovay. “We looked at previous proposed legislation, current labeling practices, the actions and positions of non-government organizations and consumer groups, considered the legislative approaches foreign governments have taken in identifying GMOs in foods and how the media’s portrayal of this topic has affected consumer options and opinions. The use of GE technology in food has long been a controversial topic.”

GE commonly refers to the manipulation of an organism’s DNA through the deletion, rearrangement or introduction of new genes, using a variety of techniques. The NBFDS law defines bioengineered foods to include only foods that contain genetic material that has been modified through in vitro recombinant DNA techniques and for which the modification could not have been achievable through breeding techniques or existing in nature.

A variety of consumer groups, companies and NGOs have claimed that GMOs in food cause health problems. Scientists have found no such risks linked to GE foods. The National Academies of Sciences, Engineering and Medicine published a comprehensive report last year further consolidating the scientific consensus around the safety of GE crops and food. The study also concluded that GE technology represents an important tool to help solve critical world problems as products made using these methods can increase food production, improve nutritional value and reduce the use of harmful chemicals and pesticides.

Bovay says mandatory labeling might be sending a message to consumers that GE food is significantly different and therefore confirm the range of fears that persist. Whatever personal opinion or belief an individual may hold on the GMO debate, Bovay explains voluntary labeling methods have been adequately communicating this information to concerned consumers for years. United States Department of Agriculture (USDA) authorizes certifying agencies that can label organic food, which cannot include GMOs. There is also a third-party verification service, the Non-GMO Project, which can apply their label to qualified foods for manufacturers for a fee. Shoppers can easily identify and recognize these ubiquitous labels at their local food stores.

“Customers can infer that the absence of these labels likely means the presence of GMOs. They can use these successful voluntary labeling methods, which are widely used, to make an informed purchase. This makes mandatory labeling redundant for many products, potentially sends a misleading message about GE food and represents a new cost for many producers. We estimate that cost to be between $7.3 and $138 billion. Taxpayers and consumers will likely be paying these costs through higher food prices,” says Bovay.

“The science on GE tells us there are no identifiable risks to human health from this technology. It is worth noting that this required labeling singles out a particular technology, connoting that GE is a cause for concern. Overall, we found that the legislation has limited benefits and that taxpayers, consumers, farmers and producers may face many costs. It is possible that the presence of these labels could change the perception of GMOs and increase understanding of GE in food production, but we have identified many potential rises in costs and negative environmental impacts that could occur because of mandatory labeling.”

One adverse cost effect Bovay identifies is dependent upon producers replacing GE ingredients, should they seek to make a GE-free option in response to assumed customer avoidance of products or anticipation of declining sales from the presence of the GE label. Producers would have to pay for segregation, certification and monitoring costs to ensure that GE content stays separated from non-GE content during production. They might also abandon GMOs entirely and revamp their operations. Farther down the supply chain, there are increased costs from warehouse and retail space taken up by products, especially if customers have choices between GE and non-GE options. However, it is possible customers will ultimately end up with more limited choices, as producers wish to curb these costs and instead present their customers with a single option. Bovay points to McDonald’s and Chipotle as evidence, where executives made a decision to avoid GMOs in certain products, which limited consumer options and raised prices for customers. Other unfavorable outcomes of the labeling may include increased use of harmful chemicals to produce non-GE food and long-term damage to the reputation of agricultural research and development.

These different scenarios make measuring the true impact of NBFDS difficult, says Bovay. Additionally problematic in making an assessment is the absence of details regarding the implementation and regulations the government will enact. Regulators have yet to draft these central components and determine threshold limits of GMOs. Thresholds allow for the presence of a small percentage of GMO material, usually less than 0.9 percent, as acceptable to avoid the GE label. NBFDS cited a few exemptions to the law, including food served in restaurants or sold in retail settings, meat from animals served GE feed and organic products. Bovay explains that another complicated matter is the considerable amount of GE corn and GE soybean used by companies for other purposes, including biofuels, seed and exports. Should a food producer have to switch to GE-free or diversify to produce a GE-free option, these changes could affect larger components of their operations beyond the foods they produce for human consumption. Over 90 percent of corn and soybean acreage in the US is GE.

Further exemptions become increasingly complex based on the oversight guidelines of the Food and Drug Administration (FDA) and the USDA through the Food Safety and Inspection Service (FSIS) says Bovay. FSIS is responsible for regulating meat, poultry, egg products and catfish, while all other foods are under the purview of the FDA. NBFDS affects foods when the two chief ingredients are under FDA supervision or when water, broth or stock is the principal ingredient. This means if the two main ingredients in a product were under USDA jurisdiction and mixed with other GE products, a GE label would not be applicable in that circumstance.

QR Code
The GE disclosure statement could be a QR code.

In order to create an accurate evaluation and overcome these challenges, Bovay drew upon other studies and examined international practices regarding the labeling of GE food and other proposed domestic legislation, including ballot measures in California and New York. Sixty-five countries have enacted GE labeling standards and, prior to the passage of NBFDS, twenty-five states had proposed labeling legislation. These reflect a wide variety of examples for what legislators might delineate for the federal law. The impetus for NBFDS was a Vermont GMO labeling law that passed in July 2014. Its passage prompted Congressional lawmakers to take action that would override other probable state laws that would follow but regulators still have a lot to do, including deciding on the design and/or wording of the GE label itself. It could be a text statement, symbol or even a QR code, an electronic barcode that would require consumers to use their cellphone to find out if the product contains GMOs.

“A QR code would not easily communicate any information to consumers. Even using the code could lead the public to an ambiguous message that a product may contain GMOs and not a definitive statement or further information about which ingredients could be GE. Maybe consumers will start to avoid products with QR codes, or any GE label or statement, altogether. It’s all conjecture at this point. We can say that the cost of the labeling itself is minimal, estimated to be only about $160 to 230 million per year. It’s the other many unknowns that we’ve tried to estimate in our study that could drive the cost of labeling into the billions,” says Bovay.

“We do not yet know what the regulation standards of the law will be nor what mechanisms will be used to enforce them so it’s hard to forecast impacts more specifically than we’ve done. What roles will the USDA and FDA play? Who will test for GE and verify products? Who will enforce the labels? How are companies and consumers going to respond? The more information we have, the better we can predict consumer, producer and industry response and, in turn, how those decisions will affect costs. It is unlikely we will know any additional details until the law takes effect. Regulators tend to work until the last available minute.”

By Jason M. Sheldon