As a result of a practical labeling scheme, the Japanese consumer can purchase non-GM products that are not organic, an option that would all but disappear with Prop 37 in California. Furthermore, in Japan, like in Australia, highly processed products such as canola oil, produced with GM crops, are exempt from labeling. In contrast, the same canola oil would have to bear a cautionary label under Prop 37, in spite of difficulties testing whether the oil has indeed been derived from GM canola. Earlier this year, the American Medical Association formally opposed the mandatory labeling of GM food. The National Academy of Sciences and the World Health Organization previously reached similar conclusions–there is no science-based justification for mandatory labeling of GM food because there is no evidence that such foods pose any risks to human health. Because it will be interpreted as a warning, mandatory labeling would imply a food safety risk that does not exist, and this in itself would be misleading to consumers. If passed, the full economic effects of Prop 37 are uncertain but there is no doubt that the measure would remove most of the certified non-GM processed foods from the California market because of the zero tolerance criterion for low levels of unintended material. Food manufacturers and retailers would be unwilling to supply a large number of both GM and non-GM processed food products due to litigation risk. For instance, there would be a change in the selection of corn flakes boxes on the food shelf. The consumers’ choice would be either organic corn flakes or corn flakes labeled as possibly containing GM. It is believed that 70–80% of processed food intentionally contain some corn,macetas cuadradas canola or soy ingredients, so these products would have to be labeled, reformulated with non-GM substitutes, or removed.

Other processed food products that do not use soy, corn, or canola could also be affected and require labeling, because they might contain unintended trace amounts of corn, canola or soy. As a consequence, Prop 37 would result in many products on the food shelf carrying a GM label. It might get to the point where there are so many products with GM labels that most consumers would just ignore the labels because they would be everywhere. For foods that contain a relatively small amount of corn or soy ingredients, the food industry could either label their products as GM or look for alternative, and possibly inferior, non-GM substitute ingredients to avoid labeling. For instance, food companies would have an incentive to use alternative ingredients such as imported palm oil to replace soybean or canola oil, despite potential health problems associated with palm oil and environmental concerns due to palm oil expansion in Asia. Mandatory labeling requirements could inhibit further development of GM technology in California’s food industry. The United States has criticized the EU’s mandatory GM labeling as being nothing more than international trade protection from foreign competition. In fact, over the last twenty years, the USDA, the FDA and the State Department, under successive administrations from both sides of the political spectrum, have publicly opposed this type of regulation at the international level because of its market distorting effects. Prop 37 may also be interpreted as an attempt to stifle competition and distort markets. In this article we outline the economic implications of GM food labeling programs to provide insight into the likely effects of introducing mandatory labeling of GM foods in California under Prop 37. Supporters of Measure 37 argue that labeling provides California consumers additional information and allows them to avoid consuming GM food. But California food consumers have that choice now. They can purchase from three different food categories: 1) conventional foods , 2) organic foods , or 3) voluntarily labeled non-GM food that is not organic. Compare this current situation to the likely outcome under Prop 37 . For targeted food products derived from GM grains, Prop 37 will most likely replace the existing three food categories listed above with just two categories: 1) organic, or 2) products labeled as “may be produced with genetic engineering.” In other words, there will be numerous GE labeled products.

For highly processed food products, a non-labeled option will remain but may only make sense using either lower grade or more expensive alternative ingredients. In general the organic suppliers will gain market share because the producers of most certified non-GM foods will have to change their label to read “may contain GM,” whereas the organic label will not be forced to change, even if the organic product has the same trace amount of GM as the non-GM counterpart. Since the perunit cost of producing non-GM crops is less than organic crops, overall food prices will rise on average as non-GM food products lose market share.Table 1 summarizes the key features of Prop 37–The California Right to Know Genetically Engineered Food Act. If passed, it will require retail labeling of some raw agricultural GM commodities as being “genetically engineered” and processed foods containing GM ingredients as “ partially produced with genetic engineering.” Exemptions from labeling would be granted to alcoholic beverages, restaurant and ready-made food, foods “entirely” derived from animals, and any food certified as USDA Organic. Also exempt would be any raw agricultural commodity that could be certified that it was produced without the intentional use of GE seed. Furthermore, Prop 37 would prohibit food labels with the message “natural,” “naturally grown,” or anything similar. The initiative charges the California Department of Public Health with enforcement, which the Legislative Analyst Office predicts will cost $1 million annually. Prop 37 sets purity standards for non-GM food that are much higher than existing standards for organic food. Organic certification is “process based,” which means that as long as the farm is an approved organic farm, following the prescribed agronomic practices, there is less industry concern over accidental contamination and therefore no regular testing for GM. Unlike Prop 37, USDA organic standards do not have a strict “zero tolerance” standard for accidental presence of GM material. In fact, the USDA has not established a threshold level for adventitious presence of GM material in organic foods. Organic growers are listed among the coalition of supporters of Prop 37, which is understandable because of the exemption provided to them by Prop 37. If Prop 37 passes, a food product could be labeled as organic and escape the testing and litigation issues facing a similar non-organic product even if both products contained identical accidental trace amounts of GM material. Mandatory labeling is unnecessary because voluntary labeling now gives California consumers a choice to purchase food products that do not contain GMOs . One existing voluntary “GM-free” labeling program is the Non-GMO Project, a verification process organized by food retailers such as Whole Foods Market.

The Non-GMO project uses the same 0.9% threshold as the EU and under this scheme, retailers receive a price premium for selling non-GM products. Whole Foods carries numerous Non-GMO products under its private label, 365 Everyday Value®, and many of these products are also organically produced. Similarly, all food products sold at Trader Joe’s with the Trader Joe’s label are sourced from non-GM ingredients , but they are not part of the Non-GMO project. Like Whole Foods, Trader Joe’s is not actively supporting mandatory labeling of GM foods under Prop 37, perhaps because it would disrupt their product lines. Several processed food products in Trader Joe’s stores that are not privately branded would likely require the new cautionary label under Prop 37,maceta cuadrada plastico not to mention all of the products under the Trader Joe’s line that will not meet the zero tolerance . The issue surrounding Prop 37 is similar to an earlier debate that took place in the 1990s over dairy products from cows treated with rBST . The U.S. FDA ruled that no mandatory labeling of products derived from cows receiving the growth hormone was necessary because the milk was indistinguishable from products derived from untreated herds. Then the state of Vermont passed a law requiring that milk from rBST treated cows be labeled to better provide consumers information. The Vermont legislation was based on “strong consumer interest” and the “public’s right to know.” Dairy manufacturers challenged the constitutionality of the Vermont law under the First Amendment and they won. The Second Circuit Court of Appeals struck down the Vermont law, ruling that labeling cannot be mandated just because some consumers are curious. The court ruled “were consumer interest alone sufficient, there is no end to the information that states could require manufacturers to disclose about their production methods”… “Instead, those consumers interested in such information should exercise the power of their purses by buying products from manufacturers who voluntarily reveal it.” . Instead of mandatory labeling, a non-rBST standard was voluntarily developed by the industry with specifications from the FDA. It has been largely applied to dairy products, giving consumers a choice; but unlike mandatory labeling, producers voluntarily responded to consumer demand for non-rBST milk, following a bottom-up process—it was not a mandate imposed on them by top-down regulations. There are a variety of international mandatory GM labeling programs differing by the products to which they are applied, the mandated adventitious threshold, and whether they apply to the “product” as a whole or to the “process” .

Table 3 summarizes the mandatory labeling laws of a select group of developed nations. As shown in the table, mandatory labeling of GM food exists and is enforced in places like Japan, the EU, South Korea, Australia, and New Zealand. Some developing or transition economies also have mandatory labeling but without strict enforcement. With mandatory labeling, consumers are not necessarily provided with greater choice at the food store. Furthermore, there is a substantial amount of GM food eaten in the EU and Japan that does not have to be labeled. These products include certain animal products, soya sauce and vegetable oils , among others. Internationally, the Codex Alimentarius Commission, an international standards-setting body for food, examined and debated GM food labeling for over twenty years without reaching any consensus. In 2011 a decision was eventually made, but the final text approved by all countries does not provide any recommendation as to the labeling of GM food. It only calls on countries to follow other Codex guidelines on food labeling . This non-endorsement means that countries using mandatory labeling could face legitimate claims of unfair trade restrictions resulting in a World Trade Organization dispute. A labeling initiative similar to California’s Prop 37 appeared on the ballot in Oregon in 2002. This initiative also proposed mandatory labeling, but defined an adventitious threshold of 0.1% per ingredient. Despite a claim of an overwhelming level of public support for GM labeling, the initiative ultimately failed with 70% voting “no.”Additionally, even if the measure had passed, it was unlikely that producers would have segregated GM foods from non-GM, non-organic, as the costs would have been prohibitive—especially for a relatively small state with a population fewer than four million. The bulk of private costs incurred as a result of labeling requirements are from efforts to prevent or limit mixing within the non-GM supply chain, known as identity preservation programs. The cost of any IP program depends critically on the level of the adventitious presence threshold specified in the labeling program. In the case of Prop 37 these costs would be incurred throughout the processed food industry. For instance, a firm marketing a wheat food product would incur costs to ensure its product did not contain trace amounts of soy, canola, or corn, because these grains all use the same grain handling and transport system. The goal of providing consumers with additional information and choice is only met when both product types are carried in food stores. In the EU, companies resorted to substituting ingredients to avoid the label, using lower quality and/or higher priced inputs, something that could also happen in California for processed products. EU consumers were not offered much new information, since no products carried a GM label after the introduction of mandatory labeling. In fact, the EU proponents of labeling are not satisfied with the existing EU regulations because of its exemptions and they have asked for an extension of labeling to include animal products.