The Welfare Effects of Implementing Mandatory GM Labelling in the USA

Although genetic engineering is a prom1Smg tool for crop varietal development, genetically modified foods continue to be controversial. Many groups that oppose these new goods are supporting a public policy of mandatory labelling for GM content. Debate, however, contirmes over whether the USA should impose a mandatory labelling policy for genetically modified (GM) foods. Groups that favour a mandatory labelling policy for GM foods include Greenpeace International (1997) Friends of the Earth (2001), and the Consumers Union (Consumer Reports, 1999). Groups opposing mandatory GM labels include the Council for Biotechnology Information (2001) and the US Food and Drug Administration (FDA) (2001). This contentious issue has engaged debate from all sides of the spectrum, yet only modest economic research has examined the merits and pitfalls of a new regulation that requires mandatory labelling for GM foods in the USA.This chapter examines the potential welfare effects of imposing a mandatory GMlabelling policy in the USA. We first discuss when a mandatory labelling policy is likely to benefit consumers. We then describe an experimental auction designed to provide data that are needed to test whether consumers will benefit from a mandatory GM-labelling policy. For a sample of adult consumers living in two major Midwestern cities, our results do not contradict the hypothesis that consumers interpret voluntary and mandatory market signals identically. These findings suggest that it would be more e fficient or welfare improving for the USA to continue its voluntary labelling policy and resist calls for new regulations that mandate labelling of GM foods.