Should The United States Initiate A Mandatory Labeling Policy For Genetically Modified Foods?

In many countries, including those in the European Union, Japan, Australia, and China, labeling is required for foods that contain genetically modified material. Other countries, including the United States, do not require mandatory labeling of GM foods. The United States, however, does allow firms to voluntarily label their products as non-GM. This raises the question of whether a mandatory labeling or voluntary labeling policy is more efficient. Proponents of voluntary labeling policies say they are less expensive, because only the firms that wish to label their products must incur the labeling costs. In a mandatory labeling regime, all firms would need to incur additional costs, whether the costs are due to product testing, label design, segregation, mistakes in labeling, etc. Many proponents of mandatory labeling of GM foods say that consumers have a "right to know" what they are eating and proponents claim that governments should mandate labels for foods made through genetic modification. This paper presents empirical evidence on consumers' value for foods with positive (i.e. this food is made with genetic engineering) labels versus and for foods with negative (i.e. this food is made without genetic engineering) labels. The positive label is likely to occur under a mandatory labeling system, while the negative label is likely to occur in a voluntary system. Thus, we present evidence on the consumer value of different labeling policies. We estimate values using a laboratory auction experiment performed on 142 randomly chosen adult consumers in the Des Moines, IA, and Saint Paul, MN, areas, grouped in 8 experimental units. They participated in a random nth-price auction experiment, in which they bid on three familiar neutral food items (an oil, a processed food, and a fresh food) that may be genetically modified. Experimental units are randomly assigned to the labeling treatment (i.e., food items with accurate GM food labels versus no food labels). Using statistical design and econometric analysis, this paper will estimate the average value of food label regimes to consumers. This will be measured as the difference in the auction price of a particular food item with and without a GM food label. We present evidence that shows that a voluntary labeling system elicits the same consumer reaction as a mandatory labeling system. Because a voluntary labeling policy would be less expensive to implement, this paper provides evidence that the United States should not abandon the current voluntary labeling system for a mandatory one. This information could be useful to U.S. public policy makers who must decide on GM food labeling legislation.