GMO Labeling: Bad for Organic Farmers?

On April 29, Vermont became the first state to pass a bill that would make it mandatory for foods containing genetically modified organisms (GMOs) to be labeled as such. On May 9, that bill became law. As you might have expected, the law is being challenged by the food industry, but if that challenge is unsuccessful, the law is expected to take effect in 2016.

If you have been reading this blog for some time, you know that, as a development agricultural economist concerned with food security, I am in favor of GMOs as a means to ensure that people the world over have access to plentiful, nutritious, and safe food. I emphasized the word “safe” in the previous sentence given that the bulk of the opposition to GMOs stems from a mistaken understanding among some and misguided — if not misleading — efforts by others to convince those same people that GMOs are unsafe and have ill effects on human health. For a discussion of that debate that tried to lay out both sides of the debate, see this previous post of mine.

What I wanted to discuss today was the presumed effects of GMO labeling laws on farmers. Specifically, their effects on organic farmers. This post stems from a conversation I had with Per Pinstrup-Andersen when I was at Cornell to give a talk earlier this year. He was the one who convinced me that GMO labeling laws would likely end up hurting organic farmers. Thus, I cannot claim intellectual paternity of the argument I’m laying out below.

GMO Labeling Laws: Bad for Organic Farmers

Imagine you are convinced that GMOs are bad for you (if you read this blog regularly, it is probably difficult for you to imagine that, but I want you to try nonetheless). Now, suppose you live in a world where there is no GMO labeling. There are two kinds of food out there: organic, and non-organic food. It is quite possible that some non-organic food is GMO-free, but there is no way for you to know. What you do know, however, is that organic food is GMO-free with certainty. So you tend to buy lots and lots of expensive organic food.

Now, suppose the government of the country in which you live decides to pass a law that would force food producers to put a label that says “Contains GMOs” on any food that does contain GMOs. “Groovy!,” you think to yourself.

Why do you say that to yourself? Because now you are facing three types of food: (i) organic food, which is GMO-free and more expensive than non-organic food; (ii) non-organic food with GMOs, which you are not going to purchase; and (iii) non-organic, GMO-free food, which is cheaper than organic food.

If you are like most consumers, you act rationally, and you substitute away from expensive organic food toward cheaper non-organic GMO-free foods. Sure, some of your friends (and maybe even you) still choose organics, but at the market level, all things being equal, people tend to be individually rational, and to gravitate towards the cheaper of two goods. And that is exactly why it is likely that GMO labeling laws will end up putting more than a few organic producers out of business.

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  1. am

    I suppose some thoughts on the ‘politics’ behind this decision would be useful. Populism and politics do often backfire on those making the decisions as you suggest is likely to happen with this decision.

  2. Peter

    If I were to make an argument against GMO labeling, I don’t think this is the one I would make. Labeling overall seems welfare enhancing–it is more information for consumers. If you want people to purchase more organics, than it seems like consumers need to be informed about the importance of organics?

    I am for GMO labeling not because I believe GMOs are bad for me, but for two reasons: (1) uncertain ecological effects and (2) uncertain health effects. It is very difficult to provide sound research on the long-run effects on either (though I am much more concerned about (1) than (2)), and I have strong ambiguity aversion.

    Thanks for the good blog!

  3. Mary M

    I’ve heard this before–including from organic farmers. But I am not convinced that will be the outcome. It would be interesting to have some data on this to see how it plays out, though.

    First, I don’t think the label as we see it now will provide accurate info on whether something is GMO or not. “May contain…” is utterly useless. Let’s take a label like this one for Goldfish:

    They are going to have to slap a “May contain…” label on this even if it carries sunflower oil. It may not contain GMO plant matter at all. And when that label goes on, it will only confirm people’s (incorrect) fears that wheat is GMO. Also, those vitamins may be GMO–like we saw with the Cheerios thing. So there may be products that don’t use GMO plants at all which will get a “May contain…” CYA label to avoid lawsuits. This CYA label may be so ubiquitous to be absolutely useless and people will ignore it.

    And we saw with the Cheerios GMO-free label that it didn’t affect sales at all.

    I think the people who are so outraged about GMOs are a small but disproportionately shouty bunch who wouldn’t buy Goldfish anyway. And everyone else will just go on doing so. That said, I still don’t support misinformation as a label strategy just to placate shouty people.

    But–I don’t think that’s the goal of the label. As I’ve noted, the goal of the label is to start bullying individual companies to remove GMOs. And that’s a different dynamic than merely labeling and will distort the conversation and the data once again.

  4. Pingback: GMO Labeling: Bad for Organic Farmers? | Marc F. Bellemare | plantlawyer
  5. Afrophile

    Unless I’m missing something, the logic described above applies only to people who currently buy organic food only because they’re using “organic” as a crude substitute for “non-GMO” but otherwise place no value on the organic label. (People who have non-GMO reasons to buy organic would continue to buy organic.) I imagine that group of people makes up a very small proportion of the organic market. Consider, for example, that there’s a robust market for organic fruits and vegetables despite the fact that there are basically no GMO fruits and vegetables on the market. None of the current purchasers of, say, organic apples are doing so to avoid GMOs, so they’d be unlikely to substitute to non-GMO, non-organic apples if suddenly they became available.

    As an aside, I think this claim is a straw man:
    the bulk of the opposition to GMOs stems from a mistaken understanding among some and misguided — if not misleading — efforts by others to convince those same people that GMOs are unsafe and have ill effects on human health.
    Many people oppose GMOs for many different reasons that have nothing to do with fears about the health effects of consuming GMOs.