Monday, July 4, 2016

Mandated GMO Labels: A Regressive Tax

by Levi Russell

The predictable effects of mandatory GMO labeling will be felt very soon in Vermont and those with low incomes will be especially hard-hit. Supermarkets in the state will lose some 3,000 products from their shelves. The video on this news story is telling: people don't seem to know much about GMOs and don't really think about the negative effects of mandatory labeling. Anti-GMO organizations such as Greenpeace have been accused of running a fear campaign that isn't supported by scientific evidence. There's no evidence that GMOs are harmful to people, but a law requiring them to be labeled very likely will be.

The federal law passed in the Senate will require companies to use QR codes or dedicated websites to provide information about the presence of genetically modified organisms in their food. The compliance costs associated with this law include the addition of the QR code or website URL to the packaging, the development of the databases with the required information, and the maintenance of this database as farming practices and ingredients change. The latter two will likely be far higher than the former and will affect food prices for the foreseeable future.

Here are some of the potential indirect effects:

1) Less consumer choice - The article linked above shows that this is already becoming a reality. I suspect those 3,000 products will come back to shelves eventually, but the development of new products is now more costly due to the necessity of adding information to GMO databases.

2) Higher prices - Additional costs to food companies will effectively shift the food supply curve to the left and raise prices.

3) Less innovation - Though "very small" food companies are exempted from the rule, many startups are created with the goal of becoming mass-market products (If you don't believe me, just watch an episode of "Shark Tank."). This requirement will be another cobweb of red tape these companies have to get through to get on consumer shelves.

Maybe all these costs are worth it. Given the lack of scientific evidence of harm and the fact that humans have been modifying the genetics of food in a far more haphazard way for a very, very long time, I have my doubts. The reality is that the costs mentioned above will fall disproportionately on those with the lowest incomes. Those with moderate to high incomes will be able to pay more for the food they really want, but for those who spend a substantial portion of their income on food already will find it harder to make other ends meet.

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