The Uncertain Benefits of GMO Labeling

How does one put a price tag on avoiding an unlikely catastrophic agricultural disaster, or on the benefits of preventing it? Over the next two years, the U.S. Department of Agriculture (USDA) may have to face these and other similarly difficult questions as it creates a labeling standard for genetically modified organisms (GMOs).

Under the National Bioengineered Food Disclosure Standard, USDA is required to develop and implement a mandatory labeling standard for foods that contain GMOs. Because the labeling standard is required by law, it is possible that the standard may be implemented even if its costs outweigh its benefits. However, USDA will nonetheless have to engage in cost-benefit analysis when it presents its standard to the White House Office of Information and Regulatory Affairs (OIRA) for review. In a forthcoming paper, Harvard Law School Professor and former OIRA Administrator Cass Sunstein argues that USDA will face a significant challenge in presenting the costs and benefits that justify mandatory labeling for GMOs.

Although determining the costs of mandatory labeling of GMOs will be, on the whole, fairly straightforward, the process is likely to be contentious. The initial cost USDA will have to grapple with—the cost of producing the labels—is unlikely to present any great difficulties, as production costs are readily quantifiable. On the other hand, costs to the consumer, such as the loss of enjoyment from discovering that their favorite food contains GMOs, are difficult to ascertain. However, because the cost of reading the label is unlikely to be very high, Sunstein suggests that USDA could provide an upper or lower bound for the cost, or simply assert that the cost will not be large.

Determining the benefits of mandatory GMO labeling will be a much more difficult endeavor.

Government agencies have previously justified mandatory labeling requirements, such as the U.S. Food and Drug Administration’s labeling standards for tobacco products, by arguing that the labels provide consumers with a benefit in the form of information about the product’s health effects. By requiring labels on products that are in some way detrimental to health, agencies can help inform consumers, in hopes that they will ultimately make choices that begin to address those negative health effects. Although health benefits from labels are not easily quantifiable, determining health effects provides a metric for determining the overall benefit of a mandatory labeling system. For example, a mandatory label on a tobacco product may provide information on the instances of consumer lung cancer.

Public opinion plays a role in this analysis. A recent survey found that less than 40 percent of Americans believe foods containing GMOs are safe to eat, and 86 percent of Americans support labeling GMOs in food products. Despite the majority of the public believing that GMOs are not safe to eat, the health benefits of labeling GMOs may not justify a mandatory labeling regime.

Clashing with general public opinion, the scientific community, is in general agreement that foods containing GMOs do not present greater health risks than foods with no GMOs, although that consensus is not without challenge

In fact, Sunstein argues that using health concerns to justify GMO labeling could end up being a disservice to consumers. Doing so could reinforce misconceptions about the safety of GMOs. Instead, says Sunstein, USDA should aim to clarify the health standing of foods containing GMOs.

Given the general scientific consensus that GMOs present no health risks, USDA may have to rely on addressing ecological concerns—for instance, “threats to nontarget organisms … and threats to biodiversity”—to justify GMO labeling. However, Sunstein does not think this will be an easy task.

Even though the prevailing belief in the scientific community is that the cultivation of GMOs does not present a significant likelihood of ecological harm, there is less of a consensus about the absolute safety of GMOs in this context than there is in the context of health safety, resulting in a “non-zero risk” of ecological harm. Additionally, some of the potential ecological harms of GMOs would be irreversible. Sunstein suggests that if there is a small risk of irreversible harm, extra precautions, such as labeling, may be justified. However, he casts some doubt on this approach by pointing to the “highly speculative” nature of these harms.

Ultimately, given the difficulty of determining the benefits of GMO labeling, USDA’s best choice may be to employ a so-called “break-even analysis.” When using this approach, “agencies describe what the benefits would have to be in order to justify the costs… and suggest that the benefits” do indeed reach the threshold. Within its break-even analysis, USDA could place more emphasis on the costs that labeling imposes than on its benefits.

Sunstein concludes that, assuming the cost of GMO labeling is relatively low, USDA could highlight the low costs of labeling, and perhaps even downplay them by presenting them as the annual costs to each consumer—a number that is unlikely to be particularly high. With low costs, USDA would not need to show particularly high benefits to justify GMO labeling. These benefits could be presented in the form of the satisfaction consumers will derive from labeling of something they believe to be harmful, or mitigating to some extent the “potentially serious or even catastrophic environmental risks that cannot be ruled out of bounds.”