Oregon will soon vote on Proposition 92, which requires mandatory labeling of GM foods. While opponents of the measure warn labeling costs will increase food prices, supporters just released a study saying the median cost to consumers would only be $2.30 per year. But that estimate overlooks some crucial ingredients.

The 14-page study, published by the Portland-based consulting firm ECONorthwest, was commissioned by Consumers Union, the national organization that publishes Consumer Reports.

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As the Oregonian reports:

"That's less than a penny a day for each consumer," said Jean Halloran, director of food policy initiatives at Consumers Union, the policy arm of Consumer Reports. "A tiny fraction of the cost estimates put out by industry and certainly a very small price to pay for consumers' right to know if their food has been genetically engineered."

Halloran said the results disprove anti-labeling television ad claims that mandatory labeling of GMO products could cost anywhere from $400 to $800 annually.

Robert Whelan, a senior economist with ECONorthwest, said the effort involved pulling together "every bit of research we could find" on the topic of costs associated with GMO labeling requirements.

But Dana Bieber, a spokeswoman for the No on 92 Coalition, said the real costs associated with the measure will fall upon food manufacturers who will have to remake their products just for the state of Oregon.

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And therein lies the crucial issue. The ECONorthwest study examined the costs of adding labels to existing products—it didn't look at the costs associated with food companies and farmers who would have to change the ingredients and crops that they are currently using. Although that's not mandatory, many believe it's preferable to adding a label that would discourage shoppers from buying their products, which are routinely described as "Frankenfoods."

De Facto Regulation

Indeed, the very first page of the ECONorthwest study makes the following disclaimer:

Many studies consider possible market impacts (e.g., speculation regarding consumer behavioral changes), and other matters not directly related to the cost of designing and labeling a product as containing a GE ingredients. A number of these studies report estimates of food price impacts from scenarios in which companies subject to GE labeling requirements are assumed to reformulate their products to contain only organic ingredients. We did not consider such scenarios. Rather we approached the question as FDA did in its study of the cost impact of nutritional labeling. FDA states that its model does not consider reformulation costs as "they depend on marketing decisions and are impossible to predict. Moreover, they do not result directly from these proposed rules."

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It's true that the FDA does not consider the" reformulation costs" of products when estimating the cost impact of nutritional labeling. But, the report fails to mention that the FDA is also required by law "to analyze the costs and benefits of proposed food and cosmetic regulations prior to implementation to make sure that the regulation will be socially beneficial."

To that end, the FDA does have a "Reformulation Cost Model" that helps estimate how much it will cost food manufacturers to change their ingredients in response to new regulations. And, as the FDA itself acknowledges, "Many of the food safety and nutrition regulations proposed by the FDA require reformulation of affected products or induce manufacturers to reformulate to avoid labeling changes."

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Long story short, although GMO labeling doesn't technically regulate the content of food, it will likely have the effect of compelling companies and farmers to reformulate their products to remain competitive.

Hidden Costs

The FDA cost model doesn't currently address genetically modified foods because the U.S. approach to regulating GMOs is premised on the assumption that regulation should focus on the nature of the products, rather than the process in which they were produced — which is why the FDA states on its website that it "has no basis for concluding that bioengineered foods differ from other foods in any meaningful or uniform way, or that, as a class, foods developed by the new techniques present any different or greater safety concern than foods developed by traditional plant breeding."

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However, there are other studies that have assessed the real world cost of GMO labeling. The Washington State Academy of Sciences published a report last year saying that the annual costs to the food industry would range from $150 million to $920 million. Similarly, a study prepared by Cornell University estimated that mandatory labeling would result in costs with "a midpoint value of $224 for the four person family, or $1.1 billion annually for all New Yorkers."

Why so much? For starters, in the United States, over 90% of corn and soybean crops are now GM. Because of this, about 70% of U.S. processed foods contain some ingredients from GM plants or products of GM plants.

As James E. McWilliams writes in Slate:

A GMO label….means that food producers would have to cleave the food system's supply chain to segregate and audit GMO and non-GMO ingredients. This would require them to prevent cross-pollination between GMO and non-GMO crops, store GMO and non-GMO ingredients in different locations, establish exclusive cleaning and transportation systems for both commodities, and hire contractors to audit storage facilities, processing plants, and final food products.

The food system's foundation would tectonically shift to accommodate dual ingredient streams (if not multiple streams). It would have no choice. GMO and non-GMO crops are currently massively mingled. The logistics of crop segregation….terrifies conventional farmers.

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Proponents of GMO labeling argue that, as the labeling requirement is adopted by other states, the demand for non-GMO versions of corn and soybeans will increase, causing production to expand and prices for non-GMO ingredients to decline.

But there's no way to be sure how many other states will adopt mandatory labeling laws. And, even if they did, it's unlikely that they will uniformly agree upon what constitutes GM food. For instance, this past may, Vermont passed a law requiring that all genetically modified foods sold in the state must be labeled. The legislation, considered the toughest GMO labeling law in the country, goes into effect in 2016. But, for the time being, it includes a mighty big loophole that excludes the labeling of milk and cheese. The state argues that milk derived from a dairy cow that ate genetically modified feed is not GM food. But activists and food retailers such as Whole Foods do believe it should be labeled.

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Where do consumers in Oregon stand on this question? And, how much will it cost food manufacturers if labeling standards vary from state to state? GMO-labeling proponents might soon learn the underlying truth of the old saying, "There's no such thing as a free lunch."