Lessons from the California GM Labeling Proposition on the State of Crop Biotechnology

1. Lessons from the California GM Labeling Proposition on the State of Crop Biotechnology David Zilberman, Scott Kaplan, Eunice Kim, and Gina Waterfield Berkeley Bioeconomy Conference 2013

2. A Quick Overview • Proposition 37 was introduced to require mandatory labeling of food sold to consumers made from plants or animals with genetic material changed in specified ways. Figure 1: Demonstrates the change in voter preference for the proposition from July 2012 to the November 6, 2012 election date

3. Political Economy of GM • Interest groups have a large impact on regulation and use political/economic capital to influence policy making decisions. • Stakeholders against GM • Organic producers, pesticide companies and distributors. • Stakeholders for GM • Biotechnology companies (like Monsanto), the farming sector using GM, technology startups, and universities and research institutions engaging with GM

4. Public Perception of GM • Large difference between US and European perceptions • Negative prior beliefs about GM caused a positive WTP for labeling • However, price discounts can sway consumers to purchase GM • Attitudes towards GM reflect attitudes towards food safety and environmental sustainability • Framing of GM plays a role in decision making regarding GM, but product discounts have a bigger impact.

5. Conceptual Framework of Voting for Labeling • Features of framework: • Heterogeneity of voters • Cost of labeling • Comparison of mandatory vs. voluntary labeling • Comparison to Median Voter Model • Goal of campaigning—increase consumers’ WTP and reduce their perceived change in price.

6. Mandatory vs. Voluntary Labeling • Price effect: • With mandatory labeling, the additional cost is distributed among all consumers • With voluntary labeling, the additional cost is distributed among consumers who choose to purchase these products • Introduction of mandatory labeling may have a negative surplus effect on the population • Voluntary labeling always has a positive surplus effect on the population

7. Is the Proposition an Optimal Mechanism to Assess Public preference? • Who will vote for the proposition? • People who’s WTP to avoid GM is greater than the cost of labeling • Who will vote against it? • People who’s WTP to avoid GM is less than the cost of labeling • However, the majority may not be willing to pay for labeling and the proposition will lose. • Yet, if the total WTP to avoid GM is greater than the cost of labeling, total welfare due to labeling may be positive even if the majority of people do not support it

8. Background on Labeling Proposition • Requires the labeling of certain plant and animal products containing GM ingredients or processed using GM technology • Significant exceptions: Meats produced from animals fed GM feed or injected with GM materials, medicines, food in restaurants, alcoholic beverages, and raw foods unintentionally produced with GM materials • Monitoring and enforcement costs • From farm-level monitoring of crop treatment to regulation of GM research facilities

9. Evolution of the Public Debate • Arguments for labeling • Freedom of information • No benefit/enhanced risk of GM food • Small farmers hurt by large biotechnology companies • Arguments against labeling • Response to freedom of information—the market will dictate the use of labeling • GM increases food availability without jeopardizing safety • Benefits of GM foods in the billions of dollars, distributed among producers, farmers, suppliers, and industry

10. Proposition 37 Polling Data

11. Top Supporters and Opponents • Supporters • Organic Consumer Association (850,000 members) • Whole Foods • Nature’s Path (a non-GMO packaged food maker which raised over $650,000) • California Democratic Party • Overall, the supporters of Proposition 37 raised $8.7 million dollars • Opponents • Monsanto (raised $8.1 million, nearly outnumbering Yes side alone) • Food companies (Hershey, Pepsico, Nestle, General Mills, Kellogg) • Biotechnology companies (DOW Agrosciences, Bayer Cropscience, BASF Plant Science) • Major newspapers such as the Los Angeles Times, the San Francisco Chronicle, and the Sacramento Bee • Overall, opponents of Proposition 37 raised $45.6 million

12. 1st Stage (mid september through early october) • Pro Argument • GMOs are risky to the environment and health • Anti Argument • GMO makes a big difference and saves lives • Outcome • Support for the proposition did not change much

13. 2nd Stage (early october through late october) • Pro Argument • Freedom of information—people need to know what they are eating • Anti Argument • Voluntary labeling works • Outcome • Support for proposition decreased from 80% to 60%

14. 3rd Stage (late october through november 6, 2012) • Pro Argument • Voluntary labeling is nice, but expensive. • Anti Argument • The proposition will cost $400/family per year • The proposition has a lot of contradictions • 70% of GM food will not be examined • Outcome • The proposition was defeated

15. Campaign spending differences Source: Cal-Access, California Secretary of State Campaign Finance website

16. Momentum and Accusations • The pro side counted on strong initial support • The anti side spent money on examining the cost of the proposition and as the poll shifted against the proposition, more resources became available to enforce the anti proposition • Money matters • The pro side accused everyone who supported the proposition to be bought by large businesses • The anti side realized that when people suspected that labeling would be costly, they would not support it

17. UPCOMING RESEARCH • Web based survey of representative sample of CA voting age population two weeks prior to election • Elicited WTP for GM-free product, willingness to vote for mandatory labeling, and willingness to vote for a ban on the use of biotechnology in food production • Mean WTP for GM-free is16.7% of price of product, but only 40% of respondents have positive WTP • WTP correlated with both support for mandatory labeling and support for banning, but many supporters of labeling/ban have zero WTP

18. Summary of survey results • How do we explain the discrepancy between consumer and voter behavior? • Implications for welfare effects of public referenda

19. General Takeaways • When people are given sound reasoning as to why certain regulation may be excessive, they tend to vote against it.