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Biotech Labeling Standards and Compliance Costs in Seed Production

After years of wrangling over labeling rules for biotech foods and feeds, regulators in some parts of the world are now turning their attention to the labeling of biotech seeds. This is, in part, due to the gradual recognition that compliance with food and feed labeling laws starts with seed purity. Accordingly, labeling rules for biotech seed are being devised through backward induction from existing food and feed labeling rules. For regulatory systems with strict standards, this is a tightrope exercise. Consider the European Union (EU). After seeing its food and feed biotech labeling and traceability law take effect in April 2004, European regulators have sought to finalize their regulatory framework by establishing labeling standards for biotech planting seeds. Yet, the choice of standards has remained contentious (Smith, 2004). A principal point of discord is the purity thresholds for technical unavoidable or adventitious presence, or AP, of biotech material in conventional seeds. Thresholds for AP in conventional seeds are to be set at levels that would allow the resultant crops and their derivatives to meet the existing AP thresholds for foods and feeds, which are equal to 0.9%. Under these conditions, some interest groups have called for minimum tolerances set at the level of detectability allowed by testing technology, typically 0.1%. Other groups have advocated maximum tolerances that would minimize disruptions in the agrifood supply chain, typically 0.5%. The EU Commission has sought a “middle ground”—discussing AP standards between 0.3% and 0.5%— with little success. At first glance, the differences in these AP standards seem minute. Yet they have caused strong disagreements, even inside the EU Commission. This is, in part, because little is known about the economic and structural implications of different AP standards. What is known, however, is that excessive compliance and displacement costs from structural change could bring substantial losses in social welfare. This would compromise the relevance of the seed-labeling regulation altogether (Kalaitzandonakes, 2004). In this paper, we seek to inform public policy by examining compliance costs for alternative AP standards in biotech seed labeling and evaluate their structural impacts. We use seed corn production as a case study.