Demands for mandatory country-of-origin labeling (COOL) for some
retail food products have sparked considerable controversy. Proponents—primarily
some cow-calf producer and fruit and vegetable grower/shipper associations—claim
such labels would benefit consumers who are concerned about food
safety, who wish to support U.S. producers, or who believe that
U.S. foods are of higher quality than imports. Others—cattle
feeder and hog finishing operators, meatpackers, processors, and
retailers—argue that mandatory labeling will merely raise
costs and bring few benefits.
In 2002, Congress incorporated COOL in the Farm Security and Rural Investment
Act. Mandatory labeling rules were slated to go into effect by September 30,
2004, but Congress has recently agreed to delay COOL for 2 years to revisit
some of the legislative requirements and consider making COOL voluntary. Unless
the law is changed, retailers will be required to identify red meats (beef,
lamb, and pork), fish and shellfish, fresh and frozen fruits and vegetables,
and peanuts as being from the United States, from another country, or from
mixed origins. The 2-year delay will apply to meats, produce, and peanuts,
but not to farm-raised and wild fish.
Researchers have tried at least two ways to determine whether benefits of
mandatory COOL exceed costs. The first, an engineering approach, requires
a calculation
of likely expenditures for segregation and recordkeeping—the activities
necessary to prove a product’s origin—along with an estimate of
what labels are worth to consumers. To estimate value to consumers, some analysts
have relied on consumer surveys asking consumers whether they want labels.
Such surveys must be carefully designed if they are to reveal consumers’ willingness
to pay for labels. The second approach entails drawing inferences about costs
and
benefits from the actual behavior of suppliers and consumers in the marketplace.
Food manufacturers infrequently label food as “Made in USA.” The
absence of such voluntary labeling suggests that suppliers believe consumers
either do not care where their food comes from or prefer the imported product.
It is also possible that consumers prefer domestic products, but are unwilling
to pay higher prices to cover labeling costs. Any of these explanations implies
that suppliers believe it is generally not profitable to label.
Some consumers may actually prefer such labels, but this group may be too small
for markets to satisfy their demands profitably. In this case, consumers who
value the information may be better off with mandatory COOL, depending on how
much they are willing to pay for label information and the cost of providing
it. Even for these consumers, however, costs could exceed the benefits. For
consumers who are indifferent to labels, the higher prices resulting from mandatory
COOL would make them unequivocally worse off.
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