|
Originally published Vol. 2 Issue
2 (April 2004)—updated May 2007
Mandatory Country-of-Origin Labeling—
Will It Benefit Consumers?
Barry
Krissoff and Fred
Kuchler
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 postponed
the deadline twice, and COOL is now slated for September
2008. Unless the law is changed, retailers will
be required to identify red meats (beef, lamb, and
pork), fish and shellfish, fresh and frozen fruit
and vegetables, and peanuts as being from the United
States, from another country, or from mixed origins.
The 4-year delay will apply to meats, produce, and
peanuts. COOL has been in effect for farm-raised
and wild fish since April 2005 and will not be affected
by the delay.
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.
|
Download PDF version