Country of Origin Labeling (COOL) will be costly and have no economic benefit to consumers, a report from USDA indicates.
An economic analysis addressed to Congress by the USDA’s Office of the Chief Economist says, “the economic benefits of implementing the COOL regulations would be insufficient to offset the costs of the requirements whether analyzing the impacts through economic models of beef, pork, and poultry industries or of the U.S. economy as a whole.”
The report notes there has been some interest from consumers for COOL information, however the benefits would be minuscule monetarily. USDA found little evidence consumers would actually increase purchases of meat if mandatory COOL were to be fulfilled. The same findings were observed in a study by agriculture economists at Kansas State University and the University of Missouri.
A 2009 analysis of COOL from USDA “estimated incremental implementation costs of $1.3 billion for beef, $300 million for pork, $183 million for chicken, and $2.6 billion for all covered commodities (beef, pork, chicken, lamb, goat, fish, fruits, vegetables, ginseng, peanuts, pecans, and macadamia nuts).”
The research from Kansas State University and the University of Missouri estimated that 2009’s COOL rule would cost the U.S. beef industry $405 million in the first year, while the pork industry would see gains of $105 million in the short-term and $635 million for poultry production. For a long-term 10 year analysis the beef industry stands to lose $8.07 billion and the pork industry would be at a $1.31 billion loss in profitability. The poultry industry was the only sector that stood to reap any financial advantage in the long-term at an estimated $753 million.
USDA’s analysis differed from the Kansas State University and the University of Missouri study because the entire U.S. economy was considered by USDA rather than the individual industries of beef, pork and poultry.
The report also says, “although consumers desiring COOL information benefit from its provision, there is insufficient evidence to conclude that such benefits translate into measurable increases in consumer demand for beef, pork, or chicken. Due to increases in the costs of production resulting from COOL implementation, however, the results of economic models indicate that consumers over the longer run face higher beef and pork prices and therefore purchase less beef and pork.”
It was also determined through the report’s economic modeling the beef and pork industries will see production surpluses decline as a result of costs associated with COOL. In addition, feeder and slaughter cattle and slaughter hogs will see a reduction in prices and quantities.
Currently, the U.S. awaits a ruling from the World Trade Organization (WTO) on the legality of COOL. Both Canada and Mexico have threatened trade retaliation. A decision is expected from the WTO by May 18.
Secretary of Agriculture Tom Vilsack sent letters to several Senators and Congressmen about the WTO topic on May 1.
"Should the WTO Appellate Body find that some aspect of the COOL requirements remains inconsistent with the United States' WTO obligations, USDA stands ready to work with Congress and USTR to resolve this trade dispute. A resolution would depend on the relevant findings of the Appellate Body and could include statutory changes such as repeal of the COOL requirements or establishing a generic label," wrote Secretary Vilsack.
One of the recipients of the letter was Senator Pat Roberts (R-Kan.) who serves as Chairman of the U.S. Senate Agriculture, Nutrition and Forestry Committee. Senator Roberts believes that "full repeal" of COOL is the only way to prevent retaliation, a spokeswoman for the Senate Agriculture Committee chairman shared.
Also receiving the letter was House Agriculture Committee Chairman K. Michael Conaway (R-Texas) who rejects the recommendation of establishing a generic mandatory label that would include an option like "Product of North America."
Chairman Conaway says, "In order to avoid what could be devastating retaliatory sanctions against U.S. businesses if we lose, the starting point needs to be that mandatory COOL for meat is a failed experiment which should be repealed. The House Agriculture Committee is prepared to lead on this issue. Our goal, which is shared by industry and consumers alike, is to provide stability, not to create uncertainty."