New report finds that mandatory country of origin labeling has not increased demand for U.S. beef

Dec 7, 2012

Demand for U.S. meat products covered by the mandatory country of original labeling (MCOOL) law that took effect in 2009 has not been impacted by the presence of the labels, according to a new analysis by the Kansas State University (KSU) Department of Agricultural Economics.

The analysis, conducted by KSU economists Glynn Tonsor, Jayson Lusk, Ted Schroeder and Mykel Taylor, and funded, in part, by USDA, involved in person surveys and experiences in grocery stores in Texas, online surveys and an analysis of retail scanner data.

“The overriding finding of limited awareness of MCOOL, narrow use of origin information in purchasing decisions and no evidence of a meat demand impact following MCOOL implementation is consistent with the argument that voluntary labeling by country of origin would have occurred if it were economically beneficial to do so,” the study’s authors wrote.

Specifically, the research found that only 23 percent of respondents were aware of MCOOL, while 12 percent incorrectly believe it was not law and the majority of participants said they never look for origin information when buying fresh beef and pork products.

In addition, they documented through the on-line component that consumers value labeling like “Product of North America” approximately the same as “Product of the United States.” And the study concluded that across species, there was no change in demand for products following MCOOL implementation.

Several groups have cited the study as proof that MCOOL has some serious flaws.

“These findings affirm our prediction that MCOOL would prove costly with no benefit,” said American Meat Institute President J. Patrick Boyle. “We always argued that the lack of demand for country- of-origin labeled product through the voluntary program that existed before MCOOL took effect was strong evidence of lack of demand for such labels.”

While the report generated several key points, the authors highlighted a few they consider to be the top economically related in a review:

1. Demand for covered meat products has not been impacted by MCOOL implementation. Across a series of demand system models estimated using retail grocery scanner data of MCOOL covered products, changes in consumer demand following MCOOL implementation were not detected. That is, no evidence of a demand increase in covered beef, pork, or chicken products, as a result of MCOOL, was identified.

2. Typical U.S. residents are unaware of MCOOL and do not look for meat origin information. In an online survey, 23 percent of respondents were aware of MCOOL, 12 percent incorrectly believed MCOOL was not law, and nearly two-thirds of respondents “don’t know” whether MCOOL is a law. Similarly, the majority of in-person experiment participants did not know whether MCOOL was in place, despite the fact that they were standing near a retail meat counter. Furthermore, the majority of inperson participants also stated they never look for origin information when shopping for fresh beef or pork products.

3. Consumers regularly indicate they prefer meat products carrying origin information. However, consumers reveal similar valuations of alternative origin labels. In both online and in-person assessments, research participants regularly select meat products carrying origin information over unlabeled alternatives consistent with previous research. However, in an online assessment, consumers revealed valuations of meat products labeled “Product of North America” to be approximately the same as “Product of United States.”

4. Our conclusions hold across the species and products evaluated. In our inperson and online based assessments, we obtain the same conclusions whether evaluating beef steak, pork chop, or chicken breast products—there was no change in demand following implementation of MCOOL. Similarly, in estimated demand systems we regularly found no change in demand for beef, pork, or chicken products.

The study concluded that the overriding finding of limited awareness of MCOOL, narrow use of origin information in purchasing decisions, and no evidence of a demand impact following MCOOL implementation is consistent with the argument that voluntary labeling by country of origin would have occurred if it were economically beneficial to do so. More broadly, the findings of this project generally support the assertions of MCOOL opponents who have asked “where is the market failure?” “While no one project can resolve all the political and economic issues surrounding the MCOOL situation, it is our hope that the findings of these studies will be utilized to improve decision making regarding the policy going forward,” the authors wrote.

Despite research such as this, some cattle groups continue the MCOOL battle.

After implementation of MCOOL in March of 2009, U.S. trading partners, Mexico and Canada, challenged the law, presenting their case to the World Trade Organization (WTO). While WTO ruled in favor of the challenge, implementation has been slow, and it now lies with the Dispute Settlement Body for action.

Last week, a WTO arbitrator set a deadline of May 23, 2013, for the “reasonable period of time” for the implementation of Dispute Settlement Body recommendations and rulings.

The U.S. had asked for a January 2014 deadline on the grounds that it needed extra time in the event regulatory changes would be needed. Canada and Mexico countered that the deadline should be early in 2013. Now, the arbitrator has concluded that it “does not justify granting additional time in this case." He said that there are enough flexibilities in the U.S. rulemaking process that “eight months (from the date of adoption) should suffice for the United States to adopt a modified COOL regulation.”

U.S. Cattlemen’s Association (USCA) sent out a release last week pushing for WTO to continue to allow the U.S. to implement COOL.

USCA President Jon Wooster stated, “USCA has remained committed to this issue and will continue to fight for the U.S. cattle producer and consumers’ right to this information regarding where their meat products originate and are raised.

“USCA will continue to work to ensure that the changes needed by May 23, 2013, maintain the legitimacy of the rule and do not take away from the basis of the law which is to allow consumers the right to this information and for U.S. cattle producers to identify their products at the retail level.”

R-CALF USA COOL Committee Chair Mike Schultz says the WTO is attempting to coerce the U.S. into repealing or modifying COOL.

“It is utterly ridiculous that our Great Nation is acting as if we are subservient to unelected foreigners at the WTO,” said Schultz in a press release.

In September, R-CALF USA joined with the Made in the USA Foundation in a lawsuit that challenges the authority of WTO to issue rulings that are inconsistent with U.S. laws.

Joel Joseph, chairman of the Made in the USA Foundation, said, “When the United States joined the World Trade Organization, Congress specified that the WTO had no power to override U.S. law. Now the WTO is attempting to do just that. The foundation, along with R-CALF USA and other groups, are suing the WTO and the United States to keep the Country of Origin Labeling Law in force.”

Despite those supporting labeling, other analysts point out the importance for Congress to take the steps necessary to comply with the ruling to avoid the sanctions that almost certainly will be requested by Mexico and Canada. — Traci Eatherton, WLJ Editor