Anderson

Dr. David Anderson

Country of Origin Labeling (COOL) has been a long-standing, polarizing issue within the U.S. beef industry. With current events causing producers and consumers alike to examine the U.S. food supply, talk of COOL has once again found its way to the forefront. COOL has had a long and quasi-complicated history in the U.S., and like most cases, to properly address the future it is crucial to understand the past.

COOL legislation was initially introduced in the 2002 Farm Bill, however, it was short lived because Congress did not appropriate the money necessary to fund the project so the USDA was prohibited from working on it. Come the 2008 Farm Bill, things were sorted out and COOL was mandated on beef, pork, lamb, seafood, nuts, fruits and vegetables.

COOL was not initially met with open arms across all facets of the beef industry, according to Dr. David Anderson, ag econ professor and Extension specialist for Texas A&M University. It comes as no surprise there was a cost associated with COOL, so at the time some packers, retailers and producers where reluctant to institute a labeling protocol that decreased profit for the producer and increased prices for the consumer.

“We were sort of operating under the assumption that consumers wanted COOL and they were willing to pay more for it to cover the costs of it,” Anderson said.

The line of thinking was sound, but after research was conducted, it was discovered to not exactly be true, especially when talking about beef. The research did show that consumers said they were willing to pay more for COOL, but when actually faced with the choice of whether or not to purchase a more expensive, labeled package of beef, they often didn’t.

At the retail level, beef is by far the most expensive form of animal protein. When displayed in a meat case, the average American operating on a fixed income simply can’t afford to pay for cuts of beef, especially since pork and chicken are usually less costly. So if an already expensive cut of beef becomes even more expensive, it equates to less of it moving off of the shelves, which was a detriment to the whole industry.

Shortly after COOL was enacted in the 2002 Farm Bill, Anderson had a graduate student who examined the cost of COOL at each step, and from there, tried to estimate if beef demand would have to grow in order to make COOL economically feasible. After examining the data, it was concluded that U.S. beef demand would have to increase 3-4 percent to cover the expenses associated with COOL.

The timing wasn’t great. From the mid-1970s through the 1990s, beef demand had seen a steady decline and the industry was already working to replenish demand. Increased retail prices were not doing anything to help the cause.

Aside from logistical problems within U.S. borders, COOL quickly ran into issues on the international trade level. It was Canada who initially led the charge in the World Trade Organization’s (WTO) case against U.S. COOL.

The U.S. shares long boarders with Canada and Mexico, and as a result, animals fluidly travel between the countries. Prior to the 2008 COOL mandates, U.S. pork producers were buying a lot of weaner pigs from Canadian farmers. The U.S. producers would feed out the pigs and have them slaughtered in the U.S.

Once COOL was enacted, packers really didn’t want the headache of processing pigs with Canadian origins because those pigs had to be kept track of for labeling purposes. Setting aside a whole day just to process Canadian born pigs wasn’t conducive in their minds. Since the packers didn’t want the Canadian born pigs, U.S. growers weren’t buying them, so Canada saw a fall in their pork markets.

“Canada argued that was an unfair trade barrier, essentially a tariff, on their pigs that was not previously negotiated as part of NAFTA,” Anderson explained.

A similar situation had transpired on the beef side of things, as well.

In a nutshell, that is how the WTO case went. The U.S. went through all the appeal processes they could and the WTO ruled against them every time, so by 2015, COOL was no longer required on beef and pork in the U.S.

As an economist, Anderson has the ability to look at COOL with an unbiased eye. He has noticed that no further consumer research has been done regarding COOL since 2002, and he believes a current survey of what consumers want is an excellent place to start if COOL is to be enacted again.

“I think there is room for some more research on COOL to see if our consumers have changed enough to where it changes that cost/benefit relationship of COOL,” Anderson said.

Anderson also discussed the value that could be gained from researching just how successful COOL has been on the commodities from the 2002 Farm Bill that kept the mandate.

From an economics perspective, Anderson says it all boils down to the concept of alternatives and consequences. COOL is an alternative, but the consequence is it costs more. If current research can show consumers are willing to pick up the bill and calf/pork prices won’t be negatively affected, then COOL has the potential to be successful. If the costs cannot be absorbed through increased retail prices, then what is the solution?

All U.S. beef and pork producers strive to raise the highest quality product they can, a product they are proud enough to put a label on. The logistics of trade and cost must be taken into consideration in order to make COOL a successful and sustainable labeling system.