Economist Cautions COOL Could Come with Added Costs

After five years, Country of Origin Labeling (COOL) may be back on the table, but it’s far from a done deal.

COOL was just one topic brought up this week during Tom Vilsack’s confirmation hearing with the Senate Agriculture Committee. It’s a familiar topic for Vilsack who spent eight years serving as Agriculture Secretary during the Obama Administration.

The history of COOL is decades old, but on December 18, 2015, Congress repealed the original COOL law for beef and pork. It was part of the omnibus budget bill and responded to a series of WTO rulings that prohibited labels based on country of origin on some products.

When asked if he’d consider COOL again if confirmed as the next Secretary of Agriculture, Vilsack was clear any type of possible rule would need to be updated and improved.

“If it's the same policy as it was four years ago when I left, the answer is no,” Vilsack told the committee. “We made every concerted effort to try to create better transparency, better information for consumers, because we understand and appreciate that consumers want to know where their food comes from. They want to know when they're buying U.S. or when they're buying something from someplace else.”

Vilsack went on to remind the committee why COOL was ultimately repealed.

“We attempted on three occasions to sort of strengthen the country of origin labeling unsuccessfully because of the WTO challenges by our Canadian friends, which would have resulted obviously in retaliation,” Vilsack said. “I am absolutely willing to listen to anybody and everybody who's got an idea about how we can circumvent or get to a point where the WTO doesn't necessarily slap it down, creating retaliatory impacts on American agriculture.”

One of the authors of the economic study sent to Congress during 2015 is Glynn Tonsor with Kansas State University. He acknowledges economics are different today than they were then.

“Labor costs are higher today than they used to be, and we have more automation today than we used to,” Tonsor says. “What's the net of that would have to be sorted out.”

While the economics have changed, Tonsor says the basic findings in 2015 are still the same.

“It is costly to track and segregate meat products,” adds Tonsor. “We have a decent ability to track live animals. But once you break down the animal and try to keep ground beef packages from rib eyes and so on, I'm not saying it's impossible. It is doable, but it is expensive.”

In the economic research rooted in the 2015 report, Tonsor says the numbers showed COOL’s cost outweighed the demand. 

“Origin is rarely a top issue for consumers,” he said. “Price, safety, taste, other things, often are leading protein purchasing decision makers. That's not to say origin traceability doesn't matter. Don't overreact to that, but relative importance of those things drives the purchasing decision.”

The U.S. Meat Export Federation (USMEF) says history shows demand for meat is growing around the world, no matter how it’s labeled. 

“Those demand dynamics haven't changed, whether the Country of Origin Labeling is an issue or isn't an issue,” says Dan Halstrom, USMEF president and CEO. “The demand appears to continue to grow.”

Halstrom acknowledges some key exporting markets buy just because it’s American grown and raised. 

 “It's a very obvious selling point in markets like Japan, for example,” he says. “Every chance we get, we distinguish U.S. beef versus Australian, or even domestic beef in Japan.”

However, the American label isn’t a selling point everywhere. Halstrom says some key trading partners see it as a volatile topic.

“In a market like Colombia, you have to be very careful about flying the red, white and blue [flag], because their domestic pork industry in particular is very strong,” he says.

While USMEF says COOL is a topic the organization won’t take a stance on, continuing to market American-raised beef and pork will happen with some countries in the future, whether it’s driven by policy or not. 

“Produced in and high quality from the USA is without a doubt a selling point,” he added. “We use that in a lot of markets. But I don't think it's so much a policy discussion. Whatever policy happens, happens. We're still going to be flying the red, white and blue flag anyway, where it’s appropriate.”

 Tonsor says no matter the decision in the future, from a demand standpoint, it all boils down to price. Any labeling requirement that could add to the cost for consumers, could be a dangerous path to head down. 

“And we’ve got to be cognizant of that – not to impose things that cost and therefore raise the price, and in aggregate, reduce interest of consumers in buying the product,” Tonsor says. “That's my word of caution on this.”

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