Academic journal article Journal of Agricultural and Resource Economics

Revealed Demand for Country-of-Origin Labeling of Meat in the United States

Academic journal article Journal of Agricultural and Resource Economics

Revealed Demand for Country-of-Origin Labeling of Meat in the United States

Article excerpt

Proponents of the U.S. mandatory country-of-origin labeling (MCOOL) law have argued that consumers prefer domestic meat and value labels confirming domestic origin. Following legislation enacted in March 2009, an ex post analysis of demand is possible to evaluate relative costs and benefits of MCOOL. This study uses retail grocery-store scanner data to estimate a Rotterdam demand model of meat products. The model results failed to detect changes in consumer meat demand post-MCOOL. Given the costs of compliance incurred by meat processors and no evidence of increased demand, our results suggest that producers and consumers have experienced a welfare loss.

Key words: country of origin, MCOOL, meat demand, Rotterdam, separability

(ProQuest: ... denotes formulae omitted.)

Introduction

Imposing mandatory country-of-origin labeling (MCOOL) in the United States was anticipated to affect demand by providing customers with additional, valuable information. Advocacy groups for MCOOL pointed to studies suggesting that consumers would prefer U.S. meat products and would be willing to pay premiums for confirmation of U.S. origin. MCOOL detractors, including Canada and Mexico, argued that the increased burden from record keeping would favor domestic meat. The subsequent lawsuits and WTO hearings have called into question the relative value of MCOOL to consumers as compared to costs faced by both domestic meat processors and North American trading partners.

Most existing research on MCOOL was conducted prior to the law's implementation, but now that MCOOL has been in place for over three years, an ex post analysis of the impacts on realized consumer demand is possible. This study attempts to determine whether MCOOL has altered U.S. demand for covered meat products since the implementation of the law.

The 2002 Farm Bill amended the Agricultural Marketing Act of 1946 to require retailers to notify customers of the country of origin of muscle-cut and ground meats from several different species. On January 15, 2009, the U.S. Department of Agriculture's Agricultural Marketing Service published a final rule, which became effective on March 16,2009 (U.S. Department of Agriculture, Agricultural Marketing Service, 2009b). Commodities covered in this MCOOL final rule include muscle cuts of beef, chicken, pork, and several other species and products (Link, 2009). Processed meat products, meat purchased at restaurants, and certain commodity meats (e.g., turkey) are exempt from MCOOL (U.S. Department of Agriculture, Agricultural Marketing Service, 2009a). Examples of the MCOOL labels now appearing on covered meat products include "Product of the U.S.;" "Product of Canada;" and "Product of the U.S., Canada, Mexico."

The length of time from the 2002 Farm Bill amendment to its implementation in 2009 resulted largely from notable contention over the proposed MCOOL rule. Segments of the U.S. meat industry supported the rule on the grounds that consumers placed value on origin labeling, while other parties suggested that the costs of implementing MCOOL would exceed expected benefits and disputed the need for MCOOL. Beyond delaying MCOOL implementation, this debate triggered a host of economic research, including estimating implementation costs and estimates of what U.S. consumers may be willing to pay for meat produced domestically, the meat demand increase needed to offset expected costs, and direct impacts on major trading partners. Nearly all of this research was conducted prior to implementation and knowledge of specific details of the final rule.

Another notable development was an assessment of MCOOL made by the World Trade Organization (WTO) and expanding political pressure on domestic policy makers. Six U.S. senators called for MCOOL labeling rules to be revised in order to address "loopholes" (Gabbett, 2009a). Led by Canada, several countries filed formal complaints with the WTO over MCOOL (Gabbett, 2009b). …

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