Estimating Consumer Willingness to Pay for Country-of-Origin Labeling

By Loureiro, Maria L.; Umberger, Wendy J. | Journal of Agricultural and Resource Economics, August 2003 | Go to article overview

Estimating Consumer Willingness to Pay for Country-of-Origin Labeling


Loureiro, Maria L., Umberger, Wendy J., Journal of Agricultural and Resource Economics


Consumer willingness to pay for a mandatory country-of-origin labeling program is assessed. A consumer survey was conducted during 2002 in several grocery stores in Boulder, Denver, and Fort Collins, Colorado. Econometric results indicate that surveyed consumers are willing to pay an average of $184 per household annually for a mandatory country-of-origin labeling program. Respondents were also willing to pay an average of $1.53 and $0.70 per pound more for steak and hamburger labeled as "U.S. Certified Steak" and "U.S. Certified Hamburger," which is equivalent to an increase of 38% and 58%, respectively, over the initial given price.

Key words: beef, consumer preferences, country-of-origin labeling, dichotomous choice, willingness to pay

Introduction

The recent food safety scares in Europe and Japan, as well as increasing standards of living in the United States, have raised U.S. consumers' interests in information about the safety, origin, and production processes used to produce their food. Food retailers, processors, and producers are exploring various labeling options to provide consumers with information about the safety, origin, and process attributes of food products (Caswell). Both producer and consumer groups have considered country-of-origin labeling of beef products sold in the United States to be an alternative that would enable consumers to choose U.S.-produced beef (Brester and Smith).

The Tariff Act of 1930 requires labels identifying the country of origin on all fresh and frozen beef products imported into the United States. However, under the existing system, the label does not need to accompany the product after it has been repackaged (Becker). Therefore, beef handlers are not required to specify to subsequent buyers whether the beef (fresh or frozen) is a U.S.-produced or an imported product. The implementation of a more stringent, mandatory country-of-origin labeling system for all meat products sold in the United States has been debated for several years by agricultural producers, meat industry organizations, and consumer advocacy groups [U-S. Department of Agriculture/Food Safety and Inspection Service (USDA/FSIS)].

A number of arguments have emerged for and against country-of-origin labeling of fresh and frozen beef products. According to Becker, arguments in favor include the idea that country-of-origin labeling would give U.S. producers the opportunity to create a competitive niche market, as long as consumers select U.S. beef over imported beef. As in the debate over genetically modified foods, labeling advocates believe consumers have "the right to know" where their meat products originate. For example, a national survey sponsored by the National Cattleman's Beef Association found 78% of the 1,000 American consumers polled support country-of-origin labeling (Supermarket News}. Finally, proponents of a mandatory labeling policy argue that the costs associated with this labeling policy, as Becker pointed out, are minimal.

In contrast, arguments against country-of-origin labeling include the concern that a label is an unnecessary trade barrier. Some trade officials worry that other countries would retaliate against the United States if country-of-origin labeling were implemented, and U. S. meat exports could suffer a large reduction. Other opponents of labeling believe a country-of-origin labeling program would be difficult to implement because many beef products are processed by combining beef originating from various countries. A recent U.S. Congressional study determined that the potential costs associated with implementation of a country-of-origin labeling system would outweigh the potential benefits, because approximately 15% of the beef sold in the United States is imported (USDA/FSIS). Consequently, industry compliance costs could be high, with consumers bearing the additional costs of mandatory labeling. Finally, labeling adversaries argue that many U. …

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