Mandatory COOL: Costly and Unnecessary

Report Trade

Mandatory COOL: Costly and Unnecessary

December 18, 2019 14 min read Download Report
Jeremy Dalrymple
Research Associate, Roe Institute
Jeremy is a research associate in the Roe Institute for Economic Policy Studies at The Heritage Foundation.

Summary

Mandatory country-of-origin-labeling (mandatory COOL) is just another instance of regulatory protectionism. Mandatory COOL has been a complete failure because consumers do not value or use the information it provides. Between its implementation in September 2008 and its eventual repeal in December 2015, the requirements triggered major costs—but little in the way of benefits. Even the World Trade Organization ultimately concluded that if consumers truly wanted COOL, then the market would supply it through a voluntary program. What is not necessary is a costly government mandate.

Key Takeaways

On December 18, 2015, Congress repealed harmful legislation that required mandatory country-of-origin labeling for covered beef and pork commodities.

This regulation was a government-mandated marketing program that placed burdensome restrictions on U.S. beef and pork producers and retailers.

Some legislators are trying to bring back this misguided policy—and have even argued that it should be included in the U.S.–Mexico–Canada trade agreement.

On December 18, 2015, Congress repealed harmful legislation that required mandatory country-of-origin labeling (mandatory COOL) for covered beef and pork commodities.REF Mandatory COOL was a government-mandated marketing program that placed burdensome restrictions on U.S. beef and pork producers and retailers. Those burdensome restrictions were costly to consumers, retailers, meat packers, and agricultural producers. They were also a non-tariff trade barrier that were rightfully opposed by Canada and Mexico—and resulted in the World Trade Organization authorizing costly retaliatory tariffs against the United States.

Now, a small number of legislators and organizations are trying to bring back this misguided policy and have argued that it should be included in the U.S.–Mexico–Canada free trade agreement (USMCA).REF

This Issue Brief provides a brief overview of mandatory COOL. It explains why mandatory COOL was unnecessary, costly, and why Congress was right to repeal it in the first place.

Overview of Mandatory COOL

Mandatory COOLREF was originally included as a provision in the fiscal year (FY) 2002 Farm Bill.REF It required retailersREF to notify customers of the country of origin of covered beef and pork commodities.

The U.S. Department of Agriculture (USDA) initially issued a final ruleREF to implement mandatory COOL requirements in 2009.REF In 2013, the USDA issued a revised mandatory COOL final rule.REF

The revised 2013 final rule required labels on covered beef and pork commodities to include the country of origin for each production step. This means that the label had to expressly list each country where the animal was born, raised, and slaughtered.REF

Under the revised mandatory COOL rule, the use of multi-country labels (e.g., “product of the United States, Mexico, and Canada”) for covered beef and pork commodities were prohibited. The rule also required that covered commodities from animals that were exclusively born, raised, and slaughtered in the U.S. had to be labeled “born, raised, and slaughtered in the United States.”REF

Additionally, the rule prohibited the long-standing practice of commingling muscle cut meat with different countries of origin.REF As a result, processing plants were only allowed to process either domestic meat or foreign meat in a single production day—but could not process both domestic and foreign meat on the same day.REF This rule also marked the first time in the history of the American meat industry that it was unlawful to have meat with different “born, raised, and slaughtered” combinations in the same package sold by retailers.REF

To comply with the rule, ranchers had to keep foreign and domestic cattle and swine in separate herds, or pens, for their entire life cycle. Cattle and swine were required to be segregated based first on where the animal was born, and then further segregated based on where they were raised.REF While this was a more stringent requirement than the already restrictive 2009 mandatory COOL rule, both rules mandated segregation of foreign and domestic cattle or swine to a certain extent.REF

Mandatory COOL also had a burdensome recordkeeping requirement: It mandated that “any person that prepares, stores, handles, or distributes” covered beef or pork commodities must maintain detailed records to identify the immediate previous source for the animal, along with the immediate subsequent recipient for the animal.REF This would have to be done for the entire life and production cycle of the animal.

Mandatory COOL Will Never Be Cool—Because It Is Unnecessary

Proponents of COOL assert that it was implemented to fill an information gap for American consumers that the market was failing to provide. However, research shows that consumers neither value nor use mandatory COOL.

According to a USDA report, “[t]he infrequency of ‘Made in USA’ labels on food suggests suppliers do not believe domestic origin is an attribute that can attract much consumer interest.”REF Similarly, a report by the Kansas State University Department of Agricultural Economics stated:

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.REF

The most striking aspect of the Kansas State University report found that the majority of participants said they never look for country-of-origin information when buying covered beef and pork commodities.REF Those same researchers found that even when mandatory COOL was the law of the land, consumers were unaware of it. REF

In addition to mandatory COOL not providing information that consumers value, it is also unnecessary for food safety, as proponents claim.REF Even the USDA has repeatedly stated that mandatory COOL is not a food safety program: Rather, it is a marketing program.REF The U.S. government already requires imported meat products to meet the same high standards as U.S. meat products. The implementation of mandatory COOL had no effect on those standards.REF The USDA monitors all beef and pork imports to ensure the safety of the American consumer.

As the North American Meat Institute stated, “U.S. meat companies would not buy these products, use them in production, and apply the U.S. company label if they were not confident in the imported product’s safety.”REF So whether mandatory COOL is called a marketing program or a food safety program, it is still unnecessary for consumers.

Simply put, if U.S. consumers had demanded that the country of origin for covered beef or pork commodities be listed on the label, the market would have responded and retailers would have provided that information voluntarily.

Mandatory COOL Will Never Be Cool—Because It Is Costly

A U.S. Department of Agriculture–sponsored study estimated that mandatory COOL would cost the beef industry at least $8 billion over 10 years, and the pork industry would suffer losses of at least $1.3 billion over the same period.REF As the study explains, industry losses arose from the “increased costs of producing, processing, and marketing food products to comply with COOL without a commensurate measurable increase in consumer demand.”REF

The report also stated that consumers would suffer an economic welfare loss of at least $7.96 billion over 10 years.REF The costs to consumers stemmed from the fact that mandatory COOL caused higher retail prices, along with lower retail quantities of covered beef and pork commodities “due to the costs incurred by producers to implement” mandatory COOL.REF

Ultimately, these economic losses to producers, packers, retailers, and consumers would lead to a “smaller overall industry with higher consumer prices and less product available.”REF

Mandatory COOL Will Never Be Cool—Because It Violates U.S. Trade Obligations

Mandatory COOL is simply a protectionist scheme. Trade policy should not be about favoring one U.S. industry or interest group over another. Rather, it should focus on lowering trade barriers. However, proponents of mandatory COOL were transparent about their desire to favor domestic livestock over foreign livestock. REF Because of the burdensome regulations imposed by mandatory COOL, it achieved those aims.

Mandatory COOL created a competitive advantage for U.S.-born, -raised, and -slaughtered cattle and swine. Canada contended that the competitive advantage arose from “incentives for US industry to use exclusively US-origin animals” in order to avoid substantial costs associated with mandatory COOL requirements.REF Because mandatory COOL treated imported livestock less favorably than domestic livestock, Canada and Mexico challenged mandatory COOL in the World Trade Organization (WTO) on the grounds that it had a trade-distorting impact by reducing the value and the number of cattle and swine that were shipped to the U.S.

The WTO found that there was “a considerable COOL discount of USD 40–60 per head for imported livestock.”REF In other words, processors of livestock were paying less for foreign livestock than for domestic livestock, even when the foreign livestock and domestic livestock were identical in every way. This was not the case before the enactment of mandatory COOL. This proved that “major processors are passing on at least some of the additional costs of the COOL measure upstream to suppliers of imported livestock.”REF

The WTO determined that while mandatory COOL imposed significant costs on the beef and pork industry as a whole, importers faced a disproportionately higher share of the costs. Therefore mandatory COOL amounted to less-favorable treatment for foreign beef and pork covered commodities.REF

In response to mandatory COOL, the WTO authorized Canada and Mexico to implement retaliatory tariffs against the U.S. and set the retaliation levels at $781 million for Canada and at $228 million for Mexico. The list of products that Canada and Mexico would be targeting for retaliation went beyond agricultural goods. The wide-ranging list also targets the U.S. manufacturing sector, along with other consumer goods.REF

These economically devastating retaliatory tariffs drove Congress to repeal mandatory COOL requirements for beef and pork on December 18, 2015. Several months later, the USDA issued a final rule that removed the mandatory COOL requirements for covered beef and pork commodities.REF

Recommendation

Congress made the correct decision in 2015 by repealing mandatory COOL. This policy should never see the light of day again—including in any trade agreement such as the USMCA.

The goal of a trade agreement should be to lower trade barriers. Lower trade barriers mean more free trade so that families pay competitive prices for beef and pork products at the supermarket.REF Mandatory COOL is the antithesis to this goal.

Conclusion

Mandatory COOL is just another instance of regulatory protectionism. As a marketing program, mandatory COOL has been a complete failure because consumers do not value, nor use, the information that it provides.

Between its implementation in September 2008 and its eventual repeal in December 2015, the requirements triggered major costs—but little in the way of benefits. For those who want country-of-origin labeling, this still is possible. Even the WTO ultimately concluded that if consumers truly wanted COOL, the market would supply it through a voluntary program.REF What is not necessary is a costly government mandate.

Jeremy Dalrymple is Research Associate in the Thomas A. Roe Institute for Economic Policy Studies, of the Institute for Economic Freedom, at The Heritage Foundation.

Authors

Jeremy Dalrymple
Jeremy Dalrymple

Research Associate, Roe Institute