USDA report on COOL not exactly a ringing endorsement

USDA report on COOL not exactly a ringing endorsement By Rita Jane Gabbett on 5/4/2015 USDA’s latest analysis of mandatory country of origin labeling (COOL) is consistent with earlier looks at the controversial rules mandated by Congress since 2009, namely that the economic benefits are insufficient to offset the costs, whether analyzing the impacts through economic models of beef, pork and poultry industries or of the U.S. economy as a whole. The study team consisted of Glynn Tonsor and Ted Schroeder at Kansas State University and Joe Parcell at the University of Missouri. Their study considered both the 2009 and 2013 USDA final labeling rules on the U.S. beef, pork and poultry markets, as required by the 2014 Farm Bill directive. The mandatory report to Congress, delivered Friday by the USDA’s Office of the Chief Economist, concluded although there is evidence of consumer interest in COOL information, measurable economic benefits from mandatory COOL would be small. “USDA’s regulatory impact analyses also found little evidence that consumers would be likely to increase their purchases of food items bearing U.S.-origin labels,” the report stated. Similarly, the Tonsor, Schroeder and Parcell study concluded, after a review of consumer labeling theory and available academic research, that there was little to no evidence of a measurable increase in consumer demand for beef or pork as a result of COOL requirements. The report noted, however, a consumer’s right to know benefits those consumers who desire COOL information. In regard to producers, packers and retailers, USDA’s regulatory impact analysis for the 2009 COOL rule estimated incremental implementation costs of $1.3 billion for beef; $300 million for pork; $183 million for chicken; and $2.6 billion for all covered commodities (beef, pork, chicken, lamb, goat, fish, fruits, vegetables, ginseng, peanuts, pecans and macadamia nuts). To estimate longer-run economic impacts from the rule, USDA analyzed how the estimated cost shifts would affect the overall U.S. economy after a 10-year period of adjustment. USDA’s economic modeling estimated that those cost shifts would result in an estimated $212 million reduction in consumers’ purchasing power in the 10th year following implementation of the 2009 COOL regulation. The study estimated that implementation of the 2009 COOL regulation resulted in economic welfare losses in the first year of $405 million in the American beef industry, but short-term gains of $105 million in the pork industry and $635 million in the poultry industry. To estimate longer-run economic impacts from the rule, the researchers analyzed how the estimated cost shifts would affect the beef, pork and poultry industries over a 10-year period of adjustment. Over a cumulative 10-year period, the Tonsor, Schroeder and Parcell analysis found that the 2009 COOL requirements resulted in economic welfare losses totaling a discounted net present value of $8.07 billion for the American beef industry and $1.31 billion for the pork industry. Model results indicated that the American poultry industry, however, would see an increase in economic welfare of an estimated $753 million. USDA estimates of adjustment costs for the 2013 amendments for labeling of muscle cuts of beef and pork ranged from $53 million to $192 million, with the expectation that the adjustment costs would decline over time. The incremental impacts of the 2013 amendments to the COOL regulations were estimated in the study to result in additional discounted economic welfare losses, over the first 10 years, of $494 million for the beef industry and $403 million for the pork industry, but an estimated economic welfare gain of $67 million for the poultry industry.