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Finally, a COOL study on labeling benefits

by 5m Editor
23 May 2003, at 12:00am

US - According to the University of Florida's research, USDAs COOL cost estimate of $2 billion for its first year massively overshoots the mark

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After months of fighting an anti-country of origin labeling battle against well-financed meatpackers and agribusiness-loving U.S. producer groups, pro-COOL forces fired back May 8 with an extensive, USDA-condemning study that shows COOL will provide significant benefits to consumers and U.S. producers.

The independent study, done by the University of Floridas International Agricultural Trade and Policy Center, pegs COOLs cost far under any of the government or private industry estimates that guess labeling will cost farmers and the food industry an estimated $2 billion to $10 billion to implement.

In fact, according to the University of Floridas John VanSickle, lead author of the 24-page report, The actual cost of record keeping for the new labeling will be less than one-tenth of a cent per pound for foods covered under the law.

The principle findings of VanSickle and co-authors Roger McEowen of Kansas State University, C. Robert Taylor of Auburn University, Neil Harl of Iowa State University and John Connor of Purdue University show both USDA and its COOL-opposing cohorts grossly exaggerated the laws implementation cost through errors in both legal and economic assumptions.

VanSickle, Taylor and Connor are ag economists, McEowen is an ag law expert and Harl is both an ag economist and ag law expert.

According to groups research, USDAs COOL cost estimate of $2 billion for its first year overshoots the mark by a staggering 90 to 95 percent. Indeed, when the lawyers and the economists applied the actual law to calculate what producers and industry must do to comply, they estimated its cost at between $69.9 million and $193.4 million.

How can the USDA--forget about industrys COOL haters--get it so wrong?

Initially, say the researchers, USDA tilted its cost estimate toward the need for third party verification, something the legislation does not require... Third party verification, they note, would be the most expensive system for the food sector to implement, a system whose costs far exceed it benefits.

A clearly better method to implement COOL, notes the study, is the presumption of U.S. origin rule. Under this approach, All products are presumed to be of U.S. origin unless they carry a mark from another country.

This sensible, easily implemented system moves the trigger point for labeling from the domestic farm or ranch--and from American farmers and ranchers--to the port of entry and to the U.S. Customs Service. Currently, federal law requires imported food to carry country of origin labels.

Additionally, the presumption of U.S. origin approach for COOL already complies with international trade rules and leaves producers untouched, say the reports authors, by red tape and record keeping that third party verification would entail.

Past analysis by COOL opponents has centered on the programs costs while the benefits side ... (has) been sorely neglected in the national debate, opines the report. When examined, however, there is overwhelming evidence (for) substantial benefits from COOL for both consumers and producers.

For example, note the researchers, if previous consumer willingness-to-pay data supporting COOL is correct--and there is no empirical reason to question it (see Issue 44)--consumers claim they will pay nearly $1 billion more per year for beef steak if they are assured of its U.S. origin through labeling.

Likewise, if ground beef carried a product of the U.S. COOL sticker, the researchers calculate consumers would be willing to pay $3.07 billion more per year for Americas most consumed cut of beef.

Similarly, beef roasts labeled through COOL would generate another $2.8 billion in sales per year.

Other important benefits, explains the report, are more difficult to quantify, but they are clear: labels inspire consumer confidence, consumers perceive a risk reduction benefit in country of origin label, and food safety.

The Florida study devotes five pages to show how USDAs $2 billion COOL cost analysis is so far off the mark. For example, according to reports authors, USDA:

  • overestimated the number of COOL-affected farmers and ranchers by 33 percent;
  • calculated producers cost for COOL implementation and record keeping at $25 per hour, over three times the Bureau of Labor Statistics hourly farm labor rate of $7.76;
  • estimated that 100,000 food handlers would be affected by COOL when a more accurate estimate is about 24,000 and, among other errors, claimed the food handlers wage was $50 an hour when the governments own number is $13.60 per hour, almost 75 percent less than the USDA estimate.
The report then boldly and quickly dismisses other cost estimates generated by anti-COOL industry representatives.

In sum, write the authors, The costs and complexity of labeling have been overblown, often to absurd levels. We disagree with the estimates of cost provided thus far by USDA and others. Our cost estimate of $69.86 million to $193.43 million is very minimal in comparison to the vast size of the food and agriculture economy. The benefits substantially outweigh the costs of labeling.

Farmers, ranchers and consumers have long held that COOLs benefits far outstrip its costs. The VanSickle, McEowen, Taylor, Harl and Connor study, the first serious, honest independent analysis of country of origin labels proves them correct on all fronts.

The study roundly and soundly impugns USDAs COOL analysis; it all but labels the agencys biased estimates and supporting math as pure bunk. Its view of industry estimates is the same: absurd.

COOL supporters now have the necessary club to beat back labeling critics and get COOL implemented as Congress intended. If farmers and ranchers fail to rally around the Florida study, COOL cannot survive the heavy industry lobbying against it.

To view the complete report in PDF format click here

Source: Illinois Stewardship Alliance - 23rd May 2003

5m Editor