Commentary: Not COOL

Rarely does a proposed regulation present a clear we-win, you-lose scenario. Usually, most laws or rulings offer something to like and something to loathe for all parties concerned.

Such was not the case with Country of Origin Labeling (COOL).

When the law was first proposed, it was tough to pretend it was anything other than a thinly disguised protection for domestic livestock producers. Although many marketing experts warned that its might not stimulate a migration of consumers to “Made in USA” meat products, a vocal segment of the cattle industry—cheered on by consumer groups always looking for their next crusade—pushed for and championed passage of the original COOL legislation.

There were three immediate problems: One, Canada and Mexico, our leading partners in meat trading, both objected and threatened to lodge a complaint with the World Trade Organization (WTO). Second, the logistics of implementation quickly became far more complex and onerous than anyone suspected. And third, the impact on consumers was best described as confusion, not confidence.

Although polling showed strong public support for country-of-origin labeling, the “yes” response pollsters elicited was a throwaway vote. Asking people if they want a theoretical benefit they believe has no consequences doesn’t truly predict behavior. But ask people if they think cops should arrest drivers who exceed the speed limit on the freeway, and you’ll get only grudging support, because drivers know the next speeder the cops catch could be them.

The original COOL labeling law for retail fresh meat products (poultry was excluded and foodservice was exempted) passed as part of the 2002 farm bill and was later expanded in the 2008 farm bill to include such foods as fresh fruits, nutsand vegetables.

Nightmare in the meat case

However, the one variable that was never understood by legislators—and equally misunderstood by consumers—was the complex nature of the U.S. meat processing industry. Few people on Capitol Hill were aware that much of the volume of what was the hot-selling new product—extra-lean ground beef—depended heavily on imported trimmings from Canada, New Zealand and Australia. Keeping track of where one-ton combos of manufacturing meat ended up by the time it was blended with several sources of commodity trimmings proved to be a nightmare, and the resulting retail labeling was confusing to most and offensive to many shoppers who thought that package of hamburger in the supermarket case they were used to buying was pure 100% All-American beef.

Worse, the rules discouraged the flow of both livestock and commodity product across the borders between the United States, Canada and Mexico and several other countries filed a complaint regarding the policy with the WTO in December 2008, calling the measure a “disguised trade barrier.”

In its complaint, according to Bloomberg News, Canada’s trade ministers noted that U.S. processors are forced to segregate Canadian animals and meat, which led some operators to avoid those products and the resulting added costs. COOL cost the Canadian cattle industry some $400 million annually, according to the Canadian Cattlemen’s Association.

Back in November of last year, the WTO ruled in favor of those countries, although in March 2012 the U.S. Trade Representative appealed the decision.Finally, last week a WTO tribunal made up of three trade officials ruled that the U.S. COOL law is indeed a violation of the WTO’s “Technical Barrier to Trade” agreement.

The ruling is the WTO’s third decision this year that has gone against U.S. both regulatory and statutory measures, including dolphin-safe tuna labeling and flavored cigarettes.

Outside the United States, the WTO ruling was clearly seen as a victory. For example, here are just a few headlines form Canada:

• The Ottawa Citizen: “Canada, Mexico win meat label decision.”
• The Calgary Herald: “Meat industry welcomes WTO ruling in meat labelling row”
• The Winnipeg Free Press: “Canada wins, again, on U.S. meat-label rules”
• The Edmonton Journal: “WTO backs Canada again in country-of-origin labelling appeal”

Can you blame them? With only 10% of our population, Canada is far more dependent on exports to sustain its beef industry than U.S. producers are.

Here in The States, most major media outlets—the ones who bothered covering the decision in any detail, that is--treated the news with the same pseudo-analysis that greeted the recent Supreme Court ruling on the Affordable Care Act: Something for everyone. But the bottom line is that if Congress doesn’t rewrite the law, WTO can apply punitive tariffs on U.S. exports.

At the end of  the day, no matter how efficiently it might have been handled, no matter how the costs might have been apportioned, no matter how vigorously the industry promoted COOL as a consumer benefit, the law was—is—ill-conceived, ineffective and of minimal value to American producers. Keeping foreign cattle and beef products out of the country due to artificial barriers ultimately doesn’t help the industry.

Making beef as affordable, as consistent and as convenient as possible is what maintains market share and supports premium pricing.

That’s far more valuable than any flag-flying labeling ever could be.

The opinions expressed in this commentary are solely those of Dan Murphy, a veteran food-industry journalist and commentator.

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