Contrary to arguments made by America’s trade competitors to the World Trade Organization (WTO), an economic downturn that sapped consumer demand — not Country-of-Origin Labeling (COOL) — caused decreased demand for cattle imports into to the U.S., according to a new study released yesterday.
“COOL did not cause the declines in livestock exports to the United States, which largely coincided with a substantial global economic downturn that sapped demand for more expensive meat products,” notes the study, authored by C. Robert Taylor, Ph.D., an Auburn University Alfa Eminent Scholar and Professor.
Canada and Mexico challenged COOL provisions related to muscle cuts of beef at the WTO in 2008, alleging the widely popular labeling law was a trade barrier that compromised their export opportunities and market access to the United States for live cattle and hogs. The cost of implementing COOL, they argued, discouraged U.S. meatpacking and processing companies from purchasing livestock of non-U.S. origin and, as a result, reduced the prices of these livestock exports.
But after close examination of more robust data sources to assess the impact of COOL on market access, the study found:
- COOL has not had a significant negative effect on the price paid for imported slaughter cattle relative to comparable domestic cattle. In fact, the fed cattle price basis declined after the law went into effect. “The price basis is lower in the six years since implementation of COOL than it was the preceding four years,” the study notes;
- COOL did not negatively impact imports of slaughter cattle. “Qualitative and econometric analysis of Mandatory Price Reporting (MPR) and monthly trade and price data cast considerable doubt on assertions that COOL negatively affected imports of slaughter cattle,” says the study. Failure to recognize the effects of imported and domestic captive supplies of slaughter cattle and beef demand uncertainty, along with other factors, played a larger role in reduced import demand than acknowledged in previous studies.
- COOL did not significantly affect imports of feeder cattle. “USDA monthly data on imports of 400-700 lb. cattle did not show COOL having a significant negative effect of imports of feeder cattle from either Canada or Mexico relative to placements in U.S. feedlots,” the study points out.
Taylor’s study differs greatly from previous studies conducted on behalf of Canadian interests in a number of ways: first, it is more detailed and exhaustive than its Canadian counterparts; second, it is based on detailed Mandatory Price Reporting (MPR) data as reported by U.S. beef packers to the Agricultural Marketing Service (AMS) of United States Department of Agriculture (USDA), data the Canadian studies failed to consider.
“MPR data are highly detailed, including origin, import or domestic, of cattle slaughtered in the U.S. and is thus a statistically rich and robust data set for analyzing COOL,” the study notes. “Since the MPR information comes directly from the beef packers, the MPR price and basis trends reflect actual operational slaughter costs and offer a distinct perspective from which to assess beef packers’ statements about the costs of COOL to the U.S. packing industry.”
Previous findings were submitted to WTO by Canadian interests that are “adamantly opposed to COOL and is a plaintiff in a COOL lawsuit against the USDA.” Moreover, data provided to the Canadian consultants was not publicly available.
The study concludes that cattle exports to the U.S. are subject to a number of variables that are completely independent of the implementation of COOL. “In light of this reasoning, neither Congress nor USDA should undertake any changes to COOL based on arguments that COOL has limited Canadian and Mexican access to the U.S. market.”
“COOL is popular with consumers because they want to know where their food comes from, and it’s popular with farmers and ranchers because they’re proud to put the American label on their products,” noted National Farmers Union President Roger Johnson. “Congress needs to stay the course on COOL,” he said.
A powerpoint to accompany the study’s findings can be found here.