The Benefits and Costs of COOL

n the last PAER the legal and regulatory aspects of the new Country-of-Origin-Labeling (COOL) law were discussed. The American Meat Institute, other meat-industry trade associations, and many USDA officials generally opposed the passage of the COOL legislation. Some economists are skeptical about the wisdom of this policy. These positions were publicly justified by assertions that the industry costs of implementing COOL were significantly higher than the benefits to consumers of red meats, peanuts, fruits, and vegetables. This article examines the issues surrounding the benefits and costs of implementing COOL by comparing the USDA's analysis with other economic information. Benefits The benefits side of the COOL equation has been sorely neglected in the national debate. USDA has failed to consider any information relevant to benefits; so have the industry opponents of COOL. There is evidence that substantial benefits arise from country of origin labeling from the consumer perspective and from the perspective of the industry. At a fundamental level, our society values information and choice for consumers. Markets cannot operate properly unless information valued by the purchaser is available. Similarly , without meaningful choice, consumers are unable to express their preferences. The methods of estimating costs and benefits with regard to labeling are very different. The last major change in food labeling occurred in 1994, when federal legislation was passed requiring nutritional labeling on foods covering over two-thirds of the U.S. food system. COOL is far simpler than nutritional labeling that requires a chemical analysis of the content of each food item by an independent laboratory. The nature of the benefits depend in large part upon the " utility value " or " satisfaction " attributed to them by the consumer. Economic studies have shown that there are added benefits to be gained by using labels to segment the market, allowing each group of consumers to buy the products corresponding to their willingness to pay. When consumers are unable to distinguish the specific qualities of different products, they are not willing to pay as high a price as they would if they were sure that the product was of a quality more likely to precisely meet their needs. Many surveys relevant to the labeling of food have revealed overwhelming consumer support for such labeling and significant concern for information as to where food is produced. For example: ä Fresh Trends 2002 found that 86 percent of consumer respondents in a national …