COOL not so cool?

 Canada has once again been stiffed by the U.S. Congress (see Globe and Mail). On Tuesday last week, the US Congress finally passed the so-called Farm Bill (Text at Library of Congress), one of the more contentious (the latest has been debated for several years) pieces of legislation regularly considered by Congress, but structured in a way that it ultimately wins bi-partisan support. For obvious reasons, the Farm Bill's provisions appeal to legislators from rural agricultural states, but also appeals to urban members because of provision for low-income food stamp programing (nearly 80% of the funds go to these programs) (See analysis in Washington Post here). The remaining 20% of the Farm Bill continues to fund various agricultural support programs, many of which are the subject of vigorous discussion in the context of the Doha Round of WTO negotiations (a subject for a later blog post).

Canadians were interested in this year's Farm Bill for several reasons, among them language regarding so-called Country of Origin Labeling (COOL) that would impose new consumer labeling for a variety of agricultural product entering the U.S., notably beef, pork, and poultry. Ottawa was hoping that some last minute lobbying in Washington would modify the requirements or perhaps eliminate them altogether (see story). Canada may have had a point. Requiring U.S. importers and retailers to apply more consumer information about where beef, pork, and poultry was born, raised, and slaughtered is likely to raise consumer prices. Moreover, the market for these products in North America is so integrated that tracing the travels of cattle, hogs, and chickens as they cross borders at different stages could be challenging. More importantly, Canadian producers are worried that new labeling requirements will be inherently discriminatory. For example, rather than deal with the hassles of labeling compliance for Canadian or Mexican products, American importers and retailers will simply opt to source more of their products from American producers because it will be easier to demonstrate where it came from.


Whether COOL is being applied in a discriminatory fashion is something that will be sorted out in the World Trade Organization. Since 2008, Canada has been litigating COOL in the WTO. Rulings thus far have given both sides reason to claim victory(Link), but also affirmed America's right to pursue product labeling requirements. The WTO's quibbles have mainly been over the proposed implementation (see link). In the wake of last week's Farm Bill, Canada has already promised to continue litigating COOL in the WTO, possibly pursuing "retaliatory" tariffs (see reaction from DFATD).

However, the real point of this blog post is that COOL and its ilk are here to stay. It's easy to be cynical about the politics behind these kinds of requirements. Indeed, a cynic can see them as largely driven by protectionist interests in domestic industry hoping that new labeling requirements will discourage foreign competition. Yet, in the case of COOL, one person's industrial protectionism is another's consumer protections. COOL is going to cost someone money (see May 2013 FAQ's USDA). But, recall that the impetus for COOL was, in part, derived from the 2003 Mad Cow episode in which bovine spongiform ensephalopathy (BSE) was found in a cow of Alberta origin. However, even that was only part of the momentum behind COOL. Such consumer labeling requirements are being imposed everywhere. In Europe, country of origin requirements were also given addition political momentum by the catastrophic BSE outbreak in the UK in the mid-1990s, the aftermath of which resulted in nearly 200 human deaths and the slaughter of nearly 5 million head of cattle as part of an effort to rebuild confidence in the British beef industry. Moreover, last year's discovery of the widespread contamination of Europe's meat supply with horse meat has further undermined consumer confidence in the food supply and provided new incentives for Brussels to consider imposing even more stringent consumer protection and consumer information requirements (link). In 2003, official reaction to the discovery of BSE in Alberta included an admonition to ranchers from Alberta's Premier to "shoot, shovel, and shut up."  In recent years, there have been several confidence-shaking instances of food-borne disease resulting in consumer deaths and massive recalls of everything from pre-cut spinach to avocados to strawberries. In each instance, the damage done to a product's reputation can be enduring if mishandled. 

All of this is taking place in an environment of enhanced concern over food safety and security, consumer demands for greater transparency, as well as a longer-term trend toward enhancing public health through big changes how products are labeled. We have come to accept that cigarette packaging seems to carry ever larger written warnings, and in Canada, graphic imagery of the consequences of smoking. Yet, nutritional information is now far more clear and consistent across different products we buy in grocery stores. In many places (New York, California), that information now extends to caloric counts on menus in restaurants (both fine and fast food).

The agricultural sector, even in highly integrated markets like North America and the EU, is rightly worried about the impact these trends toward greater transparency in consumer information will have on their bottom line. Seeing measures like COOL through the lens of naked protectionism is understandable, but misses where they fit in a series of larger trends in consumer choice and public health. Consumers are increasingly demanding more information about the products they buy, including where they are sourced and how they are made. We long ago passed the point at which ethical consumers who worried about sustainability, the ethical treatment of animals, labor rights, or the carbon life cycles of the products were on the fringes of economic activity. Ethical consumption is increasingly mainstream. Europeans, in particular, have become more and more weary of genetically engineered, industrially produced agricultural goods. Those charged with public health are increasingly worried about food safety and food security issues.

Hence, Canadian officials might be disappointed the U.S. Congress didn't purge COOL from last week's Farm Bill. But COOL is part and parcel of something much larger that producers in all sectors would be wise to embrace. The WTO will eventually sort out whether COOL is being applied fairly. However, in my view at least, COOL is emphatically NOT another example of Canadians being victimized by the U.S. Congress. COOL is here to stay. Get over it! In fact, given the reputational damage caused by the 2003 BSE crisis, and the context in which all of this is taking place, Canada's agricultural producers might consider embracing quality and transparency standards for domestic consumers well above those satisfying the toughest of country of origin requirements. Such standards would certainly come at a cost, but they could become the global standard, rebuild some lost credibility in Canadian agriculture, and would be where consumers seem to be headed anyway.....

 Just a thought.....