February 18, 2009

COOL: A Test of Democracy and Sovereignty

Opinion –Editorial by Leo McDonnell, U.S. Cattlemen’s Director Emeritus, Columbus, MT
Contact: Leo McDonnell 406/322-4447 - Email: usca@uscattlemen.org
I was told by a reporter from the New York Times that the coalition of groups and businesses that supported the passage of COOL was the largest in the history of this country. I wouldn’t know if that is correct or not, but what I do know is every poll I have seen shows over 90% of consumers and well over 80% of U.S. cattle producers supporting country of origin labeling (COOL). I also know that in the 2002 Farm Bill, COOL was passed into law.

For the last several years we have seen the democratic process surrounding COOL held hostage by a handful of elected officials and a government agency of non-elected officials. Now that we near the implementation of COOL we see foreign governments filing complaints at the WTO challenging our democracies and the right of the people of this country to govern themselves, and challenging the sovereignty of the United States to govern itself. Make no mistake, COOL has become the litmus test of the fundamental principles and rights of this country. We will find out who governs this country - the people or foreign governments.

COOL has had its share of critics, from the monthly beef Enquirer-type publications that we all get for free - and as is often the case you get what you pay for - to the so-called free traders who preach that consumers have a right to increased imports because it allows consumers more choices; to our packer and retail friends who complain about having to identify and track the source of origin of the foods they provide; to some of the older groups claiming to represent producers who just have trouble adapting to change. So what’s the real problem?

Canada and Mexico say COOL is not fair, that it discriminates against them and is causing their imports to the U.S. to decline. That’s interesting, since nearly 90% of imported goods into the U.S. today are labeled and even though the U.S. represents only 4% of the people in the world, the U.S. is the largest importing country in the world. Saying COOL acts as a trade barrier certainly has not been the case with other labeled imported product into the U.S.

Both countries have also claimed COOL has caused their imports to the U.S. to decline this year. I haven’t looked at all the numbers from Mexico yet, but you can bet they will keep sending their cattle here. Where else will they go? Canada is even more dependent on the U.S. to dump their excess, and while Canada has blamed COOL for the decline in feeder imports this fall, this is not true.

Remember the Fall of 2007 and the record import of feeders from Canada? Remember why? Yes, Canada’s own market analysts reported they had record high barley prices, exceeding U.S. corn prices and reported they were exporting feeder cattle to the U.S. for cheaper feed costs. Now, look at the Fall of 2008 where Canada reports a bumper crop of barley and considerably lower grain prices making it cheaper to feed in Canada. Even USDA reported that “feeder cattle imports declined, diverging from their earlier pattern...it was at this time that the U.S. dollar dramatically strengthened… and feed costs for barley in Canada and corn in the U.S. fell from the summer highs. These conditions, which were the antithesis of those that initially encouraged feeder cattle imports, made Canadian beef more competitive for U.S. buyers."

We all know that even though Canada has repeatedly threatened to export more beef globally, the U.S. continues to be their number one choice, and while they complain cattle imports are down, Canadian beef imports are up. That’s no surprise. Where else is Canada going to send their excess beef and cattle, and speaking of dumping, U.S. producers may want to put pressure on their elected officials to “tee up” an anti-dumping investigation against Canada. I believe you will find those antidumping margins higher today than in 1998, when the Department of Commerce found Canada to be illegally dumping cattle into the U.S. and depressing U.S. cattle prices.

Packers claim it is too expensive to keep product separate; however, we know that many of these major packers have had to prove they can segregate product to be eligible to export to Japan and Korea. We also know that packers schedule slaughter times and that you just don’t drive in and unload at the seller’s convenience.

We also know that free trade extremists have tried to justify liberalizing trade standards by stating consumers in the U.S. have a right to more choices. Except for food, I guess. What hypocrisy.

Many of the nay-sayers have claimed there is no economic benefit to COOL. This is interesting as some of these industry groups and monthly Beef Enquirer-like publications have generated millions of dollars in efficiency gains and advertising dollars from the Beef Check-Off which mandates U.S. producers to promote their product. However, these same folks don’t want U.S. producers to be able to identify their product to the consumers who are the target of such advertising. What’s sad is that due to export requirements, many of the foreign consumers of U.S. beef now know more about the origin of our product than U.S. consumers.

I don’t know what the degree of benefits are for COOL any more than measuring the benefits of the Beef Check-off where early studies commissioned by the Check-Off questioned the ability to measure it’s value. What I do know is that in a product market there are certain dynamics and fundamentals that help drive value and demand. That is, the more choices you give consumers the greater the overall demand, and the narrower the focus of one’s advertising, the greater the response to such promotion and demand.

Also, when you look at the tremendous effort put forward by such a small group of opponents, you have to believe there is a lot more value to U.S. producers than many of us ever thought. COOL helps level the playing field for U.S. ranchers, and maybe that’s what concerns packers - that COOL improves the competitiveness of ranchers in what the U.S. International Trade Commission identified as a highly uncompetitive market.

I also know that the statement, “if consumers really wanted to have COOL the market would provide it” is nothing more than a spin by those wanting to quash such market transparencies. After all, the majority of consumers think that such labels as USDA Inspected and USDA Quality Grades signify it is a U.S. product. In fact, I stated at a U.S. Trade Deficit Commission Review hearing, “just because you buy a USDA Choice steak, doesn’t necessarily designate it is from the U.S.” During a break at the hearing, four or five of the commissioners came over to visit with me and they were upset as they thought I had mislead them by stating this fact. Now, if these international experts thought that inspection stamps and/or quality grades signified “product of U.S.”, imagine what our average consumer thinks.

I also went through the same discussion with a Fox news reporter at the Denver Stock Show. In fact, this lady became angry over this, which I didn’t blame her for as most people get upset when they believe their trust has been misused. Fortunately, enough ranchers came to my rescue and explained that USDA Inspection and USDA Prime, Choice, or Select does not mean that the product was born, raised, and processed in the U.S. So why would consumers demand something they already think they are getting? Of course, they wouldn’t.

COOL does have its challenges. USDA has crippled the intent of COOL with multi-origin labels that go against Congressional and public intent. USDA has also minimized the amount of product covered by exempting beef that is cooked or cured, even though these steps are required for consumption. Imagine telling a car importer that as long as they fill the gas tank, they can call it U.S. product.

COOL also has its challenges in promoting U.S. beef. While the vast majority of ranchers and NCBA members favor using Check-Off dollars to promote U.S. beef, to do that means that one of the major lobbying opponents to mandatory COOL, NCBA, will have oversight over such promotions. Unfortunately, we all know that the success of such promotions is dependent on a positive spirit and attitude.

COOL is about increasing choices for consumers and transparencies in marketing for U.S. producers. COOL is about regionally/nationally branding a product which many geographical and national products have found to provide greater value. COOL is about allowing U.S. producers to differentiate their product in both domestic markets and global markets. After all, how can one compete if you can’t differentiate your product and how can one develop a value-based market without differentiating product? COOL is about allowing U.S. producers to compete in a domestic and global market, instead of having to operate in an international commodity market that suppresses a value-based market. Most importantly, COOL is about change and adapting to a more global market.

Established in March 2007, USCA is committed to concentrating its efforts in Washington, DC to enhance and expand the cattle industry’s voice on Capitol Hill. USCA has a full-time presence in Washington, giving cattle producers across the country a strong influence on policy development. For more information go to www.uscattlemen.org.