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COUNTRY-OF-ORIGIN LABELING
WEDNESDAY, APRIL 28, 1999
House of Representatives,
Subcommittee on Livestock and Horticulture,
Committee on Agriculture,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:20 a.m., in room 1300, Longworth House Office Building, Hon. Richard W. Pombo (chairman of the subcommittee) presiding.
Present: Representatives Boehner, Everett, Lucas of Kentucky, Chenoweth, Schaffer, Calvert, Gutknecht, Combest [ex officio], Peterson, Holden, Condit, Dooley, Stabenow, Etheridge, Boswell, Lucas, and Stenholm [ex officio].
Also present: Representatives Moran, Walden, Barrett, Thune, Ros-Lehtinen, and Minge.
Staff present: William E. O'Conner, Jr., staff director; Tom Sell, Pete Thomson, John Goldberg, Christopher D'Arcy, Brent Gattis, Callista Bisek, Wanda Worsham, clerk; Andy Baker, Howard Conley, and Andy Johnson.
OPENING STATEMENT OF HON. RICHARD W. POMBO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. POMBO. Good morning. This meeting of the Subcommittee on Livestock and Horticulture to receive testimony on the issue of country-of-origin labeling for meat and produce will come to order.
Today's hearing will allow this subcommittee to examine the issue of country-of-origin labeling for meat and produce. Although the committee has been gathering information on this subject for some time, this will be the first hearing on the matter in quite a while. I hope to provide the members here today with a broad overview of this complicated, many-sided, and often time emotional issue. Without being limited to any one specific piece of legislation, we can explore this matter more fully attempting to understand the philosophies, the costs, the benefits, and the alternatives to mandated country-of-origin labeling.
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It was my hope to open this hearing with testimony surrounding two studies mandated by Congress in Public Law 105–277 and due on April 21 of this year. One, by the General Accounting Office on country-of-origin labeling for produce was completed on time, and GAO officials made themselves to brief congressional staff on two separate occasions. I want to thank the GAO for their being responsive to the needs of this subcommittee.
I am, however, very disturbed by the lack of such responsiveness by the Department of Agriculture with regard to their report, due the same day, on country-of-origin labeling. Although most of USDA's reports are late, this committee signaled to the Department for months its intentions to hold hearings soon after the release of the two reports. The committee was not informed until Monday of this week that their testimony would be late and that the report would not be completed at all, in violation of the law—a week after it was due. Such an attitude by the Department makes the oversight responsibilities of this subcommittee more difficult. I am requesting, today, a letter from the Secretary outlining why this report is late and the steps that will be taken to ensure that future reports receive the priority and attention required. From habitually late testimony, to unfinished reports mandated by law, to rules and regulations that are promised that sit on someone's desk while the seasons change—added together, these examples raise serious concerns about the nonchalant, if not negligent, attitude adopted toward this committee's work on behalf of American agriculture by some at the Department.
Turning to the issue at hand, I am looking forward to the testimony to explore this labeling issues so that members can better understand and appreciate all of its aspects and make sense of the rhetoric. In the final analysis, I am most interested in whether or not country-of-origin labeling, mandatory or voluntary, is a tool for producers to earn more in the marketplace. If it is, then I want to know about the methods and costs of compliance in enforcement as well as any potential trade impact. Only when we understand these points can we determine the value of any country-of-origin labeling proposal.
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I would now like to welcome all of our guests and witnesses here today and to yield to the ranking member of the subcommittee, Mr. Peterson, for any statement he may have.
OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA
Mr. PETERSON. Thank you, Mr. Chairman, for taking the time to thoroughly state today's important topic. I believe the question of whether or not to require additional labeling of fresh food products is still largely unanswered, and so I welcome this discussion. I understand and respect the driving forces behind some of the current proposals—low commodity prices and consumer awareness both deserve serious attention. Minnesota farmers and ranchers are not immune to the economic downturn that we are going through, far from it. However, I believe it is in everyone's best interest to ensure that our limited Federal resources are used in the most effective and prudent manner.
As we begin to study country-of-origin labeling more closely, there are questions I hope we will address. Number one, what are the costs and benefits of additional labeling? It is a rare day when additional bureaucracy can benefit either farmer or consumer, and so we need to move cautiously in this arena. How exactly would the proposal benefit farmers with higher prices and consumers with safer food? Let us make sure we are addressing the actual needs with any new legislation.
Number 2, what signals are sent to our trading partners with labeling proposals? As we continue to struggle to get the world community to use sound, scientific evidence in their labeling, whether it is hormones or genetically altered products, is the scientific evidence for additional labeling available.
I would also like to say that some of these problems, I think, would not be here had it not been for the passage of GATT and NAFTA, and I just want to take this opportunity to make another pitch for a proposal that I put up last year which would give the Agriculture Committee equal standing in the fast track arena with the Ways and Means Committee, and I intend to reintroduce that bill as a free-standing bill and would encourage all of my colleagues on this committee and all the members of the agriculture community to take a close look at that, because I think if we would have had that framework last time, we may not have been facing some of these problems.
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Mr. Chairman, today, I look forward to receiving today's testimony and engaging in a healthy debate, and I especially welcome my colleagues to the subcommittee and look forward to hearing their testimony. I am also glad to have the GAO and USDA here to provide us with the results of their studies on the effects of country-of-origin labeling. I would just comment to the USDA that although it is not a problem unique to this Department or this administration, it is also a deep disappointment when the reports are late, so I hope that is corrected shortly, and I want to say to the USDA that your analysis is essential to this debate, and I look forward to your comments as well as the soon to be released report.
So, again, thank you, Mr. Chairman, for calling this hearing, and I look forward to hearing the testimony.
Mr. POMBO. Thank you, Mr. Peterson.
I would like to recognize the chairman of the full committee, Mr. Combest, for an opening statement.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. Thank you, Mr. Chairman. I would like to thank you, Mr. Chairman, for having today's hearing on the subject of country-of-origin labeling on agriculture commodities. The purpose of this hearing is to examine the subject of country-of-origin labeling and to review the two statutorily mandated reports on the topic. GAO provided a report on product labeling on April 21, the due date, and has briefed staff on their findings. In contrast, the U.S. Department of Agriculture, in apparent violation of the law, has failed to comply and to complete the meat labeling report on time. USDA was even unwilling to brief the committee on the work completed so far. It is particularly puzzling since this is a topic of major concern to so many people, and according to his public statements, Secretary Glickman, himself.
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I had the occasion to meet with Under Secretary for Food Safety, Kathy Woteki, on March 15 about a number of items the Department was working on at that time. One of these items was this report on country-of-origin labeling. At that time, she told me that enforcement costs for the Food Safety Inspection Service, alone, would amount to $60 million a year. Since this represents about 10 percent of the agency's operating budget, she said it raises concerns about undermining the agency's responsibility to provide inspection service in meat and poultry slaughter and processing facilities.
Under Secretary Woteki also indicated that the Department was having a very difficult time identifying any significant benefits for livestock producers. Since my primary interest in country-of-origin labeling is to determine whether or not it has potential to help producers earn more from the marketplace, I found this conclusion to be quite disappointing.
In any event, I encouraged the subcommittee chairman to schedule a hearing right after the April 21 date so that colleagues could have an opportunity to hear and evaluate both of the mandated studies. It is very unfortunate that USDA appears to have been unable to comply with the congressional mandate. The Department's failure makes it that much more difficult to reach a thoughtful conclusion on the issue.
Since we will be unable to review the administration's report on country-of-origin labeling for meat, let me offer a few of my thoughts on the subject. I believe all of today's witnesses would agree that the label of any product serves producers best when it provides information which encourages consumers to purchase it. This is the intent of all of the country-of-origin labeling proposals—selling more farmers' and ranchers' products. By associating these products with the positive feeling consumers have with their country, State or region, we hope consumers choose on behalf of our constituents.
My colleagues will find at their seat an example of what I am talking about. On April 8, the Texas Department of Agriculture rolled out a campaign to encourage Texans to choose Texas products first. ''Go Texan'' is a campaign which employs a distinctive brand in promoting Texas food, natural fibers, leather, wine, horticulture, and all products grown or produced in my home State. Texas has enlisted actor Tommy Lee Jones and baseball Hall-of-Famer Nolan Ryan as a part of this effort. I would like to show you a short commercial that kicked off in this pro-Texas campaign.
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[Commercial shown.]
I am sure my colleagues have constituents that feel as strongly about their home State's products as Nolan Ryan does about Texas. Everyone has heard of Idaho potatoes, Washington State apples, Vermont maple syrup, and Omaha beef. These products tap into consumers' loyalties in a positive way when they are making their buying decisions. Many of the witnesses today understand this idea because they represent producers that participate in check-off promotional programs based on the commodities themselves.
As Texas and other examples have shown, there is no reason why we can't come up with creative ways to promote products based on their State, region, or country of origin. What I like best about efforts such as these is that they allow producers, processors, and retailers to control the message in a way that targets consumers better than any federally mandated labeling requirement ever could. I am confident that producers will be more prudent about the costs associated in this type of labeling than Government bureaucrats.
As this committee continues to study the notion of country-of-origin labeling, I hope my colleagues will spend some time to consider not just the merits of the idea but the best way to accomplish it. Thank you, Mr. Chairman.
Mr. POMBO. Thank you.
Mr. Stenholm.
OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. STENHOLM. Thank you, Mr. Chairman, and thank you for holding this hearing today. It is evidence of the seriousness of this matter and of the importance to the sheep and cattle industry. I have the privilege of having a V.I.P. on the second panel this morning, a voter in the 17th district of Texas, Mr. A.H. ''Chico'' Denis. Chico, I welcome you at this time to Washington and thank you for testifying today.
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We have been discussing this issue, now, for over 2 years without benefit of hearing. Given the recent release of the GAO report on labeling for produce, I think this hearing today is very timely. I am hopeful we will continue this discussion when the USDA report on labeling is released.
I was very disappointed to learn yesterday that the Secretary had decided not to include in the USDA report a study addressing the fact that imported meat products are being graded and labeled as USDA Choice. Needless to say, this is causing confusion in the marketplace. I believe Chico will address this issue in his remarks, and I look forward to hearing his testimony.
Ms. Wilcox, using your criteria outlined in last year's appropriation bill for the country-of-origin labeling report, I urge the Secretary to finish the job by beginning to work immediately on a comprehensive study of the potential effects of prohibiting quality grading of imported beef and lamb. I am not asking the Secretary to add this to the country-of-origin labeling study that is currently in the approval process. I do not want the Secretary to delay that study in any way in order to complete the study I am requesting on grading. These are both important issues and should be studied and considered as soon as possible.
Regarding the country-of-origin labeling issue, I have noted the legitimate concerns raised by retailers and processors over costs of enforcement and trade implications of country-of-origin labeling. These costs usually are passed down to the producer, and I hope that we consider that. I ask opponents of this effort to reexamine the goals of the legislation that is before us, to see if there are ways to address the very serious concerns reflected in a country-of-origin labeling program, including the consumers' desire to know more about the products they are eating. If retailers and processors work with consumers and producers, I am confident we can design a country-of-origin labeling program that is consistent with our international obligations and that efficiently provides the information that consumers will value.
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Again, Mr. Chairman, I thank you for this hearing. It is very timely, and I believe this will ultimately address a problem that has been around for quite awhile.
Mr. POMBO. Thank you, Mr. Stenholm.
I would like to unanimous consent that all other opening statements will be included in the record at this time.
[The prepared statements of Members follow:]
PREPARED STATEMENT OF HON. BILL BARRETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
Thank you, Mr. Chairman for holding this hearing and allowing me to participate in it today. I'm not a member of the subcommittee, but I've always been personally interested in livestock issues, especially as we've seen U.S. producers suffer for several years from low prices, rising costs, and increased regulation.
The country of origin labeling proposals currently before Congress pose a difficult dilemma for House Agriculture Committee members. This is a highly complex issue. Unfortunately, both sides on this debate have attempted to reduce the issue to 30-second sound bites. ''Consumers have the right to know where their beef comes from. '' ''We can't do it because it will cost too much.'' ''It will be a deterrent to free trade.'' These are the comments I hear.
Well, each of these statements contain some truth. However, I contend there are real issues to address. U.S. livestock producers are hurting, and packers, processors, and retailers are right to be concerned about the consequences of knee-jerk policy decisions. But the tone of this debate has become so heated I think the goal of creating good policy has been forgotten.
I continue to have an open mind on country of origin labeling. My primary concern is to ensure that Congress doesn't end up doing something that hurts cattle producers more than it helps. We need exports not unjustified, non-tariff barriers. We need to focus on expanding trade to raise everyone's standard of living not protectionist policies that may ''help'' in the short run but really end up hurting very badly in the long run.
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From my extensive studies on the subject, I must say the hard facts seem to stack up against labeling. I'm eager to hear from the panelists today and to finally have a full and open debate on country of origin labeling. And even if this hearing only provides a forum, I would hope the proponents and opponents could get beyond the sound bites and really discuss the problems all of agriculture faces today and seek options, such as access to the USDA grade shield for imported cattle, to move the debate forward.
PREPARED STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON
Mr. Chairman, thank you for the opportunity to comment today on an issue of great importance to the cattle producers in the Second Congressional District of Oregon—country of origin meat labeling. During the first 4 months of my service to the second district, I have visited 17 of the 20 counties that I represent. During my travels I have had the opportunity to meet and talk with the ranchers of my rural district and one message above all from them has been clear: Congress must pass country of origin meat labeling legislation with specific provisions. Family ranchers are the backbone of rural America's way of life and economy, and most ranches have been in the family for generations. Ranchers in my vast, agricultural district are no exception. They keep things together, they persevere . But family operators in my district are at risk, and because of the lingering beef market predicament and other regulatory factors, many of my producers believe permanent disaster is just around the comer if Congress does not act to stabilize the industry.
If we had unlimited time today, I could read pages of notes from numerous meetings and conversations I've had and letters I've received from family ranchers in my district. The No. 1 priority to them right now is required country of origin meat labeling. It's a matter of extreme importance to my ranchers. Producers have told me that Congress needs to act now to legislate country of origin meat labeling or their livelihoods will be in jeopardy. They tell me that legislation must include three main provisions: That all meat and meat products be labeled indicating exactly what is in the package and the country of its origin; that ''U.S. Meat'' should mean meat or meat products that came from animals that spent their entire life in the United States; and that imported meat shall be labeled at the U.S. border and remain labeled until it reaches the ultimate purchaser.
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The cattlemen in my district are proud, hard-working people and they produce top-quality livestock. They strongly desire to be able to compete on a level playing field with those that export beef into the U.S. Oregon's cattlemen do not want foreign beef to be passed
off as a U.S. product and feel strongly that consumers need to know what they are eating and feeding their families.
I applaud Chairman Pombo and Ranking Member Peterson for having this hearing today to review this very important issue, and letting me share the concerns of Oregon's ranchers. I am very disappointed that USDA was not able to provide the report on this matter as directed by Congress in the fiscal year 1999 appropriations legislation last year. Such information is critical as we seek to understand this vital issue
Thank you again Mr. Chairman, and Ranking Member Peterson, for allowing me to be here with you today as we discuss this issue of great importance.
PREPARED STATEMENT OF HON. DEBBIE STABENOW, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
I appreciate the opportunity to participate in today's hearing on the issue of country of origin labeling. Our Nation's current law requires that many imported food items bear a label that informs the purchaser of the product's country of origin. Several bills have been introduced in this Congress to expand these labeling requirements. Today's hearing should move the debate on this issue forward. I am pleased that all sectors of the industry from producers to processors are represented at today's hearing. Their testimony will provide valuable insight as this subcommittee continues its consideration of country of origin labeling.
Food safety is an issue that is on everyone's minds today. In fact, back in Michigan, folks are still very concerned about the recent Listeria outbreak in the Bil Mar processing facility. Michigan also experienced another food safety tragedy, when students in the school lunch program consumed tainted strawberries. Consumer advocates have approached me and offered country of origin labeling as one solution for reducing the numbers of deaths and illness associated with food safety in this nation. I have not been convinced by the evidence shared with me to date that country of origin labeling is a viable solution. I encourage today's panels to share their data with me on the impact of country of origin labeling on food safety concerns.
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I have heard my State, Michigan, referred to as the ''salad bowl'' of the Nation. I think that is an accurate description. We grow everything from lettuce, asparagus, and beets to blueberries, cherries, and apples. In fact, Michigan is second only to California in our diversity of crops. We also have a significant dairy, pork, lamb, and beef producers. I am always looking for a way to help Michigan's agricultural community add value to their products here in the domestic market as well as on the foreign market. Our Nation has an international reputation for growing and producing the best food in the world. Proponents of country of origin labeling suggest that country of origin labeling will increase the demand for our products.
There are concerns that the labeling requirements be will be overly expensive. Even worse, some argue that the labeling requirements will be viewed as a non-tariff trade barrier by countries seeking to import their products into the U.S. The recent Government Accounting Office report on country of origin labeling confirmed that the labeling might have trade implications. The report also concluded that it is difficult to determine the precise magnitude, but that production costs would rise with new labeling requirements in place. Furthermore, the GAO determined that while the labeling might provide some food safety benefits, the cost of enforcement could detract from other food safety activities within the Food and Drug Administration.
I agree that consumers have a right to know about the products they purchase. But, they also have right to food that is affordable and safe. Furthermore, in light of the severe condition of our agricultural economy, this committee must do everything it can to help farm country. Today's hearing must balance all these interests in the consideration of country of origin labeling.
Mr. POMBO. I will now turn to our first panel and recognize our colleagues, all of which have worked very diligently on this effort over the past several years.
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To start with, I would like to recognize Mrs. Chenoweth for her statement.
STATEMENT OF HON. HELEN CHENOWETH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO
Mrs. CHENOWETH. Thank you, Mr. Chairman and Chairman Combest. Without objection, I would like to just speak extemporaneously, but have the entire text of my testimony entered into the record.
Mr. POMBO. Without objection, all written testimony will be included in the record.
Mrs. CHENOWETH. Thank you. This morning, I got up thinking about this hearing, because I am so grateful that you are finally holding the hearing. This is an issue that the Worthlin Worldwide Polling Company has shown in studies that 86 percent of the women favor country-of-origin labeling on their meat products. The aggregate of men and women together, studies showed that 78 percent of the aggregate, men and women, preferred to know where their meat comes from, and they favor country-of-origin labeling meat labeling. There is an 8 percent difference that exceeds the men's numbers with women, because this really is a concern that women have, and I am sitting here testifying as a mom, as a congresswoman, as a grandmom to a lot of grey suits up there, and this is an issue that needs to reach out beyond the Beltway in Washington, DC, because it is an issue that has life, and it is of great concern to the consumers.
The reason is that Americans have learned to be label readers. For instance, I have here, Mr. Chairman, the sales information on a Jeep Cherokee, and right here, clearly indicating, it says ''Country of Origin: Japan.'' We buy toys that are labeled as to the country of origin. These Hot Wheels—my grandsons love them—these Hot Wheels, on the back it says ''Made in Taiwan or Malaysia as marked.'' You turn it over and look at the bottom, and it is marked ''Made in Malaysia.'' Clothes that we wear—this is a hat from the Owhyee cattleman in Idaho, by the way, and it is marked, the country of origin, ''Made in Thailand.'' Dog bones—we all love our dogs, and we want to make sure that our dogs are healthy. This is a dog bone that has been imported from Brazil. This has been made in Brazil; it is clearly marked. This is a dog bone that is clearly marked ''Made in the U.S.A.,'' and they brag about the fact that it is made from the best American rawhide available.
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But, we look at the meat, and look at all of the information on these labels. Why, we have nutrition information, which we, as homemakers, really appreciate, and there is a lot of information here on these nutrition labels. There is a funny little stamp up here that says, ''Guaranteed meats,'' whatever that means. But, also, there is very detailed cooking instructions on here, and it also is labeled with regard to 80 percent lean ground beef and 20 percent fat; all kinds of information.
But, Mr. Chairman, members of the committee, what is missing? What is missing is that it doesn't tell us where the meat came from, and, today, we are importing meat from as far away as Croatia and Korea, New Zealand. Twenty-two percent of our beef that we are eating unknowingly—picking up one out of ever five pieces of meat that we eat unknowingly has come from a foreign country, and we have believed in the American USDA stamp of approval, but the fact is that USDA has inspected less than 1 percent of the foreign meat. They inspect the facilities overseas, but the meat coming into this country, less than 1 percent of it is inspected. Today, 40 percent of the lamb that we are eating comes from foreign countries, and I think about 2 percent of the pork that is coming in.
It is interesting, we are concerned, especially this year, about costs, but we just can't nail that cost down. First, we hear $60 million, then we hear $100 million, then, low and behold, it suddenly has ratcheted up to $1 billion, but studies that I have been involved in—because I have been working hard on this for 3 years—studies show that the American consumer is willing to pay more to know that the meat that they are purchasing is the kind of meat that they trust. Americans know that the American meat producer produces their meat to the highest food safety and environmental quality of anyone else in the entire world.
And America is sort of behind the 8-ball when it comes to country-of-origin meat labeling, because there are exactly 32 other countries that already require country-of-origin meat labeling, including Argentina, Brazil, Bosnia, Chile, Costa Rica, El Salvador, Guatemala, Hungary, Indonesia, Israel, Korea, Malaysia, Mexico, Philippines, the Arab countries, Venezuela, and I could go on and on, Mr. Chairman, but this is an issue that—how can you put the cost on the value of a child's life when it comes to being able to trace back and make sure that we know the origin of any disease, and if there is a disease problem in another country, the American consumer wants to be able to go to the meat counter and know for sure that she has purchased American meat. Thank you very much.
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[The prepared statement of Mrs. Chenoweth appears at the conclusion of the hearing.]
Mr. POMBO. Thank you.
Mr. Pomeroy.
STATEMENT OF HON. EARL POMEROY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH DAKOTA
Mr. POMEROY. Mr. Chairman, thank you for holding this hearing. This is exactly the place where we need to hash these issues out, the Agriculture Committee of the U.S. House; I appreciate this hearing.
It has been my pleasure to work with Helen Chenoweth, such a compelling advocate on this important issue. I think it is an issue as clear as night and day. In every sector of our economy we label the products by their country of origin, from T-shirts, to telephones, computer, stereos, microwaves, automobiles; just look at their label. But, remarkably, when it comes to the consumer going to the grocery store to purchase food for their family, they have no idea the point of origination.
I represent thousands of family farmers and ranchers, and they believe that we our doing our Nation's consumers an injustice by failing to provide them with country of origin information. America's cattle and sheep producers invest billions every year to produce the safest, leanest, most nutritious products in the world, but without country-of-origin labeling, American consumers have no idea where the product originates. Cattle ranchers throughout North Dakota support country-of-origin labeling, because they have extreme confidence in the product they produce. They believe that American consumers deserve to know whether the meat selections they consider at the grocery store were grown in the United States, Brazil, Mexico, Denmark, wherever.
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We have put in place in this country, as you all well know, comprehensive consumer quality protections designed to assure that U.S. agriculture products, including meat, pass every exacting standard for food safety and quality. The American consumer has confidence in these products, U.S. agriculture products. It, therefore, makes no sense in the world to fail to provide the U.S. consumer with the information to know whether the food item they are considering was grown here or half way around the world.
This is more than a matter, as Helen as so well mentioned, far beyond the wishes of U.S. cattle producers. The survey, the Worthlin Worldwide survey of 1,000 consumers, 78 percent support labeling; 86 percent of women in that critical 35 to 54 range so often the primary grocery shoppers for their families. A national survey in 1995 found 3 out of 4 consumers favor country-of-origin labeling and would buy U.S. products even if they cost more.
Now, we will hear, this morning, about scare tactics from the opponents of this legislation. They want to say it costs more, bureaucracy, $1 billion in costs. Let us recognize this for what it is: scare tactics by large processors intent on sliding in foreign product with U.S. beef. The U.S. Department of Agriculture's preliminary estimates may cost as much as $60 million. You factor this out, it is just 20 cents per year per consumer. During last year's 1999 agriculture appropriations debate, CBO scored a similar amendment offered at that time and came up with no cost to taxpayers for this labeling requirement.
An argument some will use is that labeling is somehow outdated, protectionist policy. I find this pretty unpersuasive, especially in light of the fact that is specifically allowed under the General Agreement on Trade and Tariffs, and 25 or maybe even more, as someone has mentioned, 32 of our trading partners label their meat products by their country-of-origin labeling. How is country-of-origin labeling by the U.S. protectionist when out trading partners are doing it in their domestic markets?
Last Congress, my office called every single meat retailer in Bismarck, ND. We think of ourselves as the heart of cattle country. Grocery stores, butcher shops, even restaurants, we tried to find one who sold identified local beef products. Not a single one could verify their beef products by the country of origin, because their supplier, IBP, blends in foreign product and does not give them that information. In light of the fact that 22 percent of the meat sold in this country—almost one-fourth of the meat sold in this country—is shipped in from outside of the United States, we sure know there is an awful lot blending going on. It is small wonder even in North Dakota they couldn't verify the origin of the products sold.
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Country of origin is common sense; benefits American ranch and farm families; provides consumers with the right to know, and it is affordable for consumers and taxpayers; it is trade friendly, and it increases competition. I, therefore, look forward very much to continuing working with colleagues from across the aisle as well as agriculture interests right across the spectrum to pass this legislation. A constituent recently told me we label our T-shirts, by golly, it is time we also label our T-bones. Thank you.
[The prepared statement of Mr. Pomeroy appears at the conclusion of the hearing.]
Mr. POMBO. Thank you.
Mr. Hill.
STATEMENT OF HON. RICK HILL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MONTANA
Mr. HILL. Thank you, Mr. Chairman, and I want to thank the ranking member for having this hearing, and if I could, Mr. Chairman, I would like to submit formal remarks for the record.
Mr. Chairman, this last weekend I played in a fundraising golf tournament, and maybe some of you did likewise, and all over this golf course there were coolers that were filled with refreshments, and this can came from one of those coolers, and it is a can, I think, probably everybody in this room recognizes, and if you are like me, I usually drink the same brand of refreshment. But, in all the coolers on the golf course that I looked in, I saw Diet Coke, Diet Pepsi, Classic Coke, Gatorade, Bud Light, Miller Lite, even the bottled water carried the Evian brand, but there were no, I repeat, there were no, none, no generic colas in those coolers. There were no bottles, there were no cans that were simply labeled beer. Now, I am sure it would have been cheaper for the sponsors of the golf tournament to fill those coolers with generic-labeled colas, beers, and beverages, but they chose not to. And that, Mr. Chairman, is what this hearing is all about—labels and brands. We live in the era of brands.
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Producers with readily recognized brands sell for more; they have higher stock values; they have broader margins, and they have better profits. They are more successful; they hire more employees; they invest in modern plants and machinery, and they are growing markets. They are the most successful enterprises in the world. What is this all about? There is a great economist by the name of Demming who explained some simple economic concepts to the world—some of you may be aware of his achievements. But, one of those was the transformation of the Japanese, because he taught the Japanese how to manufacture and market, at that time, the best cars, the best TVs, the best cameras, the best electronics in the world. They captured huge chunks of market share by following Mr. Demming's simple lead, and that lead was a simple economic concept, Mr. Chairman, that producers can determine the quality of their product, but it is the consumer who assigns value to that quality. Even if the producer has the highest quality, the producer will only be paid more if the consumer perceives that value.
Now, what does that have to do with nation-of-origin labeling? Well, Mr. Chairman, we have a problem, and the problem is that the farm producers' share of the consumer dollar is declining, and if we continue at this pace, the producers are simply going to go broke. No matter how hard they work at quality, until that quality is identified by the consumer, the producer can do nothing to increase his share of that value.
Nation-of-origin labeling is often opposed by those who say it is nothing more than protectionism. Nothing could be further from the truth. It is not about closing markets; it is about opening markets. I believe that we produce the highest quality beef and lamb in the world. I know that the USDA stamp is recognized worldwide. Now, we don't ask Coke to lend its brand name to a competitor. The supermarkets who are here today to testify against labeling beef work hard to protect their brand, because they have invested heavily in promoting the quality they produce, and I say good for them. But, U.S. beef and lamb producers have invested heavily too by accepting lower prices to support food inspection and safety, and making the USDA label a world-class brand has come at their expense.
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In markets all over the world, meat products are labeled to origin, because consumers see value in knowing the origin. Polls indicate, as the earlier testimony has indicated, that 3 in 4 Americans want to know the origin of their meat, because they want consistency; they want quality, and they want safety.
Today, Canadians who oppose national origin labeling in the United States voluntarily label their meat sold in Japan. Why? Because it increases its value. In Europe, in Japan, and all around the world labeling is supported by consumers, and it results in rewards to producers, and it will here in America too. Today, a calf born in Canada; raised in Canada; fed and fattened in Canada, and slaughtered in Canada will carry a USDA grade and inspection stamp, and the consumer who purchases that beef at the counter believes it is buying a domestic product, and all the while U.S. producers pay a check-off to promote their beef and lamb consumption. It is not right, and it is not fair.
Safeway wouldn't pay a fee to promote IGA. We wouldn't ask Coke to pay a fee to promote Pepsi. Ford wouldn't want to pay a fee to promote Toyotas. Anybody who proposed doing that would be labeled as crazy. So, when U.S. meat producers simply ask for the right to label their product so that they can pay to promote it, it simply makes common sense to allow them to do it.
Mr. Chairman, my goal is to increase the income and the share the producers have of the consumers' dollar. I know of no other way to open that door for them so that they receive the value they deserve than to allow them to label their product. It is not as though, Mr. Chairman, that meat products carry no labels. Supermarkets put their label on meat for little cost. Why would they object to producers putting their label as well? Packers put their label on the boxed beef for very little cost. The only way that we are going to allow a producers' share of the consumer dollar to increase is for us to allow producers to be able to share in the reward for the increase in quality.
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Mr. Chairman, I thank you for the opportunity to testify. I hope this hearing leads to legislation.
[The prepared statement of Mr. Hill appears at the conclusion of the hearing.]
Mr. POMBO. Thank you.
Mrs. Bono.
STATEMENT OF HON. MARY BONO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mrs. BONO. Thank you, Mr. Chairman, Ranking Minority Member Peterson, and the other distinguished members of the subcommittee, for giving me this opportunity to express my views on an issue that greatly concerns American consumers. Of course, I am referring to the country-of-origin labeling, specifically, the labeling of fresh produce.
Most of us are familiar with the labels placed on the products we buy that identify the country in which the product was produced. Fresh produce labeling is simple, inexpensive, and common sense practice to provide consumers with the same information already available in accordance with Federal law on virtually every other product we buy except fresh fruits and vegetables and meat. As I am sure you already know, I am the sponsor of H.R. 1145, a bill requiring that this information be made available to the consumers at the final point of sale, usually your local grocers. I am very pleased that this bill enjoys bipartisan support in both the House and the Senate.
Today, I would like to briefly comment on the recent GAO study on this subject. Like all parents, I care about the food that my family consumes. Of course, health and nutrition are of paramount importance. In making my purchasing decisions, as I am certain it is for all of you and many millions of other families, it is important to know what you are getting.
Although the GAO report confirms that according to recent polls approximately 75 percent of American consumers support country-of-origin labeling for fresh produce, I am concerned about the overall tone of the report and the inference a reader would draw from this study. The bulk of the study is devoted to exploring why fresh produce labeling is either too expensive or too time-consuming for both the Government and the retailer. Unfortunately, too little attention is paid to the successful example of Florida, the only State to pass a comparable State law.
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Before addressing some of my other specific concerns, I want to add at this time that I fully support free and fair trade. My bill, H.R. 1145, specifically avoids any language that would undermine our trade policies, and as a non-lawyer, I am amazed that when I ask how exactly does this practice allegedly violate any of our trade agreements nobody can give me a straight answer. Even this report acknowledges that many of our trading partners—Japan, France, England, Mexico, and many more, 28 in all— have similar laws. All we are seeking is harmonization in trading practices and fairness for our consumers and farmers.
Consumers want country-of-origin labeling for a number of reasons, including concerns about possible contamination and growing practices in other countries. The report is misleading when it discounts the effect produce labeling could have in preventing future health impacts to consumers when outbreaks of food-borne illness occur. The implication seems to be that the information would be of little use to consumers. I find that a bit of stretch. We need only to look at the recent CDC advisory warning shoppers to avoid Guatemalan raspberries. Common sense tells us that a simply country-of-origin label at the produce bin would have assisted stores and consumers in avoiding a potential health hazard.
There are many other legitimate reasons to support produce labeling, and I am please that the GAO report identifies that there are benefits to the consumer, but I wonder why the report included comments implying that retailers would be compelled to offer a consumer fewer choices if this legislation is enacted. Any of us who have visited markets like Fresh Fields in the Washington area or Jensen's in Palm Springs know that these grocery stores whose country-of-origin labeling is a positive marketing tool. And, once again, concerns about compliance costs are overstated compared with the real world experiences in Florida. In fact, routine inspections require about 15 minutes per visit, and when violations are found it takes only 5 minutes to process paperwork for new violations and 30 minutes for repeat violations. Rather than rely on speculation, I would urge the committee to look at the actual data contained in the testimony provided by Florida's deputy agriculture commissioner confirming that this is neither a time-consuming nor overly expensive regulation to enforce.
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Another issue raised was the impact labeling would have on the restaurant industry. However, my legislation exempts restaurants and other food service providers from this requirement. It is misleading to include these businesses in the section on compliance and enforcement if they are specifically excluded from the law.
While there are many other issues that concern me about this report, my overriding sense is that the benefits of country-of-origin labeling are understated in the GAO study.
In summary, the single most important thing to remember is that consumers overwhelmingly support fresh produce labeling. Something is very wrong if we in Congress cannot empower our constituents to enjoy the same rights as the citizens of so many of our trading partners.
Finally, I want to thank the Members of the House and Senate who have joined me in support of this legislation, and I want to express my appreciation to the subcommittee and you, Mr. Chairman, for allowing us to explore this important issue that is so essential to the well being and lives of so many American families.
[The prepared statement of Mrs. Bono appears at the conclusion of the hearing.]
Mr. POMBO. Thank you. I have no questions of my colleagues. Do any of you have questions of our colleagues? Mr. Everett.
STATEMENT OF HON. TERRY EVERETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALABAMA
Mr. EVERETT. Thank you, Chairman Pombo. I appreciate you calling this meeting. It is a subject I am very interested in. I am co-sponsor of both Mrs. Chenoweth's and Mrs. Bono's bills. I think the American public ought to have a right to know where the foods that they eat come from.
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I also would like to mention that I plan to reintroduce my own bill that would enforce current labeling laws specifically dealing with frozen produce. The Tariff Act of 1930 requires imported commercial products, including frozen produce packages, be labeled with foreign country-of-origin information in a conspicuous place. Why then is this information often missing, misinterpreted or ignored completely? Due to the vague language of this statute, the U.S. Customs Office claims it has not been able to enforce the law, allowing many importers to fool the American public into thinking they are eating high quality, American grown products.
Now, unfortunately, the American consumer and farmers lose while foreign producers gain. U.S. Customs Service has proposed to amend current legislation and regulations to ensure uniform labeling standards by requiring a country-of-origin label to be marked on the front panel of frozen produce packages. However, in 2 years Customs has failed to implement this regulation. The legislation I plan to introduce merely codifies Customs' proposal and clarifies the term ''conspicuous'' by requiring the label to be moved to the front panel. This way consumers have the necessary information they need when making purchasing decisions.
Further, the bill provides an 18-month grace period to provide frozen food packagers with ample time to move the required information to the front of the package without incurring significant costs. And, let me say, Mr. Chairman, when I introduced this last year, the folks that came to my office in opposition to it, one of the first things they said was this would cost millions of dollars in printing of labels. Well, that is absolutely untrue.
First of all, in the real world out there that I have spent for 30 years, I had, in addition to newspapers, I own three rotary printing concerns, and that is no problem whatsoever, and if they need help on how to make a plate change, I will show them. I will be glad to go and show them. There is no significant costs involved in that. As far as inspection, that seems to be pretty simply—if it is not labeled, it is not sold. So, I think that would take care of itself.
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The legislation is consistent with current law and NAFTA. Remarkably, as has been pointed out by our panelists here, many countries, including Canada—the Canadian and Mexican government, require strict labeling requirements to ensure consumers have the information they need about the food that they purchase. Surely, Americans deserve the same opportunity. Thank you, Mr. Chairman.
Mr. POMBO. Thank you.
Mr. Dooley.
Mr. DOOLEY. Yes, I would just be interested in how some of you respond—a lot of your foundation for advocating this legislation is the fact that in the range in the figure of 75 to 86 percent of consumers think that there would be some benefit and value to having country-of-origin labeling. By that same token, if consumers were also to that same degree were advocating the labeling of beef that was produced with feed using hormones, do you think that should be included on the label? If you had the same number of people out there in the general public that supported some of the work that Consumers' Union did just recently in developing a toxicity index based on the amount of pesticides that were used on a particular produce, would you also support that as being part of labeling regime, because you had 85 to 90 percent of the American people that wanted that on the label? Mrs. Chenoweth.
Mrs. CHENOWETH. Mr. Chairman, Mr. Dooley, when we break the costs down, even using the $1 billion figure, with 250 million consumers, only 3 percent of which, according to USDA, are vegetarians, that calibrates out to about $4 per year.
Mr. DOOLEY. My question was, would you support labeling if 75 to 85 percent of the consumers wanted to have labeling on meat products that were produced with feed that was hormone used or injected with hormones or produce where there could be the ability, as the Consumers Union identified in a toxicity index, that if 75 to 85 percent of the consumers wanted that on the label, just as they want country-of-origin labeling, would you support that?
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Mrs. CHENOWETH. Yes, I would.
Mr. DOOLEY. You would?
Mrs. CHENOWETH. I would, because in Japan, I guess they already require the hormonal labeling, and yet the information that we are getting back is that the Japanese consumer will go for the label that has the American flag on it first and buy that meat first, because even the Japanese consumer trusts the American meat producer more than anyone else in the world.
Mr. DOOLEY. Mr. Pomeroy.
Mr. POMEROY. I would observe, Congressman Dooley, if they want to get an organic-produced product, that ought to be labeled, ought to be clearly available. If there is a health dimension to toxicity or any of these other things you are talking about, they surely ought to have the information to make an informed choice. I also believe, though, as a general matter, it is a lot easier to know that production—for example, North Dakota—it is a lot easier to know what goes into the production of U.S. beef than beef produced around the world, and I believe that, therefore, country-of-origin labeling does bring right in and of itself, a dimension of information that consumers find helpful in the product, kind of along the lines of what you are talking about.
Mr. DOOLEY. So, when we are negotiating with the EU on the hormone case that we just won, when there is going to be in excess of 90 percent of their consumers that will want labeling of beef from the United States and labeling that it was produced with hormones, then you think the U.S. position should be to accept that labeling?
Mr. POMEROY. I think that is a different dimension. Although the early—I have noted with great interest the indication from the EU is that, first of all, they have just ignored the WTO ruling. Second, they are pretty adamant in saying, well, if they ever do comply under any circumstances, there is going to be very extensive labeling along with it going far beyond country-of-origin labeling. Country-of-origin labeling much has been applied to our products sold in foreign markets across the country. We are only looking to do the same.
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Mr. DOOLEY. Yes, Mr. Hill.
Mr. HILL. I think it is important to note that there is U.S. beef being sold in Europe today that is certified as not being hormone fed, and certainly it is appropriate under the provisions for natural grown production produce to carry that label. I think one thing you want to keep in mind, however, and that is that cattle coming from outside the United States can be fed by feeds that have been treated by pesticides that are illegal in the United States. As a matter of fact, we have grains coming to the United States from Canada that have pesticides and herbicides that are illegal in the United States yet we allow those grains to come into the United States. One of the ways that a consumer can be assured that what they are buying and what they are consuming meets at least the U.S. standards is to be able to identify it as U.S. production.
Mr. DOOLEY. Mr. Hill, I think that—and, perhaps I am mistaken—but we cannot allow the importation of any food product that has any residues of any chemical material that is not registered for use in the United States. So, if you are aware of grain products coming into this country that are treated with materials that are not registered in the United States, I would suggest that you make USDA and AFIS and FSI known of this, because we would then have a trade action that we could take against them.
Mr. HILL. If I might respond to that, Mr. Pomeroy and I co-sponsored legislation in the last Congress to address this very issue requiring REPA to harmonize the requirements, rules and regulations, and licensing provisions between the United States and Canada, because the circumstance that I have just described is in fact occurring. Now, that residue may not appear on each kernel of grain, but that grain is being raised using pesticides and herbicides that are not licensed and in many instances not legal in the United States.
Mr. DOOLEY. Mrs. Bono, you represent a lot of vegetable growing areas, and this whole issue—what is science based and what is not—and if we have country-of-origin labeling which is arguably not science based—you have again the Consumers Union that adopted this toxicity index where they could measure the amount of the pesticides that are used on the produce which seems to me to be somewhat analogous in terms of providing consumers with information, then if you support country-of-origin labeling, would you support labeling if 95 or 90 percent or 85 percent consumers wanted to produce labeled with a toxicity index?
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Mrs. BONO. Without jumping into an immediate yes or no without looking into that greater—one thing in my one year of Congress here, I do like to sit a little bit with issues before I commit—but at first glance, first of all, what we are saying now, I think I want to agree with what my colleagues here have said which is that I think that simply the label itself ''Made in the U.S.A.,'' gives the consumer certainly a certain amount of confidence in the product itself.
But, I think the thing that you are overlooking here—you are not just talking about pesticides, and it is not necessarily—the larger issue isn't food safety, but we are also talking about, if you look over the past 5 years, how many outbreaks we have had of different microorganisms that have been on, say, Guatemalan raspberries? So, I think it is other issues, too, here that come into play, not just the pesticides.
Mr. DOOLEY. Well, I thank all of you for your statements, and I also would point out of the 12 cases of food borne illnesses that have been identified by country of origin, 10 of those were in the United States.
Mrs. BONO. Well, thank you. If I could address that, it is nothing more than giving the consumer the right to know, and I can't possibly see what is wrong with that, and I personally do think it could help anybody, whether it is the Guatemalan farmer or the American farmer. If they are going to say that there is a cyclospora outbreak on a certain raspberry from somewhere, it just gives the consumer the ability to make the choice, and when we talk about numbers, of course, I don't care if you want to break it down to two cases that come from Guatemala, when it is your children, it doesn't matter whether it is two or 2 million.
Mr. POMBO. Any further questions for this panel?
[No response.]
I would like to thank the panel for your testimony and excuse this panel. You are welcome to join us on the dais if time permits.
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I would like to call up our second panel, Ms. Caren Wilcox from USDA and Mr. Robert Robertson from GAO. We welcome you to the subcommittee hearing. Ms. Wilcox, I would like to start with you if you are prepared. You may begin.
STATEMENT OF CAREN A. WILCOX, DEPUTY UNDER SECRETARY FOR FOOD SAFETY, U.S. DEPARTMENT OF AGRICULTURE
Ms. WILCOX. Thank you, Mr. Chairman, members of the subcommittee. I am pleased to appear before you today to discuss the issue of country-of-origin labeling. The conference report accompanying the Agriculture Appropriations Act of 1999 directed the Secretary to conduct a study on the potential effects of mandatory country-of-origin labeling of imported fresh muscle cuts of beef and lamb. This study is in clearance, and USDA will submit it to Congress once clearance is completed. I apologize for the delay and sincerely wish I were here with a copy to present to you today.
I would like to begin with a brief background of current import requirements for meat since these are important to the food safety aspects of this issue. However, I must stress at the outset that the broad issue of country-of-origin labeling primarily is one of marketing not food safety. The USDA's Food Safety and Inspection Service ensures that imported meat is every bit as safe as domestically produced meat. FSIS requires imported meat to be inspected using a complex and comprehensive process that is equivalent to the U.S. system and then upon arrival at a U.S. port of entry, FSIS reinspects all meat shipments contrary to some testimony given this morning when there is often confusion between what FSIS inspects for imports and what FDA inspects for imports. Also, all imported products—about 85 percent—then proceed to a U.S. plant for further processing into value-added products; again, all under FSIS inspection.
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FSIS has certified only 37 countries that meet U.S. inspection standards. In general, inspection under an equivalent system means meeting U.S. standards for microbiological pathogens and chemical residues. It also means meeting all sanitation standards applicable to U.S. meat processing plants. Perhaps, most importantly, all plants exporting meat to the United States must meet equivalent requirements of the Hazard Analysis and Critical Control Points inspection system, our HACCP system with which you are very familiar.
FSIS requires that imported meat carcasses and parts of carcasses must be labeled with the country of origin and foreign establishment number, either as part of the country's mark of inspection or on the product's packaging at the time of import. The container must bear in English, in a prominent and legible manner, the country of origin, the foreign establishment number, and the name or descriptive designation of the meat product. If meat products are imported in individual retail or consumer-size packages, they also must be labeled in English with the country of origin, foreign establishment number and name or descriptive designation of the meat product from the time it enters the country until purchased by the consumer. Some commonly purchased consumer items include canned ham from Denmark, packaged leg of lamb from New Zealand, and meat pot pies from Canada.
There has been some discussion this morning about the labeling of State products and U.S. products. FSIS has already established a voluntary program for labeling any and all beef products as ''Product of the United States'' establishing standards to ensure the label is meaningful and accurate. We continue to encourage and support the use of this label.
Country-of-origin labeling could result in a variety of costs and benefits to various sectors, including producers, the Government, industry, and consumers, and there are a variety of regulatory regimes for country-of-origin labeling that could be adopted. These options include enforcement by USDA at retail; limited enforcement at wholesale establishments which are already regulated by USDA; enforcement at retail by States or other Federal agencies involved in marketing; monitoring and referral through private, third party certifiers, or enforcement through a whistleblower or a competitor complaint system. Each of these is discussed at greater length in my written statement.
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Currently, only 11 countries export fresh beef to the United States, and Australia, Canada, and New Zealand account for the vast majority. For lamb and mutton, by far the vast majority comes from Australia and New Zealand, and much of that is already labeled as to country of origin.
FSIS estimates the cost of its current food safety compliance visits, including labor time, travel costs, recordkeeping, and other expenses at $100 per visit. Thus, we estimate the annual cost to taxpayers for country-of-origin compliance checks could be approximately $100 multiplied by the number of retail or other points of inspection multiplied by the number of visits. In addition to retail establishments, the USDA, of course, would have to monitor compliance with labeling requirements in slaughter and processing plants, wholesalers, and distributors.
We believe our study will show that country-of-origin labeling would present both costs and benefits to industry and consumers. Balancing those impacts would be challenging. Of course consumers often wish to have more complete information about products presented to them in the marketplace, and, at the same time, we all must assure that any implementation of such a regulatory regime will not interfere with trade. It also cannot be excessively costly or take resources away from food safety priorities.
Trade experts who have reviewed the issues tell me that mandatory country-of-origin labeling at the retail level may be consistent with U.S. commitments under our trade agreements provided various criteria are met. Since I am not an expert on the details of the GATT or NAFTA Agreements, I will let my written testimony speak to this issue.
Because the United States is a major importer and exporter, it is likely that a U.S. requirement for country-of-origin labeling would be challenged by our trading partners. In addition, the United States has objected to other countries' labeling proposals because of costs or lack of consistency with international agreements. Establishing a mandatory country-of-origin labeling requirement in the United States could undercut our ability to object to such requirements in the future.
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Mr. Chairman, I want to thank you again for the opportunity to appear before you today, and I will be happy to answer your questions and those of the other members of the subcommittee.
[The prepared statement of Ms. Wilcox appears at the conclusion of the hearing.]
Mr. POMBO. Thank you, Ms. Wilcox.
Mr. Robertson.
STATEMENT OF ROBERT E. ROBERTSON, ASSOCIATE DIRECTOR FOR FOOD AND AGRICULTURE ISSUES, U.S. GENERAL ACCOUNTING OFFICE
Mr. ROBERTSON. Thank you. Good morning, Mr. Chairman, members of the subcommittee. We are happy to be here this morning to talk about our recently issues report on country-of-origin labeling as it pertains to fresh produce. I am delighted to have with me this morning Erin Landsburgh. She is the individual that was responsible for leading the work that we are going to be talking about today.
As you are probably aware, this work was conducted in response to the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999. In essence, that act asked us to look at a number of cost-benefit issues related to the country-of-origin labeling of fresh produce at the retail level. I am going to go ahead and summarize my statement and ask that the statement in its entirety be placed in the record.
My summary consists of five basic points. The first concerns compliance costs for mandatory country-of-origin labeling. In short, the magnitude of these costs are uncertain and would depend on several factors, including, as you might expect, the extent to which current labeling practices would have to be changed. An association representing grocery retailers estimates that it would cost roughly two staff hours per week per store to ensure that the produce is properly labeled. However, there could be additional costs incurred if, for example, stores were required to maintain paperwork documenting country of origin or if stores lost sales as a result of the labeling laws. Whatever these costs turn out to be, it is unclear who ultimately will bear the burden of paying them, whether it is the retailers, their suppliers, or the consumers.
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My second point concerns possible substantial costs and difficulties associated with enforcing a country-of-origin labeling law. FDA estimated that the Federal monitoring of a labeling law might cost as much as $56 million each year. Furthermore, the law would be difficult to enforce. I say this because while inspectors could ensure that retailers have the signs and labels in place and check whatever documentation is available, there is no guarantee that they could determine from a visual inspection that the loose, unmarked produce in a particular bin was indeed from the country designated by the sign on that bin; it is an inherent problem associated with enforcement of this type of law.
Third, I would like to touch upon possible trade implications of a country-of-origin labeling law. In this regard, other countries could view a U.S. labeling law as a trade barrier if, for example, they are concerned that additional costs may be incurred by their exporters. If our trading partners do take this view, they might challenge the law's consistency with international trade obligations or take steps to increase their own country-of-origin labeling requirements. Moreover, according to USDA officials we spoke with, enacting a labeling law could make it more difficult for the United States to oppose any foreign country's labeling requirements that the United States finds objectionable. And as a slight aside here, about half of the U.S. trading partners have country-of-origin labeling laws, and so far the United States has not formally challenged any of these laws.
My fourth point concerns the limited usefulness of a labeling law in responding to outbreaks of illness caused by contaminated fresh produce. Considerable time and in some cases weeks or months generally passes between the outbreak of a produce-related food borne illness, the identification of the cause, and a warning to the public about risks of eating certain foods. By the time a warning is issued, country-of-origin labeling would benefit consumers only if they remembered the country-of-origin for produce that they had already consumed or still had the produce or if the produce was still in the store.
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My fifth and final point concerns consumers' views of country-of-origin labeling—something that has been talked about already this morning. Based on surveys of consumer views, most people, depending on the survey we are talking about here, roughly 75 to 85 percent, favor this type of labeling for produce. Further, one survey that we looked at found that about half of all consumers would be willing to pay a little bit more to get U.S. produce. However, interestingly enough, consumers rate information on produce freshness, nutrition, handling and storage, and preparation tips as more important than information on country of origin. The chart to my right summarizes how consumers rate different types of produce labeling information. I know that you may not be able to see this, if you move to page 9 of my prepared statement, the same chart is on the top of that page, called figure 2. Basically, what it is showing you, if you look at the top bar on that chart, is about 80 percent—actually, over 80 percent of consumers rate information on freshness and expiration dates as extremely or very important, and over 90 percent rate this type of information as at least somewhat important. If you move down that chart, you will see how consumers rate information on various things like nutrition, storage and handling, and preparation tips, and you will see that country-of-origin information ranks about fifth on that list.
Mr. Chairman, that concludes my summary, and I will be happy to answer any questions you may have.
[The prepared statement of Mr. Robertson appears at the conclusion of the hearing.]
Mr. POMBO. Thank you.
Mr. Peterson.
Mr. PETERSON. I don't know if either of you can answer this question, but Mr. Robertson indicated that a good number of countries have country-of-origin labeling?
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Mr. ROBERTSON. Right.
Mr. PETERSON. Do you know, or does anybody know, is this one of those cases where we agreed to this, and we allowed these countries to have this country-of-origin labeling, and then we agreed not to have it? I mean, we did this in other areas where we basically gave up a lot of our export enhancement-type funds, but we let other countries keep theirs, and then it was GATT-legal. Did you look into this issue whether we have signed off and said it is OK for you to have these labels in these other countries? Or are the trade agreements silent on this?
Mr. ROBERTSON. Well, somebody mentioned this earlier, and it is quite true, that there is no prohibition against country-of-origin labeling under WTO or NAFTA agreements. We have not, as I said, formally challenged any of those laws, but we were told that that doesn't necessarily mean that they won't be challenged later on.
Mr. PETERSON. Thank you. Ms. Wilcox, from the research that you have completed today, would you say that the country-of-origin labeling would enhance safety of imported meat?
Ms. WILCOX. As you know, Mr. Chairman, under FSIS inspection, we don't believe that country-of-origin labeling is an indicator of food safety; it is a marketing program.
Mr. PETERSON. So, you say that this is a marketing issue not an inspection issue; that is your point?
Ms. WILCOX. Well, we are fortunate that under our statute, meat and poultry that is imported to the United States is very comprehensively covered and inspected in other countries under an equivalent system and then it is reinspected when it comes here by a substantial number of inspectors working for FSIS, and, therefore, we have a very comprehensive system, and we actually have records of substantial or some amounts of fresh beef and other products that are rejected at the border.
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Mr. PETERSON. Is everything inspected?
Ms. WILCOX. Yes.
Mr. PETERSON. Every single thing that comes in?
Ms. WILCOX. Well, not every single thing is opened up and inspected, but there is a system for both direct inspection and random inspection, yes.
Mr. PETERSON. So, it is subjected to as detailed an inspection as a United States plant would be, for example?
Ms. WILCOX. Yes. In fact, the other countries, of course, have to operate an equivalent system to ours also.
Mr. PETERSON. One of the things that we have problems with being up on the Canadian border with all these issues that come up, and as I understand it—this isn't so much in my area but the meetings I have had with Canadians and people on both sides—apparently there is a lot of feeder cattle in Montana and Idaho and over there that they send these feeder cattle to Canada, and then they feed them out, and then they turn around, and I think they might slaughter them and then send the beef back into the United States—I think is what happens. If we had the country-of-origin labeling, what would they be labeled? They were born in the United States—they started off there—and then they were shipped to Canada. I don't know, maybe nobody can answer that question, but they actually originated in the United States.
Ms. WILCOX. I am told that that would have to be defined in any legislation, and it would depend upon the definitions put into the bill.
Mr. PETERSON. And, the other thing I think you mentioned is that 85 percent of the imported beef that comes in is further processed?
Ms. WILCOX. Yes.
Mr. PETERSON. Is that correct?
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Ms. WILCOX. Yes.
Mr. PETERSON. So, in that capacity then, it would be inspected in the regular USDA——
Ms. WILCOX. Yes, as you know, we have to provide inspection wherever meat is processed, and, therefore——
Mr. PETERSON. So, all we are talking about here is outside of that is 15 percent.
Ms. WILCOX. Correct.
Mr. PETERSON. And, you are saying all of that is inspected at some point or another as well.
Ms. WILCOX. Yes, according to our system, it is.
Mr. PETERSON. OK. I guess that is it.
Mr. LUCAS [presiding]. Thank you, Mr. Peterson. Mr. Stenholm, any questions?
Mr. STENHOLM. First a comment: I appreciate our four colleagues' forthrightness and honesty in answering Mr. Dooley's question in saying it would not make any difference. I think there area lot of folks in the producing business that would like to see that question maybe not advertised in a manner in which some folks would want to see it advertised. I happen to believe that we have the safest food supply in the world, but there are those, who don't believe it and have their own conclusions and would continue to influence public opinion. We should be making sure that our consumers in the United States do continue to have the most abundant food supply, the safest food supply at the lowest cost to our consumers. Increased costs will be passed back to producers, and consumers will pay their fair share. This is a legitimate discussion that needs to be held.
Now, I want to talk about whether the administration is consistent in its enforcement of the Tariff Act and the Meat and Poultry Inspection Act, especially with regard to substantial transformation. I understand that Customs requires that imports undergo more extensive changes than USDA requires in order to avoid the need for country labels. In other words, if you simply slice a meat carcass in half and ship it to market, USDA considered that enough to satisfy the substantial transformation requirement. Why doesn't such meat flunk the Customs test and violate the law here? Why or why not? And, if you can't answer today, I would appreciate an answer for the record.
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Ms. WILCOX. I think we will have to provide you an answer for the record, Mr. Chairman. It has been an issue for many years, as you well know, and we will try to give you an answer.
[The Department responded:]
FEDERAL REGULATION OF COUNTRY OF ORIGIN LABELING FOR IMPORTED FOODS
Agency: U.S. Customs Service, Department of the Treasury
Imported Foods Regulated: All
Statutes Administered: Section 304 of the Tariff Act of 1930 statute, requires, with limited exceptions, every article of foreign origin (or its container) to be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit in such manner so as to indicate the ultimate purchaser in the United States the name of the country of origin of the article. In determining whether a U.S. processor is the ''ultimate purchaser'' of an article, the Customs Service employs the same ''substantial transformation'' analysis that is applied for determining the origin of an imported good produced in two or more foreign countries.
Agency: Food Safety and Inspection Service, U.S. Department of Agriculture
Imported Foods Regulated: Meat, Poultry, and Egg Products
Statutes Administered: The Food Safety and Inspection Service regulates the labeling of meat, poultry, and egg products amenable to the Federal Meat Inspection Act (FMIA), the Poultry Products Inspection Act (PPIA), and the Egg Products Inspection Act (EPIA), respectively. Regulations promulgated under these acts require meat, poultry, and egg products imported into the United States to bear the name of the country of origin and the establishment number assigned by the foreign inspection system where the products were produced. Under FMIA, PPIA, and EPIA, upon entry into the United States, meat, poultry, and egg products are deemed and treated as domestic products.
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Agency: Agricultural Marketing Service, U.S. Department of Agriculture
Imported Foods Regulated: Fresh and Frozen Fruits and Vegetables
Statutes Administered: The Perishable Agricultural Commodities Act establishes a code of fair trading practices in the marketing of fresh and frozen vegetables in interstate and foreign commerce. One provision of the law prohibits misrepresentation or misbranding as to grade, size, weight, variety, origin, count, et cetera of fresh and frozen fruits and vegetables received, shipped, sold or offered for sale in interstate or foreign commerce. The law does not require that specific descriptive terms be placed on the container but does require that any markings that are used must not give a false or misleading representation of the packed contents.
Agency: Food and Drug Administration, Department of Health and Human Services
Imported Foods Regulated: All Food Products not regulated under FMIA, PPIA, and EPIA
Statutes Administered: Products must be labeled as to country of origin under the requirements of the Tariff Act of 1930 and its implementing regulations. FDA works cooperatively to assist the Customs Service in enforcing the labeling requirements. FDA's interest in the matter of origin labeling is whether the label or labeling of the food, and representations that express or imply a geographic origin of the food, or of any of its ingredients, is misleading. Conditions under which geographic origin representations are not misleading are specified in 21 CFR 101.18.
Mr. STENHOLM. I think this is going to be a subject that needs to be looked at, because enforcement of current law is always important particularly before you change the law.
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I am a little bit disturbed that the Secretary chose not to look at the grading question, and I would respectfully ask that be reconsidered in a separate study. One of the things that does bother me and others is the fact that imported meat gets a USDA label—USDA Choice, for example, or USDA Good. That infers it is USDA produced meat, The question is: why should we have to have it stamped ''USDA?'' Why can't it be ''New Zealand Choice lamb,'' Australian Choice lamb?'' In fact, I think both of those countries would welcome that stamp based on the conversations that I have had with them. I know that if our product goes to Japan, we want it labeled USDA Choice. I do think as we pursue the grading question that this is a very valid question that will be asked by other witnesses later today as to we treat imported products to make sure they are labeled accurately? Australian lamb carcasses are not accurately stamped if they say is ''USDA Choice,'' and I don't think this will raise a trade concern. I think most countries interested in market growth are going to welcome this, including us.
Have your groups, GAO or USDA or anyone you know, conducted a defensible cost-benefit analysis for country-of-origin labeling?
Mr. ROBERTSON. We did not by agreement with the appropriations staff. Given the time constraints, we mapped out some work that we could do within the few months that we had available, and that did not include doing a cost-benefit analysis. There were reasons for not embarking down that road from the standpoint of—as I said earlier in my statement—that it is really difficult to get your arms around, in any meaningful way, good figures on what it is going to cost to implement a country-of-origin labeling law, at least as it pertains to produce. It depends not only on the ultimate law and the requirements of the ultimate law that would be passed, but it also depends on figuring out some answers to difficult questions about how consumers and how retailers and how suppliers are going to react to that law. We are kind of going into unchartered ground in doing that type of thing.
Mr. STENHOLM. Would you or would you not recommend that this committee consider the answers to those questions in a more detailed manner than which you have done thus far or others or anyone else has done? Is there anything in your studies to suggest to you that cost is—on a scale of 1 to 10 with 10 being a major concern to producers and consumers and 1 being of very little concern, is there anything in your studies that would help you to put a number on that for me today between 1 and 10?
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Mr. ROBERTSON. Well, I think what we could say based on the people that we have spoken with thus far and the numbers we have seen thus far, is that there is going to be significant costs associated with compliance and enforcement.
Mr. STENHOLM. Significant costs but no quantification other than that?
Mr. ROBERTSON. I would be remiss, I think, in trying to give you a number.
Mr. STENHOLM. Ms. Wilcox, any quick response from you on that?
Ms. WILCOX. Well, I think that Mr. Robertson's response has been similar to what we would give you. There are many unknowns in this whole process of trying to determine what would be value for consumers, and also some of the costs are very difficult to quantify.
Mr. POMBO [presiding]. Thank you, Mr. Stenholm. I had several questions I wanted to ask. Ms. Wilcox, what is the number of retail establishments in the United States that sell fresh meat and meat products to consumers? And, since relatively little of your agency's personnel spend any time in these types of establishments, would you envision shifting personnel from in-plant inspections or developing an entirely different workforce to carry out the inspections for country-of-origin labeling?
Ms. WILCOX. I believe that FMI has estimated that there are around 127,000 retail establishments. That is a number that I understand is different and not used by the Department in the past, but that is the number that has now been, I understand, provided to the Department.
It is true that we do not have a vast inspection force that normally is at retail, and I think in my testimony I tried to outline various modes that might be used to enforce country-of-origin labeling if you were to decide to ask the Department to do that.
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Mr. POMBO. Can you share a couple of those with us?
Ms. WILCOX. Well, there are some things that you could do. There would be various things we could do at retail with the kind of pick up that we already do in terms of—we do inspect on occasion at retail; we could also ask you to make arrangements to help us to fund State and local inspection, because they are more often at the local level and certainly do the bulk of the in-distribution inspection at this time. There are also certain ways that we might be able to work out a certification program of some kind, and the Department is also looking at sort of a complaint system that could work, and it has worked in certain instances where competitors certainly do not like to have others using a product that they don't label. So, there are a wide variety of options.
Mr. PETERSON. Mr. Chairman, will you yield?
Mr. POMBO. Yes.
Mr. PETERSON. Ms. Wilcox, I am having a hard time understanding how this would work even if you set up this system. How would you know where this meat came from once it got into the retail store? It all looks alike.
Ms. WILCOX. That is correct.
Mr. PETERSON. Are you going to set up some big, huge bureaucracy like OSHA where you are going to have to keep 20,000 pages of stuff in your store to prove where this came from so you can trace it all the way back?
Ms. WILCOX. We believe there would probably have to be some kind of a paperwork trace-back system if you were to decide to go ahead with this.
Mr. PETERSON. But, how would you know whether that paperwork is real or not? I mean you are going to have to have people sign off every time——
Ms. WILCOX. Sure, you would have to have a certification system that would go through. It would be very complex.
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Mr. PETERSON. But, how would you know which one lied in the chain if there were four people that signed off and it was the wrong stuff? How would you know? I mean, how would you know who to go after?
Ms. WILCOX. Once the product would be divorced from its primary carcass and not carrying a label of some kind, if that product were mixed together, unless one were able to go back to records and look very carefully and also, of course, do random inspections in which there could be product already there that would be from another country, and one would have to watch the process. It would very complicated.
Mr. PETERSON. I don't know, it just seems to me—I would like to see a judge trying to figure out whether this beef was Australian or not. I mean, I don't know how, once it got in the store, how you would ever figure out who was responsible if you could even tell it wasn't from the United States, I don't know. Sounds like a big bureaucratic boondoggle potential. Do you agree with that?
Ms. WILCOX. Well, I would hope that we could avoid it being a bureaucratic boondoggle, and whatever you give us to enforce, we will try to do that.
Mr. POMBO. We have a vote ongoing on the floor, a very important vote, and I am going to recess the committee so members have as much as time as they can to get over to the floor, and we will reconvene very shortly. So, we are temporarily going to recess the committee.
[Recess.]
Mr. POMBO. I am going to call the hearing back to order.
I am going to recognize Mrs. Chenoweth for here round of questioning.
Mrs. CHENOWETH. Thank you, Mr. Chairman. I wanted to ask Mr. Wilcox—when we talk about inspection of meat, isn't it the case that actually you inspect the facilities and that less than 1 percent of the actual meat is physically inspected? I am not challenging you. What I want to do is understand this. Your testimony as well as information that I received off of the Website indicates that the inspection is in a system certified by FSIS as equivalent to the FSIS inspection system, and in your statement today, you did indicate that it is an equivalency inspection rather than all of the meat as it comes over the border.
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Ms. WILCOX. Well, Mrs. Chenoweth, we have really a three-part system for determining if meat and poultry in another country has reached the standard required by the United States for import. The first thing that FSIS international staff does is to review all of the law and regulations that are created by the other country, and they do an extensive review for comparable requirements between our country and theirs.
Then we have a group of international inspectors who go out to that country and who review that entire system on site. I can give you a for instance. I know that a very experienced inspector just went to do an audit of a country that has already been listed as appropriate to export to us, and he will be there for a month in that country while he goes through a random review of plants and inspects those plants and also all the processes that are underway there.
The third part of it is that then when the product is exported to the United States, we have a very extensive import inspection force, and they do look at products specifically, and they also randomly look at other products. So, I can't tell you that they open every package; they don't, but they do review all the paperwork related to that, and then they randomly inspect certain products and test certain products as it is coming in and look at it all.
I think the 1 percent number that you are using is a widely quoted number related to the inspection of fresh fruit and vegetable produce that is coming into the country, because, as you know, FDA does not have as extensive inspection force as FSIS does, and we have run into that discussion of how much we do and it is usually that people have had the 1 percent quoted to them as applied to FSIS when it is really an FDA number.
Mrs. CHENOWETH. All right. I think, basically, we are on the same page. I think the concern that most consumers have is we don't eat the plants over in the foreign countries, and the system is inspected, and I respect that. And, Mr. Chairman and Ms. Wilcox, my bill does not propose more inspection. All my bill does is propose that the consumer understand where the meat came from, and then they can make that ultimate decision.
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Ms. Wilcox, isn't it true that most carcasses and parts of carcasses, as you indicated in your testimony, must be labeled with the country-of-origin and foreign establishment number, according from your testimony, either as part of a country's mark of inspection or on the product's packaging at the time of export? So, I know that Mr. Peterson had some great concerns about all the paperwork, but actually the information is known when it goes to the processor.
Ms. WILCOX. That is correct.
Mrs. CHENOWETH. And, so what my bill would do, Mr. Chairman, is simply give that same information to the consumer as it would to any other purchaser who was purchasing cars or dog bones or any other things. So, thank you very much for waiting so long.
Ms. WILCOX. Thank you.
Mr. POMBO. Mr. Stenholm, did you have any additional questions?
Mr. STENHOLM. Yes, thank you, Mr. Chairman.
One additional question going back to the grading question. Ms. Wilcox, you, Mr. Robertson, or anyone else, would you have any observation for me today regarding the previous statement that I made concerning trade implications or otherwise? Why should we have imported lamb or imported beef roll stamped USDA Choice versus having it New Zealand Choice, Australian Choice? The grading standard, I believe, should be the same. I want the same for us, our product; USDA Choice in Japan for example. I believe that would be to our benefit and to the Japanese consumer. What is the impediment to keeping us from doing the same under current law?
Ms. WILCOX. Could I ask Mr. Clayton to answer that question, Mr. Stenholm?
Mr. STENHOLM. Sure.
Ms. WILCOX. He came with me from AMS.
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Mr. CLAYTON. Mr. Chairman, just for the record, I am Kenneth Clayton, Associate Administrator of the Department's Agricultural Marketing Service.
Mr. Stenholm, I think you have phrased an interesting area of inquiry and certainly at the moment there is nothing to prevent New Zealand, Australia, Canada, anybody from marketing a product with whatever grade standards in the United States. The use of grades in the United States is voluntary. Obviously, the most common language of trade, the prevalent language of trade in the United States, certainly, are USDA grade standards.
It is probably important to keep in mind that the basic function of grade standards, which basically is a language of commerce, a language of trade that lets buyers and sellers communicate, really has application where you have got differences in product that could make a difference to those involved in the marketing or ultimate consumption of a product. Therefore, you have grade standards to describe those differences in product quality. There are lots of schemes that one could come up with, certainly, to describe that quality.
Mr. POMBO. Mr. Stenholm, would you yield for just a minute?
Mr. STENHOLM. I will be happy to.
Mr. POMBO. I want you to specifically answer the question in terms of most consumers, if they see a product, whether it is beef or lamb, ruled USDA Choice assume that that is an American product, and that is not necessarily true. How could we identify as quality grade USDA Choice or Prime or whatever as an American product versus an imported product?
Mr. CLAYTON. Well, I probably would want to think that through a little bit more thoroughly before trying to give a definitive answer to that. Certainly, product as it is traded in the United States and internationally, for that matter, does get traded on the basis of USDA grade standards, and that is an identified language of trade which is used here and in markets across the country. To what extent consumers perceive a product with a USDA grade as being of U.S. origin is a fair question to which I don't have an answer. I don't know. I have not seen really a study on that that would explicitly draw the link in a way that I would be comfortable with. So, I don't know that I can really answer that part of it.
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Again, though, I would reiterate that it is a language of trade. Whatever we have in the marketplace needs to make sense to people who are buying and selling and consuming product. Having arguably a single language of trade certainly, is, I think, arguably more efficient for all those engaged in the marketing of product. It certainly is easier, I would think, for consumers to deal with, and so there is, I think, benefit to having a single language of trade.
The issue of country of origin as it might then relate to that is, granted, a related question. How one would differentiate, I think I would defer for the time being, and I want to think about that a little bit more in terms of how if one were going to do that you would do it most appropriately so that, again, you continue to enjoy the advantage of a well-known and identified language of trade and not lose that, because I think that is very important here, and certainly, internationally, I think it is fair to say that the USDA grade system and USDA grading, for that matter, are kind of the gold standard in terms of marketing particularly our beef and other meat products overseas. We would not want to lose that, certainly.
Mr. STENHOLM. I would agree with that, and I thank you for that answer, and, again, that is why I am respectfully asking the Department to look at the grading question not as part of the country of origin but as a separate question. We all need more time, and we all need more time to think it through, but there is a very relevant question for which there is an answer out there. And, Mr. Dooley, you were not here earlier when I associated myself with a lot of the questions that you asked and commended our colleagues that answered very honestly and very forthrightly the questions that you asked, and I think this is something that all of us need to keep in mind and consider as we pursue this question. Thank you, Mr. Chairman.
Mr. POMBO. Thank you, Mr. Stenholm, and I will join with you in requesting that information for the committee. I think it is not only relevant but very important information, and, as you have stated, grade stamping is optional and voluntary. It is not a requirement for the sale of fresh meat in this country to be grade stamped, and yet it seems to me like if you want to use USDA Choice grades or quality grades as an international means of distinguishing the difference in international language of distinguishing quality, I have no problem with that. I believe that we are probably the most consistent of anywhere in the world in terms of our quality grading. But I don't see any problem with using that quality grading and rolling New Zealand lamb ''New Zealand Choice.''
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Mr. STENHOLM. Would the chairman yield on that?
Mr. POMBO. Yes.
Mr. STENHOLM. Every country interested in international trade should agree to a standard. USDA Choice would be equal to New Zealand Choice, Australian Choice, Canadian Choice, Mexican Choice, Argentine Choice, but the consumer would know that the choice grade, whether it had New Zealand or United States or Canada would mean the same thing. The question is what else do you put on it, and there is an implication that if our beef is in Japan and it is rolled Japanese Choice——
Mr. POMBO. That it is Japanese.
Mr. STENHOLM. That it is Japanese. And the issue here is we want it to be labeled what it is without incurring unnecessary costs. In this case, I think we are talking about the same amount of ink, one purchase of a stamp.
Mr. POMBO. The same person rolling it on.
Mr. STENHOLM. That is for the study.
Mr. POMBO. I know that other Members had additional questions of this panel. Unfortunately, we have an extremely important debate occurring in the floor at this moment, and I know we lost a few of our members over there because of that. Additional questions will be submitted to you in writing. If you could answer those in a timely fashion, it would be greatly appreciated by the committee. But, thank you, both of you, very much for your testimony, and I will excuse this panel.
Ms. WILCOX. Thank you, Mr. Chairman.
Mr. POMBO. The next panel, Mr. George Swan, Mr. Dean Kleckner, Mr. A. H. ''Chico'' Denis, and Mr. R. Jay Taylor.
Thank you all very much for joining us here today. I am going to start with Mr. Swan. All of your written testimonies will be included in the record. If you could summarize those written testimony and keep it within the 5-minute time limit, the committee would greatly appreciate that. Mr. Swan, if you are ready, you can begin.
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STATEMENT OF GEORGE SWAN, PRESIDENT, NATIONAL CATTLEMEN'S BEEF ASSOCIATION
Mr. SWAN. Thank you, Chairman Pombo and Mr. Peterson. Thank you also, and members of the committee, for holding this hearing today. I am George Swan, currently president of the National Cattlemen's Beef Association. I am the fourth generation rancher from House Creek Ranch in Rogerson, ID. We commend your leadership and continuing efforts to examine this issue which is very important to the concerns of the cattlemen and cattlewomen of this great country.
During 1998, beef imports were equal to about 8 percent of total U.S. beef production. This beef is generally blended into ground beef or processed beef products and sold at the retail meat case without informing consumers that it is not U.S. production. In addition to beef imports, nearly 1.1 million head of live cattle were imported from Canada directly to U.S. packaging plants in 1998. Of all the value out of the production took place in Canada, these cattle were processed, and in fact they were basically laundered as U.S. products.
NCBA adopted in January 1997 policy to require imported beef and meat products to be labeled as such. An NCBA task force addressed challenges proposed by various segments of the beef industry to facilitate implementation of labeling. The NCBA country-of-origin labeling task force had these recommendations: first, the definition of U.S. beef include all beef produced from cattle slaughtered in the United States except those cattle brought into the United States in sealed trucks for slaughter. In addition, this definition will not include imported beef trimmings, imported boxed beef, or beef produced from imported carcasses.
Second, all fresh muscle cuts offered for sale at the retail meat case and not meeting the definition of U.S. beef will be labeled as imported. The imported label will be required regardless of whether the product is graded with USDA quality grade, and that identity will be maintained to the retail meat case.
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Third, U.S. beef labels should be available for use on ground, processed beef products if individuals or firms wish to meet the criteria established for the domestic label and market the products accordingly. Otherwise, they would be labeled ''Blended Product'' or ''Blended with Imported Beef.''
And, fourth, due to the unique complexity of labeling ground beef, a pilot study of significant scope and magnitude should be conducted to test consumer response to and cost of labeling ground beef as imported U.S. beef or a percentage of imported and U.S. beef. If it is not found that this labeling would not impose a significant cost on U.S. producers, this label will become mandatory industrywide. Additional research funds will be directed toward developing additional information about potential improvements in source verification and accountability and consumer acceptance of ground beef through labeling.
Mr. Chairman, consumers demand quality and consistent products, and producers in this country are continually trying to meet that demand of those consumers, our customers. Country of origin labeling will give consumers the ability to make informed decisions when purchasing meat and meat products. A national consumer poll commissioned by NCBA and conducted by Worthlin Worldwide in November 1998—and some of that data was presented earlier by your colleagues—showed that consumers overwhelmingly support the concept of putting country-of-origin labels on fresh meat in the supermarket. A follow-up survey in March 1999 found statistically consistent figures that 76 percent of the consumers agreed with the statement that the United States should require labels on meat that show country of origin labeling. On the other side of the coin, only 24 percent said that country-of-origin labeling was unnecessary. In a question that was asked in March and was not asked in November in the survey—we asked the consumers regarding the United States and importers, if they purchased or saw packages in the meat case like packages of hamburgers and steaks with the different countries origins labeled there—United States, Canada, whatever—if they were faced with that choice whether they purchased their product of the United States or an imported product, 91 percent of the consumers said they would choose the U.S. product. Of those who said they would choose U.S. beef, 69 percent would do so because they prefer to buy American, loyalty to U.S., to support U.S. businessmen and also the farmers and ranchers. Thirteen percent thought U.S. beef would be safer, and 9 percent felt it would be of higher quality. NCBA believes that through country-of-origin labeling we can improve our ability to market U.S. beef and ensure that we are getting the full value for resources we are spending to promote our product.
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Labeling is not a new concept. Many countries around the world require such labeling on foreign products. In some of our largest markets—Japan, for example—we have taken advantage of labeling to better identify our product with the Japanese consumer. The growth in that market since the barriers were eased has resulted in a market that can send $1.5 billion worth of clearly market and identified U.S. beef. In every other market in which we compete with Canadian beef, their products are clearly marked as to its country of origin; it is part of their marketing strategy. They are obviously willing to put resources and effort into promoting their product in other countries. So, why not in the United States?
The National Cattlemen's Beef Association is prepared to participate in a process of evaluating critical marketing and trade issues within the beef industry. NCBA will explore providing additional input as other issues arise. I would like to thank you for this opportunity today, Mr. Chairman, and I would also like to enter into the record two letters that I have here today. One of them addressed to you in response to some of costs incurred, and I would also like to introduce as part of the testimony.
Mr. POMBO. Without objection, they will be included in the record.
[The prepared statement of Mr. Swan appears at the conclusion of the hearing.]
Mr. POMBO. Mr. Kleckner.
STATEMENT OF DEAN KLECKNER, PRESIDENT, AMERICAN FARM BUREAU FEDERATION
Mr. KLECKNER. Thank you, Mr. Chairman, members of the committee. I am Dean Kleckner. I am president of the American Farm Bureau. I am a corn, soybean, and a 2,000-head hog producer in north central Iowa. We strongly support legislation that will require country-of-origin labeling for all products. We believe that consumers have the right to know. I think this is the consumers' right-to-know issue where the food they are buying is produced in order to be able to distinguish American products from imports and to be able to buy those products produced by their fellow Americans. Consumer surveys show this, as has been indicated many times this morning.
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We feel that it is important to change the current practice of allowing cattle to be imported into the United States and then when processed, carry the USDA inspection label. This misleads the consumers into thinking they are buying a U.S.-produced product—I have heard that several times this morning; it is certainly true. Imports of lamb into the United States have more than doubled in the last several years from 7 to 16 percent of consumption. Nearly 70 million pounds of lamb are now imported. Some retailers that sell American lamb now have both domestic and imported in the meat case without differentiation. In addition, some imported lamb is graded by USDA and sold at retail simply as USDA Choice lamb. Foreign lamb is frequently advertised as USDA inspected lamb without a mention of whether it is domestic or imported. Fruit and vegetable imports are seeing this same type of import growth with little opportunity for consumers to identify domestically-produced fruits and vegetables.
We also believe that it is important that beef produced in the United States should be able to proudly display the American flag and be labeled as such. This gives consumers the knowledge they need to make decisions as to where their food is produced. While we feel it is important to label most beef products, certain challenges arise in the case of ground beef—you just heard Mr. Swan mention that as several others did. In some instances, a product may be from more than one country. A system should be adopted to make all parties comfortable with the labeling of ground beef. We urge members, you folks, to work with the industry to come up with that system.
Because of WTO provisions, we encourage all labeling to state the actual country of origin rather than just label the product ''Imported.'' We believe that WTO rules prohibit using the words ''imported'' on products. Our folks tell us that this is called an unfair trade barrier, but the labeling the actual country of origin on the label would not be an unfair trade barrier.
Legislation has been introduced in both the House and the Senate to require that imported meat and meat products be labeled. Under current law, labeling is permitted but not required. Not only would this legislation provide consumers with information they want but it would help bring U.S. labeling laws into uniformity with requirements of many of our trading partners around the world.
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We appreciate the initiative of Representatives Chenoweth and Bono for introducing country-of-origin labeling legislation. We support them; we believe they can be made better, both of them, through committee action, and, Mr. Chairman, we look forward to working with you in that process. One concern we have with Mrs. Chenoweth's bill is how to label the meat product from stocker calves coming into the United States. We believe that the product coming from these cattle should be labeled as American since a major portion of their life is in the United States, and they are fed American beef. I think—as I heard this morning—with Canada, it could be some of the same thing there. There ought to be a way to work that out that would be satisfactory to everybody.
In conclusion, the bottom line, country-of-origin labeling is simply a matter of informing the American consumer and helping to assure consumer confidence in their purchases. Enhancing market opportunities for domestic meat, meat products, and all agricultural commodities by requiring labeling of imports is critical to the agricultural industry.
We want to thank this committee for holding this hearing and particularly you, Mr. Chairman, and I will respond to questions when the time is right. Thank you.
[The prepared statement of Mr. Kleckner appears at the conclusion of the hearing.]
Mr. POMBO. Thank you.
Mr. Denis.
STATEMENT OF A.H. ''CHICO'' DENIS, CHAIRMAN OF THE BOARD, RANCHERS LAMB, REPRESENTING THE AMERICAN SHEEP INDUSTRY ASSOCIATION
Mr. DENIS. Thank you, Mr. Chairman. I want to agree with the other panelists in thanking you and the rest of the subcommittee for holding this hearing. The labeling and the grading of the lamb meat has been a long-time concern for the lamb industry. My name is Chico Denis. I am producer; have been for about 40 years, and I have been about 30 years in the lamb feeding business, and I am currently chairman of the board of Ranchers Lamb.
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Ranchers Lamb is new slaughter plant that we put together and built in San Angelo. We currently kill from 6,000 to 13,000 lambs there a week. We have a big stake in this meat grading and labeling. We believe that all the edible meat in the United States should be labeled as to country of origin. We have our shirts and our toys—as has been mentioned here this morning—already labeled. Those costs have been dealt with, and there was no big upheavals in their markets. We believe also like the others that this is a consumer interest. The consumer has a right to know what the product they are buying is and where it comes from. It should not be construed as a trade issue or a trade restriction issue. It is simply a matter of informing the consumer where their product is coming from.
Right now, increasingly in our industry, in the lamb industry, we are seeing the products mixed between domestic and imported product. It goes into a box—let us say a box of legs of loins or whatever, and the box is stamped ''USDA Choice'' because of the grading loophole that has been discussed here this morning, and then the grocer nor the consumer nor anybody else can tell whether that is a domestic product or a mixed product or a totally imported product.
This gives a distinct price advantage to the importers, because they are able to mix a cheaper product in their boxes, and we have a very difficult time in competing with them. It also makes it very difficult for us to advertise our product as good, American lamb, because the consumer can't tell what she is buying, and if she were inclined to buy it, couldn't find it, because it is not marked; it is not distinguished.
We believe that the grading of the foreign products should be stopped. It should never be stamped with a USDA shield. The consumer, as you have heard this morning, believes that to be a domestic product whenever they see that shield. We believe that there is no reason for the Government to deceive the American consumer in this fashion, and it should be stopped. The meat should be inspected and stamped that it has been inspected and passed by USDA just like it is, but it should not be stamped with a USDA grade. This practice along with the country-of-origin labeling has allowed the importers to have an indistinguishable product that they put into the market at a price that the domestic price cannot compete with.
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The increase in imports of lamb meat that Mr. Kleckner referred to is very real. We have seen since 1997 when the surge occurred approximately a 40 percent decrease in price for feeder lambs as well as for slaughter lambs, and when you are in the business, that is very real. My written testimony has the exact dollar figures for those prices for the record.
The imports still are increasing. The Australian and New Zealand people are doing a very good job in getting more and more product over here. As long as they are able to sell it without differentiating it, it will continue to increase. When their currency devalues or anything happens, it becomes more attractive to send it over here, and we have no quotas or tariffs or anything that will stop an unlimited amount from coming in.
We just went through an ITC, an International Trade Commission hearing on 201. We got unanimous decision both in the injury and the remedy phases. We need some help from this subcommittee and active participation in getting the administration to give us effective trade relief in that area.
The country-of-origin labeling and the stopping of the grading of the imported meat will help us. By differentiating our product, we can then go out through advertising and educating of the consumer; convince the consumer that we have a better product that they should buy. That will restore optimism to our industry. The lamb industry is sort of in the doldrums, in the tank right now, and we need to get that restarted. If we can get the confidence back in our producers that there will be a profitable venture, then we will see our industry recover.
Again, I would like to thank you, Mr. Chairman, and the rest of the members of the subcommittee for holding this hearing. It certainly has come at a good time for us. We need all the help we can get. Thank you.
[The prepared statement of Mr. Denis appears at the conclusion of the hearing.]
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Mr. POMBO. Thank you.
Mr. Taylor.
STATEMENT OF R. JAY TAYLOR, REPRESENTING THE FLORIDA FRUIT AND VEGETABLE ASSOCIATION, THE FLORIDA TOMATO EXCHANGE, AND THE FLORIDA FARMERS AND SUPPLIERS COALITION
Mr. TAYLOR. Mr. Chairman, members, I just realized sitting at this panel that now that we have a farmer that grows fruits and vegetables, we could have a heck of a barbecue just with the panel alone. [Laughter.]
I come from Florida. I have operations in Florida, Georgia, and Virginia, just across the Bay, and I am representing the Florida Fruit and Vegetable Association, among other things.
We believe that the country-of-origin labeling is long overdue. It is something that has needed to happen for many years. For 69 years, goods imported in this country have been required to be labeled to the country of origin, but there was an interpretation, the infamous J list of those things that were exempted from that requirement. The automobiles that we drive, the T-shirts that we wear certainly have them; the food we feed our families don't.
Sixty-nine years ago when that law was enacted, we were in a very different world. The fruits and vegetables imported in this country as a percentage were minuscule. Today, during the winter months, 70 percent of the food imported into the country from Mexico makes up a 30 percent share for the American farmer. So, it is a very different scenario.
Country-of-origin labeling enjoys widespread support. When did you ever think you would see farmers, organized labor, the National Association of State Departments of Agriculture, and consumer groups all on board and fully in unison? I have had the pleasure of standing next to Ralph Nader, a quintessential consumer advocate, in a press conference supporting country-of-origin labeling along with the displeasure and the unhappiness with NAFTA.
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The soundness for the basic logic of these bills is a magnet for support; recent surveys have indicated 85 percent of the people—we have heard that number bandied about quite a bit today. One interesting thing is the State of Florida has had a country-of-origin labeling law for 20 years. When you poll the people of Florida, that 85 percent that are in favor rises to 96 percent. Ninety-six percent of the people polled in the State of Florida enjoy having the enforcement of country-of-origin labeling in their grocery stores.
The opposition to this bill basically comes from one organization: the Food Marketing Institute. I say that this is nothing more than attempt to continue your business as usual regardless of the wishes of the American public; all in an attempt to save a few pennies of profit. I export a large percentage of my product through a country that requires country-of-origin labeling: Canada. Canada as well as Mexico require labeling, our two NAFTA partners. This cannot be considered trade issue. All we are asking for is equal treatment.
The cost of this bill is not and should never have been an issue worth consideration. In 20 years of enforcement, the State of Florida can prove without a doubt that this is not an expensive proposition. Even if a chain store were to add all additional costs to the average consumers' weekly bill, it would amount to less than a penny a week. Now, I thought it very interesting with the GAO representatives preceding us were very willing to quote the FMI estimates of the cost of this bill and how laborious it would be. They neglected to refer to 20 years of experienced State of the Union. We have representatives here in the room from the commissioner of agriculture from the State of Florida's office. They have all of the facts and figures that this committee or the GAO would need to substantiate what the true costs of this legislation would be. The retail industry can say whatever it wants, but 20 years of evidence certainly is hard to ignored.
The GAO recently released its report that by its very title brings doubt to the objectivity of the findings. ''The Potential Consequences of Country-of-Origin Labeling'' says a lot; the potential benefits might have been a more germane subject.
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In this report, one issue that I must raise is the assumption that there is little to gain from labeling when there is a health scare because of tainted foreign produce. When children became ill after eating Mexican strawberries, consumers had no way to tell where the strawberries on the grocers shelves were from and so stopped buying strawberries at all. The blameless strawberry farmers of California—and there are several representatives here from California—took it on the chin through the height of their season because of that. Labeling would have allowed the consumer to continue to buy without fear of endangering their families. We in Florida were able to continue to eat strawberries through that period, because we knew that they were not imported.
As a farmer, I can tell you that there are real significant differences between the rules we live under here in the United States and those in developing and third world countries, such as Mexico, one of our largest trading partners in agricultural products. I listened to some testimony before the ITC. I was disgusted. Our Mexican counterparts put themselves forward as the technologically elite of the industry, and so I sent an undercover film crew into Mexico to produce a short documentary that I have, and I am willing to give to anybody. We have copies; we will give them to anybody who asks.
My time is up. I would like to thank the committee for the time to testify. Thank you.
[The prepared statement of Mr. Taylor appears at the conclusion of the hearing.]
Mr. POMBO. Thank you. Thank all of you for your testimony.
Mr. Swan, I had a specific question for you dealing with how we would define country of origin. It is one of the concerns that I have as we move forward in this process is the definition of country of origin, and I think Mr. Kleckner touched on it in his oral testimony in terms of light cattle coming in, whether it is Mexican steers or whatever coming in. And I have got to admit, I get 350, 400 pound steers coming in; we keep them for a 1 1/2, 2 years, and then sell them, and in a number of the bills that have been introduced, it is my understanding that those would not be classified as American cattle.
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Mr. SWAN. Mr. Chairman, basically, the National Cattlemen's Beef Association believes that the added value to that product—the example you are using of cattle coming across from Mexico and you are keeping them for a period time—the added value would occur in the United States because they would be fed, processed basically here; the beef quality assurance would be basically guaranteed within this country, they would then qualify for the U.S. stamp or the U.S. product.
As was alluded to earlier about the number of cattle leaving the United States and going to Canada, it was kind of phrased, ''Well, maybe there would be lot of cattle going north into Canada.'' I think, last year, we had a total of maybe 50,000 head of feeder animals that went north into Canada. In other words, less than 5 percent of the total number of fed cattle coming back into the United States would be processed. So, that is an issue that we are trying to open up more, but within a 110-, 120-day—I am using this as an example—of having value added to that animal in the United States would qualify it for a, quote, unquote, ''labeled'' U.S. product.
Mr. POMBO. In terms of cost to this program—and I know that there is a lot of debate in terms of what the costs would be and who would pick those up—one of my concerns with this is that the cost, whatever it is—whether it is $30 million, $60 million, $100 million—is actually going to be borne by the producer, and you and I both know that if you put added costs on the packer or the retailer, they are not going to take that out on the other end; they are going to take it out on your end, and then the producer is the one that is going to pay the cost of this program. Has your organization looked at that aspect of this and tried to estimate what the impact would be on the industry of bearing that cost at the producer level?
Mr. SWAN. Chairman Pombo, I don't know that we have an actual cost of what it would be. We know that there have been costs thrown out—suggested the $1 billion, and we have—part of my written testimony and also submitted here today says that some of those costs would not be incurred, because they are already being done in regard to identifying cattle coming into this country. So, there are some costs out there that are being thrown around, and until we get come reports from the USDA and we look further into this, I am not here to tell you right now that all the costs would be incurred by the producers. I do know this, though, that we have got a lot of countries around the world that require country-of-origin labeling today. I guess I ask the question, where are those costs being passed down to?
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Mr. POMBO. Well, I can tell you that in looking at the cost of beef in the stores and what I am getting, it looks like I am the one bearing the cost of everything we are doing right now, and it would only stand to reason that if we have an additional cost in the program, I am going to bear the cost of that one too. So, it is a concern, and I know that you have a very well qualified staff here, and I look forward to getting a report from them on what they think the cost is going to be and how that would be dispersed throughout the industry.
Mr. SWAN. Yes, sir, and I will guarantee you that you will get that question answered more definitely.
Mr. POMBO. The one other issue is the whole issue of trace-back, and the retailers and packers would have to develop a system of trace-back so that they could determine where the products came from originally. There is a concern amongst many that a big portion of that increased cost is going to be made up in that and that the regulations that would be required in that part of it would be very onerous. Have you guys looked at that part about how easy it would be to trace beef back to the producer from the retail level?
Mr. SWAN. Right now, we have got task force groups working today to further look at where the arriving animals and how far we go—right now, it is a voluntary situation—so that we can identify animals so that we can have trace-back regardless of pathogens or residues or anything of that nature. That is an ongoing subject that we are debating at this time.
However, this is an issue right now of deciding whether we are giving consumer the right to choose a U.S. product versus an imported product, and I think that is what the issue boils down to right there.
Mr. POMBO. Well, I agree with your final statement that it boils down to a consumer issue, so to speak, in terms of knowing whether or not it is American or not or from somewhere else, but I will tell you and the other members of the panel that before I put my support behind anything, it is going to have to be a lot more thought out than where we are right now, because I believe there are a lot of questions out there that could impact producers, that could impact me at home that have not even been addressed, and I wish we had USDA's report today so that we would have that information available; we don't. And I don't know if it is going to answer questions that I have or not, but as we move forward with this issue, there has to be a lot more thought put into the impact on the producers in order to provide that consumer choice.
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I just don't think we are there yet. I don't think that there has been enough questions asked and enough thought put into what the actual impact is on the people you all represent. I can understand what the problem is; I can understand what your issue is, but unless we think this thing all the way through, I think we have got some problems in just taking a bill, any of the bill that have been introduced, and passing that, because I don't think it has really been thought out exactly what the impact is going to be on you.
Mr. SWAN. Mr. Chairman, can I comment on that before Mr. Kleckner does, and I would be willing to yield the mike?
That is why this is a good starting point right here with this hearing. The National Cattlemen's Beef Association and the beef producers of this country are willing to work through this process to identify a piece of legislation that will protect, preserve the credibility, the viability of this industry, the beef industry in this country giving the consumer the right to make a choice on eating U.S. beef or imported products. We have got confidence in our product and producers in this country, but I can say this, Mr. Chairman, agriculture has been taking a pretty big hit over the last several years, and if we don't stand up for agriculture—Mr. Dooley made the comment that we have the cheapest, safest food source in the world, and I can't agree with him more, but we are sacrificing—the agriculture producers in this country today—because every time we go into trade negotiations or whatever, we always back up a step, and it is time for us to stand up for agriculture and be that voice, because this is the backbone of this country, and if we can't make a stand now, when will we?
Mr. POMBO. Well, I know agriculture has taken a real hit over the past couple of decades, and I even had to get an non-farm job, but——
[Laughter.]
Mr. Denis, I can tell you that you will have the support of the chairman of the subcommittee on your 201 action. There is no question about that, and I am sure that other members of the subcommittee will also be full supportive in that regard.
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Mr. SWAN. I appreciate that.
Mr. POMBO. Mr. Peterson.
Mr. PETERSON. Thank you, Mr. Chairman, and I would just say that there is some of us that think that if we have gotten some help to derail GATT and NAFTA at the time, we might not be in this situation. So, anyway, I want to follow up a little bit on what the chairman was talking about here. I have a real concern about how this is going to work, and I am real worried that we are going to end up with a ton of paperwork and maybe putting the burden on people it shouldn't be put on, and I can see where you could keep track of a live animal and figure out where it came from, but once you slaughter that animal, I think it becomes a lot more difficult.
Now, the fellow from Florida, I guess, Mr. Taylor, was saying about how easy this is, but I just want to have everybody look at the GAO report where it says in Florida, which has a mandatory labeling law for all imported produce, enforcement occurs during the course of routine State health inspections that are conducted about twice each year, and in every store during those routine inspections, the officials check the shipping boxes and packages in the store against the display signs. It takes 15 per visit, and they say that sometimes they have no reliable means to verify the accuracy of these signs or labels, and it says when violations are found, it takes 5 minutes to process the paperwork and so forth and so on.
In the other two States where they have labeling, according to the GAO, they don't enforce the law, and, basically, Florida really doesn't enforce this, it looks like; in Maine, it says it does not enforce it at all, because the list of countries to be identified keeps changing, and the paperwork to verify the country is often unavailable, and in Texas, it says that the labeling law is not currently being enforced.
So, we too often in Congress are passing laws that feel good or sound good but really don't do anything, and I think if we are going to actually make this work, it is a lot—as the chairman said—more complicated and a lot more dangerous than we are letting on here, and what is your response to the GAO saying that you basically are not doing much in Florida other than just a cursory check? People could change these boxes, change the shipping packages, and nobody would know the difference, and you can't tell the difference in this produce just by looking at the produce, and that is my concern.
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Mr. TAYLOR. That is right. Mr. Peterson, in the exemption of the Tariff Act of 1930, they didn't do away with the requirement of country-of-origin labeling to the back room of that grocery store, and it is easy to go into the back room and see where that product that is on the shelf comes from. In the audience here we have Dr. Martha Roberts, the deputy commissioner for the State of Florida, and I think she would probably take exception with the GAO's report where it says that there has been no enforcement of that law in the State of Florida. I am certain that the people that have been fined in the State of Florida would disagree with it as well. I know as a consumer in the State of Florida that I can walk into my grocery store in my hometown and things are labeled.
Mr. PETERSON. Well, I guess, I would appreciate those comments if they would make them to me and to the GAO as to whether they think the GAO has fallen short here, and that would be helpful.
Mr. TAYLOR. Yes, sir, I am sure that they would love to have that opportunity.
Mr. PETERSON. The other thing that I am wondering about is has there been any effort made for the two sides to get together and see if there is a way they can work this thing out? Has there been any attempt by you folks and the food marketing people to sit down and come up with something that might be workable or is there no dialogue going on at all?
Mr. TAYLOR. A good answer to that, Mr. Peterson, is that the law as it stands and is enforced in Florida must be palatable to the Food Marketing Institute and the large chain stores that are located there, because they are in a competitive position and a very competitive market, and yet they have never tried to do away with the law or complained about the enforcement.
Mr. PETERSON. Well, I am not talking about the Florida law, because I have some questions about whether you are really doing anything there. We have been talking about this issue for 2 years. Is there anything going on where there are serious discussions being held that would get us to some place where there is a middle ground or a compromise or some kind of a system that everybody can agree on?
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Mr. SWAN. Mr. Peterson, if I can address that. I will be back here tomorrow testifying on price reporting, and we have now been deliberating with the packing industry for the last 5 or 6 weeks to try to hammer out a compromise on mandatory price reporting.
Mr. PETERSON. Right.
Mr. SWAN. As soon as we get this price reporting situation through with tomorrow and moving in that direction headed for legislation, we are planning to, the beef industry, sitting down with FMI to hammer out this very issue the same we did with the packing industry. I think that we have got to keep the lines of communication open so we can communicate and cooperate.
Mr. PETERSON. So, that has happened yet, but you—at least you are willing to——
Mr. SWAN. Mr. Peterson, I think that that owes it to this committee to issue that challenge also to FMI to come to the table with the beef industry——
Mr. PETERSON. Well, we are going to ask them when they get up here as well.
Mr. KLECKNER. Mr. Peterson, we have not sat down with FMI. I know they are here, and I know the folks there very well; they are good people. We just disagree on this.
I have sat through the whole thing this morning, including this panel, and I keep asking myself what is the reasons not to do this? A lot of members overwhelmingly tell us year after year they want it done; consumers, the polls, the surveys show that. So, the reasons would be it is going to be way too costly, and those costs have to be paid for by somebody—producers—in the end, consumers pay all of the cost, but, certainly, producers early. Or it seems to me that the second one is that it won't be effective; that people can cheat. Other than that—and those are major issues—then why not?
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I think the cost—when I go to our local Hy-vee store in Iowa and buy some tomatoes, every tomato has a sticker on it irritates me, because it is hard to get off—and apples, the same way. But it says something. It doesn't too often say country of origin, although I have seen some country-of-origin stickers. I don't think you could stick these on a grain of rice or even on a grape. At some point, you have to take, I believe, into account that honorable people are in this industry, and when the labels are there, it will be—they won't change labels in the back room. I mean, if they do that in Florida, they ought to fine them and put them in jail. I don't think the folks at Hy-vee in Iowa or in the Seventh Patron would do that.
I have watched apples being processed or tomatoes in packing plants in California, Chairman Pombo, and the equipment you have here today is amazing. It is done—they go down faster—well, not faster than they can see—but the computers whip them out by size and by color and by weight, and they go into different bins. That is the automation that is here today. I think the same thing can be done in the beef industry with beef or pork—what I grow.
Can it be done? Certainly. Is it going to be terribly costly, $1 billion a more? Heck no, it won't be. Consumers want it; producers want it, so what is the downside? I think that is why you are here, and that is why we are here, and this is a heck of a good start, but I think we ought to start with the idea that we are going to do it and find ways to do it not starting with the mindset—I shouldn't tell you where to start—but my mindset is not that we can't do it, so let us see the ways that we can not get it accomplished rather than being positive about it.
Mr. PETERSON. Could I ask those of you that have been advocating free trade, what I don't understand is how this squares with that. I mean, if where we are trying to get is to open up the marketplace so everything is on a level playing field and everybody is operating in a free competitive market, then why do we have to go on the other hand and label our products other than to try to get our people to buy more of our products which is contrary to what we are doing in those trade agreements? That is part of what I don't get here. I have some real problems with the NAFTA, as you are aware, and I think we got taken to the cleaners in NAFTA, and this just seems to go contrary to that philosophy for those that push that agreement, in spite of the fact that a lot of us had concerns about it.
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Mr. KLECKNER. You and I, Mr. Peterson, have talked about this before, and we just disagree on NAFTA and GATT, and we probably never will convince each other. I don't view this—I may be the only one at the table—well, I shouldn't say that; Mr. Denis, I think, likes lamb—I really like lamb. I will buy it a lot. Many people in this room do, I guess. I am not so sure that, frankly, Mr. Denis to have American lamb labeled American lamb as opposed to New Zealand lamb which has some awfully good quality also—and you mentioned that—they are doing a good job of promoting. In the end, I will buy based on the way it looks in the meat counter, the quality, and the price, and then from that point on the proof of the pudding is in the taste, and if I can consistently buy American lamb, I will buy it if the quality and the price is right or New Zealand lamb, Mr. Denis. It is the same thing—I produce pork, and I compete with Danish pork and Canadian pork, and I just think American consumers ought to have that opportunity to buy Canadian and Danish pork. They ought to have the opportunity to buy mine, and let them buy it based on quality, price, everything else, and let them know where it comes from; that is all we are asking.
Mr. PETERSON. The last thing I will say, Mr. Chairman, and I apologize, is that there currently is a program where voluntarily you can put the U.S.A. label on your product. So, if that is in place and if that is what you are trying to accomplish, then why do we need a law that says that you have to do it if it is there for the people that want to do it?
Mr. SWAN. Mr. Chairman, may I make a comment on that? Mr. Peterson talked about free trade. The beef industry also believes in fair trade. We have no idea that this is not going to limit the amount of cattle that can come in through Canada or anything like that. It is labeling the product. The packers have a way to trace back on the boxes; it is documented where that—basically, when that animal was processed at the packing plant. They can trace it back and know exactly where the animal came from. The retailers can do the same thing. NAFTA had nothing to do with the amount of live cattle going back and forth across the border. If we didn't have NAFTA, they would still be here today. They were there before, so it will continue to occur that way. All we are looking is to marketing our product—U.S. beef.
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And I can just say this: I have done an informal survey with my consumer friends that are not even related to agriculture other than consuming our products. What I have asked, I have said, ''You know, when you go in and buy USDA Choice or Prime in a restaurant or in the retail store or select, what type of a product do you think that you are getting?'' And they think that they are getting a U.S.-produced product; that is what they think they are getting right today, because it is not labeled whether it is U.S.-produced or imported product.
Mr. PETERSON. It is not accurate that it is that easy, because I can tell you there is a plant in my district, Long Prairie Packing, and anywhere from 20 to 30 percent of their cattle come from Canada everyday. This is a little plant where they haul all these cattle in and they slaughter them, and these are Canadian cattle and American cattle being slaughtered at the same time; being made into hamburger out of the same process, and there is no way in the world that they could comply with this. They would have to segregate these cattle, and they would have to take Canadian cattle one day and America cattle the other day, and the way the process works—I mean, that is part of what we are saying here is that this is a lot more complicated than a lot of people realize, especially for those of us up near the border which you are going to run into a lot of other issues that I don't think anybody's thought about at this point.
Mr. SWAN. Yes, Mr. Peterson, I am on the border also. I am in Idaho, and so we do border where a lot of fed cattle are coming down across the border. But, you see, when you are talking about hamburger and whole meat cuts, two different issues right there, and that is why we are willing to sit down to see how we can hammer out the hamburger issue, because there is a concern there on how we would label that, whether it would be U.S. or a blended product or an imported product. So, we need to sit down and hammer this out. That is why this is a good starting point. When it comes to whole meats, it is pretty tough to blend a whole meat cut.
Mr. PETERSON. Well, right. But, I mean, there is a lot of plants that are in this situation, and we have got to come to some resolution of those issues before we can move ahead.
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Mr. DENIS. Mr. Peterson, I would comment that in the case of lamb, there is no problem in keeping it separate. It is a smaller carcass; very little of it is ground; it is nearly all sold as whole muscle cuts. We will have the capability in our plant when we get into fabbing of identifying which lamb those cuts came from back to the feed lot, and the feed lot will have the identity all the way back to the producer. That won't be a problem for us.
Mr. POMBO. Mrs. Chenoweth.
Mrs. CHENOWETH. Thank you, Mr. Chairman. I want to welcome Mr. Swan to the panel. I am sorry I wasn't here to get to introduce you before you were called up, but we are very proud of the work that you are doing.
I like lamb too, Mr. Kleckner, but I love beef, and my question is, I am asking more and more, where is the beef?
I do want to respond to Mr. Peterson's comment about the fact that there is a voluntary situation in place where people can volunteer to label U.S. beef. The fact is that McDonald's tried to doing that, and they were disallowed from doing that, because new rules and regulations had taken effect where McDonald's could not any longer advertise 100 percent U.S. beef. So, that is the reason why this bill came forward. I do want to assure Mr. Kleckner, Mr. Denis, Mr. Swan, and Mr. Taylor that—and I am speaking for my colleague, Mary Bono, too—we are more than willing, more than anxious to work with you as the bills mature.
With regard to the cost, most Americans don't realize that 320 million pounds of meat is consumed every month by American consumers that has already come from foreign countries; 320 million pounds a month comes from foreign countries. I found the chairman's comments very interesting, and it is typical of the fact that the producers have been squeezed out to the point they either have to take a second job, a night job in Congress, or else they are having to shave pennies. And the fact is that if you don't like the issue, you either kill the messenger or confuse the issue, and that is what has happened, because, actually, the cost will be probably passed on to the consumer.
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Now, we have heard figures anywhere from $10 million, $60 million, $1 billion, and even if you take the $1 billion figure—$1 billion, which is astronomical. Both Mr. Kleckner, Mr. Swan has disputed that figure, but let us take it, the $1 billion figure. That would amount to $4 a year per consumer—$4 a year. That is two Happy Meals from McDonald's—no, less than two Happy Meals from McDonald's. And I know from studies that we have done that the American consumer is willing to pay more, and I don't think we ought to lay that on them if we can possible avoid it, but they are willing to pay more to know that they are getting American meat.
With regard to just the—we have run out the economies on this bill, Mr. Chairman, and I would love to sit down with you and go over the economies on it, because with the American producer being able to fill—the American beef producer, let us say—being able to fill the 22 percent demand that is now active demand in the marketplace. When you are able to sell 22 percent more, it is going to help our producers. But the fact is that this is a consumers' right-to-know, and that is why this issue is so very electric.
Last year, figures show us that we had 3.3 million head of cattle come in from foreign countries over the border from Canada in sealed trucks or various other countries, and when the critters come in in sealed trucks, there is very little inspection done before they go straight to the slaughter house, and I do want to work with you, Mr. Swan and Mr. Kleckner, on that issue. I do want to also say, Mr. Taylor, I really appreciated your testimony. A very sad thing happened last year in Idaho. We have a lot of fruit producers also in Idaho, as you are well aware, and even though one of the major grocery chain's corporate headquarters, we still had a lot of apples hanging on the trees that couldn't be harvested because they were brought in from foreign countries.
Now, Americans want to support the American food producer first, and like I say the trust is very high for the American food producer, and, Mr. Taylor, as long as I am addressing you, I would like a copy of your documentary.
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[The prepared information appears at the conclusion of the hearing.]
Mrs. CHENOWETH. And I do want to say that I have sat down numerous times with the Food Marketing Institute and tried to put together meetings with our cattle producers and the Food Marketing Institute, and I, for one, will continue to try, but I welcome people being able to get together and working for a solution that really is workable for the consumers who we represent. Thank you very much. Thank you, Mr. Chairman.
Mr. POMBO. Mr. Dooley.
Mr. DOOLEY. Thank you, Mr. Chairman. Just to clarify for the record that since the implementation of NAFTA, we have seen a significant increase in U.S. agriculture exports both to Canada and to Mexico, and in fact when I am talking to members of the National Cattlemen's Association, they have stated that Mexico is the fastest growing market for U.S. beef, and so I think we should not be deluded that this administration and prior administrations have not served agriculture well in negotiation of some of the trade treaties. In fact, in a recent agreement that we have negotiated with China as it pertains to beef, we have seen the administration negotiate a reduction in beef tariffs from 45 percent to 12 percent, and we have also seen the administration be the champion on this beef hormone issue that has won multiple agreements with E.
Along the lines of some of the earlier comments from Mr. Pombo, is that we have the pork producers out as a commodity group that is opposing the country-of-origin labeling, because they think it might potentially increase costs to producers, and they also think that they have the ability to voluntarily implement a plan which can communicate to consumers that they are U.S.-produced pork that they are being offered, and I guess, Mr. Kleckner, the American Farm Bureau has long been an advocate of having less Government intrusion into the private sector. It was one of the strongest advocates of the unfunded mandates bill into the private sector. There is no question that this is going to incur additional costs if we mandate this at a Federal level. It seems to me to be a little bit inconsistent with the Farm Bureau's position on private sector approaches that the Farm Bureau is now in a position that they would mandate that the private sector implement a labeling regime when you have other commodity groups out there that are doing it voluntarily because they see value there.
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I am cotton grower, and we have put a lot of money into Cotton, Inc., and built a logo; built some brand name I.D. We have Washington State apples that are communicating it is a U.S. product. We have Florida Citrus that is doing the same thing. There is nothing to preclude U.S. agriculture and commodity groups from promoting labeling. There is nothing to prevent McDonald's from labeling 100 percent U.S. beef if in fact it is produced with 100 percent U.S. beef. And I guess I am a little bit concerned on why we think that we have to go to a mandated system here. Mr. Kleckner, why does it take this? Why does it take big Government?
Mr. KLECKNER. Mr. Dooley, good question, obviously. You and I addressed a little bit about this some time ago. I don't see that this is big Government, simply passing a law that says there should be country-of-origin labeling. If there is going to be a huge bureaucracy created to enforce it with policemen on every corner or in every store, we hadn't ought to do it. But I think Florida's example—and I have often wondered why Congress in their infinite wisdom doesn't sometimes start pilot projects. We have got a pilot project for this one going in Florida right now, and I don't know where the GAO is coming from. Mr. Taylor indicates that he didn't think that it was accurate, and we need to decide that. I don't see this as big Government, Mr. Dooley, or inconsistent with our long-term, long held beliefs on less Government and less Government involvement; I personally believe in that. All I know is that I am telling you Farm Bureau policy that is not even close votes. Our members just want country-of-origin labeling.
I don't think, frankly, it is the panacea that some of our members think it is going to be, but I think it is a matter of having consumers be able to choose, and there will be some consumers, perhaps, down the road, that may choose imports, because they think it is better quality or the price may be different, but that ought to be their option. We are simply letting them know where it is from, granting that it is not going to be perfect; that maybe a package of beef will be mislabeled as to the country of origin on occasion, but it is not going to happen very often.
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Mr. DOOLEY. I think that there is general consensus that this is not a science-based issue; that it is more of a consumer's right to know; everyone would agree with that? And I guess you asked the question, why should we object to this? And one of my concerns is that we have always been strong proponents—many of us on the Agriculture Committee and I thought the Farm Bureau also—that we have to be careful in terms of any labeling requirement that is communicating information to the consumer that is not science in its basis. And, now we have a situation where we are going to be mandating a labeling regime that is not science-based and that does not open us up to proposals by other interests? And I talked a little bit earlier about the work of the Consumer Union, and Mr. Taylor talked about how Ralph Nader was supportive of this effort. I would also guarantee you that Ralph Nader would be supportive of a labeling requirement that would require products being labeled that they were beef hormone, the feed. He would also be an advocate of using some of the work that his organization did with the Consumer Union in putting forth a toxicity index, because he thinks that that would be important to a consumer's right to know.
Isn't there any concern out there that once we go down this path that we can potentially leave ourselves open to other initiatives of labeling on the same basis of consumer right-to-know. When I hear time and time again people making the argument that 95 percent of consumers support this, I can guarantee you, I can take a poll out there on these other two issues, and you would have 90 percent of the consumers that would want it too, but that doesn't make it right when we are in the midst of negotiations with the EU right now in this beef hormone issue.
I mean, I am really troubled by this Congress taking action today on a consumer right-to-know issue that is not science-based requiring country-of-origin labeling, and then we are going to go into negotiations with the EU on beef hormone, and our side is going to say—and we don't think that there is a science basis which we have prevailed in WTO and a science basis for the labeling of U.S. produce or U.S. beef with beef hormones, and we are going to be making an argument that their consumers don't have the right to know there, but we also have just made the argument here that consumers have the right to know that it is a U.S.-produced product? I mean, Mr. Swan, how do you make the intellectual consistency here?
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Mr. SWAN. Well, Mr. Dooley, I guess to answer that question—and that was a long question or statement—I would like to say one thing up front. First of all, NCAN, the predecessor organization of NCBA are in full support of NAFTA.
Mr. DOOLEY. No, you guys are terrific on trade.
Mr. SWAN. I wanted to set that kind of clear. When you talked about the foreign countries having the opportunity to know about our product or whatever, right now, they have already got it in a lot of those countries. They have already got country-of-origin labeling in regard—so, our part is labeled going into their countries. We are asking for the consumers to have that same right here in this country, and I guess it is my understanding—maybe I am wrong, and you are a cotton producer—but isn't it mandated by law on cotton that it is also labeled?
Mr. DOOLEY. Fiber could be exported to Asia; it could be manufactured into a fabric or a shirt; could be reexported into the United States, and it could be labeled as a Cotton, Inc. fabric.
Mr. SWAN. But it is labeled as such that it was either cotton from the United States or whatever, is that correct?
Mr. DOOLEY. As the fiber was.
Mr. SWAN. Yes, so——
Mr. DOOLEY. Which is quite a bit different than what you folks are asking about.
Mr. SWAN. Well, we are just asking for that consumer to have the right to distinguish between a product——
Mr. DOOLEY. But the analogous situation would be that if you would—the beef that you raised here, if it went up to Canada or Mexico and came back as processed in the United States, it would be labeled U.S. beef.
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Mr. SWAN. No——
Mr. DOOLEY. In terms of the analogy to what we are doing with cotton.
Mr. SWAN. Right now, if they spent the time in Canada or wherever they spend in that country and the value was added to that product, it would come in as an imported product. In other words, if my calf sold at 400 pounds and went to Canada and was fed and brought back down here to the United States, it would be a product of Canada, because it would have had further value added there. But if the product came across as a 400-pound calf into the United States and the value was added here to that product and then processed here, it would classified as U.S. beef.
Mr. DOOLEY. I guess I am just struggling with why we need to have a mandate here. If there is value in having a product U.S.-produced, then let us label it voluntarily. You use the example in Japan of what is happened in terms of our increase in sales in Japan, because the ''Produced in the U.S.A.'' had value. If this is something that makes sense and it increases market share and increases return—a financial return, then why aren't we doing it voluntarily? I don't quite get that we need Government mandating that we have every piece of produce out there labeled where it was produced.
Mr. KLECKNER. Mr. Dooley, I don't know what George is going to say, but it seems to me that we are talking more about labeling foreign product from the country it comes from. I think our own producers—our pork producers—and I know John McNutt very well with the National Pork Producers is going to testify soon; I read his testimony—but I think we ought to be labeling our own products here in this country. But I think our consumers ought to know a Canadian product coming in or a New Zealand lamb product coming in so they can make the choice, and I don't think they will voluntarily label it as long as they can get the advantage of having the USDA stamp on it and our consumers thinking that it is an American product simply because they see the USDA stamp.
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Mr. SWAN. You pose a very good question, Mr. Dooley, and as a beef producer in NCBA, we don't market or sell beef. That is up to the packer and the retailer to do that, and so that is a great question to ask, and I guess we got to look at that as they are the ones that are marketing our product for us.
Mr. TAYLOR. Mr. Dooley, in the produce industry, we have millions of small farmers across the country. It would be very, very difficult, if at all possible, to unite them into an organization large enough and strong enough to be able to do any kind of promotion to label our product to the end user. But every one of those farmers has to live up to expectation of every acronym that lives inside the Beltway, whether that is the EPA, the Department of Labor, the FDA, the Department of Agriculture, whatever it is.
Now, taxpayers in this country have invested millions and billions of dollars to ensure that we have the safest and most wholesome supply of food in the world. All we are asking for is—like Mr. Peterson says—not to be sold out on trade agreements, such as NAFTA, where we have no recourse other than to pull our belts a little tighter and try to survive. Now, if we are going to live in a different regulatory climate than people in third world developing countries that have access to our market, we should have some ability to differentiate, and you certainly can't put that on the back of a 100-acre family farmer that is growing cucumbers and squash.
Mr. POMBO. Mr. Boehner.
Mr. BOEHNER. I have great empathy for where we have seen prices go in a lot of commodities over the last several years, but as I look around the dais this afternoon, I see six members who have been strongly supportive of all the organizations that you represent. It just so happens we are having a little disagreement over this issue.
I won't get into the cost issue or the regulatory issue because it is unclear to me how large of an organization is going to have to be established here in Washington to enforce this. It is one thing to require retailers and others to label, and they may not be all that significant, but there has to be a regulatory system and an enforcement system, and, unfortunately, when we write laws, sometimes we forget just how large of an organization, how much costs are going to be involved in trying to enforce the law.
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But back to the issues that I think are central here. If we had country-of-origin labeling imposed, I would like to ask each of the four of you to determine—outline for me the economic benefit to farmers that you represent.
Mr. DENIS. I will start as far as the lamb producers are concerned. Our concern is that we cannot differentiate our product. We feel that we have a better product——
Mr. BOEHNER. No, the question is what is the economic benefit to the farmers and ranchers that you represent?
Mr. DENIS. If we can differentiate the product, then we can sell our product; it is a better product. We can advertise; we can point out the benefits of buying our product. As long as it is indistinguishable, we can't do any of that, because the consumer just goes and all they see is just lamb or if they see it has some USDA markings on it, it is all the same, but we think the USDA grade and shield is our mark, and the importers have adopted that. We look at that and the consumer looks at that as our mark, as the domestic industry's mark.
Mr. BOEHNER. Mr. Kleckner?
Mr. KLECKNER. I don't know the economic benefit if you ask me to quantify it. I suppose Mr. Denis said it in general, but we have not done a study on the increase in sales if labeling were done. You would have to really make a whole bunch of assumptions, and it could be done. We have not done it.
Mr. BOEHNER. Mr. Swan?
Mr. SWAN. Yes, Mr. Boehner, I, too, along with Mr. Kleckner cannot quantify the dollars and cents, but we do know in foreign markets since the easing of the requirements in Japan that we have seen the sales of our product increase dramatically in the retail stores when the product has been labeled U.S. as opposed to some other foreign country. Do I have quantified in dollars and cents that are returned back to me? I don't at this point, but what happens is, right now—yes, my staffers have said we have taken market share away from the Australians in that process.
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I think right now that is what we are trying to say here is that we have confidence in the beef producers in this country and what we are doing in raising our product that the consumer will want to buy our product, because we are producing a very high quality, consistent product that meets the standards that the consumer demands today. So, as we move our product, then hopefully it will increase our market share of our product produced in this country which will stimulate the economy back to the producers in this country.
Mr. BOEHNER. Mr. Taylor?
Mr. TAYLOR. Everyone has talked about increasing market share and increasing the profitability of that, and that is very true, and I think that those benefits are there, but there is another side to it. The strawberry farmers in California that all of a sudden there was sick children in Michigan from Mexican strawberries. No one who went to the stores bought any strawberries, because they couldn't trust it to feed it to their children. Now, had those strawberries been labeled with country of origin at the grocery store, as they were in Florida, we certainly would have been able to sell that California crop of strawberries. As it was, they went ripe on the vine, and it cost the industry millions of dollars.
I am at the height of my harvest on tomatoes on the west coast of Florida right now. I would be devastated financially should there be a scare from tomatoes from Mexico, say, with a disease or something that.
Mr. BOEHNER. So, each of you think that your—the people you represent would benefit by increased market share, because people in the United States would want to buy U.S. products as opposed to foreign products, which brings me to my second question which is to remind people that 20 to 30 percent of the United States agricultural output every year is exported around the world. Do any of you believe that other countries would retaliate and see this as discrimination in our law and retaliate against your brothers and sisters that produce commodities that are primarily exported?
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Mr. TAYLOR. If I could speak first? I sell about 20 percent of my product in a year to the country of Canada. Canada has the labeling law. We certainly are not retaliating against them. It is certainly not harming my efforts in that marketplace. In fact, I believe that it helps my efforts in that marketplace.
Mr. SWAN. I can concur with that the fact is we are not trying to throw any trade barriers, and I feel that the Canadians—using that as an example—would be plum tickled pick and proud to have the maple leaf stamped on their product, because they are proud of it. So, I don't see this as being a retaliation of any effort. Besides that, a lot of countries already have country-of-origin labeling in their own countries. Why can't we have it in ours?
Mr. KLECKNER. Mr. Boehner, I would concur. I think, was it, 30 to 40 countries of the world have country-of-origin labeling now, and it has been increasing. Countries can say they are retaliating or they may say ''Because the United States is doing it, now we are forced to do it.'' But I think that is a real stretch if they say that. This is not, in my view, a trade issue. If they want to say ''We want to label some more, because you are in a labeling country of origin, I guess go ahead and use the argument; to me, it doesn't wash, because at least in the United States we label everything else with content—the nutrients, the fat, the protein, the manganese—it is all labeled. To put another label on ''Product of the United States'' or ''Product of Canada'' or ''Product of Japan,'' it seems to me that should not lead to any retaliatory action whatsoever.
Mr. BOEHNER. Mr. Denis, care to comment?
Mr. DENIS. My only comment would be that in the case of Australia, which is the biggest exporter of lamb to the United States, they require labels over there. My other question would be that we have heard say that we can label our product, and we can, but we have seen instances where the importer adopt name brands and that sort of thing that very nearly approximate ours, and we think it is going to take a law to stop that from happening. I also would dispute the fact that the labeling is science-based or not science-based. It is either labeled or it is not; it has nothing to do with science. That is entirely different from hormones and those types of things.
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Mr. BOEHNER. Well, I think the point that Mr. Dooley was making earlier is that if Congress were to see fit to pass country-of-origin labeling, you are opening up a whole new arena of activity, and those who think that the biotech-produced products ought to be so identified will be right here at this table where you are several months later and demanding that we require that identification on the products. Those who are concerned about beef hormones, and who knows what the next issue is, they are going to want to require it on the label, and that is why those of us who sit here and those of us who have worked with your organizations over the years, our job is to try to implement popular public policy considering a broad range of problems that we could encounter, and, with that, Mr. Chairman, I yield back.
Mr. POMBO. Mr. Stenholm.
Mr. STENHOLM. I thank all of you for your testimony today in bringing the producer side to this question of us. Mr. Boehner and Mr. Dooley have asked some very good questions, one of which I think everybody has thought of. I don't think this is anything new. I don't think there is anyone at that table that has not already thought of the ramifications of that which is being asked.
In regard to the dollar value to producers of this, let's look at another form of branding—corn flakes. We have done a little research in that area over the last several weeks, and we find that the value of a brand is worth about $1.09 of an 18-ounce box of corn flakes versus a non-brand. Somebody believes that advertising pays off, and they are willing to spend the money, and the consumer, apparently, is willing to spend that $1.09 in order to buy a brand. What is wrong with doing that to country of origin? Chairman Combest discussed the Texas effort. States attempt to say their product—A, B, or C—is better than the other 49 States. We compete, and it is important for producers to believe that.
Since many of these country-of-origin laws have been on the books since 1930, I think we are kind of sensationalizing some of the discussion about this. I want to kind of refocus on what the current law is and what businesses are already doing. Regarding Australians and New Zealanders—I have had many conversations with them over 20 years, and I don't think it is a problem. I don't think it is a trade barrier to anybody; I really don't. The next panel will talk about what we can do to keep it from being overly complicated, overly regulated, and overly costly?
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Mr. Denis, your testimony is not just about country of origin but also the physical rolling of a grade that suggests the product that is imported is USDA because it says USDA, and that is why I have asked for the additional study. As the chairman has indicated, we should look at whether or not it would make just as much sense to have an internationally accepted grading system. I doubt that Canada is going to want to have a USDA grading system, but if the Canadian system and the U.S. system is the same for beef and the same for lamb, and it is Canadian Choice or USDA Choice beef or Australian Choice or U.S. Choice lamb, then the consumer will ultimately know what they are buying.
There is a big part of me that says there is nothing wrong with that, and some of the negative connotations that are suggested sometimes, I just don't believe that has to happen provided we do it right. That is the question. When we start legislating and we start adding mandates—and every single one of you at that table have been on our side opposing Federal mandates—we have to be careful about another Federal mandate and consider what will result.
But the bottom line is this: advertising seems to pay whether it is Manhattan shirts or Van Heusen shirts or whoever is making cotton shirts or whatever it is. I remember when I was the charter trustee of Cotton, Incorporated and we talked about this. Back in those days, cotton farmers had a tremendous objection to spending their dollars promoting synthetic shirts. They said ''Promote cotton'' until we talked to our wives, they suggested that a blended shirt that didn't have to be ironed was better than a cotton shirt even though, Charlie, you were raising cotton.
Now we are talking about country of origin. We are talking about an international marketplace which every one of you at that table knows you are in. We are seeking that elusive level playing field, and I hear the message that price is the problem we are having in the United States. When your competitor gains a 30 or 40 percent advantage because of the value of the currency in the different countries, there is no such thing as a level playing field, and that has to be taken into consideration whatever country. When you are dealing with the international marketplace, I would hope that in future negotiations we would always be saying to producers in other countries, ''We want to compete with you. If you can produce better beef and sell it in the United States, we want you to sell it. Or if you can produce better lamb, we want you to sell it, but we want you to sell it under your brand, and we want you to sell it under quality standards that we all agree to.'' That is what I hear you saying in your testimony today; at least that is what this member hears you saying.
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To take a carcass in and you cut it once, and all of sudden it is domestic, I think a lot of these things we could look at administratively and take care of without passing any more laws if we just have some good, solid discussion of it.
Mr. Chairman, that is what I see as a result of this hearing today. We must start honestly looking at all of these questions and see if enforcement of current law agreed to in international circles, is the answer. But the whole question of labeling has been around too long to be bad.
Mr. POMBO. Thank you. Mrs. Chenoweth.
Mrs. CHENOWETH. Thank you, Mr. Chairman. There has been comments made about more Government mandates and more labeling, and, boy, I hear that, because I am a congressman that hates Government mandates, but this is a case involving international trade and commerce, and so who else but us can address the problem? The fact is that we have talked about the McDonald's issue quite a bit, and I thank the chairman for allowing me to make this point, and it is precisely the point that my bill or any other bill that might be fashioned probably will go to, and that is that McDonald's was not able to advertise U.S. beef precisely because they couldn't guarantee to the consumer that it was U.S. beef.
And, Mr. Stenholm, I believe—if you don't mind my talking across the dais—the gentleman from Texas made a very interesting observation and that is that you ought to talk to your wives. When 95 percent of the people here want country-of-origin meat labeling and for us to sit up here and say the science isn't with us when we know that the carcasses or carcass parts are labeled when they go into the processing plant, it doesn't take a whole lot of science; it just takes good old American common sense to know that you can track that right through to the consumer retail counter.
Mr. STENHOLM. Would the gentlelady yield?
Mrs. CHENOWETH. Mr. Stenholm, yes, I will yield.
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Mr. STENHOLM. When we are talking about the Government mandates, if we do mandate it, admit it.
Mrs. CHENOWETH. That is right.
Mr. STENHOLM. It is nothing to be ashamed of. Some of your bill is a Federal mandate, and I may end up supporting portions of it.
Mrs. CHENOWETH. But with regard to the cost-benefits that Mr. Boehner brought up, it also doesn't take a rocket scientist to realize that if—No. 1 point—that if 40 percent right now, 34 to 40 percent, of the lamb that is being consumed in America comes from overseas and most consumers believe they are buying American lamb, 22 percent of the beef that is being consumed, that is 1 billion hamburgers a month that are the equivalent of foreign meat, and they believe that is American, and we know that American consumers will buy American products first out of loyalty and out of trust, because our American food producers are encumbered with very high environmental and food safety standards, and Americans trust that. Well, then it doesn't take a rocket scientist or a Von Meeses to figure out that if our lamb producers can gain a 40 percent or even 30 percent advantage, they are going to see their businesses become healthier. My concern is, first, consumers' right-to-know, but I know that economically it will benefit our farmers and ranchers. Thank you, Mr. Chairman.
Mr. POMBO. Thank you. Before I excuse the panel, I would just say that I had one of my lamb growers in my office yesterday, and he produced a label for me that was clearly marked ''Australian lamb,'' and as you looked at it, you could tell that these guys were advertising their Australian lamb, but in real small letters in the bottom, it said ''Product of Canada.'' So, this lamb was Australian lamb coming into Canada, coming into the United States. Now, the question I have got—and I will ask this rhetorically, and it goes on something Mr. Taylor said with our alphabet soup of agencies up here—is why is it more profitable for Australians to ship lamb into Canada and process it and ship it back into the United States? And if you look at cost competitiveness and our ability to compete on the international market, I think you have got to answer that question, and you will find what your answer is in terms of why or at least one of the big reasons why it is becoming increasingly more difficult for American agriculture to compete on that international market. We are doing it to ourselves, and as we proceed with this issue, I look forward to working with all of you, because I think it is a very important issue. I think it is something that this subcommittee and the full committee is very much dedicated to trying to work out and see exactly where this takes us over the next few months.
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Mr. SWAN. Mr. Chairman?
Mr. POMBO. Yes.
Mr. SWAN. If I make a closing comment for myself it is that our policy of the National Cattlemen's Beef Association is driven by the grassroots producers, and to nothing into the issue won't sell in that country. I can't go back to them and say ''We did our best, but we didn't get anything.'' We have got to come to a resolution of this issue. I am counting on this committee, the full House Agriculture Committee, our opponents that will be testifying to sit down and to hammer this out, and I will guarantee the National Cattlemen's Beef Association is willing to come to the table to work through the solutions to come to an agreement.
Mr. POMBO. Well, I appreciate that, and I am sure all of you and the organizations you represent are willing to work with the committee and others to try to make sense out of all of this, but thank you all very much for your testimony.
I would like to call up the next panel, Mr. John McNutt, Mr. Timothy Hammonds, Mr. Patrick Boyle, and Mr. Steven Anderson.
Thank you all very much for joining us today.
Mr. McNutt, if you are ready, you can begin your testimony.
STATEMENT OF JOHN MCNUTT, PRESIDENT, NATIONAL PORK PRODUCERS COUNCIL
Mr. MCNUTT. Thank you, Mr. Chairman and members of the subcommittee. I am John McNutt, a fourth generation pork producer from Iowa City, IA. I am president of the National Pork Producers Council. The National Pork Producers Council is a national association representing 44 affiliated States with almost 100,000 producers.
I very much appreciate the opportunity to appear here on the behalf of the U.S. Pork Producers. Pork producers, even after suffering through the worst crisis in recorded history in 1998, unanimously said no to the country-of-origin labeling at our annual meeting in March. You might very well ask why the pork industry, while in crisis, why we would resist an issue that other livestock species believe will help them. As a threshold matter in dealing with this issue, pork producers have concluded that mandatory country-of-origin labeling will not help raise hog prices. Indeed, producers are very concerned that mandatory labeling could very well result in lower hog prices.
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Country-of-origin marketing would require extensive recordkeeping, segregation, and tracking of both imported animals and meat. If we take the United States, in general, 10 years ago, we imported about 10 percent of the pork that we consumed in this country. This last year, that was down to 3 percent, and it is getting smaller, because the U.S. pork producers are producing a very good product, and it is a product that is very competitive in the world.
If you are a consumer of pork and you go into a U.S. grocery store, you have a 97 percent chance likelihood of buying of U.S. product. That means that there is only about 3 percent of the product that is not raised domestically, and of that, a fair amount of it is branded as some sort of specialty product. I think we want to make it very clear that in the previous panel the other species that has issues that are important to them, and we are just saying that the issues that confront us as the pork industry are different.
I have on my lapel a U.S. pork seal button. It is a branded product that we have rolled out last June of 1998. We are using this is special promotions with retailers in Japan. We are making a business decision about where we roll out a branded product. If there is a demand for that in the United States, we certainly move that here when we our resources allow that. I think we have to be very careful that we don't do anything that forces us into an even lower price situation than we currently have.
Imported products are inspected in the country of origin under a system of inspection that must be equivalent to U.S. inspection if they are further processed. According to USDA, 85 percent of all imported meat and poultry is further processed in the United States. Most of the hogs imported for immediate slaughter into the United States are from Canada, while most of the pork is from Canada and Denmark.
Absent compelling evidence to the contrary, it is fair to assume that Canadian and Danish pork do not carry negative images in the minds of U.S. consumers. In fact, many products at supermarkets and restaurants list country of origin as a way of boosting sales. Do any us really believe that listing products as Colombian coffee, Danish ham and ribs, Argentine beef, or New Zealand lamb is done for any reason other than to boost sales of those products? Americans as opposed to some other people in the rest of the world seem to express a preference for imported products and for evidence all you have to do is look at our balance of trade numbers.
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Clearly, U.S. consumers have positive images of those imported products or they wouldn't be designated as they are. By requiring country-of-origin labeling, we are giving importers a free ride in establishing an overall country identification for their products. Perhaps, most disturbing, country-of-origin labeling could be used by our competitors to our disadvantage and invites copycat actions and legislation in those countries. For example, another country could determine that importation of an animal from the United States that is slaughtered in that country does not confer origin. For example, hogs sold live to another country, slaughtered and processed in that country could be sold as U.S. pork products to a third country even though those animals and products have been totally outside of our food safety control system. I do not think that we want to export live animals and have that meat be sold to another country as U.S. pork.
With that, I would like to thank you, and I would urge you not to include pork in this legislation.
[The prepared statement of Mr. McNutt appears at the conclusion of the hearing.]
Mr. POMBO. Thank you.
Mr. Hammonds.
STATEMENT OF TIMOTHY M. HAMMONDS, PRESIDENT AND CEO, FOOD MARKETING INSTITUTE
Mr. HAMMONDS. Thank you, Mr. Chairman, and thank your committee for considering this issue, and I would also like, as president of Food Marketing Institute, to thank the previous panel for all of the free publicity here this afternoon. Our PR staff inside FMI will be happy to hear that we were a frequent topic of conversation. I would also like to say to the previous panel that as supermarket operators, we appreciate that they are facing real problems. I grew up on a family dairy farm myself; we know the kinds of issues they are grappling with, and, after all, producers in the local community are also customers at our local supermarkets.
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On this particular issue, however, we just don't believe that the country-of-origin labeling proposal is the right way to attack the very real problem that the previous panel is trying to address today. In fact, we think that the new country-of-origin labeling mandates for meat and produce would produce no meaningful benefits while imposing significant new costs on the industry, consumers, and taxpayers. In fact, the requirements we think could very well harm those very producers who support this legislation by triggering reprisals from nations that view labeling mandates as non-tariff trade barriers.
Many of the issues we make in my written testimony have been raised already. If you will permit me, I will submit that for the record and just try to add a few points here that I think may help lend some perspective. I think it was quite properly pointed out during the questioning in the previous panel that there just is simply no evidence that existing requirements fail to protect the food safety for products in the United States as they appropriately should. If food is not safe, it should be prohibited from entering this country or leaving a packing house. Country of origin labels would not help consumers determine on their own if a product is safe. As to consumers' right-to-know, we believe the overriding consumers' right-to-know is that the products they are offered for sale and they are buying are safe products regardless of where they come from.
The clear objective, we think, of the proposed legislation is to restrain imports into the United States. We feel that is a very dangerous precedent to set. Clearly, we are on the eve of a serious trade dispute with our European trading partners over beef. Clearly, we are also in the middle of discussions as to how and if products exported from the United States that have been genetically modified could be labeled. Those are serious issues; they are difficult to deal with; they are dangerous for American trade, and we feel it exactly the wrong time to impose new mandates that our trading partners will certainly see as trade restrictions, inviting retaliation from them.
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There have been ample comments on cost of doing this. I would just add to the comment that it is easy to check in the back room to see where the boxes are from. To remain cost competitive, our members almost always try to pack out onto the shelf a full box of the product, and keeping an empty box in the back room for an inspector to come in and check is a real problem for us. First of all, that invites a problem from the health inspectors if it harbors infestations of various kinds, and it certainly provides a problem for the safety inspectors if it creates slip-and-fall problems in the backroom. So, quite often, in States that do try to have some form of labeling, when someone goes into the back room, the boxes for the products on the shelf are long gone. Therefore, have no easy way to check origin short of stores inventing a very expensive new system of maintaining invoices and tracking in a similar manner in the store.
On the issue of consumer surveys, it has been suggested there is a strong consumer desire for country-of-origin labeling. Those surveys that we have seen typically position such labeling as having a food safety benefit based on the false assumption that imports are likely to be less safe or unwholesome. It is also telling, we think, that those surveys often do not ask consumers if they would prefer the far simpler alternative of having domestic meat and produce simply voluntarily labeled ''Grown in the U.S.A.''
To try to measure the impact of that, we commissioned our own national telephone survey. It was conducted this March by the nationally known research firm of Market Facts; it is a national projectable survey. We screened consumers to be sure they were primary grocery shoppers or at least shared that responsibility, and then for those that did, we asked whether they shared a concern about the safety of foods imported into the United States? We then asked those that shared the concern whether they would prefer country of origin labels or to see products grown in the United States simply identified ''Grown in the U.S.A.?'' We think the results were quite interesting. One-third of the consumers expressed no concern about the safety of imported food; another one-third preferred specific country-of-origin labels, and a final one-third called for ''Grown in the U.S.A.'' In other words, consumers really don't know what they want in this area, and they split evenly when given the alternatives. However, we can say that two-thirds want either nothing or something other than the current proposal. I can imagine their frustration when they find out country-of-origin labeling is then going to require them to decide on their own whether a product from Argentina might be safer or more desirable than, say, a product from Uruguay.
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As to an alternative to mandated labeling, let me point out that the industry does have a way to develop voluntary programs with U.S. retailers and grocers. I believe we have provided the committee with some examples. Here are just a few others. This happens to be from the Wal-Mart Corporation. When these products are in ample supply in their local market and not threatened with the fines that come with the mandatory program, they found out a way to market local products. Here, for example, is a program for Vidalia onions from Georgia, the program for Texas 1015s, and the program for Saint Augustine, FL onion.
So, when the industry is willing to sit down with a retailer and talk about a way we can deliver a positive message, there is a way to do it. When growers and producers voluntarily identify their own products as grown in America, retailers have demonstrated a willingness to partner with them to promote their products with a positive message. We believe that is a superior alternative to the one being proposed here today. It is clearly a far better approach; it is clearly much less expensive and does not raise any of the trade issues that I believe are so dangerous at this time. I thank you for allowing us to appear here today.
[The prepared statement of Mr. Hammonds appears at the conclusion of the hearing.]
Mr. POMBO. Thank you.
Mr. Boyle.
STATEMENT OF PATRICK BOYLE, PRESIDENT AND CEO, AMERICAN MEAT INSTITUTE
Mr. BOYLE. Thank you very much, Mr. Chairman. It is always a pleasure to appear before the subcommittee. The issue of country-of-origin labeling is clearly complex if we have learned anything from the past few hours in this chamber. It is complex in that it proponents see it as a means to a variety of ends. For some, it is a means to limit competing imports; for others, country-of-origin labeling is a way to promote U.S. products to American consumers.
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First, the protectionist trade objectives of some country of origin proponents run completely counter to our Government's free trade position. Our members have benefited tremendously as have all of the U.S. food and agricultural community from expanded world trade. Like it or not, free trade includes both exports and imports of goods. Since 1990, beef exports have more than doubled, and pork exports have grown 370 percent. Using country-of-origin labeling as protectionist trade policy will clearly invite retaliation from key trading partners. For example, Canada, our third largest market for U.S. meat exports, could retaliate in a way that jeopardizes our $350 million plus in meat exports to that country each year.
Second, with certain exceptions, country of origin has never been a significant factor in meat purchasing decisions of American consumers. Mr. Hammonds' survey in his testimony supports this statement. Rather, consistent quality, convenience, price, nutrition, food safety have all been identified in numerous consumer surveys as driving forces in making purchasing decisions. In this regard, brand identity in the meat and poultry industry has been a successful way to communicate to consumers that a particular product identified by a company's name or by a species designation will meet their expectations consistently for quality, price, convenience, and other meaningful attributes.
Another way that agricultural producers have achieved brand-like marketing benefits is through emphasizing unique, geographical identity, such as the regionally grown onions in Mr. Hammonds example or Mr. Combest's reference to the new ''Buy Texas'' program. The hallmark of these programs are that their participants, both producers, processors, and retailers and volunteers. Even in the case of marketing orders that promote so many domestic products, such as California avocados or California table grapes. These participants initially vote to join and fund these programs voluntarily.
Similarly, USDA has established a voluntary ''Certified U.S.'' meat labeling program which is currently available to livestock producers, the packers I represent, and supermarkets to whom we sell our product. If consumers' right-to-know is such a compelling reason for ensuring that the product that they are buying is produced in the United States, then that voluntary certification program at the Department of Agriculture is available for them today to being to identify their beef and their lamb as ''Grown in the United States.''
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If country-of-origin labeling requirements were imposed, AMI believes that the cost would exceed any quantifiable benefit. The largest cost component would relate to the rigorous audit trail that would need to be required from farms through retailer in order to ensure compliance with the country-of-origin labeling law. For example, it would require individual animal I.D.s for those species within the scope of the law, primarily cattle where cross-border trade flows are common and growing. Meat packers who could face criminal prosecution or civil penalties for mislabeling their products to the distribution channel would demand very clear Federal evidence from their livestock producers as to the country of origin as to the history of each individual head of cattle. Also, country-of-origin labeling would impose additional costs associated with foreign and domestic segregation in our plants, recordkeeping, inventory management, and the management of country-specific labeling that would accompany packages.
In summery, AMI supports voluntary efforts to market U.S. meat products in many ways through brand promotion or geographic identification, for example, but we oppose mandatory country-of-origin labeling legislation, because its implementation and enforcement costs would far exceed any identifiable marketing benefits. Thank you very much, Mr. Chairman. I look forward to answering any questions the committee may have.
[The prepared statement of Mr. Boyle appears at the conclusion of the hearing.]
Mr. POMBO. Thank you.
Mr. Anderson.
STATEMENT OF STEVEN C. ANDERSON, PRESIDENT AND CEO, AMERICAN FROZEN FOOD INSTITUTE
Mr. ANDERSON. Thank you, Mr. Chairman. My name is Steve Anderson, and I am president and chief executive officer of the American Frozen Food Institute. AFFI is the national trade association that represents frozen food processors, marketers, and suppliers to the industry. AFFI's membership of 586 companies freeze and market products ranging from juice, fruit and vegetables, to entrees, meals, and desserts, and we appreciate the opportunity to be with you today.
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The Smoot-Hawley Tariff Act of 1930 requires imported foods and other goods of foreign origin to bear the country of origin marking. Section 304 of this statute requires that imported consumer goods, including processed foods, display on the label of the product the country of origin of the good itself. Section 304 has never required labeling to disclose the country of origin of foreign ingredients present in the good. Such a requirement would depart from well established precedent under which a good is not required to be marked with the country of origin if it is transformed in the United States into a new and different product. In other words, our tariff laws, for very good reason, have always applied the country of origin rule to the good itself not its components. AFFI is opposed to any new country-of-origin labeling schemes that would place the food industry under conflicting and more burdensome requirements.
Of particular concern to the frozen industry are proposals that would impose country of origin requirements for ingredients of multi-component products. Such proposals would violate the country's obligations to its trading partners under international agreements, including the Uruguay Round negotiations of GATT and NAFTA. On this point, I want to be very clear. This violation of our country's trade obligations would have serious consequences to U.S. producers. Although some might argue—and they have today—that NAFTA and GATT provide more harm than good for the citizens of this country, the fat remains that the United States is a party to these agreements and has pledged to adhere to the requirements they contain. Violation of current international law simply is not in this Nation's best interest.
Any new country-of-origin marketing requirements imposed on imported foods and food ingredients will be viewed as technical barriers to trade and will be detrimental to U.S. exports. As the use of freezers and microwaves increases in developing nations, exports represent the largest growth for U.S. frozen food manufacturers. Actions taken by the United States to restrict certain imports will result in new retaliatory restrictions hindering the access of U.S. exports to lucrative markets abroad.
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To demonstrate AFFI's concerns, I would like to show you a label of a typical, domestically-produced frozen meat lasagna. As you can see by looking at the ingredient statement which is representative of the products sold in the market today, this product includes 23 individual components. In order to maintain a consistent supply of quality and taste for its products, a processor must have multiple sources for each of these components. Although most frozen food processors primarily use domestic sources for their ingredients, in some cases suppliers of ingredients may be from other countries. So, for certain ingredients, suppliers may vary throughout the year depending on variations in the growing season, weather conditions, and availability, all of which must be factored into the corporate procurement decision.
Now, getting back to our lasagna package, here is an ingredient statement that includes some of the potential countries from which only a portion of the components could be sourced in today's market. There are 16 countries listed here. AFFI believes that should specific country of origin marketing requirements be applied to one ingredient, they likely would have to be applied to all ingredients. If each package were required to show the specific country of origin of each ingredient in that particular item as opposed to the potential options, a company would have to maintain thousands of variations of labeling for just this one product.
Country of origin marketing at the ingredient level would complicate the manufacturer of a frozen meat lasagna and other frozen food products, because companies would have to segregate the ingredients; would have to segregate finished products in order to ensure compliance with this type of labeling requirement.
Who would benefit from this complicated and costly process? We know from years of our market research that the average consumer buys a product because it offers consistent quality and taste and because it carries a brand that they trust or because it is sold at a certain price, not based on where the product is from. Congressional action in this area would constitute yet another step towards overload of unnecessary information that desensitizes consumers to more relevant label statements, such as nutrition and dietary information.
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We thank you for the opportunity to express the views of the American Frozen Food Institute today.
[The prepared statement of Mr. Anderson appears at the conclusion of the hearing.]
Mr. POMBO. Thank you. I thank all of you for your testimony.
Mr. Anderson, I was looking over these handouts that you passed out. You don't have down here where the caramel coloring is from. [Laughter.]
We have had testimony earlier today that Canada requires country-of-origin labeling. How does that impact you or your industry in terms of exporting into Canada products that are manufactured here?
Mr. ANDERSON. Well, their labeling regime is different there, and I am not terribly knowledgeable about how Canada applies it. There was a discussion here today, and Mr. Stenholm had brought it up on the substantial transformation issue—and the reason that we are really concerned about this issue. What it hasn't been mentioned today is the ingredient label. These are actually labels as they appear, and these are real life labels. We source products throughout the world, and it would be terribly burdensome, and there has been much mention about the consumer right to know, and it is an issue that I would like to talk a little bit later if we do have the time. But we think it would be terribly burdensome on our industry. As to the Canadian situation, I would be happy to address that at a later time if I may submit something for the record, but I am not terribly knowledgeable about the Canadian law right now.
Mr. POMBO. Well, let me followup then. We have had testimony earlier today that there is somewhere between 30 and 40 different countries that require country-of-origin labeling, and I am sure that the members of your organization do business in most, if not all, of those countries. I would like to know how they are handling that.
Mr. ANDERSON. None of those countries, as we know, are requiring ingredient labeling as the current legislation would. As I understand, those——
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Mr. POMBO. Well, this hearing is not on a specific bill or specific legislation.
Mr. ANDERSON. No, I understand that.
Mr. POMBO. And what I am curious is to that many of the companies that belong to your association or your group are international corporations. They do export a huge amount of American product internationally, and I would like to know how they deal with that.
Mr. ANDERSON. From 35 countries that I heard referred to in the earlier testimony, it was unclear from that whether those were State or national requirements or I think in the case of Canada, there are certain provincial laws that are separate than the national law. So as to the actual shipping of the product, exporting from the United States to other countries, we would have to—I would have to get back to you on the specifics of those particular countries.
Mr. POMBO. I would like to have that, because I think it is extremely relevant to our discussion here today, and in overlooking the entire idea of doing country of origin is how you deal with it elsewhere. I mean, a lot of our big agriculture corporations are international now, and if it is, in fact, true that there are between 30 and 40 countries around the world that require country-of-origin labeling, I would like to know how they deal with that.
Mr. Boyle, many of the members that you represent here today ship internationally. How do they deal with the country of origin requirement?
Mr. BOYLE. Well, there are country-of-origin labeling laws, Mr. Chairman, and there are country-of-origin labeling laws, and those based in other countries, like Japan, for example, are far different from some of the bills that have been contemplated in this Congress and past Congresses.
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For example, in Japan, there is a requirement that U.S. beef be identified through placards in the retail case as the country of origin, but in order to satisfy that labeling law in Japan, we can merely assert that the product was packed in and originated from the U.S. packing facility. That is complying with the Japanese country-of-origin labeling law. It is easy for us to do that. We don't need to develop new trace-back mechanisms or animal I.D.s or certification or audit trails to make that assertion or to be in compliance with the Japanese labeling law. But it also——
Mr. POMBO. Let me stop you right here. So, your problem, then, at least with what you have discussed to this point is not necessarily country of origin but the definition of what country of origin is, because it does not seem to be a problem to comply with Japan's country-of-origin law, because all it requires is that it originate in an American plant to be stamped ''American Beef.'' And your concern with some of the legislation or some of the discussion that we have had up to this point is that it would be difficult or impossible for your members to comply with their definition of country of origin.
Mr. BOYLE. Not necessarily, Mr. Chairman. We will, as an industry, obviously comply with any law this Congress passes at some cost. The cost in complying with the Japanese country-of-labeling law is minimal, but there is another component there that one has to factor into the economic equation and that is what benefit, if any, is derived from providing that labeling information? In Japan, the U.S. designation of the country of the origin helps us sell our products at a premium. In fact, we voluntarily as an industry, by companies with that do business in that market, also in partnership with the U.S. Meat Export Federation go far beyond just the placard at the retail case in Tokyo, for example. We promote voluntarily the country of origin, because it is a premium that we derived at the market from that country-of-origin labeling.
Here in the United States, conversely, while there would be costs associated with complying with any congressional country-of-origin labeling mandate, you still have to factor in what benefit at the market—what economic premium would result from that designation? And to the best of our knowledge, we have not seen any quantifiable, economic benefit that results from providing bad information to American consumers. Indeed, the survey of the Food Marketing Institute would seem to indicate that the majority of consumers don't view country of origin as a significant factor in their purchasing decision.
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Mr. ANDERSON. Mr. Chairman, if I could just followup on that, if I may. The Clinton administration has actually done a pretty good job internationally in making a lot of the arguments that this panel is making today. As an example, in the Republic of Korea recently, there was a country-of-origin marking that was proposed by Korea, and the Clinton administration strenuously objected to that, and that was actually withdrawn. So, the same arguments that we are making today are being made by the U.S. Government as they have attempted to put in place country-of-origin markings in other places around the world.
Mr. BOYLE. Mr. Chairman, if I may also return to speak on that very point that Mr. Anderson made. The European Union is contemplating requirements for identity of animals, barring trace-backs and audits on all the beef that is marketed within the European Union. As you may know, because of the BSE concerns in the past years, they have developed animal I.D. systems. Their carcasses do have passports as they make their way through the distribution process. We do not have that here. The European Union is contemplating proposing that as another barrier on our access to that market for our beef export, and the U.S. Government is joining the American Meat Institute and the National Cattlemen's Association in opposing that kind of trace-back and animal I.D. requirement which would be part and parcel of some of the bills that have been introduced to this Congress to mandate country-of-origin labeling on U.S. imported beef.
Mr. POMBO. Thank you. Mr. Peterson.
Mr. PETERSON. Thank you, Mr. Chairman. First of all, this question we asked the last panel, are all of ready and willing and able to sit down with the other side and see if there is any middle ground that can be found on this that people can live with?
Mr. HAMMONDS. I might respond to that from Food Marketing Institute, particularly with National Cattlemen's Beef Association, we found many, many areas where we can work together on issues on this is one particular issue, we have had an offer to sit down with them face-to-face and work out an agreeable solution since last November, we have heard repeatedly since last November each time we make the offer, as you heard this morning, ''There is just one more issue we need to get out of the way, and once that settled, we would be happy to talk with you.'' Our offer is still valid; we are ready to sit down with them whenever they come to an agreement that they are ready to do it.
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Mr. BOYLE. Similarly, we would be willing to sit down with the cattlemen and the lamb producers to talk to them about our experience with branding products, be they company brands or geographic brands, and the values and the benefits of the challenges, if you will, that are associated with the branding of product. It is our assessment that merely labeling beef as ''U.S. Produced,'' which would represent about 85 percent of the red meat in the retail grocery case today is not going to confer the traditional attributes that are associated with the brands. Those attributes have to do with the unique characteristics of that product, a perceived value, the mind of the consumer, and some added benefit in the form of higher prices paid for that unique mission-branded product.
There are some very successful efforts between cattle producers and beef packers to uniquely position a branded-beef product in the marketplace. It does have certain benefits associated with the characteristics that it provides consumers on a consistent basis. We are not convinced that branding 85 percent of the meat in the meat case today with the same brand is going to provide the traditional differentiation that is associated with branding products in the marketplace today.
We will be willing to sit down and talk with the cattlemen about our experience with brands and find ways to differentiate the beef to be produced in this country and a way to maximize the cost that we can return to producers that market those products together.
Mr. ANDERSON. Mr. Chairman, in response to that question, I would like to associate myself with the comments that were made earlier today by the chairman of the full committee and by Mr. Dooley. I think there is a difference between positive labeling and negative labeling, and I think we have all seen the benefits of the nutrition labeling in the National Labeling and Education Act that I think has given consumers more information to make decisions on their dietary needs and their various obligations of their diet. But I am also very concerned about the negative aspect of the various proposals that we have that if they are—it implies that there is something wrong with imported product, and I would like to associate myself with the video that we saw earlier in promoting Texas agricultural products or the whole emphasis of being a product made in the U.S.A., that we don't put anything on the label that is going to actually scare the American consumers about the safest food supply in the world that we all know.
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Mr. PETERSON. Mr. Chairman, it sounds to me like these folks want to talk, but it is not happening. Maybe tomorrow, we are going—they said after tomorrow there may be some discussion. If it doesn't happen, I would suggest maybe you and I should round up all the suspects and get them in a room and see if we can have a good discussion and come up with a resolution that would be good for everybody.
Mr. POMBO. Well, I have been through this with most of these folks before, and I am willing to do it again.
Mr. PETERSON. One other thing I wanted to clarify. It is my understanding—maybe, Mr. Boyle—that in a lot of these countries that have country-of-origin labeling, that the requirement is really where the meat is finally processed and not necessarily where it is raised. I right about that, that the rules where these countries have these rules that are very different than what is being proposed by some of these bills that are before us? Am I right about that?
Mr. BOYLE. That is generally true, Mr. Peterson. Most of the international trade obligations impose upon the signing country, such as the United States, a consistent treatment, if you will, of similar products or identical products in their jurisdiction. So, any labeling requirements that you would propose on a foreign product coming in, you would have to make similar impositions of requirements on similar products here in the United States.
That is one of the reasons, it seems to me, that we have this discussion, if you will, about the grading of carcasses, whether they grade out as USDA choice, prime or select, or whether they are slaughtered here in the United States so the carcasses are imported. Under the WTO obligations which we agreed to as part of the last negotiating rounds, in fact, they have been in place for many decades, similar products, such as carcasses must be treated similar ways within the jurisdiction, within the country that signs the accord. Consequently, the carcass in a beef packing cooler, whether it originated in Canada or in the United States, under our WTO obligation must have equal access or equal treatment under our laws. That would include the marketing provisions of the Department of Agriculture in a grading program. To differentiate that or make that unavailable to carcasses depending on where they originated would require a change to the WTO obligations.
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Mr. ANDERSON. Mr. Chairman, if I may in response, the regulatory authority of the Smoot-Hawley Act on country-of-origin marketing falls within the purview of the Secretary of the Treasury and the Customs Service which has had about 70 years of various case laws dealing with this country of origin issue, and it is so complicated, it is almost mind-boggling. Any amendment that would be made to the Federal Meat Inspection Act having to do with country-of-origin requirements, could possibly be very different, very conflicting, and very difficult for our industry, as an example, to comply with since we are currently complying with the country-of-origin markings under the Tariff Act of 1930.
Mr. PETERSON. Thank you.
Mr. POMBO. Mrs. Chenoweth.
Mrs. CHENOWETH. Thank you, Mr. Chairman. I wanted to ask Mr. McNutt to respond to a question. I received some information yesterday from the National Pork Producers Council with regard to the balance of trade relative to overall pork production in the United State, and it looks pretty doggone good.
Mr. MCNUTT. We got a good story.
Mrs. CHENOWETH. You have had a good story all along, because with regard to your total percent of production, you export 6.5 percent of that production, and you only import 3.2 percent. Now, while my country-of-origin meat labeling does include pork because it really is a consumers' right-to-know issue, nevertheless, when we talk about the increase of numbers of cattle that were sold into Canada for consumption. We talk about last year we had—whoopie—50,000 head, and yet at the same time there were millions of head of cattle coming into the United States. That balance of trade figure is what is concerning us. It could happen to pork in the future. I am so glad that things are working as well as they are for you, and I like to eat the ''Other White Meat'' too.
Mr. MCNUTT. We appreciate that.
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Mrs. CHENOWETH. I really do, and I think that you have done a great job in your ad program.
I did want to address my next comment to Mr. Anderson. I find this label very interesting, Mr. Anderson, and it is indicative of the fact that we are not addressing the issue. I mean, you guys, you have got to get it. Ninety-five percent of your wives and the women out there want to know the kind of food that they are putting in their children's bodies; your children, my grandchildren. And Mary Bono's bill has been misrepresented here, because Mary Bono's bill only requires labeling for perishable commodities. It doesn't require labeling for salt or macaroni, but it would require labeling for tomatoes and, here, your label says ''May contain a product of U.S. or Mexico,'' and, Mr. Anderson, I can tell you as a woman I would much rather have my tomatoes come from the United States. On the beef, on the perishable items, not considering where the dehydrated garlic and other natural flavorings came from, that is not called for in either one of our bill, just the perishable items. But it would be so much easier and the American consumer would be so much happier if with regard to these perishable items, it just said, ''Product of the U.S.'' and that could be voluntarily done. You see, that is the voluntary program that would really work for the American consumer, and, Mr. Anderson, I think you or one of the members of the panel made the point that we need to—maybe it was Mr. Boyle, whoever wants to respond to this, we need to use the voluntary measures to solve this problem. I talked to the executives at McDonald's and asked them ''Why aren't you labeling any longer?'' And they said that they simply couldn't do it. There was a complaint by USDA about the label. These kinds of claim are not permitted, because you can't guarantee where the meat came from. So, you see, even you in a voluntary program couldn't guarantee where the meat came from, and so I really am anxious with you, but we have got to talk about apples and apples.
Mr. ANDERSON. If I may respond to the first part of your question, and I think that was said by Mr. Boyles on the voluntary issue. The label that you are seeing in front of you has nothing to do with Congresswoman Bono's bill. We are not impacted by that bill. We are impacted by the legislation that you introduced as it relates to meat imported in the United States that would be put in a frozen lasagna. We would be covered. But I think you have mentioned that this is a consumer right-to-know issue in your statement. If the consumer has a right to know about the meat in a multi-component product, then it is probably very logical that would follow that in the same right that you probably or some would extend that to other products. Our question is, is the meat ingredient any more important than the other ingredients that are in the package? So, it was not our intention to mislead as to the Bono bill. The Bono bill does not affect us at all in this regard, but this is what a label would like if your proposal were extended to other ingredients in a multi-component dinner.
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Mrs. CHENOWETH. Mr. Chairman, Mr. Anderson, this is precisely what I am talking about when I say if you don't like the issue, confuse it, because plain and simple reading of my bill does not deal with macaroni; it doesn't deal with food coloring; it doesn't deal with corn starch, and that is, Mr. Anderson, the way the process works up here is we deal with bill by bill.
Mr. ANDERSON. Correct.
Mrs. CHENOWETH. And my bill only deals with meat. It would have absolutely no implications on the extension of this label at all.
I also want to address to Mr. Hammonds the poll that was taken. I read it with interest your comments about it, the poll that was researched by Market Facts. I guess you and I sort of have to look at this whole thing about the polls as to whether the glass is half empty or the glass is half full, because as I read your testimony, it says the results were quite interesting that one-third of the consumers expressed no concern about the safety of imported food. Right, I would agree. Another one-third, though, preferred specific country-of-origin labels, and that was exactly 32.1 percent, and the final one-third, 31.3 percent asked for labels calling for ''Grown in America.'' So, it looks to me like two-thirds of the people that you polled—that Market Facts polled would even prefer to be able to identify their food with regard to the country-of-origin labeling.
Mr. HAMMONDS. Well, it is certainly an aspect that I think if we could sit down with the producers and the produce people and Patrick Boyle's members from American Meat Institute, we could work out an acceptable solution that would be voluntary. Clearly, for two-thirds of the people, the country-of-origin labeling proposals are not what they are looking for. I think even those that think they support country-of-origin labeling might not be interested when they found out they had to make a judgment between product from, say, Brazil versus Uruguay versus Argentina. I don't think that would be very interesting to them.
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I think the point here is for those that want to buy American product—and we would like to promote American product—the ''Grown in the U.S.A.'' label would satisfy that need; would give them the information they are looking for; could be done voluntarily, and could be developed into a positive message at retail as opposed to a negative message that somehow imported product is not as safe or not as good for you. It seems to us that anyone that is looking at this area would have to say there is a voluntary solution that could work and avoid all of the problems that we have been talking about today.
Mrs. CHENOWETH. Mr. Chairman, Mr. Hammonds, I guess I have trouble like anyone else who would read your testimony with the plain meaning of the words that you used in your testimony. Clearly, your testimony showed that the results of that poll showed that two-thirds of the people would prefer to know some sort of country of origin, and, second——
Mr. HAMMONDS. No——
Mrs. CHENOWETH. Well, let me read it again.
Mr. HAMMONDS. I am sorry, it didn't show that.
Mrs. CHENOWETH. Let me read it again. It said one-third of the consumers expressed no concern about safety; another one-third preferred specific country-of-origin labels, and the final one-third—I am reading from your testimony—the final one-third called for ''Grown in the U.S.A.'' So, my guess is just whether we see that as the glass empty or full, but it——
Mr. HAMMONDS. Well, I guess it is whether you see the point: Would people like to be able to select between product grown in another country or grown in the U.S.A? For either one of those groups, a voluntary ''Grown in the U.S.A.'' designation accomplishes that goal. It doesn't require new legislation; it doesn't require a tracking system; it doesn't generate inspectors with fines for the stores, and it can be done as we have demonstrated here on many, many products with a positive message to buy American product not with a negative message that somehow part of what is on the shelf is unsafe or unhealthy for you.
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Mrs. CHENOWETH. Mr. Chairman, I do want to say that can be done voluntarily if you know where the meat came from, but right now we don't know where the meat came from.
I do want to ask Mr. Boyle a question. He stated that my bill is protectionist and that it would restrain imports. What we would be doing to restrain imports other than giving a free choice to the consumer?
Mr. BOYLE. That comment, Congresswoman Chenoweth, is based upon some of the comments that have been made by foreign countries who have reviewed your bill and speculated about the pressures that they would be under as representatives of their constituency, the cattle-producing constituencies, for example, in Canada, how they would respond if we imposed upon them country-of-origin labeling requirement that we would have to support and verify the imposition of animal I.D.s, trace-backs, certification, and audit trails, paperwork trails in order to ensure that we are in compliance with the Federal regulation. If we start doing that to comply with as bill such as the one you have introduced should it be adopted by the Congress, it would not be an unreasonable expectation to expect our Canadian trading partners under pressure from their cattle producers that see us export $365 million a year of U.S. beef to Canada to impose a comparable system here in the United States.
It would take us a period of time to develop that kind of trace-back I.D. system that would be needed to comply with your law. In that interim period of time, we could very much lose that Canadian market, because we would not be able to meet requirements in Canada in order to comply with their country-of-origin labeling obligations. We may be able to get it back over time, but in the interim their trace-backs, their animal I.D. programs are much further along than we have here in the United States. It would give them a competitive advantage in the near-term in order to—that would allow them to impose similar requirements in Canada that we could not meet here near-term. So, that market would be lost at least near-term. From a marketing perspective, once you lose a market, it is fairly difficult and time-consuming to get it back.
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Mrs. CHENOWETH. Mr.——
Mr. POMBO. I have to cut you off here. We can go to a second round if you want.
Mr. BOYLE. Mr. Chairman, if I might, Congresswoman Chenoweth had one other question that she directed to me earlier about McDonald's, and it has come up a few times earlier. If I may, now, before we adjourn this hearing, I would like to——
Mr. POMBO. On her second round of questioning, if she wants, she can get to that. Mr. Stenholm.
Mr. STENHOLM. Many of your members are involved in international trade. Do you have any information to share with the committee concerning what other countries are requiring with regard to country-of-origin labeling? And is it having a positive or a negative effect on our ability to sell United States product in the international marketplace? Any specific examples of what other countries are doing and has it affected your members where we are participating in international trade? Mr. Anderson?
Mr. ANDERSON. The chairman asked me that question, and we were not aware—I was not aware of any today, but we would be happy to provide that to the subcommittee.
Mr. STENHOLM. OK, if the chairman has asked the question——
Mr. ANDERSON. He has only asked me; I don't know if he has asked—I blew the answer to the question; maybe they know the answer to it. [Laughter.]
Mr. STENHOLM. Does anybody else want to add to the chairman's question?
Mr. BOYLE. I responded to this earlier, Congressman Stenholm.
Mr. STENHOLM. Again, if you have already responded, I don't want to get into that. I want to ask another question on my time, and then we will get into that one.
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Mr. ANDERSON. We would be happy to do that.
Mr. STENHOLM. If we had an international standard for grading commodities and we in the United States adopted it, and every one of the countries participating adopted the same standard, what would be the negative downside lamb being imported New Zealand Choice instead of having it USDA Choice. What is the negative downside of that, Mr. Boyle?
Mr. BOYLE. I am not sure at first blush I see a negative downside to that, Mr. Stenholm. It is quite an undertaking, though, to harmonize grading systems within the four or five countries that you mentioned. Within the United States and Canada, we have been trying for decades to harmonize our beef grading program. In fact, when I was administrator of the Agricultural Marketing Service that oversees that grading program as part of its responsibilities, we attempted to bring close together the quality specs——
Mr. STENHOLM. Let me interrupt you right there, to answer the question. How important is it to have it harmonized? I mean, if country A and country B and country C all have a choice grade, but we slightly differ, but the consumer knows that when you buy USDA Choice, you are going to X, and if you buy country Y, you are going to X, and if it is done, in this case, you say voluntarily, to me, I think this can be done under current law. It is just a matter of changing the role.
Mr. BOYLE. Well, in terms of assessing the value to a carcass, if you will, which is the purpose of the grading program from a marketing perspective, from a commercial trade perspective, closeness in specs is not precise enough to base the value judgments on. That is why we want to have exactly the same specs. If you are going to have a USDA Choice and a Canada Choice from a commercial marketing and trading perspective, you want to make sure those specs are comparable, identical. And, similarly, when that——
Mr. STENHOLM. Now, who is going to be interested in that? Who is the one predominantly interested in making sure that it is as you just described?
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Mr. BOYLE. My packers who sell USDA Choice product, and Mr. Hammonds' retailers to other retail and food service establishments. But it goes beyond that too, Mr. Stenholm, because the consumers, themselves, if they see ''Choice'' or ''Prime,'' they are going to assume that it is the same quality standard.
Mr. STENHOLM. Right. Now, that is where I think you say in your response to my question the word ''Choice.'' But then how important is it to have USDA Choice, New Zealand Choice, Australian Choice, Canadian Choice?
Mr. BOYLE. Well, the survey data that—not just Mr. Hammonds' organization has discussed here today—but there are ongoing annual surveys that are consumer attitude surveys that are released every spring. When you ask consumers in an open-ended way, which is the best way to get their weighing and balancing perspective of different factors in their purchasing decisions, the country of origin, however it is conveyed, of growing a USDA product in Canada or Australian Choice, is not of the significant driving factors.
So, in answer to you question, I am not sure it has that much of an impact.
Mr. STENHOLM. That is my opinion. Mr. Hammonds, from the standpoint of your members who buy Mr. Boyle's meat.
Mr. HAMMONDS. Well, I think the ultimate consumer right-to-know is that the products they are buying are safe and wholesome. It seems to me that if in their mind the product had a grade label on it was realistically equivalent to U.S. standards, then beyond that not much would matter to them. They want that basic assurance and they certainly don't want to have to choose between products grown in various international countries as to judging what one might be better than an another. They want to know the products that are coming in here are equivalent to U.S. standards and are safe and are wholesome.
Mr. STENHOLM. Our grading system has pretty well done that. Not perfectly, and we could have some improvements in some areas, but we do have consumer confidence. Why wouldn't other countries be just as interested in making sure their products meet those standards? Mr. Anderson, your companies would not buy from another country that does not deliver the quality which they have stamped on there, would they?
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Mr. ANDERSON. You are right. This goes back to Uruguay Round, and there were rules of origin, in article 2, which really deal with country of origin issues and not dealing with the grade issues. But the reason these rules of origin were put in was to make sure that we had a consistent, uniform, impartial and reasonable method in which to trade food products throughout the world. We live, as we all know, in a global economy, and that is surely true as it relates to the food industry, and without addressing the specifics of your proposal on the grading issues, I think all countries are interested in having uniformity and consistency throughout their trading practices, so when our members buy products, they know what they are getting, and there is some consistency with what they may be buying from other countries or sourcing here within the United States.
Mr. POMBO. Mr. Thune.
Mr. THUNE. Thank you, Mr. Chairman.
This is a very narrowly defined issue. A lot of things that have been discussed today from food safety and a wide range of issues, all of which I am sure important, but for me it is really about more markets and better prices for American producers. That is the issue where I come from, and there are a number of things that have been discussed in terms of cost, which as far as I can tell is somewhat subject to dispute. I don't believe that in terms of being able to quantify exactly, there seems to be, again, a wide range of opinion as to what the cost might be. Some discussion of trade laws and how labeling might fall under trade laws, but from what the GAO indicated this morning, a number of countries around the world, a good percentage of them, already have labeling laws, and those have never been challenged, at least they didn't give any report if they have been challenged in terms of violations of trade laws.
The one thing I am particularly concerned about is in looking again at the overall objective here, in my judgment, which is better marketing opportunities, better prices, and hopefully more demand—more export demand, more domestic demand—for American grown agricultural products; in this case, livestock. The whole question of retaliation and how that might effect or impact, again, our ability to sell our product. To me, it seems like again if there are a number of our trading partners—and I have a question that has been posed to you before as to whether or not there would be—what experience you have in other countries where they have labeling laws on the books. But, to me, it is sort of a hypothetical argument when you talk about retaliation and at this point in time what appears to me to be somewhat of a hollow one based upon the experience that there are as many countries around the world who already have labeling laws on the books, to what impact that might have on this country, on our producers were we to pass a labeling law. I am just curious to know what your thoughts might be on that.
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Mr. MCNUTT. There is an issue that is before us right now. Primarily, we are saying we can't see any benefit to us at the U.S. pork industry, but we can see harm, and a good example would be that we had 4 million Canadian hogs currently coming into the United States. If we had a labeling law, and we had to segregate those animals at plants and run them through in separate shifts, and deal with them as separate blocks of animals versus the way we do it right now as they are just intermixed into the flow, but they are still tracked by groups so we can find out who they are, but there is a group of U.S. hogs and a group of Canadian hogs, et cetera.
We are working very hard on the Canadians right now to get access into Canada for U.S. pigs this year. We realize we have had a crisis and a capacity issue here in the United States. There is lots of capacity in Canada, and we have to get our hogs to being able to go over that border when the currencies are right to do that.
The Canadians currently have a rule that says when they take U.S. hogs they have to group them all by group and run them through in separate batches, and that is a trade restriction to us, and we are working very hard on the Canadians right now to remove that restriction, because it is not science-based; there is no good reason for it. If we implement that here in the United States, then we don't have much argument with them to do anything to us in Canada.
Mr. THUNE. My understanding would be, though, what you are talking about in terms of the restriction of the quarantines and that sort of thing, that would be violation, but what I am suggesting here is my understanding from all I have heard today is that the labeling laws would be so sort of below the radar in terms of how they might impact existing trade agreements.
Mr. ANDERSON. If I may, in response to that question as well and getting to the earlier question that chairman asked me, I think the question implies that we don't have country-of-origin labeling laws in this country which in fact we do; we have for 70 years, and they relate to processed food products as well. So, I think that we do have country-of-origin labeling; other countries have country-of-origin labeling.
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You mentioned hypothetical examples. I think there are some real world examples. Last year, when the Senate appropriations bill was working its way through the Senate and there was country-of-origin meat on the table during that debate, our trading partners strenuously objected to the U.S. Trade Representative's Office in response to that proposal. So, I think it is not hypothetical at all; it is real world, and I think it is distinctly possible that not only would they retaliate with other country-of-origin requirements, but there are many forms of retaliation. It just doesn't have to be country-of-origin marking for country-of-origin marking. And I think that is a detriment to American agriculture.
I think we all know how dependent U.S. agriculture is for exports. Mr. Boyle suggested that they have doubled the amount of exports that they have had. We have doubled the amount of exports in the frozen food industry since 1990, and as developing countries acquire microwaves and acquire freezers, we are exporting frozen food products around the world, and I would hate to have anything to be done that would harm that.
Mr. THUNE. And that is exactly my point. I am particularly sensitive to that argument for that reason, but all the things that you have suggested, the fact that they would resist that sort of legislation shouldn't surprise anybody. I think that as a political matter they would naturally if they saw a labeling on the table say, ''We don't want anything to do with that.'' I would love to see if you get some real world data that would substantiate that other than the objections that might have been voiced in response to some legislation that was proposed last fall on labeling.
Mr. ANDERSON. Just because a nation puts rocks in its harbors to keep product out, I don't think we ought to do the same. I think we can be very positive and proactive in exporting American agriculture, including frozen foods.
Mr. THUNE. And I agree with that, and that is why I want to come back to my original point. I think that we are looking for more market opportunities, but I also think that—you said it yourself—there are a lot of labeling laws on the books in this country; have been for a lot of years. I view the whole debate over labeling to be a very potentially positive development for agriculture, but I want to be wary of what those downside risks might be, and in my judgment looking at the things that have been laid out there on the table today, the retaliatory argument is probably the more compelling one, but that is what I am trying to find out exactly where that might be added and to what degree we have an empirical data that would give support to that argument.
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Mr. BOYLE. Mr. Thune, if I may, the current ongoing debates with the European Union provides a real world situation that I think is relevant to your question and your concern. Any time one of the world's greatest free-trading nations, the United States contemplates a labeling requirement in this case involving country of origin, it does provide a precedent for other nations who have free trade obligations with the WTO to look at similar labeling requirements, maybe not country-of-origin labeling but labeling for genetically-modified products; maybe labeling for hormones in beef which are two very real topics of discussion right now with the European Union. It is a larger agricultural market for commodities than it is for beef at this point in time, but when the United States starts contemplating labeling obligations as a leader of free trade commitment around the world, it is a precedent that does concern not only those of us that make a large part of our living in the international market but on the part of our trading partners as well for our free traders. I am sure the Australians, the New Zealanders, the Canadians who complained to the U.S. Trade Representative last fall as the issue was making its way to the Congress, we are not only motivated on behalf of their own domestic cattle interest and a market that they have developed here in the United States with their beef products, I am sure they were also motivated as free traders about the precedented steps and the arguments that directs the Europeans to impose labeling requirements on our products going into that country. So, the precedent is of concern as well as the potential for retaliation.
Mr. POMBO. The gentleman's time has expired. Mrs. Chenoweth, did you have a quick comment you wanted to make?.
Mrs. CHENOWETH. I have a question I wanted to ask Mr. McNutt. You have a pork check-off system, don't you.
Mr. MCNUTT. That is correct.
Mrs. CHENOWETH. And the pork check-off system requires that your advertising programs benefit only U.S. pork, isn't that the case?
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Mr. MCNUTT. Yes, that is the case, but we do collect off-check on all imported product here.
Mrs. CHENOWETH. But you see the difference in the beef check-off where actually advertising for foreign beef up to 22 percent, and so we are in a different set circumstances, and did you want to comment?
Mr. MCNUTT. What the U.S. pork seal has developed as a promotion developed for check-off dollars.
Mrs. CHENOWETH. Thank you, and I just very quickly wanted to say, Mr. Anderson, or, Mr. Boyle, one of you made the comment about we already have country-of-origin labeling. Well, maybe I am just a simple consumer, but why is it that I can go get a set of Hot Wheels or a dog bone or a blouse, and the country of origin is in the label, but I go to the meat counter, and it is not there? So, whatever we say, what we want is to be able to go to the meat counter and know where the meat came from.
Mr. POMBO. I thank the gentlelady and thank this panel for your testimony. If there are further questions, they will be submitted to you all in writing. If you could answer those for the committee in a timely fashion it would be appreciated. Thank you all very much. The hearing is adjourned.
[Whereupon, at 2:52 p.m., the subcommittee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Statement of Hon. Helen Chenoweth, a Representative in Congress From the State of Idaho
Mr. Chairman, thank you. I appreciate your holding this hearing to review Country of Origin Labeling for Meat and Produce. I cannot overstate the importance of this issue to the American consumer and producer nationwide. This hearing is very, very welcomed, and I look forward to bringing a great deal of information to the attention of the committee.
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I would like to welcome Mr. George Swan, a fellow Idahoan, as well as the president of the National Cattlemen's Beef Association. Mr. Swan, I am happy to have you here with us today, and I look forward to hearing from you.
In the 106th Congress, I have introduced H.R. 1144, the Country of Origin Meat Labeling Act of 1999. This a simple bill to provide American consumers with important information they want and need.
My legislation would ensure American homemakers know where their meat comes from; and recognize American producers' high commitment to meat quality and food safety.
The Country of Origin Meat Labeling Act of 1999 would provide for country of origin labeling on meat and meat products. This means that whichever country the livestock is born, raised and slaughtered in, its origin will be clearly labeled on all meat.
Mr. Chairman, we already label just about everything we buy. We label the origin of the clothes we wear, the cars we drive, and the TV's we watch. We even identify which country produced rawhide chew-bones we give to our dogs. Yet, we don't let people know where the meat they eat comes from. This astounds me.
Every month, without anyway of knowing, Americans unknowingly eat over 320 million pounds of meat raised in parts of the world as far away as Hungary, Uruguay and Croatia.
Mr. Chairman, the safety of our Nation's meat supply is something that we must never take for granted. Whether we shop at a comer store or a deluxe supermarket, we expect the quality of our meat and meat products to be consistently high. We fill our grocery baskets, assuming that the meat we bring home to our families is tasty, wholesome, and most of all, safe.
However, without a country of origin label for meat, American consumers are at risk of purchasing a low-quality foreign meat product that could contain foodborne disease under the false assumption that they are buying high-quality American meat.
Today we live in a global economy, where national borders are more open and where trade barriers have fallen. Free trade has helped to fuel our economic expansion. However, with free and open trade comes the responsibility to protect American consumers from inferior foreign product.
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Much of our food safety efforts in the past have focused on American products. Ensuring food safety, however, can no longer be achieved by focusing solely on domestic production and distribution. Foods can be contaminated at any point throughout the food chain, from farm to table, but in the case of imported meat, we must be especially vigilant.
For many countries, labeling the origin of products is commonplace. In fact, other countries are moving to make their meat supplies more traceable and accountable to the consumer.
Japan, Argentina, Hungary, Chile, Mexico, Canada, Russia, and Korea, to name just a few, have labeling requirements for imported meat. If other countries are doing this, the United States should be able to do the same.
Country of origin labeling has enjoyed strong initial support. A recent Wirthlin Worldwide survey of 1,000 consumers found that 78 percent endorse the labeling of meat and meat products.
Today, groups and organizations such as the American Farm Bureau Federation, the National Farmers Union, the American Sheep Industry Association, the National Cattlemen's Beef Association, the National Consumers League, and the United Steel Workers of America have rallied behind the country of origin meat labeling issue.
This an electric issue, Mr. Chairman.
The Country of Origin Meat Labeling Act of 1999 would provide consumers the right-to-know. The legislation would also ensure that the high-quality American meat that we're proud of is properly labeled and receives the recognition it deserves in grocery stores nationwide.
As Americans, we've invested billions of dollars in ensuring the safety and quality of our meat, so why should we allow the uncertainty and risk to remain?
We need the peace of mind meat labeling would provide.
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Thank you, Mr. Chairman.
Statement of Hon. Mary Bono, a Representative in Congress From the State of California
Thank you Mr. Chairman, Ranking Minority Member Peterson, and the other distinguished members of the subcommittee for giving me this opportunity to express my views on an issue that greatly concerns American consumers. Of course I am referring to country-of-origin labeling, specifically the labeling of fresh produce.
Most of us are familiar with the labels placed on the products we
buy that identify the country in which the product was produced. Fresh produce labeling is a simple, inexpensive and common-sense practice to provide consumers with the same information already available, in accordance with Federal law, on virtually every other product we buy except fresh fruits and vegetables, and meat.
As I am sure you already know, I am the sponsor of H.R. 1145, a bill requiring that this information be made available to consumers at the final point of sale, usually your local grocers. I am very pleased that this bill enjoys bipartisan support in both the House and the Senate.
Today I would like to briefly comment on the recent GAO study on this subject. Like many parents, and Chairman Pombo I won't presume if it is you or your wife who does the shopping, but one of my responsibilities is shopping at the grocery store for my family. Like all parents, I care about the food that my family consumes.
Of course, health and nutrition are of paramount importance. In making my purchasing. decisions, as I am certain it is for you and the many million of other families, it is important to know what you are getting.
Although the GAO report confirms that, according to recent polls, approximately 75 percent of American consumers support country-of-origin labeling for fresh produce, I am concerned about the overall tone of the report and the inference a reader would draw from this study.
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The bulk of the study is devoted to exploring why fresh produce labeling is either too expensive or too time consuming for both the government and the retailer. Unfortunately, too little attention is paid to the successful example of Florida, the only State to
pass a comparable State law.
Before addressing some of my other specific concerns, I want to add at this time that I fully support free and fair trade. My bill, H.R. 1145, specifically avoids any language that would undermine our trade policies. And, as a non-lawyer, I am amazed that when I ask how exactly does this practice allegedly violate any of our trade agreements? Nobody can give me a straight answer. Even this report acknowledges that many of our trading partners—Japan, France, England, Mexico, and many more, 28 in all, have similar laws. All we are seeking is harmonization of trading practices and fairness for our consumers and farmers.
Consumers want country-of-origin labeling for a number of reasons, including concerns about possible contamination and growing practices in other countries. The report is misleading when it discounts the affect produce labeling could have in preventing future health impacts to consumers when outbreaks of food borne illness occur. The implication seems to be that the information would be of little use to consumers. I find that a bit of a stretch. We need only look at the recent CDC advisory warning shoppers to avoid Guatemalan raspberries. Common sense tells us that a simple country-of-origin label at the produce bin would have assisted stores and consumers in avoiding a potential health hazard.
There are many other legitimate reasons to support produce labeling. And I so pleased that the GAO report identifies that there are benefits to the consumer. But I wonder why the report included comments implying that retailers would be compelled to offer consumers fewer choices if this legislation is enacted. Any of us who have visited markets like Fresh Fields in the Washington area, or Jensen's in Palm Springs, know that these grocery stores use country-of-origin labeling as a positive marketing tool. And, once again, concerns about compliance costs are overstated, compared with the real world experiences in Florida. In fact, routine inspections require about 15 minutes per visit. And when violations are found it takes only 5 minutes to process paperwork for new violations, and 30 minutes for repeat violations. Rather than rely on speculation, I would urge the committee to look at the actual data contained in the testimony provided by Florida's Deputy Agriculture Commissioner confirming that this is neither a time consuming nor overly expensive regulation to enforce.
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Another issue raised was the impact labeling would have on the restaurant industry. However, my legislation exempts restaurants and other food service providers from this requirement. It is misleading to include these businesses in the section on compliance and enforcement if they are specifically excluded from the law.
While there are many other issues that concern me about this report, my overriding sense is that the benefits of country-of origin labeling are understated in the GAO study.
In summary, the single most important thing to remember is that consumers overwhelmingly support fresh produce labeling. Something is very wrong if we in Congress cannot empower our constituents to enjoy the same rights as the citizens of so many of our trading partners.
Finally, I want to thank the Members of the House and Senate who have joined me in support of this legislation. And I want to express my appreciation to the subcommittee and you Mr. Chairman for allowing us to explore this important issue that is so essential to the wellbeing and lives of so many American families.
Statement of Hon. Earl Pomeroy, a Representative in Congress From the State of North Dakota
Good Morning, Chairman Pombo, and all members of the Livestock and Horticulture Subcommittee. Thank you for allowing me to testify this morning at this important hearing on country of origin labeling for meat and produce products.
Mr. Chairman, I want to commend you and this subcommittee for your willingness to hold this hearing on one of the most pressing issues facing the hundreds of thousands of American livestock producers. Besides mandatory price reporting, no other issue resonates more clearly in cattle country than country of origin labeling.
Today, you will be hearing from expert witnesses on the pros and cons of country of origin labeling for both meat and produce. I am a strong supporter of both produce and meat labeling. But, since I am from North Dakota (which is in the heart of cattle country), I will elaborate on my strong support of meat labeling, and I'll allow my colleague Ms. Mary Bono of Southern California (which is citrus country) to discuss produce labeling.
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I believe the issue of country of origin labeling is as clear as night and day. In every sector of our economy, we label products for their country of origin. We can easy tell where our clothes are made by looking at the label on our pants or shirts. Moreover, we can determine the origin of computers, telephones, stereos, microwaves, and automobiles by looking at the product label. Remarkably, however, when consumers go to the grocery store to purchase meat products to feed their families, they have no idea where the meat originated.
As a representative of thousands of beef and sheep ranchers, I believe that we are doing our Nation's ranchers an injustice by not acting on country of origin legislation. America's cattle and sheep producers invest millions every year to produce the safest and most nutritious meat in the world. Without country of origin labeling, American consumers have no idea where the product originates. Cattle ranchers throughout North Dakota support country of origin labeling simply because they have extreme confidence in the product they produce and strongly believe that, when given a choice at the retail level, American consumers will choose overwhelmingly a North Dakota steak over a Brazilian or Mexican steak.
Not only is country of origin labeling for meat products strongly supported by America's cattle ranchers, but American consumers clearly have made up their minds. According to a recent Wirthlin Worldwide survey of 1,000 consumers, 78 percent endorse the labeling of meat and meat products. More importantly, 86 percent of women between the ages of 35 and 54, in many cases, the mother who feeds her family, support country of origin labeling. (However, more than 22 percent of meat that we consume does not come from American cattle, sheep, and/or hogs.) Furthermore, a national survey in late 1995 found that nearly three out of four consumers (74 percent) favor country of origin labeling, and more than half would buy food products with a United States country of origin label—even if it cost more than a similar foreign product.
Mr. Chairman, country of origin labeling critics love to use scare tactics about the evils of country of origin labeling. Recent reports by country of origin labeling foes claim that labeling will increase costs by a $1 billion annually for compliance and traceback, and will require a bloated bureaucracy be forced to oversee country of origin labeling. The opponents of country of origin labeling claim that the $1 billion increase costs will be thrown on to the backs of consumers and taxpayers.
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Nothing could be further from the truth. According to preliminary estimates from the United States Department of Agriculture (USDA), country of origin labeling may cost $50–$60 million per year which is only an additional 20 cents per customer per year. Moreover, during last year's fiscal year 1999 Agricultural Appropriations debate, Senator Johnson's amendment was scored by the Congressional Budget Office (CBO) to have no cost to taxpayers. Clearly, the financial back-breaking cost argument of the country of origin labeling foes cannot be taken at face value.
Another argument that country of origin foes will use is that it is an outdated, protectionist trade policy. They believe that it is contrary to the principles of open trade. I do not believe that argument. In fact, country of origin labeling is consistent with the General Agreement on Trade and Tariffs (GATT). Moreover, approximately 25 of our trading partners label their meat products for the country of origin. I ask how is country of origin labeling by the United States protectionist, when 25 of our trading partners do it? I believe it simply levels the playing field for our producers and consumers.
Another argument used against country of origin labeling is that it will allow niche markets to be created by foreign countries. For example, the American consumer will be more likely to eat New Zealand lamb products than United States lamb products. I beg to differ. In fact, I believe that country of origin labeling will increase competition, and, when given a choice between a prime North Dakota, South Dakota, or Oklahoma steak, American consumers will choose, hands down, homegrown meat products.
Mr. Chairman, Congress must pass this legislation. I am an original cosponsor along with Mrs. Chenoweth of both H.R. 222 and H.R. 1144. I also strongly support the efforts of Senator Johnson and other farm-state Senators in their efforts to assist American cattle ranchers. Both bills label all meat products for their country of origin, and both go a long way in providing the consumer with the right to know and American ranchers with a level playing field in today's global economy.
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Country of origin labeling is common-sense, benefits America's ranch and farm families, provides consumers with the right to know, is affordable for consumers and taxpayers, is trade friendly, and increases competition. I look forward to working with my colleagues from both sides of the aisle, the National Farmers Union, the National Cattlemen's Beef Association, the American Farm Bureau Federation, the America Sheep Industry Association, and the National Consumers League to pass this important legislation. I am hopeful that our task for country of origin labeling is as simple as one rancher recently asked me, ''We label our T-shirts, why not our T-bones?''
Statement of Hon. Rick Hill, a Representative in Congress From the State of Montana
I want to thank you Mr. Chairman and the subcommittee, for this opportunity to testify on an extremely important issue to Montana cattle and sheep producers. I am currently an original cosponsor of both of Representative Chenoweth's Country-of-Origin Meat Labeling bills. I thank Congresswoman Chenoweth for her support of the agriculture industry and I look forward to working toward the enactment of country of origin labeling legislation.
The livestock industry has been severely hurt in recent years. A loss of exports combined with the Clinton administration's failure to address flaws in the North American Free Trade Agreement have resulted in historic lows in the cattle industry. Montana sheep producers have also been severely damaged by low prices. The United States International Trade Commission (ITC) recently voted unanimously that the sheep industry has been damaged by unfair imports from foreign countries. The ITC also found that the cattle industry has been hurt by Canadian imports and that case is still ongoing.
I support county-of-origin labeling for one simple reason: I believe the brand name ''U.S. Beef'' and ''U.S. Lamb'' have value in the global marketplace. Without this legislation, our producers have difficulty capturing that value.
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A recently completed issue brief from Montana State University backs up my contention. For example, consumer surveys conducted by Wirthin Worldwide indicate that 76 percent of U.S. consumers support country-of-origin labeling for meat. Furthermore, the survey results show that 91 percent of consumers say they would choose beef products labeled as ''Product of the United States'' over similar products labeled as ''Product of Canada, or Australia, or New Zealand.'' Only 6 percent indicated that they had no preference among these choices.
International consumers might also prefer information regarding country-of-origin since U.S. beef products are superior to imported beef products. For example, recent research suggests that Korean hotel and restaurant industry participants consider U.S. beef to be a superior product to Canadian and Australian beef products.
Imports that are blended into our production combined with the American consumers desire to purchase U.S. meat products, encourage me to support country-of-origin legislation. U.S. beef and sheep producers consistently produce the highest quality of meat on the market today and Montana beef producers are recognized by Midwest feeders as the source of superior cattle. Some of this country's best purebred and commercial breeders call their home Montana. They watch with great dismay Canadian trucks loaded with fat cattle cruise past their doors en route to U.S. packing plants. These Canadian born, bred and fed cattle ultimately end up in grocery stores nation-wide, sold as U.S. Department of Agriculture beef. It is even more violating to consider that this Canadian beef can be exported to foreign countries as U.S. beef.
Country-of-origin labeling for meat imports is currently required by some countries. Japan, for example, has insisted that all meat imports be labeled by country-of-origin since July 1997. Our President even offered to label U.S. meat to gain entry into European Union. The European Union has effectively blocked U.S. beef since 1989, costing U.S. producers a minimum of $100 million annually.
Country-of-origin meat labeling is not an effort to protect producers from competition. Rather, it is an effort to level an already unfair playing field. The United States imports between 13 percent and 18 percent of total U.S. beef supplies from other countries. U.S. beef producers can compete with any country with a quality and consistent product. We should give producers the opportunity to compete and consumers the opportunity to choose. The Country-of-Origin Meat Labeling Act will provide that opportunity. I am proud to cosponsor Country-of-Origin Meat Labeling and I look forward to its enactment.
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Statement of Caren Wilcox
Mr. Chairman and members of the subcommittee, I am pleased to appear before you today to discuss the issue of country of origin labeling. The conference report accompanying the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 1999 directed the Secretary to conduct a study on the potential effects of mandatory country of origin labeling of imported fresh muscle cuts of beef and lamb. This study is in clearance, and the Department of Agriculture (USDA) will submit it to Congress once clearance is completed. I would like to begin with a brief background of current import requirements for meat since we will be discussing the food safety dimension of this issue. I must stress at the outset that the broad issue of country of origin labeling primarily is a marketing issue, not a food safety issue.
CURRENT REQUIREMENTS FOR MEAT IMPORTS
USDA's Food Safety and Inspection Service (FSIS) ensures that imported meat is every bit as safe as domestically produced meat. FSIS requires imported meat to be inspected under a system that FSIS has determined—through a complex and comprehensive process—to be equivalent to the U.S. system. Then, upon arrival at a U.S. port of entry, FSIS reinspects all meat shipments. Almost all imported products, about 85 percent, then proceed to a U.S. plant for further processing into value-added products—all under FSIS inspection.
FSIS has certified only 37 countries that meet U.S. inspection standards. In general, inspection under an equivalent system means meeting U.S. standards for microbiological pathogens and chemical residues; it also means meeting all sanitation standards applicable to U.S. meat processing plants. Perhaps most importantly, all plants exporting meat to the U.S. must meet the requirements of the Hazard Analysis and Critical Control Points (HACCP) inspection system.
According to data from USDA's Economic Research Service (ERS), the amount of imported fresh muscle cuts of beef consumed in the United States is very small compared to consumption of the same domestically produced product. The volume of imported beef muscle cuts represents about 1 percent of domestic beef consumption. However, about 24 percent of U.S. lamb consumption is imported. In any event, not one pound of imported products is permitted entry into the U.S. unless it has undergone inspection in a system certified by FSIS as equivalent to the FSIS inspection system.
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FSIS requires that imported meat carcasses and parts of carcasses must be labeled with the country of origin and foreign establishment number, either as part of the country's mark of inspection or on the product's packaging at the time of import. The container must bear, in English, in a prominent and legible manner: the country of origin, the foreign establishment number, and the name or descriptive designation of the meat product. How this information is displayed depends on whether it is for carcasses or for individual retail packages.
Imported meat products, such as individual retail packages or consumer size packages, must be labeled, in English, with the country of origin, foreign establishment number, and name or descriptive designation of the meat products so consumers know the origin of the product. Some commonly purchased items include: canned ham from Denmark, packaged leg of lamb from New Zealand, and meat pot pies from Canada.
Imported carcasses or carcasses from animals imported into the U.S. are currently eligible to receive a USDA grade provided they meet all other inspection requirements. Livestock and meat grading is a voluntary service that is widely used in the U.S. by those engaged in the marketing of these products. Uniform meat grades provide a standardized way of communicating values between buyers and sellers and reflecting consumer preferences back through marketing channels to the producer. Meat grades are applied to carcasses to identify differences in value-determining characteristics associated with the quality and/or cutability of meat. Quality grades (Prime, Choice, etc.) reflect palatability and the eating quality of meat. Yield grades identify carcasses according to the amount of usable lean meat.
In addition to labeling requirements, official meat inspection health certificates must accompany all consignments of meat and meat products imported into the U.S. (except those for personal consumption). These certificates, signed by an official of the national meat inspection program of the exporting country, certify that the exported products meet these 3 criteria: they were derived from livestock that received ante-mortem and post-mortem inspections at the time of slaughter in plants certified for importation of their products into the U.S.; they are not adulterated or misbranded as defined by U.S. meat inspection regulations; and they have been handled in a sanitary manner and are otherwise in compliance with requirements equivalent to those in the Federal Meat Inspection Act (FMIA) and U.S. meat inspection regulations.
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SCOPE OF ANALYSIS OF COUNTRY OF ORIGIN LABELING REPORT
Our report analysis covers only imported fresh muscle cuts of beef and lamb, as required by Congress. It does not include cuts from imported live animals nor does it include products from further processing these imported muscle cuts, such as ground products, since imported raw materials that have undergone a significant transformation may carry a domestic product label under current regulations. For purposes of preparing our analysis, USDA estimates that 235 million pounds of beef and 71 million pounds of lamb and mutton are imported fresh muscle cuts eligible for country of origin labeling.
ENFORCEMENT AND COMPLIANCE COSTS
Country of origin labeling could result in a variety of costs and benefits to various sectors including producers, the Government, industry, and consumers. This section of my testimony briefly reviews some potential issues in this regard.
Because the U.S. requires imported meat and poultry to meet our high food safety standards, USDA considers country of origin labeling to be a marketing issue—not a food safety issue. Enforcement and compliance costs for labeling are difficult to estimate and would vary based on the particular regulatory regime established.
There are a variety of regulatory regimes for country of origin labeling that could be adopted. Briefly, those options include (1) enforcement by USDA at retail; (2) limited enforcement at wholesale establishments, which are already regulated by USDA; (3) enforcement at retail by States or other Federal agencies involved in marketing; (4) monitoring and referral through private, third-party certifiers; or (5) enforcement through a whistleblower or competitor complaint system.
Currently only 11 countries export fresh beef to the U.S.: Argentina, Australia, Canada, Costa Rica, Guatemala, Honduras, Japan, Mexico, New Zealand, Nicaragua, and Uruguay. Australia, Canada, and New Zealand account for the vast majority; imports from other countries are negligible. For lamb and mutton, only six countries export to the U.S.: Australia, Canada, Costa Rica, Iceland, Mexico and New Zealand. By far, the vast majority of imported lamb and mutton comes from Australia and New Zealand, and much of that is already labeled as to country of origin. Thus, if Congress only required the labeling to state its country of origin and not the product name, only 13 different labels would need to be developed and applied.
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If enforced at retail, there are several issues Congress should consider. A 1997 report prepared by the Food Marketing Institute estimates approximately 127,000 grocery stores in the U.S. They would label most meat products. USDA does not conduct routine inspection at retail establishments for activities unrelated to food safety. FSIS does conduct limited food safety compliance activities, such as taking samples for E. coli O157:H7 or conducting compliance checks for recalled products. FSIS estimates the cost of its current food safety compliance visits, including labor time, travel costs, recordkeeping, and other expenses, at $100 per visit. Thus, we estimate the annual costs to taxpayers for country of origin compliance checks could be approximately $100 multiplied by the number of retail points, multiplied by the number of visits. In addition to retail establishments, USDA would have to monitor compliance with labeling requirements at all slaughter and processing plants, wholesalers, and distributors.
If USDA were required to enforce country of origin labeling at retail, USDA would either need additional funds or would need to redirect existing funds. Depending on the regulatory regime Congress chooses, other Federal or State agencies or third parties may be able to perform these tasks at a lesser cost.
Enforcement of country of origin labeling at wholesale establishments is another option Congress could consider. Under this option wholesalers would be required to prepare the appropriate labels to accompany products from the wholesaler to the retailer. FSIS, through its current food safety inspection activities at wholesale establishments, could examine labels and records to ensure the proper country of origin documentation has been received by the wholesaler and accurately forwarded to retailers.
Congress might consider enforcement by States or private party certifiers. Because State and local entities have a large presence at retail already, such a system might cost less than if the Federal Government were charged with enforcement.
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A private party certification program could be established for country of origin labeling along the lines of the proposed organic labeling program for meat and poultry. Under that program, the Federal Government is establishing voluntary standards producers must meet in order to receive the organic label. Private certification organizations, approved by USDA, would then apply those standards to the producers requesting approval for an organic label. However, the organic labeling program is voluntary and a mandatory labeling program, such as that proposed for country of origin labeling, may raise the costs of the program considerably. Obviously, these certifiers would charge for the certification, although the amount they would charge is unknown at this time. USDA would be responsible for imposing penalties for non-compliance.
An enforcement option Congress could consider is to rely on competitors and whistleblowers to report violations. This option would not require a large presence at retail, thus reducing costs. Based on FSIS' experience this type of enforcement can be cost-effective, particularly helping to focus resources where most needed.
COSTS TO INDUSTRY
A country of origin labeling requirement would probably increase some costs to packers, processors, and retailers, including the cost of preserving the identity of domestic and imported products, the direct costs of new or revised labels, and possible shifted costs if firms cease using imported products as a result of a new labeling regime. Domestic products would have to be labeled too. While FSIS has not quantified the overall costs, some industry estimates have placed the cost at greater than $1 billion per year. While we have not had time to review the industry estimates, we believe that if country of origin labeling is adopted, it should be done in a manner that minimizes the costs to industry. For example, it is worth considering whether country of origin labeling could be implemented similar to the Agricultural Marketing Service's (AMS) grading system, where carcasses are graded in slaughter plants, and the grades pass through all the way down to the retail chain. Such an approach might greatly reduce the costs of a new labeling requirement on domestic industry, though it could be more complex in practice than it might seem.
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BENEFITS TO PRODUCERS AND CONSUMERS
Based on reports of private polling it is possible that consumers might be willing to pay some premium for domestic product, which would be one of the benefits to domestic producers from a country of origin labeling requirement. FSIS, however, is unaware of any studies that attempt to quantify the amount of such a premium. If the price premium were large or sustained over a long period of time, one might expect greater use of voluntary country of origin labeling by our domestic industry.
FSIS has already established a voluntary program for labeling any and all beef products as ''Product of the United States,'' establishing standards to ensure the label is meaningful and accurate. While we continue to encourage and support the use of this type of label, there has not been extensive use of this program by domestic industry.
The relative lack of voluntary labeling may reflect unwillingness of consumers to pay a price premium for domestically labeled products or it could be that the price premium may be less than the costs domestic industry would incur in changing to a country of origin labeling regime. In either case, any possible benefit to producers and consumers is difficult to quantify. As mentioned earlier, FSIS considers country of origin labeling to be a marketing issue—not a food safety issue. Therefore, the benefits to consumers from these requirements would be minimal.
TRADE IMPLICATIONS
Mandatory country of origin labeling at the retail level may be consistent with U.S. commitments under various trade agreements provided various criteria are met.
Article IX of the GATT addresses Marks of Origin by setting out guidelines for rules and their application on imports into a country at the time of import. Regulations on marks of origin are allowed, but difficulties and inconveniences to commerce or industry should be minimized, while protecting consumers against fraudulent or misleading indications. Marks of origin at the time of import are to be permitted provided they do not seriously damage products, reduce the product's value, or unreasonably increase costs.
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Article III of the GATT requires that imported goods be treated like domestic product (national treatment) in respect to laws and regulations affecting their internal sale, offering for sale, purchase, transportation, distribution, or use. If labeling is required for purposes other than country of origin, post importation, then national treatment requirements could apply.
The disciplines of the World Trade Organization (WTO) Agreement on Technical Barriers to Trade (TBT Agreement) apply to a broad range of industrial and agricultural products. The Agreement establishes fundamental rules and procedures regarding the development, adoption, and application of voluntary standards, mandatory standards (technical regulations), and the procedures (conformity assessment procedures) used to determine whether a particular product meets such standards. These requirements are intended to ensure that standards, technical regulations and conformity assessment procedures do not create unnecessary obstacles to trade. Key obligations under the TBT Agreement include non-discrimination and national treatment; transparency; and a prohibition against unnecessary barriers to trade.
The North American Free Trade Agreement (NAFTA) also has various provisions, which would guide the application of country of origin labeling requirements.
Because the U.S. is a major importer and exporter, it is likely that a U.S. requirement would be challenged by our trading partners. In addition, the U.S. has objected to other countries' country of origin labeling when they are objectionable because of costs or lack of consistency with international agreements. Establishing a mandatory country of origin labeling requirement in the U.S. could undercut our ability to object to such requirements in the future.
It is important to consider that U.S. exporters can and do label products as a marketing tool when it will expand their market. In some markets, however, the presence of a mandatory country of origin label could be used to the detriment of U.S. products by protectionist interests.
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Supporters of country of origin labeling have emphasized that consumers have a right to know if the meat and meat food products they purchase contain imported meat and that such labeling would help consumers make better informed choices.
Depending on the regulatory regime adopted, compliance with and enforcement of an extended country of origin labeling requirement could result in additional costs to the Government, domestic industry, and consumers.
Thank you again for the opportunity to appear before you today. I will be happy to answer any questions you or other members of the subcommittee may have.
Statement of George Swan
Thank you Chairman Pombo, Mr. Peterson and members of the committee for holding this hearing to discuss country of origin labeling. NCBA commends your leadership and continuing efforts to examine the issues and concerns of interest to cattlemen and women, and for working with us to find ways to improve our ability to more effectively market U.S. beef. I am George Swan, president of the National Cattlemen's Beef Association. I am a fourth generation rancher on the House Creek Ranch, Rogerson, ID.
During 1998, beef imports were equal to about 8 percent of total U.S. beef production. This beef is generally blended into ground beef or processed beef products and sold at the retail meat case without informing consumers that it is not U.S. production. In addition to beef imports, nearly 1.1 million live cattle were imported from Canada directly to U.S. packing plants during 1998. Although all of the value-added production took place in Canada, these cattle were processed—in effect they were laundered—and sold as U.S. beef.
Because the majority of our members felt this was a false representation of U.S. beef, NCBA adopted policy during the January 1997 Convention to require imported meat and meat products be labeled as such. An NCBA task force was appointed to address challenges posed by various segments of the beef industry and to facilitate implementation of labeling. The NCBA Country-of-Origin Task Force recommended that:
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The definition of ''U.S. Beef'' include all beef produced from cattle slaughtered in the U.S., except those cattle brought into the U.S. in ''sealed'' trucks for slaughter. In addition, this definition will not include imported beef trimmings, imported boxed beef, or beef produced from imported carcasses.
All fresh muscle cuts offered for sale at the retail meat case, and not meeting the definition of U.S. beef, will be labeled as to its country of origin, and would be required regardless of whether the product is graded with USDA Quality Grade and that identity will be maintained to the retail meat case.
The ''U.S. Beef'' label should be available for use on ground/processed beef products if individuals or firms wish to meet the criteria established for the domestic label beef and market the products accordingly. Otherwise it would be labeled ''blended product,'' or ''blended with imported beef.''
Due to the unique complexity of labeling ground beef, a pilot study of significant scope and magnitude should be conducted to test consumer response to, and costs of, labeling ground beef as ''imported,'' ''U.S. Beef,'' or percentage of ''imported and U.S. Beef.'' If it is found that this labeling would not impose a significant cost on U.S. producers, this labeling will become mandatory industry-wide. Additional research funds will be directed to developing additional information about potential improvements in source verification and accountability—and consumer acceptance of ground beef—through labeling.
Since this policy was adopted, NCBA has worked with several Representatives and Senators, including members of this committee, to introduce legislation and pursue its consideration in Congress. We certainly appreciate their hard work to broaden the political support for country of origin labeling. We also are aware that last year's effort to enact labeling legislation was hampered by the venue in which it was being debated—namely, the appropriations process.
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That is why we are both appreciative and excited by your calling this hearing. It represents a critical step toward ensuring this issue is considered in the proper forum and with all sides having an opportunity to discuss their positions as we, hopefully, continue to move forward. We also are confident that USDA's report, another important part of this process, will soon be completed and help us verify our belief that by requiring country of origin labeling on beef in the retail meat case, cattle producers can better serve their customers—namely, consumers.
CONSUMER CHOICE
Consumers demand quality and consistency, and producers are continually working to meet consumer demands. With the current system, there is limited ability to identify the source of product that does not meet consumer demands. Country-of-origin labeling will give consumers the ability to make informed decisions when purchasing meat and meat products and the relative value of meat from different countries will be determined through competitive forces in the marketplace.
A national consumer poll commissioned by NCBA and conducted by Wirthlin Worldwide in November 1998 showed that consumers overwhelmingly supported the concept of putting country of origin labels on fresh meat in the supermarket. A follow-up poll in March 1999, found statistically identical results showing that 76 percent of consumers agreed with a statement that the U.S. should require labels on meat that show country of origin. On the other side of the coin, only 24 percent of consumers said country of origin labels were unnecessary.
In questions added to the March poll, consumers were asked which product—U.S. or imported—they would purchase if they saw packages of ground beef and steaks in the meat case, all priced the same, with various types of country of origin labels. Faced with a choice between beef with labels saying ''Product of the United States'' and ''Imported Product'':
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91 percent of consumers said they would choose the U.S. product;
1 percent would choose the imported product;
6 percent said it didn't matter.
Of those who said they would choose U.S. beef:
69 percent would do so because they prefer to buy American, loyalty to the U.S., to support U.S. businesses and to support our farmers;
13 percent thought U.S. beef would be safer and 9 percent felt it would be of higher quality.
In a similar question, consumers, faced with a choice of beef with four different labels saying Product of: Canada, Australia, United States and New Zealand:
89 percent said they would buy the U.S. beef;
3 percent said Canadian beef;
1 percent each said they would buy Australian and New Zealand beef;
6 percent said it made no difference.
Similar to responses to the question of ''American'' versus ''Imported,'' the survey showed that:
73 percent would choose the U.S. product because they prefer to buy American, loyalty to the U.S., to support U.S. businesses and to support American farmers;
11 percent thought U.S. beef would be safer;
6 percent said it would be of higher quality.
MARKETING U.S. BEEF
NCBA believes that through country of origin labeling, we can improve our ability to market U.S. beef, and ensure that we are getting the full value for the resources we are spending to promote our product. Labeling is not a new concept. Many countries around the world require such labeling on foreign product. In some of our largest markets, Japan for example, we have taken advantage of labeling to better identify our product for Japanese consumers. The growth in that market since the barriers were eased has resulted in a market that consumed $1.5 billion worth of clearly marked and identified U.S. beef.
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NCBA also believes there is an inherent value to beef producers, including those from other countries, in being able to market their product as ''U.S. Beef.'' I cannot give you quantifiable data to support our belief—at least yet. However, logic suggests this is the case given the extreme reaction by Canadian producers and officials when this issue was considered in Congress last year.
In every other market in which we compete with Canadian beef, their product is clearly marked as to its country of origin—it is part of their marketing strategy. They obviously are willing to put resources and effort into promoting their product in other countries. Why not in the United States? Again, we believe it is because they are getting extra value for their product by wearing our brand.
Country of Origin labeling, which was considered by the 105th Congress, is an ongoing issue and a priority for American cattle producers. U.S. cattle producers want to assure consumers they are getting the beef they want, not to mention the U.S. beef producers' marketing dollars promote.
NCBA will be discussing country-of-origin labeling with retailers, packers, food processors and other industry groups in the near future to find the best solution for meeting consumer expectations. NCBA will also be working within a producer coalition that includes the American Farm Bureau Federation, the American Sheep Industry Association and the National Farmers Union to achieve our goals.
The National Cattlemen's Beef Association is prepared to participate in the process of evaluating critical marketing and trade issues within the beef industry. NCBA looks forward to providing additional input as other issues arise. Thank you for the opportunity to present this information.
Statement of Dean Kleckner
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The American Farm Bureau Federation is the largest general farm organization in the United States, representing over 4.8 million members across the country. We appreciate the opportunity to come before your committee today to offer our position on labeling the country of origin on meat products. We strongly support legislation that will require country of origin labeling for all products. As trade increases and agricultural products both fresh and processed flow across international borders, U.S. consumers deserve the right to know where their food products originate.
Farm Bureau policy states: ''Imported products should be labeled at the distribution point and retail level as to the country of origin. Labels on imported products should state on the main display panel of the package that the product is imported in letters not less than one-half the size of the product name''. Our policy goes on to state that ''We support the establishment of a grown in the U.S.A. labeling program'' and that ''U.S. origin products should proudly display the American flag in a prominent position on the label''. We also state in our policy that ''All livestock entering the United States for any purpose should be permanently identified as to country of origin''.
We strongly support the labeling of products, all the way to the retail outlet, as to its country of origin. We feel that consumers have the right to know where the food they are buying is produced in order to be able to distinguish American products from those produced in other countries, to be able to buy products produced by their fellow Americans, and to be able to depend upon the products produced in America. Consumer surveys indicate that the majority of consumers want to know the origination of their meat products.
In addition, we feel that it is important to change the current practice of allowing cattle to be imported into the U.S. and then, when processed, carry the USDA inspection label. We feel that this practice misleads the American consumer into thinking they are buying a U.S.-produced product when in fact it was imported into this country.
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For example, imports of lamb to the United States have more than doubled in the last several years from to 7 to 16 percent of consumption. Nearly 70 million pounds of lamb are now imported into the United States annually. Sheep industry analysts estimate that imported products will comprise over 20 percent of consumption. Some retail accounts that have sold American lamb now have both domestic and foreign products in the meat case without any differentiation. In addition, some foreign lamb today is graded by USDA and sold at retail to the consumer simply as USDA Choice lamb. Foreign lamb is frequently advertised as USDA-inspected lamb without mention of whether it is a domestic or imported product. Fruit and vegetable imports have seen this same type of import growth with little opportunity for consumers to identify domestically produced fruits and vegetables.
Farm Bureau also believes that it is important that beef produced in the U.S. should be able to proudly display the American flag and be labeled as such. Again, this gives consumers the knowledge they need to make decisions as to where their food is grown and produced.
While we feel that it is important to label most beef products, certain challenges arise in the case of ground beef. In some instances, a product may be from more than one country. We feel that a system could be adopted to make all parties comfortable with the labeling of ground beef. We urge members to work with the industry to come up with that system.
Because of the provisions of the World Trade Organization (WTO) we encourage all labeling to state the actual country of origin rather than just label the product ''imported.'' We believe that the rules of the WTO prohibit using the words ''imported'' on products as an unfair trade barrier. Therefore, we urge that the actual country of importation be stated on the label.
Legislation has been introduced in both the House and Senate which would amend the Federal Meat Inspection Act to require that imported meat and meat products be labeled so that U.S. consumers would be able to identify the country of origin at retail sales points. Under current law, labeling is permitted but not required. Not only would this legislation provide consumers with information they want, but it would also help bring U.S. labeling laws into uniformity with requirements of most of our trading partners around the world.
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Farm Bureau appreciates the initiatives by Reps. Helen Chenoweth and Mary Bono for introducing country of origin labeling legislation. We believe that these bills can be improved through committee action and look forward to working you, Mr. Chairman, during that process.
One concern with the Chenoweth bill is how to label the product from stocker calves coming into the United States. We feel that the product from these cattle should be labeled as American products since a major portion of their life span is in the United States being fed on American feed products.
Consumers should have access to full information about the origin of their products. Country of origin labeling is simply a matter of informing the American consumer and helping assure consumer confidence in the products they choose to purchase. Enhancing the market opportunities for domestic meat, meat products and all agricultural commodities by requiring labeling of imports is critical to the agriculture industry.
We want to thank this committee for having this hearing today. We feel that legislation requiring labeling not only will have a positive impact upon American producers, but also upon American consumers. Thank you for the time you have given us today to express our views on this subject. I will respond to any questions that the committee may have at the appropriate time.
Testimony of A.H. Denis, III
Mr. Chairman and members of the subcommittee, on behalf of the Nation's sheep industry, I greatly appreciate your leadership in conducting this hearing on labeling of lamb meat in the U.S. Labeling of imported lamb meat has been a long-standing concern of the domestic industry. This issue along with quality grading of imported carcasses is part of the devastating situation facing America's lamb industry today.
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I am a lamb producer, feeder and chairman of the board of Ranchers Lamb of Texas. Ranchers Lamb is a lamb slaughter company formed in 1996 by sheep producers in San Angelo, TX. Ranchers' Lamb currently slaughters from 6,000 to 13,000 lambs per week and has a major stake in effectively addressing the imported lamb situation, including labeling of foreign meat at retail and grading and branding of foreign meat by USDA.
All edible imported meat should be labeled as to the country of origin. This action is not and should not be seen as an effort to restrict trade. It is an action to give the American consumers the information to make an intelligent choice in the purchase of food for their families. Increasingly, in the case of lamb meat, importers are mixing domestic and imported product at the wholesale level so that neither the grocer nor consumer can identify what they have. This practice gives a distinct price advantage to imports over purely domestic product due to the low price underselling by imports. Additionally, the domestic industry's advertising of our product becomes more difficult due to the lack of product identification. Brand names used by importers clearly aim to indicate the product may be domestic.
In addition to Country of Origin labeling, the grading of foreign meat by USDA must be stopped. Virtually all consumers believe that the USDA shield and grade, whether rolled on the meat carcass or placed on the package label, means that USDA is certifying the product to be domestic. There can be no excuse for this deceit of the American consumer by our own Government. Foreign meat should be inspected by USDA, for wholesomeness, but should be marked only as ''Inspected by USDA.'' The lack of Country of Origin labeling and the USDA grading of foreign product has allowed the Australian and New Zealand exporters and their importing companies in the United States to become very effective in making their cheaper product indistinguishable from the American product.
The need for labeling and cessation of quality grading of imported lamb is an issue driven in our industry by the volume of lamb imported into the U.S. market. This increase in imported lamb has precipitated a severe financial crisis that our industry continues to suffer from since lamb imports flooded our market in 1997. In March 1997, feeder lamb prices were at $122.75—by December 1998 prices had plummeted 40.9 percent—to $72.50 and prices for slaughter lambs declined from $102.75 in February 1997 to $61.50 in December 1998—or by 40.1 percent. In 1993, approximately 56.5 million pounds of imported lamb meat entered the domestic market. By 1997, the amount had risen by 49 percent—to 84.4 million pounds. It's risen even higher since then. From January to September 1998, 76.9 million pounds of imported lamb meat entered the United States—a 19 percent increase from the first 9 months of 1997. Imports have taken market share from domestic producers, increasing from 20.7 percent of the market in 1996 to 30 percent of the market during the first 9 months of 1998.
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The U.S. International Trade Commission concluded that in eight product categories; such as racks, ribs, loins, legs and shoulders, imported lamb prices undercut U.S. prices 79 percent of the time by margins averaging 20 to 40 percent. This data Mr. Chairman, we believe reflects the desperate need to provide equity in the U.S. lamb marketplace between imported and domestic lamb. Labeling is one such measure to assist this goal, but obviously we must also address the severe underselling of imported lamb in the U.S. market.
The U.S. market is also attractive because—unlike the European Union, which has absolute quotas on lamb meat—an unlimited amount of lamb can be sent to the American market. The surge of imports now swamping the market threatens to capsize the U.S. sheep industry. Australian producers told the International Trade Commission that exports of fresh chilled lamb meat are projected to increase 21 percent in 1998—and by another 24 percent in 1999. New Zealand's figures are even higher. Their exports of fresh chilled lamb meat were projected to increase 83 percent in 1998 and another 36 percent in 1999.
Mr. Chairman, key members of all segments of the lamb industry from producers, feeders to packers and processors have been united in addressing the flood of cheap imported product. On September 30, 1998, representatives of the U.S. lamb industry filed a section 201 trade action with the U.S. International Trade Commission. On February 9, the Commission voted unanimously that imports from Australia and New Zealand are cause of serious threat to the domestic lamb industry. On March 26, the entire U.S. International Trade Commission recommended trade restrictions of lamb imports for 4 years to the President. The statute allows 60 days for the President to decide on implementation of trade remedies. It is absolutely critical that the administration implements the most effective trade relief possible. We ask for the committee's active support of the industries requested program to the President for implementation of an effective trade remedy.
The labeling of imported lamb by country of origin and only inspecting the meat rather than quality grading would strengthen the domestic lamb industry in the market place. This strength would come from domestic advertising and educating the U.S. consumer on the differences between U.S. and imported lamb thus allowing for buying practices to favor domestic product. This remedy would restore optimism and confidence in the industry to restart the investment in our business.
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On behalf of Ranchers Lamb and the American Sheep Industry Association, we pledge our assistance to you in securing equity in the U.S. lamb market and addressing the issues of labeling and USDA grading of imported meat. Admittedly, we have the next four weeks as the critical window of opportunity to ensure the President decides upon implementation of effective trade restriction on lamb imports under section 201 of the Trade Act of 1974. The immediate future of thousands of farms and ranches, as well as lamb companies very much depends on the outcome of this important trade case.
Mr. Chairman, we compliment you and the subcommittee for conducting this hearing on key issues involving imported meat. Your timing could not have been better given the devastation in the lamb industry and the key opportunity to address the section 201 trade relief and the issues of labeling and grading.
Statement of Jay Taylor
My name is Jay Taylor. I am president of Taylor & Fulton, Inc., a tomato and vegetable grower, packer, and shipper. We operate in three States along the eastern seaboard, Florida, Georgia, and Virginia. We have been in business for 50 years and now have the third generation working in the company. I am here representing the Florida Fruit and Vegetable Association, the Florida Tomato Exchange, and the Florida Farmers and Suppliers Coalition. I am a member of the board and the executive committee of the Florida Fruit and Vegetable Association, a member of the board of the Florida Farmers and Suppliers Coalition and president of the Florida Tomato Exchange. This is a comprehensive group of organizations that represent the widest segment possible of Florida agriculture.
We believe that country of origin labeling is long overdue and is a critical part of the American consumer's right to know. For 69 years, goods imported into the United States have been required to be labeled with the product's country of origin so that the ultimate consumer will know where it was produced. Your shirt, coffee mug, chair, and pen probably have country of origin labeling. It's hard to find a consumer product without one.
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The Tariff Act of 1930, which required country of origin labeling, exempted certain products from the requirement that it be labeled to the ultimate consumer. This so called ''J'' list allowed fruits and vegetables to be marked only as far as the back room of a grocery store not out to the consumer. We feel now and have always felt this interpretation of the law is misguided and should be changed. What consumer product could be more important to American consumers than the food they feed their families? Seventy years ago, when this list of exceptions was developed, we were in a very different world. There were very few imported fruits and vegetables in the marketplace, so there was no need for labeling. We now import twice as much produce as we did 10 short years ago.
Country of origin labeling enjoys widespread support. When did you ever think you would see farmers, organized labor, the National Association of State Departments of Agriculture, and consumer groups all on board and pulling in unison? I have had the pleasure of standing next to Ralph Nader, the quintessential consumer advocate, at a press conference supporting one another on this very issue. The soundness of the basic logic of this bill is a magnet for support. In recent surveys 85 percent of those polled support country of origin labeling. In fact, in the State of Florida, where we have had country of origin labeling enforced for nearly 20 years, the consumer support rises to 96 percent.
The opposition to this bill basically comes from one organization, the Food Marketing Institute. I say that this is nothing more than an attempt to continue ''business as usual'' regardless of the wishes of the American public all in an attempt to save a few pennies of profit. In the most profitable department of the store, I might add. Opponents of the bill say that country of origin labeling is a thinly veiled attempt to restrict trade and give the domestic producers an edge. I take exception to this view as I export a large percentage of my product to a country that requires country of origin labeling. Canada, as well as Mexico, requires labeling and, as an exporter to that country, I believe this actually helps me market my crop. Anyone that is truly producing a premium product wants that label to get to the consumer to build repeat business. Brand identification is difficult at best and cost prohibitive to most farmers from any country, but I am proud that my produce is labeled as being from the U.S. in foreign markets.
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I say that our farm product is superior and should have the same recognition as a car or even the shirt on your back. If labeling is not good for the American consumer then we should do away with all of it. To pick and choose what product needs it and what doesn't isn't fair, and again I ask what could be more important than your family's food?
The cost of this bill is not, and should never have been, an issue worth consideration. In 20 years of enforcement, the State of Florida can prove without a doubt that this is not an expensive proposition. Even if the chain store were to add all additional costs to the average consumer's weekly bill it would amount to less than a penny a week. Florida stores have remained competitive and have maintained prices at the national average even though they are ''burdened'' by this 20-year-old law. In fact, in the last year Florida's two largest grocery chains had a combined profit of more than $550 million. The retail industry can say whatever it wants but 20 years of evidence certainly are hard to ignore.
The GAO recently released a report that by its very title brings into doubt the objectivity of the findings. The ''Potential Consequences of Country of Origin Labeling'' lacks a certain amount of respect for history as it mostly ignores the 20 years of Florida's experience as well as those of our close trading partner and supporter of labeling, Canada. The authors of this report adopted the scare tactics of the Food Marketing Institute rather than relied on the actual costs incurred in places that have lived with labeling. Japan, Mexico, Canada and the E.U. all require country of origin labeling, why can't we? All we are asking for in this bill is equal treatment, nothing more.
In this report one issue that I must raise is the assumption that there is little to gain from labeling when there is a health scare because of tainted foreign produce. When children became ill after eating Mexican strawberries, consumers had no way to tell where the strawberries on the grocer's shelf were from and so stopped buying any at all. The blameless strawberry farmers of California took it on the chin though at the height of their season. Labeling would have allowed the consumer to continue to buy without fear of endangering their families.
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As a farmer, I can tell you that there are real, significant differences between the rules that we live under and those of a developing nation such as Mexico. After listening to Mexican producers expound on their technological prowess before the I.T.C. I was disgusted and felt that I must do something to show the truth of the situation. I ended up hiring a film crew to go undercover in the growing areas of Mexico. They captured film of unsafe and unclean conditions on even the largest farms. Pesticide abuse, child labor and unsanitary conditions were all easily documented. I believe that our society has developed to a point where we should be using our vast marketplace to foster positive change in countries where there are not the protections in place for labor or consumers that we take for granted here.
In conclusion, I can only ask why with broad support from Congress (103 co-sponsors in the last Congress), farmers and consumer groups, this is such a hard subject with which to deal? It cannot be considered a trade issue, we only ask for equal treatment; it is not expensive or burdensome as shown in Florida and Canada; and it is something that American citizens expect on all consumer goods.
It is up to this Congress and this subcommittee to find a way to make this work and give the American consumers what they want.
Testimony of John McNutt
Mr. Chairman and members of the subcommittee: I am John McNutt, a pork producer from Iowa City, IA and president of the National Pork Producers Council (NPPC). I very much appreciate the opportunity to appear here on behalf of U.S. pork producers to express our views on country of origin labeling.
The National Pork Producers Council is a national association representing 44 affiliated States that annually generate approximately $11 billion in farm gate sales (although farm gate sales were reduced to about $9 billion in 1998 as a result of the lowest hog prices ever in real terms). According to a recent Iowa State study conducted by Otto and Lawrence, the U.S. pork industry supports an estimated 600,000 domestic jobs and generates more than $64 billion annually in total economic activity. With almost 11 million litters being fed out annually, U.S. pork producers consume 1.065 billion bushels of corn valued at $2.558 billion. Feed supplements and additives represent another $2.522 billion of purchased inputs from U.S. suppliers which help support U.S. soybean prices, the U.S. soybean processing industry, local elevators and transportation services based in rural areas.
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BACKGROUND
You have legislation before you that would impose expanded country-of-origin labeling requirements at the retail level by amending the Meat Inspection Act. Under this pending legislation, USDA would be required to identify the origin of imported meat. Cutting of meat into pieces or reworking of meat would not be enough to change the origin of the meat. Indeed, pork derived from imported slaughter hogs would be considered a foreign product under H.R. 1144.
NPPC OPPOSES MANDATORY COUNTRY OF ORIGIN LABELING OF PORK
At our recent annual meeting with producer-elected delegates from 44 States, a resolution that expresses NPPC's opposition to mandatory country-of-origin labeling was unanimously approved. As a threshold matter in dealing with this issue, pork producers have concluded that mandatory country-of-origin labeling will not help raise hog prices. Indeed, producers are very concerned that mandatory labeling could result in lower hog prices.
For the record, the demographic composition of the delegates showed:
Fifty-one percent of the delegates have 200 sows or less.
Average delegate age was 44 years old
Thirty-six percent sell fewer than 2,000 hogs per year
Seventy-two percent market fewer than 10,000 hogs per year
COUNTRY OF ORIGIN LABELING COULD RESULT IN LOWER HOG PRICES
Country-of-origin marking would require extensive record keeping, segregation and tracking of both imported animals and meat. During 1998, 4.1 million head of hogs were imported from Canada while 295,849 metric tons of pork from all destinations (primarily Canada and the EU) were imported into the United States. According to USDA, U.S. consumers purchase approximately 15 billion retail packages of fresh meat and poultry each year. USDA estimates the annual cost to monitor for compliance of country-of-origin will be $60 million, which represents more than 10 percent of the entire FSIS budget. Enforcement of origin marking would divert resources from food safety, which could undermine HAACP implementation and potentially decrease consumer confidence in the meat supply. A 1987 study by the U.S. General Accounting Office concluded that the benefits gained from additional country-of-origin labeling of food products would not justify the costs of implementation and enforcement of the labeling laws. Without question, the increased packer, processor, retailer and USDA costs associated with labeling will be passed back to the producer in the form of lower hog prices. Clearly, someone must pay for this requirement. We believe that a significant percentage would be shouldered by pork producers.
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U.S. PORK SEAL-WHERE YOU FIND THE VERY BEST PORK
When Pork-The Other White Meat campaign was introduced over 10 years ago, U.S. pork producers were announcing their vision of the future. It has proven tremendously successful. Now we have developed the new U.S. Pork seal to represent our focus for the years ahead. This seal is the foundation of an aggressive, long-range program to become the world's preferred supplier of high-quality, low cost pork. Like Columbian coffee, America's pork producers have set their sights on establishing a truly unique, premium position and identity for U.S. pork that is recognizable around the world as the very best.
Consumers around the world are increasing their demands that the food they buy meets the highest quality and safety standards. In response to those demands, the U.S. pork industry is working everyday to provide global consumers with the pork that meets the most stringent standards for safety, quality, wholesomeness, reliability of supply and value. The U.S. Pork seal is a visable symbol of that effort. We think this approach, rather than attempting to discourage other nation's products from entering the U.S. is the preferred way to advance our farm food production.
ORIGIN MARKING IS NOT A FOOD SAFETY ISSUE
Imported products are inspected in the country of origin under a system of inspection that must be equivalent to U.S. inspection if they are further processed. According to USDA, 85 percent of all imported meat and poultry is further processed in the United States.
Most of the hogs imported for immediate slaughter in the U.S. are from Canada while most of the pork is from Canada and Denmark. Absent compelling evidence to the contrary, it is fair to assume that Canadian and Danish pork do not carry negative images in the minds of U.S. consumers.
In fact many products, supermarkets, and restaurants list country of origin as a way of boosting sales. Do any of us really believe that listing products such as Columbian coffee, Danish ham and ribs, Agentine beef, or New Zealand lamb is done for any reason other than to boost sales of those products? That's why we developed the U.S. Pork label to indicate to our customers they are getting a product they know is of unquestioned quality.
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Clearly, U.S. consumers have positive images of those imported products or they wouldn't be designated as they are. By requiring country-of-origin labeling we are giving suppliers a free ride in establishing an overall, country identification for their products. In a certain sense, we are giving to them, at U.S. Government and private sector expense, the country identity that we seek to establish in foreign markets through the use of the U.S. Pork seal.
REPERCUSSIONS IN EXPORT MARKETS
Perhaps most disturbingly, country-of-origin labeling could be used by our competitors to our disadvantage. It invites copy-cat action and legislation in those countries. For example, another country could determine that importation of an animal from the U.S., and slaughtered in that country does not confer origin. For example, hogs sold live to an entity in another country, slaughtered and processed in that country, could be sold as U.S. pork product to another country even though the animal and product had been totally out of our biosecurity control all the while. I don't think we want to export live animals and have the meat product from those animals come back to the U.S. as if it had never left our borders and food safety controls, yet this legislation if approved would encourage other countries to do exactly that.
CONFLICTS WITH U.S. POSITION
If adopted, H.R. 1144 or similar legislation would conflict with the position taken by the U.S. in international trade negotiations. H.R. 1144 endorses the concept that the origin of the animal is determined by certain residency or weight gain criteria, which directly contradicts the U.S. position in the ongoing WTO negotiations to harmonize International Rules of Origin.
In the end, the proposed legislation would increase costs and lower prices and not achieve its intended objectives. The legislation is flawed because it places emphasis on identifying imported product for those who seek such products; there is no enforcement mechanism; and it does not include all product sold in the U.S.. As an example, the legislation excludes more than 40 percent of all beef sold. If those who feel the question this legislation seeks to address if one of food safety, wouldn't they want to identify the country of origin of the beef going into the millions of hamburgers eaten daily at our fast food restaurants? The bill fails on each account and the National Pork Producers is opposed to its approval.
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Testimony of Tim Hammonds
Mr. Chairman and distinguished members of the committee, I am Tim Hammonds, president and CEO of the Food Marketing Institute, the leading business association for the supermarket industry. The Food Marketing Institute (FMI) is a nonprofit association conducting programs in research, education, industry relations and public affairs on behalf of its 1,500 members including their subsidiaries * food retailers and wholesalers and their customers in the United States and around the world. FMI*s domestic member companies operate approximately 21,000 retail food stores with a combined annual sales volume of $225 billion * more than half of all grocery store sales in the United States. FMI*s retail membership is composed of large multi-store chains, small regional firms and independent supermarkets. Its international membership includes 200 members from 60 countries.
We very much appreciate the leadership and work of this panel to analyze the impact of new country of origin labeling mandates for meat and produce. FMI believes strongly that such mandates would provide no meaningful benefits while imposing significant costs upon the industry, consumers and taxpayers. In fact, such requirements could very well harm producers—including those that support the legislation—by triggering conflicts with nations that view labeling mandates as nontariff trade barriers. There is a very real danger that such nations could respond with new trade barriers on U.S. products coming into their countries. This would increase our trade deficit and ultimately could lead to trade wars involving hundreds of products.
Here I should note that FMI chairs the Food Industry Trade Coalition, which also strongly opposes this kind of labeling legislation. This coalition includes companies and organizations involved in the domestic and worldwide manufacturing, distribution and marketing of food products to consumers. A list of trade associations that are members of the coalition is attached to my written statement.
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In my brief comments today, I would like to summarize the supermarket industry's concerns about country of origin labeling. I should point out that these are fully in line with the findings in the new report by the General Accounting Office (GAO). FRESH PRODUCE * Potential Consequences of Country-of-Origin Labeling, April 1999.
I will close with an industry alternative to such legislation. This involves programs in which producers, in partnership with their retailers, voluntarily promote U.S.-grown meat and produce with labels, brochures and signs that identify their place of origin as a positive feature.
Does Not Make Food More Safe. Let's look first at the many flaws in new labeling requirements. Contrary to some assertions, these proposals will not enhance food safety. There is simply no evidence that existing requirements fail to protect food safety in a manner that new country of origin labeling would fix. If food is not safe, it should be prohibited from entering this country or leaving the packing house. Country of origin labels will not help consumers determine on their own if a product is safe.
The GAO report cites 98 outbreaks of foodborne illnesses linked to fresh produce, between 1990 and 1998. Of the 12 cases in which the country of origin could be identified, 10 were traced to produce grown in the United States.
The clear objective of this proposed legislation is to restrain some U.S. produce imports. It is a thinly veiled attempt to promote U.S. products by casting imports in a negative light. U.S. growers have tried to create this perception in public relations campaigns suggesting that foreign-grown produce is unwholesome and unsafe.
These efforts, however, could prove to be contrary to their own interests. Experience suggests that any adverse publicity about food hurts the entire product category. Consumers do not look at the place of origin; they simply stop buying the food product.
Consider the impact of the adverse publicity about Alar on apples a few years ago. Consumers stopped buying apples altogether, costing growers everywhere hundreds of millions of dollars in lost sales. Consumers did not try to decide on their own whether the apples were from the Northwestern United States (where no Alar had been applied) or from the Northeastern United States (where Alar had been applied). They simply quit buying apples.
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Added Costs to Consumers and Taxpayers. Now, let's look at the cost of new country of origin labeling mandates. These proposals are unfounded mandates that will cost the industry, consumers and taxpayers well over $1.3 billion a year. Country of origin labeling on meat alone will cost the industry more than $1 billion a year, according to the American Meat Institute.
Mandatory produce labeling will cost the Nation's 156,000 food retail outlets about $200 million a year in added store labor costs alone, according to FMI research. This is based on the very conservative estimate that stores will require two hours of labor per week to maintain the country of origin shelf labels or stickers.
This figure does not include the costs to design, print and ship the labels; the costs to continually segregate by country all produce items as they move through the supply chain from growers to warehouses to the back rooms of stores; or the costs to provide administrative support for all these activities.
The annual cost to taxpayers will exceed $110 million, according to the GAO report. The U.S. Food and Drug Administration estimates that the annual budget to enforce new labeling mandates would be $56 million, while the U.S. Department of Agriculture would budget $60 million. When all these costs are totaled—including those that we have not yet identified—such labeling mandates could add upwards of $2 billion a year to U.S. consumers' food bill.
Let's look at what country of origin labeling will require of our industry at the retail level, starting with fresh produce. Consumers have heard the health messages: eat more fruits and vegetables, as many as five servings a day. And they are following doctors' orders, demanding a wide variety of produce year-round. The average supermarket produce department now carries more than 370 items year-round—up from 295 items just 5 years ago and 239 a decade ago. Supermarket Business Produce Operations Review, a yearly publication released each October.
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Most produce is sold in bulk (not packaged). If these labeling mandates were enacted, food retailers and wholesalers would face a nearly impossible compliance challenge. Perishable products move quickly through the food system and come from numerous sources, both domestic and foreign. The mix changes continually from day to day and from season to season as the industry tries to keep pace with the surging consumer demand.
Government inspectors will find country of origin labeling quite difficult to enforce. This is based on experience of inspectors trying to enforce the Florida labeling law. As the GAO report notes, Florida inspectors ''sometimes have no reliable means to verify the accuracy of these signs and labels.'' I point this out because the produce labeling proposal before this subcommittee is modeled after the Florida law.
Now we have to ask what benefits, if any, could outweigh the high cost, industry disruption and enforcement problems that such legislation will bring. Will consumers benefit? When selecting produce, consumers are most concerned about product freshness; quality and appearance; and price. PRODUCE Merchandising, *Consumers Vote for Freshness, Quality,* October 1996, p. 95.
The country of origin is, at best, a secondary concern for most consumers.
It is true that some surveys have suggested a strong consumer desire for country of origin labeling. These surveys typically position such labeling as having a food safety benefit, based on the false assumption that imports are likely to be less safe and wholesome. It is telling that these surveys often do not ask consumers if they would prefer the far simpler alternative of having domestic meat and produce labeled ''Grown in the USA.''
To measure consumer interest in this alternative, FMI commissioned a national telephone survey of 785 consumers, which was conducted this March 5–7 by the well-known research firm Market Facts. In this nationally projectable survey, consumers were screened to ensure that they were the primary grocery shoppers for the household or at least shared that responsibility. Those qualifying were then asked whether they are concerned about the safety of foods imported into the United States. The survey then asked those who expressed this safety concern whether they would prefer either country of origin labels on imported foods or simply labels that identify foods ''Grown in the USA.''
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The results were quite interesting. One-third (32.5 percent) of consumers expressed no concern about the safety of imported foods. Another third (32.1 percent) preferred specific country of origin labels, and the final third (31.3 percent) called for ''Grown in the USA'' labels. I should add here that the percentages for the three groups are all within the sample margin of error of each other.
In other words, consumers really do not know what they want in this area and split evenly when given the alternatives. However, we can say that two-thirds want either nothing or something other than the current country of origin proposal. We can only imagine shoppers' frustration, perhaps even anger, when they discover that a country of origin label would then require them to decide whether a product from Argentina might be safer or more desirable than a product from, say, Uruguay. Requiring customers to make distinctions like this is clearly not a viable option for the typical grocery shopper.
Trade Implications. Finally, this legislation would undermine U.S. trade policies. The United States has been a leader in the effort to eliminate nontariff trade barriers that discriminate against U.S. goods and services. Currently, we are engaged in a dispute with the European Union, which is proposing new labeling regulations for U.S. beef. Consider how our credibility would be damaged if we now enact our own labeling requirements for foreign imports.
At this very moment, our dispute with Europe over beef and bananas is on the verge of escalating into a trade war involving hundreds of products. Our Government has already drawn up lists of European products that will be subjected to prohibitive tariffs. In this highly charged environment, it would be extremely unwise to subject our trading partners to new labeling requirements that surely would be seen as a new trade barrier.
In short, new country of origin labeling mandates are protectionist burdens that provide no meaningful consumer benefit. The proposed country of origin requirements will do nothing to increase sales of U.S. products and will only result in increased costs to the industry, consumers and taxpayers.
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Voluntary, Cooperative Labeling Programs Promote U.S. Meat and Produce. As an alternative to mandated labeling, let me direct your attention to voluntary programs involving U.S. retailers and growers. In these cases, grocers and retailers are working to develop a market niche by voluntarily labeling products by place of origin or brand—for example, Washington apples, Idaho potatoes, Certified Angus beef. The labels are used to promote high-quality domestic products in a positive manner.
Now I'd like to share with you some current examples of cooperative promotional programs by two FMI members.
Hy-Vee, Inc., is using label, brochures and other materials to promote two brands of beef: Amana Quality Beef and Blue Ribbon Beef. Hy-Vee is a supermarket chain based in West Des Moines, IA, that operates in seven States. You have copies of the company's point of purchase (POP) brochures before you today. Both programs emphasize that these products are high-quality, Midwest, grain-fed beef.
Also, I have with me today some promotional posters that Wal-Mart, another FMI member, uses to promote onions from different U.S. locales. They include Vidalia, Saint Augustines and Texas 1015 onions.
These cooperative promotional programs show you what U.S. producers and supermarkets can do to positively promote their products for consumers. This is clearly a far better approach than mandating country of origin labels on imports that are costly, raise false safety and quality concerns and undermine U.S. trade.
I thank the chairman and the subcommittee for this opportunity to share our concerns. FMI members look forward to working with you and consumers on constructive efforts to increase sales of U.S. meat and produce both at home and abroad.
Testimony of J. Patrick Boyle
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Good morning. I am Patrick Boyle. For the past 9 years I have served as president of the American Meat Institute (AMI), which represents packers and processors of about 70 percent of the beef, pork, lamb, veal and turkey produced in the U.S. About two-thirds of these companies are small businesses with fewer than 100 employees. The remaining third are mid-to-large firms, including some major international food processing companies. Earlier in my career, I served as administrator of USDA's Agricultural Marketing Service (AMS), the Federal agency, which oversees numerous marketing orders and agricultural marketing initiatives.
The issue of country-of-origin labeling is complex in that its proponents see it as a means to a variety of ends. For some, it is a means to limit competing imports. Frustrated by growing Canadian or Mexican imports, some see such labeling as a way to discriminate against other North American agricultural products and thereby improve the position of U.S. products in the U.S. marketplace. For others, country-of-origin labeling is a way to promote U.S. products to consumers. If Americans only knew how to choose U.S. products, they reason, then they would prefer to purchase those products and help American agriculture in the process.
AMI shares the goal of those who seek to promote U.S. products, so I will focus my comments today on how best to promote the sale of U.S. meat. Today's hearing is timely. Just last week, AMI concluded its 15th annual Meat Marketing Conference in Anaheim, CA. We have co-sponsored this one-of-a-kind conference for the past decade and a half with the Food Marketing Institute, and this year other co-sponsors included Food Distributors International and the National Chicken Council. With 640 registrants and 30 exhibiting meat and poultry companies, this is the largest meeting we know of that is totally dedicated to meat marketing.
In 15 years of these conferences, much ground has been covered with respect to the products and approaches that motivate U.S. consumer meat purchases. Consistent quality, convenience, price, nutrition and even food safety have all been mentioned as driving forces, to one degree or another, in consumers' purchasing decisions. The creation of brand identity has been a constant goal in the fresh meat and poultry industry as a way to communicate to harried consumers that a particular product will meet their expectations consistently for quality, price, convenience or whatever attributes that brand conveys. Both supermarkets and manufacturers have had success with brand identity for fresh meat and poultry—such as Perdue chicken, Certified Angus Beef and Smithfield's Lean Generation Pork.
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One of the ways to establish something similar to brand identity is what we would call geographical identity—something akin to country-of-origin labeling. Examples of this would be the ''Buy Texas'' program established by that State's agriculture department, as well as the ''Florida Orange Juice'' and ''California Strawberry'' promotion programs established through industry marketing orders. Hallmarks of these programs are that their participants are volunteers—even in the case of marketing orders, in which participants vote to join and fund the program. In fact, USDA's Agricultural Marketing Service established a voluntary, ''Certified U.S.'' meat-labeling option, created by Secretary Glickman a year ago. This and similar programs are currently available to livestock producers, meat companies and supermarkets.
Mandatory country of origin labeling, as contemplated in a number of bills introduced in the 106th Congress, far exceeds the need for marketing initiatives that would spur consumer purchases of U.S. meat products. Given the progress we know has been made in the past 15 years through voluntary brand-labeling campaigns and other voluntary, geographically-oriented marketing campaigns, we believe mandatory country-of-origin labeling is not only not helpful, but actually harmful to the U.S. livestock, meat and retail industries. I would like to outline the ways in which we believe mandatory country-of-origin labeling will hurt:
Hundreds of millions of dollars costs to livestock producers annually: Among the various bills being considered by Congress are a myriad of different country-of-origin distinctions for live animals, their place of birth, place of slaughter and so forth. Despite these differences, there is one constant that would be required of everyone who would sell livestock or meat under a country-of-origin labeling mandate: a verifiable audit trail that can provide meat buyers or consumers a guarantee of labeling accuracy.
If country-of-origin labeling requirements were not applicable to all meat products, or were restricted to just one type of meat product, or limited to just one marketing venue, then requirements for that audit trail might be relatively minimal. But if such labeling were to truly address what its proponents espouse (i.e., identifying for consumers the origin of all of their meat purchase choices), then a rigorous audit trail will be required from all sectors of this industry.
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A rigorous audit trail would also require individual animal I.D. for those species—primarily cattle—where cross-border trade flows are common and growing. AMI has estimated that if every head of cattle were required to carry a unique I.D. eartag, the cost today would be at least $246 million (eartag cost of $2.50 multiplied by the national herd size).
You can be sure that meat packers, who would face criminal prosecution for mislabeling their products, would demand very clear and credible evidence from their livestock suppliers as to the country of origin of their livestock.
Hundreds of millions of dollars costs to meat packers annually: An AMI survey of its membership has identified a country-of-origin labeling cost associated with foreign and domestic product segregation, recordkeeping, inventory management labeling and other plant operations that averages of a cent per pound for all beef and pork produced in this country. That of a cent per pound is the total cost of country-of-origin labeling compliance by packers and processors averaged out over all the meat we produce annually, and it totals $324 million per year.
Companies currently using imported product—whether livestock or meat—report to us that their per pound costs to comply with a country-of-origin labeling mandate would run from 4 to 8 cents per pound on their own production. It is worth noting that, in the labeling arena alone, companies would have to manage new labels declaring ''U.S.'' or ''Imported'' for thousands of separate products per company. For example, one pork processor member of AMI has more than 8,000 separate SKU products; another beef and pork slaughterer produces more than 5,000 SKUs. Each of these products would be required to conform with new requirements, potentially doubling the number of labels each manufacturer who uses imported products must maintain and apply accurately to his products.
Hundreds of millions of dollars costs to supermarkets and grocery stores annually: According to the Food Marketing Institute and the National Grocers Association, who represent collectively more than 156,000 large and small retail food businesses nationwide, costs for product segregation, storage, labeling, documentation and signage would be $2,400 per store. Total annual costs of mandatory country-of-origin labeling to retailers would be $375.1 million.
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Sixty million dollars estimated annual cost to USDA to monitor compliance: According to a July 1998 internal USDA memorandum, regulatory costs at USDA for monitoring and ensuring compliance with mandatory country-of-origin labeling would be about $60 million annually. This is about 10 percent of the entire FSIS budget for food safety inspection. One has to ask the question whether it is a worthy objective to divert one out of every ten food safety dollars to policing a program designed to sell more U.S. meat products.
Finally, I should add that the protectionist trade objectives of some country-of-origin proponents run completely counter to AMI's free-trade position. Our members have benefited tremendously—as has all of the U.S. food and agriculture community—from expanded world trade. Like it or not, free trade includes both exports and imports of goods. In 1998, the U.S. was a net exporter of pork, a net importer of beef and lamb. However, since 1990, beef exports have more than doubled and pork exports have grown 470 percent. Using country-of-origin labeling as protectionist trade policy is the equivalent of biting the hand that feeds us. We will face certain retaliation from key trading partners. Canada, our third largest market for U.S. meat exports, could retaliate in a way that jeopardizes our $350 million plus in meat exports to that country annually.
In summary, AMI supports constructive and voluntary efforts to market U.S. meat products in many ways—through brand promotion or geographical identification, for example. But we oppose mandatory country-of-origin labeling legislation as a costly and harmful requirement that will not achieve the desired marketing results. Thank you for your time this morning.
"The Official Committee record contains additional material here."
Statement of Steve Anderson
Thank you, Chairman Pombo and members of the committee. I am Steve Anderson, president and chief executive officer of the American Frozen Food Institute, located in McLean, VA. AFFI is the national trade association that represents frozen food processors, marketers and suppliers to the industry. AFFI's membership of 586 companies is responsible for approximately 90 percent of the $60 billion worth of frozen food processed annually in the United States. We appreciate the opportunity to appear before the subcommittee today to discuss country of origin marking requirements for food products.
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OVERVIEW
AFFI is a technology-based organization, and its members freeze and market products ranging from juice and branded and private label fruits and vegetables, to brand-name pizza, entrees, meals and gourmet desserts. The Smoot-Hawley Tariff Act of 1930 requires that imported frozen foods of foreign origin bear a country of origin marking. AFFI members' products have been subject to the Tariff Act's country of origin marking requirements since 1930, and, as a result, AFFI is opposed to any new country of origin labeling schemes that would place the frozen food industry under duplicative, conflicting and/or more burdensome requirements. AFFI believes such new country of origin marking requirements for frozen foods would violate international trade laws; would confuse consumers while providing them no useful, new information; would subject its members to the large and unjustified costs of segregating ingredients and maintaining an impractical variety of label stock; and potentially would limit the ability of its member companies to compete in essential export markets.
CURRENT U.S. COUNTRY OF ORIGIN MARKING RULES ARE SUFFICIENT
For nearly 70 years, the Tariff Act of 1930 has been the statute under which the United States has administered country of origin marking requirements for imported goods. Section 304 of this statute requires that imported processed foods and consumer goods display on the label of the product the country of origin of the good itself. Many AFFI members' products are included within the scope of section 304 and, therefore, frozen food products of foreign origin, as well as certain frozen food products with imported content, are required to be marked with the product's country of origin. AFFI does not, nor has it ever, objected to the Tariff Act's marking requirements for country of origin.
Section 304, however, does not require, and has never required, labeling to disclose the country of origin of the foreign ingredients or materials present in the good. Such a requirement would depart from well-established and long-standing precedent under which a good is not required to be labeled for country of origin if it is transformed in the United States into a new and different article, as determined under applicable origin rules. In other words, United States tariff laws, for good reason, have always applied the country of origin marking rule to the good itself, not its components.
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Regulatory authority for section 304 of the Tariff Act has been delegated to the Secretary of the Treasury. The U.S. Customs Service, which operates within the Treasury Department and has primary responsibility for implementation and enforcement of section 304, works in cooperation with the U.S. Department of Agriculture (USDA) regarding country of origin marking requirements for meat and poultry products. It is important to note, however, that the Federal Meat Inspection Act (FMIA), which is the primary food safety statute to which both domestic and imported meat processors must adhere, is not the statute through which country of origin marking requirements are provided. Any amendment to the FMIA to incorporate country of origin labeling requirements, therefore, would be unprecedented and ill-conceived because such requirements would conflict with long-standing country of origin marking practice established under the tariff laws and would impose an unnecessary new product labeling scheme on the food industry. It would be virtually impossible for AFFI members to attempt to satisfy two different, and potentially conflicting, country of origin labeling requirements on a single package.
AFFI believes the Tariff Act, with its nearly 70-year history of marking regulations and the voluminous body of law which has developed through implementation of the statute, should be the Act that continues to govern country of origin marking requirements for food products.
INTERNATIONAL TRADE LAW GOVERNS USE OF COUNTRY OF ORIGIN LABELING
Of particular concern to the frozen food industry are proposals that would impose, directly or indirectly, country of origin marking requirements for ingredients of multi-component products. AFFI believes such proposals would violate this country's obligations to its trading partners under international agreements, including obligations under the World Trade Organization (WTO) agreement and the North American Free Trade Agreement (NAFTA). It would interfere with the objectives of the Uruguay Round negotiations of GATT, which in its Agreement on Rules of Origin imposed disciplines on member countries designed to prevent the use of country of origin marking rules as disguised barriers to trade. On this point I want to be very clear. Such a violation of our country's trade obligations would have serious adverse repercussions for U.S. producers.
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As provided in article 2 of the Uruguay Round Agreement on Rules of Origin, the United States pledged that its rules of origin, including those applied for marking purposes, would be administered in a consistent, uniform, impartial and reasonable manner. Article 2 requires further that nonpreferential origin rules not be used as instruments to pursue trade objectives and that they not create restrictive, distorting or disruptive effects on international trade. In addition, member countries, including the United States, expressly have undertaken disciplines under article 9.1 of the Agreement on Rules of Origin to recognize as the country of origin of a product the country in which the last substantial transformation is carried out.
Defined most generally, the substantial transformation principle provides that a good will have as its country of origin the last country in which it underwent a change in name, character, or use, thereby resulting in a new and different article of commerce. For example, an imported cow is ''substantially transformed'' into a new and different article of commerce when it is slaughtered and packed in the United States. Further, a frozen food processor which includes imported meat in its frozen lasagna product again has transformed the meat, as well as all the other ingredients in the lasagna product, into another new and different article of commerce.
It should be noted that the Customs Service has issued, as part 102 of the Customs Regulations, rules of origin applying to the marking of products under NAFTA. These special rules are not based on the substantial transformation principle, but instead create a hierarchy of rules incorporating, in part, a ''change in tariff classification'' methodology for determining country of origin. This ''tariff shift'' approach also is under consideration at the World Customs Organization, which is in the process of developing a harmonized tariff-based classification system for WTO member nations. Even under the tariff shift approach, a cow would be listed under a different tariff classification than would the ground meat or the frozen lasagna.
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Finally, article 2.2 of the Uruguay Round Agreement on Technical Barriers to Trade states that member countries may not adopt technical regulations, including marking and labeling regulations, that are more stringent than necessary to achieve a legitimate objective, or that are applied with a view to or with the effect of creating unnecessary obstacles to international trade. Clearly, establishment by the U.S. of new country of origin marking requirements in an effort to eliminate competition from imported goods would be violative of article 2.2.
Similarly, a scheme that requires producers of goods using imported ingredients to mark their products to disclose the country of origin of each such ingredient would discriminate against imported goods and constitute an impermissible nontariff barrier.
Although some might argue that NAFTA and/or GATT provide more harm than good for the citizens of this country, the fact remains that the United States is a party to these agreements and, as such, has pledged to adhere to the requirements thereunder. Congressional action which would violate our country's international trade obligations would result in adverse consequences for the United States, including in particular retaliation against our country's exports. Such a course of action simply is not in this nation's best interest.
INGREDIENT LABELING WILL CONFUSE CONSUMERS
Equally as important, a country of origin labeling regime for ingredients of multi-component products would serve only to confuse consumers, while burdening the frozen food industry, as well as other segments of the food industry, with unnecessary costs.
To demonstrate AFFI's concerns, one need only observe a label for a typical, domestically-produced frozen meat lasagna. (Attachment 1.) As can be seen by looking at the ingredient statement which appears on this generic lasagna product which is representative of products being sold in the market today, this product includes 23 individual components. In the real world, in order to maintain consistent supply, quality and taste for its products, the processor must have multiple sources for each of these components. Although most frozen food processors primarily domestic sources for their ingredients, in some cases, suppliers of particular ingredients may be from other countries. So, for certain ingredients, suppliers may vary throughout the year depending on variations in growing season, weather phenomena, as well as cost and consistent availability, all of which must be factored into corporate procurement decisions.
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Getting back to the lasagna package, attachment 2 contains an ingredient statement that includes the potential countries of origin from which only a portion of the component could be sourced in today's market. As you can see, there are many countries listed here, including the United States and 16 others. AFFI believes that should specific country of origin marking requirements be applied to one ingredient, it likely would have to be applied to all ingredients. As a result, if a company were required to label each potential source of each of its components, a typical label might look like the one depicted in attachment 2. The label in this attachment lists the sources of only some of the ingredients which potentially could be sourced from other countries. This is a conservative representation. A more inclusive listing obviously would be even more overhearing.
It also is worth noting that if each package were required to show the specific country of origin of each ingredient in that particular item, as opposed to the potential options, a company would have to maintain hundreds variations of labeling for this one product.
As these mock labels demonstrate clearly, country of origin marking at the ingredient level would complicate significantly the manufacture of a frozen meat lasagna or other frozen food product because companies would be required to segregate ingredients, as well as segregate finished products, in order to ensure compliance with the labeling requirement. But who would benefit from all this complicated and costly manufacturing process and confusing label? No one.
The frozen food manufacturer would still need to ensure there were multiple suppliers, from numerous countries, available for a wide variety of ingredients. To limit supply of a key ingredient to one U.S. supplier, for example, might mean at that any given time of the year, due to a drought, disease or other unexpected act of nature, this key component unexpectedly might become unavailable. Or, due to similar circumstances a particular ingredient could increase dramatically in price, thereby forcing the manufacturer to seek alternative sourcing options or risk being forced to increase the retail price of the finished product.
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Maintaining hundreds of different labels for a single product in a frozen food plant that processes numerous different products would require a complicated and cumbersome packaging inventory system. In this regard, it is important to be mindful that most of these products are packaged in cardboard boxes, and that maintenance of on-hand inventory of such a large quantity of packages would require significant storage capacity. Many, if not most, facilities simply would not be able to handle this burden.
Even if the frozen lasagna manufacturer were able to comply with such a labeling requirement, the average consumer shopping for frozen meat lasagna will be given no additional useful information when examining an ingredient statement containing the country of origin of those ingredients. A consumer who looks at the ingredient statement on the frozen lasagna package on one shopping occasion may not look at it on the next purchasing occasion, although in fact, it may be different. Even if the consumer does study this information with each purchase of the same product, there is little chance he or she will be able to discern a difference if the country of origin of one of the 30 ingredients differs from one purchase to the next.
In addition, we know from years of market research that the average consumer will buy a product because it offers consistent quality and taste, or because it carries a brand they trust, or because it is being sold at a good price. In fact, when asked in a telephone poll conducted by Opinion Research Corporation on behalf of the American Frozen Food Institute, ''What are the main things that influence which frozen fruits or frozen vegetables you purchase?'' only one respondent out of the 656 polled cited the country of origin of a product as an important factor in his or her purchasing decision.
Consumers may refer to nutritional information, or other information which is included in labeling, to make purchasing decisions based on their dietary needs and goals. Yet, at what point do labels become hyper-inclusive and therefore provide an overabundance of unnecessary information? By requiring the inclusion listing of the country of origin of each ingredient, Congress in effect would be saying to consumers that they should look at this information because in some way, it could affect them. That is an unfounded, and therefore confusing, message to consumers. Consequently, mandatory country of origin marking for ingredients would constitute yet another step toward overload of unnecessary information that desensitizes consumers to more relevant label statements.
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In addition, it is interesting to note that domestic companies which produce fat-reduced products, such as frozen entrees, generally rely on imported lean meat in order to comply with the maximum fat levels stipulated by the Nutrition Labeling and Education Act (NLEA). If the availability of imported lean meat is restricted or cost-prohibitive, consumers may not have available for purchase these nutritionally beneficial products.
NEW COUNTRY OF ORIGIN MARKING REQUIREMENTS COULD CURTAIL EXPORTS OF U.S. PRODUCTS
The global food marketplace represents the largest growth market for the domestic frozen food industry. Global U.S. exports of frozen food have increased dramatically, from $600 million in 1990 to $1.3 billion in 1997. (See USDA chart, attachment 3) Exports in every frozen food category, including vegetables, juice, prepared meals, ice cream, bakery, and fruits, increased during the 1990 to 1997 period. As the cold chain infrastructure improves throughout the world, and the use of freezers and microwaves increases in developing nations, exports represent a virtually untapped market for U.S. frozen food manufacturers.
Despite the urging of some sectors, regulation of food products imported into the U.S. cannot be contemplated without taking into account the increasing dependence of the U.S. economy on global sourcing, as well as export markets. U.S. frozen food manufacturers legitimately are concerned that any new country of origin marking requirements imposed on imported foods or food ingredients, particularly if these requirements are outside internationally-agreed-upon rules of trade, will be detrimental to U.S. exports. Actions taken by the United States to restrict certain imports will result in new retaliatory restrictions hindering the access of U.S. exports to lucrative markets abroad. Because the United States in the past has exercised international leadership in removing and preventing product labeling standards that function as disguised barriers to international trade, this country has nothing to gain, and much to lose, from resorting to new country of origin marking mandates.
COUNTRY OF ORIGIN MARKING DOES NOT ENHANCE FOOD SAFETY
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Some proponents of new country of origin marking requirements insinuate that there is a connection between the country of origin of a product and its safety. There is no such connection. USDA's Foreign Agricultural Service confirmed this fact in a September 1997 document which stated in relevant part, ''Country of origin labeling does not address the issue of food safety. If a product is not safe, it should be prohibited from entering the United States. Country of origin labels will not help consumers determine if a product is safe.''
The General Accounting Office in its recently released report, ''The Consequences of Country of Origin Labeling for Fresh Produce'' also came to the same conclusion regarding the lack of connection between food safety and country of origin labeling.
NEW COUNTRY OF ORIGIN MARKING REQUIREMENTS CONSTITUTE UNFUNDED MANDATES
Implementation and enforcement of new country of origin marking mandates will cost millions of dollars. USDA estimated in 1998 that costs of proposals pending at the time to place new country of origin markings on meat and meat-containing processed foods would cost the Food Safety and Inspection Service (FSIS) $60 million, or approximately 10 percent of the annual FSIS budget. GAO has estimated new country of origin labeling requirements for raw produce at retail would cost the Food and Drug Administration (FDA), the Federal agency which likely would be given enforcement responsibility for this new mandate, approximately $57 million. The GAO study also correctly points out that food inspection at the retail level generally is carried out by State and local inspectors. If Federal funds were not appropriated for these new requirements, they would place a significant and unfunded burden on State and local inspectors, a burden they likely could ill-afford.
Proponents of new country of origin marking mandates seek Government intervention in a misguided attempt to limit or eliminate competition from imports. AFFI believes this Government-mandated market intervention should be avoided. New requirements established ostensibly to assist certain producers in fact may be detrimental to these very industries due to lost domestic production and export opportunities. In addition, undue costs will have to be borne by entities involved in every aspect of the food chain, from producers to processors and retailers. Consumers also will bear some expense as increased costs along the food chain lead to increased costs of food products at the retail level. No corresponding benefit, however, will be gained.
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Moreover country of origin marking schemes, particularly those which would entail ingredient labeling, expressly are prohibited by international law and therefore must not be enacted.
Thank you for this opportunity to present the views of the American Frozen Food Institute. I would be happy to answer any questions you may have.
"The Official Committee record contains additional material here."
Statement of the Grocery Manufacturers of America
The Grocery Manufacturers of America (GMA) appreciates the opportunity to submit testimony on proposed legislation that would require country-of-origin labeling on certain food products. GMA is the world's largest association of food, beverage and consumer product companies. With U.S. sales of more than $450 billion, GMA members employ more than 2.5 million workers in all 50 States. Led by a board of 44 chief executive officers, GMA speaks for food and consumer product manufacturers at the State, Federal and international levels on legislative and regulatory issues.
GMA's member companies are affected by country-of-origin labeling rules in two significant ways. As importers of ingredients for use in manufacturing grocery products, and some products manufactured abroad for sale in the U.S., they are governed by regulatory compliance issues under U.S. tariff laws, and applicable labeling requirements, including the laws and regulations pertaining to country-of-origin marking. As exporters, GMA members are affected by country-of-origin rules and marking rules of foreign countries as well. Accordingly, GMA's members favor the development of internationally-harmonized origin rules that are neutral and transparent, and that do not pose barriers to the sale of their goods in foreign markets. Therefore, we oppose legislation currently pending in Congress that would require special country-of-origin labeling on meat and produce.
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Country-of-origin labeling mandates for meat and produce are onerous for international trade. Enacting this kind of legislation could mean retaliation from other countries, who will very likely adopt similar measures to impede exportation of U.S. meats and produce. Such action by the United States would provide a road map for other countries seeking mechanisms to limit growth in imports of U.S. meat and produce.
We were pleased to see the comments in the April 1999, General Accounting Office report on country-of-origin labeling for produce from agencies such as the Food and Drug Administration and the U.S. Department of Agriculture, particularly the USDA's assertion that mandatory labeling could be viewed by other countries as a trade barrier. The report is consistent with a 1987 GAO report, which stated that ''insufficient evidence exists that the benefits gained by extending country-of-origin labeling throughout the food chain'' would justify the cost of implementing, monitoring and enforcing such a requirement. Accordingly, we do not recommend a change at this time to the labeling requirements on imported meat and meat food products. General Accounting Office GAO/RCED-87-142 Imported Meat - Residues and Labeling, 1987.
Country-of-origin labels have nothing to do with food safety but could actually raise food prices and damage efforts to expand global access for American products. In fact, very little information has been presented which would indicate that such marking requirements would be of any value to consumers. Referencing again the 1987 GAO study, GAO reported USDA comments, which stated that all imported meat and meat products and live animals must fully comply with U.S. health and safety standards. Further, USDA said that, since no health and safety issues are involved, the proposed country-of-origin labeling is solely intended to act as a nontariff trade barrier.
Food producers in the United States have benefited substantially from bipartisan efforts to eliminate trade barriers to U.S. food products. It is critical to U.S. agriculture and the food industry that we continue to focus on opening new markets, not on closing our own.
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In sum, GMA opposes the proposed legislation that would mandate country-of-origin labeling for meat and produce. We appreciate the opportunity to submit our comments for the record.
Statement of the National Meat Association
National Meat Association, headquartered in Oakland, CA, represents meat packers and processors, distributors and further handlers of meat and meat products throughout the United States. These firms include slaughterers, firms that manufacture all types of meat products including ground beef, steaks, roasts, and a huge variety of ready-to-eat products. These products are sold through a variety of outlets to reach the ultimate consumer in restaurants, fast food eateries, retail stores and supermarkets, club stores, and a broad variety of institutions.
We're pleased to present you with information today about the complex nature of our members' business operations, and to inform you that the desire of some producers to label every meat product with the country-of-origin of the ingredients it contains would, quite frankly, be an overwhelming requirement that could cause smaller firms in the industry, that are already operating on extraordinarily tight margins, to close. Thus, the advocates of such country-of-origin labeling would most likely realize the unintended consequence of concentrating the industry even more.
Country-of-origin labeling would be particularly costly for NMA members who blend and grind lean imported meat with fatty trimmings from domestic packing houses to make America's most popular food, the hamburger. Without these imports of lean beef, the trimmings from home grown cattle would be of lesser value. Because lean ground beef can come from several different countries and be used in varying proportions, the labeling of ground beef blended from domestic and imported sources would be both complex and cumbersome, creating a substantial expense which would ultimately be borne by consumers paying more for ground beef and domestic producers receiving less for fatty trimmings. Even if a generic label were allowed, for example ''ground beef, contains lean imported beef and fatty domestic trimmings,'' this would be unlikely to benefit either foreign or domestic cattle producers.
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Country-of-origin labeling is available now for producers who are willing to control their quality and make strategic alliances to brand their products. A recent issue of Forbes magazine describes two substantial U.S. packers who are developing strong niche markets for their branded beef products. In each case maintaining the consistent quality which is necessary to support branded meat products requires a close alliance between the packer and the producer. Branded meat products cannot rely on ingredients of unknown origin which are purchased on a commodity basis.
The proponents of country-of-origin labeling need to consider the potential unintended consequences. Just as Japanese automobiles are now preferred by many U.S. consumers, country-of-origin labeling would give consumers the ability to choose meat from the U.S. or from Canada, Australia or Argentina, among others. Significant numbers of consumers who already prefer imported cars and wine could well develop a preference for imported meat.
Another likely, but unintended consequence of U.S. country-of-origin labeling would be other countries imposing similar labeling requirements on U.S. meat. The worldwide spread of country-of-origin requirements for meat could have a severe impact on U.S. exports, such as organ meats, which are used as sausage ingredients in foreign countries.
U.S. meat competes strongly and successfully in free and open markets. The U.S. should continue its excellent progress in opening world markets for U.S. meat. Adopting country-of- origin labeling in the United States would signal foreign nations that they can move away from their commitments to open markets for U.S. meat and even begin to close off markets that have been significantly opened.
America became a great country because entrepreneurial people developed successful business enterprises that have the ability to compete freely in the marketplace. We urge you not to distort food safety laws with protectionist provisions.
Thank you for your time and attention.
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Statement of Thomas Zaucha
Mr. Chairman and members of the subcommittee, my name is Thomas K. Zaucha and I am president and chief executive officer of the National Grocers Association (N.G.A.). The National Grocers Association is the national trade association representing retail and wholesale grocers that comprise the independently owned and operated sector of the food distribution industry. This industry segment accounts for nearly half of all food store sales in the United States—more than $200 billion.
Summary of Position. N.G.A.'s retail and wholesale grocers place the highest priority on providing consumers safe and healthy food at reasonable prices. Government studies have shown that country-of-origin labeling proposals are costly for consumers, burdensome on the food industry, unenforceable by Government agencies, and do not enhance food safety. On behalf of the nation's independent retail grocers and wholesalers, N.G.A. strongly opposes proposals to mandate country-of-origin labeling on meat, meat food products, and perishable agricultural commodities. It is wrong for some producers to use the guise of Government regulation to promote the misconception that imported foods lack either the safety or quality of domestic products in order to gain marketplace advantage. Voluntary, cooperative merchandising programs by the industry segments that feature agricultural product lines like pork, beef and others, offer a more honest and meaningful approach in winning consumer support than costly, misleading, country-of-origin labeling mandates.
Legislative Proposals. H.R.1144 would require that all meat and meat food products, whether domestic or imported, bear a label notifying the ultimate purchaser of the country-of-origin that is the source of the meat and meat food products. To qualify as domestic meat, the animal must be born, raised for its entire life, and slaughtered and otherwise processed in the United States. Imported meat would mean any product that does not satisfy all of the defined requirements for domestic meat or livestock. Failure to bear a country-of-origin label would deem the meat product misbranded.
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H.R.1145 would require a retailer to inform consumers at the final point of sale of the country-of-origin for each perishable agricultural commodity. It is important to note that, as defined by the Perishable Agricultural Commodities Act, the retailer, under the bill, would become responsible and held accountable for all country-of-origin labeling of both fresh and frozen fruits and vegetables. To be in compliance, the retailer would have to inform consumers of the country of origin, either by means of a label, stamp, mark, placard, or other clear, visible sign on the commodity or on the package, display, holding unit, or bin containing the commodity at the point of sale to consumers. Failure to indicate the country-of-origin subjects retailers to civil penalties of $1,000 for the first day the violation occurs, and $250 for each day thereafter.
Government Studies Detail Adverse Consequences. Last week, the General Accounting Office (GAO) released its report, ''Fresh Produce: Potential Consequences of Country-of-Origin Labeling.'' This report detailed the magnitude of compliance and enforcement costs for country-of-origin labeling requirements. The Food and Drug Administration estimated that Federal monitoring alone would cost about $56 million annually and said that enforcement would be difficult. While inspectors could ensure that retailers have signs or labels in place and could review documentation, if it were available, they might not be able to determine from a visual inspection that produce in a particular bin was from the country designated on the sign or label. Such documentation is often unavailable at the retail store.
According to U.S. Department of Agriculture officials and industry representatives, mandatory country-of-origin labeling at the retail level could be viewed by other countries as a trade barrier, leading to the adoption of retaliatory measures. Country-of-origin labeling will not protect or enhance the market for domestically-grown products, because as GAO reports, A country could respond by enacting or more strictly enforcing retail labeling laws that could hinder U.S. exports.
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From a food safety perspective, country-of-origin labeling for fresh produce would be of limited benefit to food safety agencies, because it can take weeks or months for the agencies to identify an outbreak, determine the type of food involved, identify the source of food contamination, and issue a warning. GAO reported that, Between 1990 and 1998, CDC identified 98 outbreaks of foodborne illnesses linked to fresh produce. In 86 of these cases, the point of contamination was never identified. The remaining 12 cases were traced to contamination in food handling and to seed that was contaminated.'' Ten of the 12 cases of contamination were domestic and other countries were the source of two. Finally, while surveys show that consumers may believe that U.S. produce is safer than imported, officials from the U.S. Department of Agriculture, the Food and Drug Administration and the Center for Disease Control told GAO that sufficient data are not available to make this determination. Both the data and Government agencies confirm that country-of-origin labeling is not a food safety issue. If food safety is even an issue for either an imported or domestic product, the regulatory agencies should take appropriate regulatory action to control and eliminate its source.
USDA was also directed by Congress to issue a report on country-of-origin labeling for meat, but it has not yet been released. However, in 1987, a similar report was released by the General Accounting Office entitled, ''Issues Involving Country-of-Origin Labeling for Imported Meat''. The report concluded, ''Compliance with and enforcement of an extended country-of-origin labeling requirement would result in additional expenses for the food industry and the Federal Government. Increased costs would result for label approval, increased numbers of labels, and segregation of imported meat in inventory as well as during processing. In addition, a requirement that restaurant menus and/or notice changes state the country-of-origin of all meat items sold in such establishments would increase the consumers' cost of the product purchased. Enforcement costs of USDA and compliance costs to the industry could be substantial. The costs would ultimately be passed on to consumers/taxpayers, either through increased costs of food products or increased taxes.''
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''In our opinion, insufficient evidence exists that the benefits gained by extending country-of-origin labeling throughout the food chain, including menu notices or signs in those eating establishments that serve imported meat, would justify the cost of implementing, monitoring and enforcing such a requirement. Accordingly, we do not recommend a change at this time to the labeling requirements on imported meat and meat food products.''
It is important to note that the GAO study confirmed that USDA would have to expand its enforcement efforts at the retail level if country-of-origin labeling for meat was extended. USDA indicated that there are no known tests for identifying meat as to its origin; i.e., whether a piece of meat, either raw or cooked, could be tested and identified as domestic or imported. Therefore, as a result, detailed monitoring systems would have to be required in order to check that the identity of the meat's originating country was retained throughout the food chain. USDA has limited its enforcement role in reviewing activities of retail stores. Enforcement would require either adding more USDA authority and inspectors, or delegating enforcement to the already overburdened States.
Consumers Will be Forced to Pay for Increased Costs. Projected costs associated with country-of-origin labeling of meat and meat food products range from approximately $1 billion to $1.4 billion per year for producers, packers, retailers and Government agencies. For the 30,300 supermarkets and 126,000 grocery stores in the U.S., the costs would exceed $375 million. Retailers would have to maintain separate storage and cutting and grinding operations. They would have to create new package labels and display cards that would have to be constantly monitored and updated, as well as verify all documentation to support the label and signage claims.
It is anticipated that the costs for maintaining country-of-origin labeling for fresh and frozen produce would be comparable. Supermarket labor costs to comply with country-of-origin labeling for fresh produce alone are estimated at $38 million annually. Similar labor costs could be anticipated for the 126,000 grocery stores, raising the total labor costs to almost $200 million.
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The point is the food industry will be unable to absorb these increased costs and they will be passed on to the consumers in the form of higher prices. The GAO reports the consequences for consumers are negative—higher prices and/or less product choice.
Country-of-origin labeling is not the answer for those domestic agricultural producers who seek to gain some marketplace advantage. Creating trade barriers to imports will only result in retaliatory action by foreign countries against agricultural exporters that produce for both domestic and foreign consumption. To artificially increase consumer prices by imposing costly requirements on certain commodities will shift consumer preferences and demand to product lines not covered. Such action will adversely affect domestic producers. Independent retailers and their wholesalers have long been supporters of voluntary merchandising programs, featuring dairy, meat, produce, or other commodities as a means of informing and attracting consumers. Many retailers in recent years have featured ''locally grown'' or ''home State'' farm products to be supportive of producers. It is this type of voluntary joint industry cooperation that is a far better answer than costly Government labeling mandates.
Statement of The National Food Processors Association
The National Food Processors Association (NFPA) is pleased to provide testimony to the House Subcommittee on Livestock and Horticulture on the issue of country of origin labeling on meat and produce.
NFPA is the voice of the $430 billion food processing industry on scientific and public policy issues involving food safety, nutrition, technical and regulatory matters and consumer affairs. NFPA's three laboratory centers, its scientists and professional staff represent food industry interests on government and regulatory affairs and provide research, technical services, education, communications and crisis management support for the association's U.S. and international members, who produce processed and packaged foods, drinks and juices.
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NFPA supports efforts to enable marketers of food products to establish voluntary promotion programs aimed at informing consumers of the benefits of their particular food products. Food processors and distributors should be free to make truthful, non-misleading voluntary statements on food product labels that advise consumers about the nature, benefits, origin, or improvements of such products. In general, companies and retailers are in the best position to decide what information may be useful or of interest to their customers, in the light of all relevant marketing considerations, in much the same way that companies decide whether to make health or nutrient content claims for their products. NFPA believes, however, absent identified health and safety concerns, companies should not be required to disclose such information on their food products.
NFPA is aware of legislation recently introduced in the Congress to require new costly and burdensome labeling or disclosure requirements on certain food products which have been imported, or which contain imported ingredients. These proposals would impose new country of origin marking requirements that convey no unique health or safety information to consumers, but would appear to be intended solely to help insulate domestic producers from the competition of imported products. Of great concern is that such labeling requirements may lead to unnecessary and unfounded consumer apprehension about the safety of food products containing ingredients imported from certain countries around the world.
Although the food products processed and distributed by NFPA members are largely derived from ingredients produced in the United States, a number of members import ingredients from other countries for incorporation into products that are formulated and processed in the United States. In addition many NFPA members distribute products processed in the United States worldwide, and accordingly they have a very substantial interest in the maintenance of rules of origin and marking that will not interfere unnecessarily with the free flow of food products in the world market.
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IMPLICATIONS OF NEW COUNTRY OF ORIGIN LABELING REQUIREMENTS
Country of origin labeling provides no unique food safety information to consumers. Evidence does not exist that imported products pose a greater public health risk than domestic foods. Expanded country of origin labeling requirements would fail to convey any unique health or safety information and would only serve to confuse the consumer about the quality or safety of food products. Existing Federal law already subjects imported meat and food products to inspections at U.S. ports of entry. Countries exporting meat to the U.S. have been determined by the U.S. Department of Agriculture to have regulatory systems that provide a level of food safety equivalent to the U.S. system. Also, processed food products containing meat products from either foreign or domestic sources are expected to conform to the same processing standards and good manufacturing practices to ensure the food is safe.
The U.S. food supply is one of the safest in the world. Consumers look to food companies to produce safe and high quality products whether derived from domestic or imported ingredients. In the U.S., there are a variety of regulations and guidelines that foods and food manufacturers must meet. These requirements, coupled with a food industry that is committed to providing foods that are safe to consume, help ensure that the U.S. maintains a food supply in which we can continue to have confidence. New labeling requirements will do nothing to increase consumer confidence or improve the safety of the U.S. food supply.
Consumers would bear the cost of new labeling requirements. The cost associated with segregating products containing domestic and foreign ingredients must be considered. Processors will be forced to maintain an inventory of labels reflecting all possible combinations of countries from which imported products have originated -a costly undertaking that would eventually be passed on to the consumer. While country of origin labeling is intended to ''protect'' many domestic producers from foreign competition, increased retail costs will simply reduce consumer demand.
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The proposed requirements are inconsistent with the concept of substantial transformation. The World Trade Organization (WTO) is currently engaged in an effort to harmonize international rules of origin. The outcome is expected to apply the substantial transformation test to confer origin. Newly proposed country of origin legislation would inappropriately mandate retaining markings of original nationality even when the product has undergone substantial processing in the U.S. Food processing such as canning, freezing, drying, etc., transforms a food ingredient substantially by changing it from a perishable commodity to a finished, shelf-stable, consumer product. Any new requirements for country of origin markings would override the common and prevailing concept of substantial transformation and fail to recognize the value added through processing technology. For example, soup, which combines several different foods some or all of which may be imported—becomes a U.S. product when processed, with a new name and a new identity.
Producers would be subjected to ''traceback'' to verify compliance. Failure to accurately identify imported ingredients in processed food products or raw meat retail sales will render the products misbranded, and trigger criminal prosecution under the Federal Meat Inspection Act. In order for retailers and processors to verify the origin of products, a certification or verification system would have to be established through the production chain to enable ''traceback'' to the source.
Mandatory labeling requirements that promote specific geographical locations are inconsistent with U.S. obligations under the WTO. As a member of the WTO, the United States has committed to the Agreement on Technical Barriers to Trade (TBT). Under the TBT Agreement, ''members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.'' They must not be more restrictive than necessary to fulfill legitimate objectives which are defined as: ''national security, the prevention of deceptive practices or protection of human health and safety.'' NFPA has opposed similar requirements from other nations, identifying them as TBTs and disruptive to trade.
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Country of origin labeling requirements for the purpose of promoting domestic product would violate national treatment rules. The WTO Agreement requires equitable national treatment. Rules ''should not be applied to imported or domestic products so as to afford protection to domestic production.'' These marking requirements, strongly supported by the U.S. producer groups, are intended to protect a specific U.S. industry segment from foreign competition.
New country of origin labeling requirements will be viewed as protectionist and invite retaliation. These requirements are clearly a non-tariff trade barrier. They invite retaliation from our trading partners who are likely to demand reciprocal labeling on foods imported from the U.S. or call for WTO dispute settlement action. The U.S. has been a leader in seeking to eliminate trade barriers and should not, now, be perceived as reverting to protectionist policies.
NFPA appreciates the opportunity to submit testimony on this important issue. We are very interested in the deliberations and the conclusions of the subcommittee and we offer our assistance to you anytime during the process.
National Federal Lands Conference
April 23, 1999
MATT MILLER
U.S. Representative Helen Chenoweth
Washington, DC 20515
DEAR MATT:
My sincerest apologies for not being able to be in Washington, DC as planned, to testify before the House Agriculture Committee on H.R. 144, [the] Country of Origin bill.
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The decision of the Agriculture Committee to reschedule the hearings for this bill from May to April 28, on such short notice makes it impossible for our organization to reschedule plane flights, especially at much higher plane fares. This meeting is too important for such a decision, and in my opinion, shows very poor judgement.
I was prepared to testify in support of H.R. 1144, as a rancher who is affected by the influx of imported produce and meat products that is unregulated, as well, as president of the National Federal Lands Conference, an organization which represents many ranchers, farmers, and other producers of fruits, vegetables, nuts, and grains.
This rescheduling to exclude people like myself, who would testify in favor of H.R. 144 is an outrageous disgrace.
Please include this written testimony in favor of H.R. 1144 in the hearing testimony materials.
Sincerely,
BERT N. SMITH
PRESIDENT
"The Official Committee record contains additional material here."