Professor Iain Fraser of the University of Kent considers the impact of country of origin labelling on UK farming and food production post Brexit.
There remain many unanswered questions and concerns about the implications for the food industry post Brexit. One particular issue gaining increasing attention is the call for clear labelling of food for consumers especially with respect to country to origin (COO). The UK farming and food industries recognise that labelling domestic production can provide an important marketing advantage in an extremely competitive retail environment. It is frequently claimed that UK consumers prefer meat from domestically produced animals. Recent consumer research in 2017[1] lends support to this assertion reporting that 67% of respondents would prefer to buy UK food. Also, 27% of respondents claimed they would buy more British produce even if imported food prices declined.
Calls for extending the coverage and scope of COO food labels for use by consumers post Brexit have also gained traction with policy makers. The parliamentary Food and Rural Affairs Committee in an extensive report on Brexit and food[2] explicitly discussed the possibility of extending COO food labelling. In particular, the report advocated that the UK should extend the use of mandatory COO labelling to a greater array of food types including bacon, sausages and cheese. In response the UK Government acknowledged the proposals of the committee although there is no explanation or insight offered as to how the UK would change COO labelling or any other food labels in practice.
The economic rationale for COO labels
Quite simply, the reason for identifying COO is to satisfy consumer demands for information about food. Consumers wish to know the origin of the food they are eating. However, origin is a credence attribute, that is an attribute that cannot be verified by the consumer even after the good has been experienced. Thus, the information must be provided prior to purchase so as to inform the purchase decision.
The economic argument as to whether or not COO information is supplied on a voluntary or mandatory basis should come down to costs and benefits. Available evidence is mixed when it comes to what consumers will pay (as opposed to value) for COO information. At the same time modifying food labels to include mandatory COO information is costly. Therefore, it remains unclear if the costs of providing COO information outweigh the benefits.
Of course, the balance between costs and benefits may well change as improvements in technology allow for cheaper, more rapid and reliable information to be collected and employed. Therefore, some of the technology solutions that are currently being proposed with regard to tracking food through supply chains (i.e. QR codes and blockchains) may offer possible technical as well as economic solutions.
What the pilot initiatives within the EU demonstrate is that implementation of COO labelling can quickly run into problems, especially with regard to the single market.
Pilot trials and legislation
Importantly, the call for extending COO labelling is not restricted to the UK. There are currently several pilot COO trials being implemented within the EU.
These pilots are justified on the same basis as an extension of COO in the UK – consumers want (need) to know where their food is coming from. But what the pilot initiatives within the EU demonstrate is that implementation of COO labelling can quickly run into problems, especially with regard to the single market.
Take for example the case of Italy introducing mandatory COO labelling on pasta and rice packaging. The Italian legislation called for information on the primary ingredients, which also meant that the place of cultivation of the rice and wheat needed to be given. Although this information might be welcomed by consumers, the potential ramifications for international suppliers of rice and wheat to the Italian market are negative. Serious concerns have been expressed about how the implementation of the various pilot schemes can introduce trade distorting measures within supply chains and are potentially in breach of EU single market rules.
Another important example of how COO labelling has been used in an effort to extend consumer information and choice comes from the US. In 2008, legislation was introduced requiring food processors to incur additional costs in terms of information provision about the sources of meat in products. This change in how COO information was implemented, lead to an extensive trade dispute in the WTO between the US and Canada and Mexico. The dispute was finally settled in favour of Canada and Mexico and subsequently the US withdrew the offending legislation.
What these examples demonstrate is that attempts to extend the scope of COO information to satisfy consumer demands for information can very quickly contravene international trade legislation or single market rules. Thus, these examples provide a timely reminder to the UK that even if there are demands from consumer groups to extend and potentially change COO labelling, there is a real possibility that these efforts could lead to unintended trade disputes. At the heart of this issue is the need to balance information provision for consumers without indirectly introducing trade restrictions that are in breach of international legislation.
Agricultural policy post Brexit
Finally, another important, emerging COO issue stems from how the recently proposed changes to UK agricultural policy post Brexit may impact the supply of domestically produced food stuffs. It is proposed in the recently published Agricultural Bill[3] that post Brexit farming will only receive government financial support in exchange for the production of public goods. This will mean a completely new allocation of funds to agriculture and is likely to have serious implications for the continued existence of certain UK farming sectors. This, plus changes in border tariff arrangements, may mean that food supply chains will be seriously impacted. In the post Brexit world, we will see if UK consumers are really prepared to support UK agricultural and food production.
Professor Iain Fraser
School of Economics, University of Kent
emailI.M.Fraser@kent.ac.uk
web kent.ac.uk
References
1. Benton, et al. (2017) British Food: What role should UK producers have in feeding the UK? http://www.leeds.ac.uk/download/481/british_food_makers_report
2. House of Commons (2018). Brexit: Trade in Food. Environment, Food and Rural Affairs Committee, Third Report of Session 2017–19. www.parliament.uk/efracom
3. https://publications.parliament.uk/pa/bills/cbill/2017-2019/0266/18266.pdf
