Consumer Welfare of Country-of-Origin Labelling and Traceability Policies
Traceability regulations are a way to protect consumers by forcing firms to identify and track products step-by-step through all stages of production, processing, and distribution. Traceability is often used in conjunction with country-of-origin labelling where products explicitly identify where pro...
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| Format: | Article |
| Language: | English |
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MDPI AG
2021-05-01
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| Series: | Agronomy |
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| Online Access: | https://www.mdpi.com/2073-4395/11/5/916 |
| _version_ | 1797535093013610496 |
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| author | Joel Bruneau Albert I. Ugochukwu |
| author_facet | Joel Bruneau Albert I. Ugochukwu |
| author_sort | Joel Bruneau |
| collection | DOAJ |
| description | Traceability regulations are a way to protect consumers by forcing firms to identify and track products step-by-step through all stages of production, processing, and distribution. Traceability is often used in conjunction with country-of-origin labelling where products explicitly identify where production takes place. However, such country-of-origin regulations can conflict with WTO provisions. This paper analyzes the impact on consumer welfare of traceability and country-of-origin in an international trading regime to assess whether such regulations actually improve consumer welfare. The paper constructs a theoretical model that highlights the potential market failure that arises from traceability. The paper then introduces a simple international trade regime to identify impacts on consumer surplus. The paper compares outcomes with, and without, traceability and country-of-origin regulations. Given the inherent free-rider problem, the paper shows that, as long as costs associated with traceability are low enough, mandatory regulations are welfare improving. Free trade, in the absence of foreign traceability, can lower consumer welfare so provides a rationale for country-of-origin rules. However, mandatory country-of-origin rules need not be welfare enhancing. We show that country-of-origin rules are similar to import barriers and so are third-best solutions. The better solution is international adoption and recognition of traceability rules which would make country-of-origin rules moot. |
| first_indexed | 2024-03-10T11:39:25Z |
| format | Article |
| id | doaj.art-9adb2616ec26451181f91ff2f4719c98 |
| institution | Directory Open Access Journal |
| issn | 2073-4395 |
| language | English |
| last_indexed | 2024-03-10T11:39:25Z |
| publishDate | 2021-05-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Agronomy |
| spelling | doaj.art-9adb2616ec26451181f91ff2f4719c982023-11-21T18:37:31ZengMDPI AGAgronomy2073-43952021-05-0111591610.3390/agronomy11050916Consumer Welfare of Country-of-Origin Labelling and Traceability PoliciesJoel Bruneau0Albert I. Ugochukwu1Department of Economics, University of Saskatchewan, 9 Campus Drive, Saskatoon, SK S7N 5A5, CanadaCentre for the Study of Science and Innovation Policy, Johnson-Shoyama Graduate School of Public Policy, University of Saskatchewan, 101 Diefenbaker Place, Saskatoon, SK S7N 5B8, CanadaTraceability regulations are a way to protect consumers by forcing firms to identify and track products step-by-step through all stages of production, processing, and distribution. Traceability is often used in conjunction with country-of-origin labelling where products explicitly identify where production takes place. However, such country-of-origin regulations can conflict with WTO provisions. This paper analyzes the impact on consumer welfare of traceability and country-of-origin in an international trading regime to assess whether such regulations actually improve consumer welfare. The paper constructs a theoretical model that highlights the potential market failure that arises from traceability. The paper then introduces a simple international trade regime to identify impacts on consumer surplus. The paper compares outcomes with, and without, traceability and country-of-origin regulations. Given the inherent free-rider problem, the paper shows that, as long as costs associated with traceability are low enough, mandatory regulations are welfare improving. Free trade, in the absence of foreign traceability, can lower consumer welfare so provides a rationale for country-of-origin rules. However, mandatory country-of-origin rules need not be welfare enhancing. We show that country-of-origin rules are similar to import barriers and so are third-best solutions. The better solution is international adoption and recognition of traceability rules which would make country-of-origin rules moot.https://www.mdpi.com/2073-4395/11/5/916traceabilitycountry-of-origin labellinginternational tradeconsumer surplusmarket failure |
| spellingShingle | Joel Bruneau Albert I. Ugochukwu Consumer Welfare of Country-of-Origin Labelling and Traceability Policies Agronomy traceability country-of-origin labelling international trade consumer surplus market failure |
| title | Consumer Welfare of Country-of-Origin Labelling and Traceability Policies |
| title_full | Consumer Welfare of Country-of-Origin Labelling and Traceability Policies |
| title_fullStr | Consumer Welfare of Country-of-Origin Labelling and Traceability Policies |
| title_full_unstemmed | Consumer Welfare of Country-of-Origin Labelling and Traceability Policies |
| title_short | Consumer Welfare of Country-of-Origin Labelling and Traceability Policies |
| title_sort | consumer welfare of country of origin labelling and traceability policies |
| topic | traceability country-of-origin labelling international trade consumer surplus market failure |
| url | https://www.mdpi.com/2073-4395/11/5/916 |
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