Partial Implementation of COOL: Economic Effects in the U.S. Seafood Industry

Mandatory Country of Origin Labeling (MCOOL) was implemented on seafood in the United States on April 4, 2005. MCOOL exempts the foodservice sector and excludes processed seafood from labeling. This paper contributes to understanding the economics of the MCOOL law for seafood by showing that current partial implementation may have unintended consequences on the domestic supply chain. While labeling satisfies the market demand for information provision in one market, exemptions in the other market may create incentives for the diversion of imports, which are assumed to be lower in quality than domestic seafood, to the non-labeled sector. Analyzing alternate scenarios such as voluntary labeling shows that total welfare may be greatest under this scenario compared with partial MCOOL. Voluntary origin labeling of seafood by some U.S. retailers indicates there is no compelling market failure argument warranting partial MCOOL implementation. This work is therefore a step towards analyzing the effect of partial MCOOL policy in the seafood industry taking into consideration the nature of the industry.