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Extending CoOL: A benefit cost analysis

Feasibility report

This report by the Centre for International Economics examines the feasibility of a proposed extension of the current food standard concerning CoOL (gazetted in December 2005) that was specified in a Ministerial Direction to Food Standards Australia and New Zealand (the Ministerial Direction).

The extension would require that all countries of origin be specified for each major component of packaged food products containing two (or fewer) fruits or vegetables.

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Contents

Summary
Private costs to individuals are significant
Private benefits to individuals are marginal
Public benefits and costs
Conclusion: costs exceed benefits

1   Introduction
Background
Benefits and costs of extending CoOL
Purpose of this study
Our approach and the scope of this study

2   Scope of the proposed extension
Countries of origin of up to two components
Scope: general
Scope: specific
Main products likely to be affected in the market

3   Structure of costs: financial model
Office of Small Business Costing Tool
The Financial Model
SKU impacts
Product-specific impacts
Company-wide impacts

4   Estimates of compliance costs
Cost rise with countries sourced and ingredients used
Small firms and low volume sales items are hardest hit
The greater the number of products affected, the greater the cost
Average cost increase to food processors is 1.4 per cent

5   Economy-wide costs
Output and exports down, imports and consumer prices up
Horticultural incomes down, national welfare down
Required consumer benefit to off-set costs

6   Private and public benefits, private and public costs
Specific market observations and evidence
Public benefits
Public costs

7   Conclusion
Private costs
Private benefits
Public benefits and costs

APPENDICES

A   Manufacturing firm’s costs

B   Juicing firm’s costs

C   CIE ORANI horticulture
The ORANI model
The simulations undertaken

D   Alternative CoOL extension options
Fair Dinkum Food Campaign proposal
AusVeg proposal

References

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