Ideasroom

What fake honey and trade wars have in common

Country-of-origin labelling is a hot topic in New Zealand and elsewhere.

Data suggests a large majority of New Zealanders would like to know where their food comes from. In line with this, Parliament is currently considering new legislation – the Consumers’ Right to Know (Country of Origin of Food) Bill. Under this Bill, mandatory country-of-origin labelling would be required with respect to some food products.

While consumer organisations support such labelling, arguing for a consumer’s ‘right to know’, many producers firmly object. Interestingly, a new country-of-origin food labelling system came into force in Australia in July.

Labels on products can provide consumers with valuable information. If devised correctly, they may have a significant impact on consumers’ purchasing decisions. However, they can also backfire and generate unintended consequences, and they can be costly, confusing or even unfairly exploited by dishonest sellers.

There is more to country-of-origin labelling than originally meets the eye.

A variety of producers opt to employ it – for instance, the ‘Buy New Zealand Made’ campaign lets businesses that meet the relevant requirements employ the iconic ‘New Zealand Made’ trademark with the red Kiwi in a blue triangle. From a firm’s perspective, this can be an important marketing tool.

Country-of-origin can serve as a signal of quality. New Zealand honey, Swiss watches and Belgian chocolate are examples of this. But country-of-origin can also relate to consumers’ ideology or identity. Consumers can use such labelling as a means to choose products that promote fair trade or minimise the harm to the environment. For example, ‘New Zealand’ may evoke a ‘clean and green’ image. Country-of-origin labelling can also help consumers avoid buying goods from specific countries – those that exploit other countries, have poor social standards, abuse human rights or harm the planet.

Country-of-origin can play an important role when countries experience a political conflict or trade war. Consumers may wish to refrain from buying products from rival countries. Furthermore, as we have seen in the context of the US-China trade war, governments can raise tariffs on imported goods as a means to further harm their rival countries.

Labelling can help consumers capture valuable, memorable experiences, as is often the case with tourism-related consumption. For instance, tourists who visit New Zealand may buy New Zealand-made products, such as Mānuka honey, alpaca rugs and duvets. They may do so, at least in part, to acquire a souvenir that will remind them of their travel and as a way to cherish their memories.

Lastly, country-of-origin can prove important in managing scandals. Consider, for example, the recent crisis regarding needles in Australian strawberries. A New Zealand producer may wish to make it clear their strawberries are New Zealand-grown and packed. This will hopefully allow the New Zealand producer to distinguish their products and avoid the negative impact of such a crisis.

Country-of-origin labelling has a lot of positive potential. Consequently, unscrupulous firms may be tempted to exploit it in an unfair or misleading way. Unfortunately, a recent string of New Zealand legal cases illustrates this.

In one case, footwear labelled ‘UGG New Zealand’ and ‘New Zealand owned and operated’ turned out to be made in China and predominantly from Australian sheepskin. In another series of cases, traders sold – mainly to tourists – ‘New Zealand made’ alpaca rugs and duvets that were actually from Peru. In the context of food, goats’ milk tablets and milk powder sourced from Spain and the Netherlands were labelled ‘100% New Zealand made and proud of it’. In yet another case, NatureBee Potentiated Bee Pollen made in China was mislabelled using the ‘New Zealand Made’ trade mark.

So where to from here?

The law should develop a more nuanced understanding of country-of-origin statements, which impact consumers, producers, markets and international trade in a variety of ways. The discussion around the Consumers’ Right to Know Bill can provide an opportunity for policy-makers to revisit the issue more generally, gradually going beyond food labelling. At the same time, the Commerce Commission and the courts should prioritise enforcement, greater deterrence and novel tools that will better address the misuse of country-of-origin labelling.

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