Mandatory national origin labels

Bryan Caplan asks:

Is anyone willing to often even a semi-plausible economic argument in defense of mandatory national origin labels?

I oppose the policy, but the obvious argument in favor is that the practice can partially cartelize consumers and oppose market power.  The label, if it discourages some customers at the margin, could induce lower prices and higher quantity (and quality) from the foreign firms with market power.  

In opposition, I would note that many of these markets (e.g., textiles) are quite competitive or that sometimes labels will boost the market power of the producers who are not discriminated against.  Or if the label means some customers won't buy the foreign product no matter what, it could be the inelastic customers are left in the market and prices go up.  Ethically speaking, the whole idea rubs me the wrong way, as it does Bryan.

Without any law, the "desired" countries and regions of origin will add a label voluntarily, and consumers will make inferences against non-labeled products, thus offering most of the benefits a coercive policy might bring.


Comments for this post are closed