“Pardon me, do you have any real Dijon?”
Rather than a romantic gaze, that question is eliciting howls of pain from French mustard lovers in the United States ever since the U.S. imposed punitive tariffs on imports from Europe of numerous specialty food products.
These trade sanctions were authorized by the World Trade Organization when it ruled that European restrictions on imports of hormone-treated U.S. beef ran counter to international trade agreements.
This whole case is a tempest in a teapot for the average American. Few spend much of their household budget directly on fancy European foods. And only farmers care much about whether meat from hormone-implanted cattle should be allowed into Europe.
But there’s a powerful truism here for the U.S. beef industry, or any exporter for that matter. Winning a legal battle over some trade rule does not mean that a country, company or economic sector such as the beef industry is going to “win” the broader war of success in international trade.
U.S. beef producers have demonstrated their legal right to ship meat to Europe even when it comes from cattle that have been implanted with synthetic hormones. But they have yet to convince European consumers that such meat is healthy. That’s why beef producers would be well-advised to consider the old adage that’s the core of successful retailing—”the customer is always right.”
Much of the resistance to U.S beef imports was simply old-style protectionism by European Union governments. But Europeans’ concern about food safety is also a real issue.
Numerous human deaths resulting from eating meat from cattle infected with “mad cow disease” together with more recent contamination of hog feed in Belgium have made food safety a front-page issue across Europe.
It’is clear that many, if not most, European households prefer meat produced without growth hormones.
So why won’t companies listen? The U.S. auto industry is a vivid case study.
For years, Detroit has bellyached about Japanese barrier to the importation of U.S. cars. But U.S. automakers paid little attention to producing cars that met Japanese needs in terms of size and fuel economy. They were generally unwilling to even design right-hand drive models to conform to Japan’s left-hand lane driving style.
When asked about this some years ago, then General Motors president Robert Stempel blustered and said offering only left-hand drive models didn’t have anything to do with his firm’s poor sales showing in Japan. That sort of attitude illustrates why the U.S. auto industry lost so much market share around the world in the past four decades.
If the U.S. beef industry wants to make money selling meat to Europe, they should give customers what they want. If they want hormone-free beef, then produce such beef for them.
As economists have illustrated, agriculture is trending away from undifferentiated commodity products toward identifiable, branded products produced for specific markets. In today’s financially stressed agriculture, the opportunity for a farmer cooperative, for example, to specialize in non-hormone-implanted beef for European and domestic markets seems a golden one.
There is a more general lesson in all of this that goes back to Adam Smith.
In The Wealth of Nations, Smith pointed out that butchers and bakers do not try to offer consumer-pleasing products out of some concern for the well-being of their customers. They do so because that’s the way for them to be successful in business and earn money for their own families’ well-being.
As more and more firms become involved in international business, they need to realize that success stems from pleasing potential customers, not from standing on one’s rights to sell a particular product whether that product is highly desired or not.
Remember, the customer is always right.
© 1999 Edward Lotterman
Chanarambie Consulting, Inc.