COOL meat-labeling battle may trigger a red-hot trade war

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Aug. 27, 2014 - USDA's country of origin meat labeling mandate (COOL) “violates our international trade obligations and discriminates against two of our largest trading partners, Canada and Mexico. . . . We don't believe there is any regulatory fix that will bring the U.S. COOL rule into compliance with our international trade obligations.”

That's according to National Cattlemen's Beef Association (NCBA) President Bob McCan, a rancher from Victoria, Texas. McCan tells Agri-Pulse that COOL provides “no benefit to our member producers, no benefit for consumers, and has only served to strain our relationship with two of our largest trading partners.”


Bob McCan, National Cattlemen's Beef Association
The World Trade Organization apparently agrees. A Wall Street Journal story last week quoted unnamed sources as saying the WTO had ruled against the U.S. in a discrimination complaint brought by Canada and Mexico. The two countries charged that the COOL policy, which requires meat labels to indicate where the animal that provided the meat was born, raised and slaughtered, was designed to protect the U.S. industry. The WTO in July delivered its ruling to the three governments involved. But they have been withholding comment until the ruling is formally announced. That is expected within the next three to six weeks.

In June, well before the ruling, ag and food industry organizations asked Congress to “authorize and direct the Secretary of Agriculture to suspend indefinitely the revised COOL rule for muscle cuts of meat upon a final adjudication of non-compliance with WTO obligations.” The 62 organizations included McCan's NCBA along with the American Beverage Association, American Frozen Food Institute, American Soybean Association, ADM, Campbell Soup, Cargill, Coca-Cola, Grocery Manufacturers Association, Hershey, Hillshire, Kraft Foods, Mars, National Association of Manufacturers, National Pork Producers Council, Nestle, Smithfield Foods, Snack Food Association, Sweetener Users Association, Tyson Foods, and the U.S. Chamber of Commerce.

Lets Talk Food

A lot is at stake. In June 2013, Canada listed 38 categories of U.S. exports that could be targeted for retaliatory tariffs, ranging from beef, pork, poultry, cheese, apples and cherries to fructose syrup, chocolate, ketchup, wine, stainless steel pipe, office furniture, and mattresses. Canada's Agriculture Minister Gerry Ritz has said that COOL is costing his country's livestock industry a billion dollars a year.

Claude Rochon, spokesperson for Canada's Department of Foreign Affairs, Trade and Development, tells Agri-Pulse that its list of retaliatory targets is designed “to make it clear, particularly for certain members in the U.S. Congress, that continued non-compliance with the U.S. trade obligations will have economic consequences for key U.S. exports beyond the meat and livestock sector. By refusing to fix COOL, the U.S. is effectively legislating its own citizens out of work by disrupting our highly-integrated North American supply chains. The specific products were selected with a view to maximizing economic and political effect in the United States while minimizing economic impact in Canada.”

Rochon promises that if and when the WTO authorizes retaliatory measures, “Canada will take action.” He said Canada would not divulge any confidential discussions that are ongoing, “but we note that at the end of the day this issue will need to be resolved by legislative change in the U.S .Congress, and to date no legislation to that effect has been introduced.”

Rochon concludes that his government “remains confident in its position and continues to stand with the Canadian livestock industry. We remain steadfast in taking whatever steps may be necessary, including retaliation, to achieve a fair resolution for hardworking Canadian farmers and ranchers. Removing onerous labeling measures and unnecessary costs will return competitiveness to our industry on both sides of the border, boost growth and help strengthen the prosperity of Canadian and U.S. producers alike.”

Such economic saber rattling by Canada and Mexico and by the U.S. food industry clearly has sparked congressional attention. In a bipartisan July 30 letter, 112 members of Congress asked  Agriculture Secretary Tom Vilsack and U.S. Trade Representative Michael Froman to “immediately rescind” the COOL labeling mandate if the WTO rules in favor of Canada and Mexico. The letter warns that “the impact of potential retaliatory actions poses a significant risk to the American economy.”

Rep. Rick Crawford, R-Ark., chairman of the House Agriculture Committee's livestock subcommittee, tells Agri-Pulse that the best next step, as called for by the 112 members of Congress representing urban as well as rural districts, is to rescind COOL: “I feel Secretary Vilsack can take that action and we can avoid a drawn-out battle by eliminating a bad rule.” He insists that “no matter how well-intentioned it might have been, COOL was not a good rule and I think that the WTO will probably bear that out and give us an opportunity to mitigate any further discord that we might have with Canada or Mexico.”

 

Roger Johnson, National Farmers Union
Not so fast, says National Farmers Union (NFU) President Roger Johnson. Rather than believe unsubstantiated reports, he's waiting for the WTO to announce its ruling. He says “There's a lot of time under the WTO calendar before anything ever happens.” If, as he expects, the U.S. appeals any adverse WTO ruling, the WTO probably wouldn't authorize retaliatory action until mid- to late-2015.

Johnson also points out that the groups opposing COOL have lost in U.S. courts three times and that NFU is “prepared to argue that there is not an economic impact.” As for the members of Congress lined up against COOL, Johnson says that “The best that they could do is to get a bunch of people to sign a letter, not to pass a piece of legislation.” He concludes that “the consumers who overwhelmingly want to know more and more about their food and support this law at about a 90 percent margin, probably don't have to get too worried.”

USDA Chief Economist Joseph Glauber also believes that any actions related to COOL are likely to be very slow moving. He says that whenever the WTO announces its COOL ruling, “the parties will have an opportunity to appeal. An appellate ruling would likely happen in early 2015. Assuming the Panel and Appellate body were to side with Mexico and Canada, an arbitration panel would follow to decide size of damage. If awarded damages, Canada and Mexico would have the right to impose duties on U.S. products. The effect of a retaliation obviously would depend on the size of the damages, if awarded, and the products targeted.”

#30

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