Monday, December 7, 2015

Tariff ruling may force U.S. to repeal COOL

Canadian farmers are hoping that the United States politicians will finally agree to scrap County of Origin Labelling (COOL) legislation now that the U.S. faces potential tariffs totalling more than $1 billion US.

The World Trade Organization has ruled that Canada may impose up to $750 million US ($1.055 billion Cdn) and Mexico $228 million against products from the United States because its COOL system breaks world trade rules.

Canada had argued for tariffs totaling $3.068 billion and the Mexico for $703 million.

Farmers in both countries saw prices for cattle and hogs depressed because U.S. packers didn’t want to buy their livestock except at heavily discounted prices to cover their additional costs to meet COOL regulations.

They had to keep the imported livestock and meat segregated so they could apply accurate labeling.
Because farmers couldn’t export at full price, their domestic packers also dropped the prices they were willing to pay farmers.

John Masswohl spoke for the Canadian Cattlemen’s Association, saying  the amount is big enough to get U.S. legislators’ attention and “what we want is for the U.S. Senate to be motivated to repeal COOL.”

Canada’s trade minister, Chrystia Freeland, and Agriculture Minister Lawrence MacAuley said Canada will retaliate if the U.S. Senate fails to take “immediate action".

The U.S. House of Representatives in June passed a bill to repeal COOL, but the Senate has not yet voted on it.

“We are disappointed with this decision and its potential impact on trade among vital North American partners,” said Tim Reif, general counsel for the Office of the U.S. Trade Representative.

“We will continue to consult with members of Congress as they consider options to replace the current COOL law and additional next steps.”

COOL has been costly for the U.S. farm sector, said the North American Meat Institute, which represents meatpackers. Chicago live cattle contracts fell by their daily price limit following the WTO’s announcement.

But R-CALF, a group of U.S. cattle producers, said the “absurd” decision overstated the damage.
The Harper government issued a list of U.S. products it intended to hit with tariffs over the COOL issue, but the Liberals have yet to say which ones they might pick.

Usually countries pick products that will get the attention of the politicians who can make the decisions they want, in this case a complete end to COOL.

This is the second time Canada has won on the COOL issue. The previous time, the U.S. amended its regulations, but Canada and Mexico successfully argued that the amendments were not enough and, Canada argued, made matters even worse.
This whole lengthy episode is an example of why the world trade system does not work. It took Canada's cattle and hog farmers far too long to get justice and it cost them millions in legal and consulting fees.

And while they were waiting for justice, their prices were depressed and they suffered a severe and long-lasting loss of competitive advantages they ought to enjoy while the Americans farmers forged ahead.