WTO AUTHORIZES $1 BILLION IN RETALIATION FOR COOL, AG INTERESTS REACT
Dec. 8, 2015
U.S. lawmakers and ag industry stakeholders were quick to respond today after the World Trade Organization authorized $1.01 billion in retaliation for damages resulting from the U.S. country-of-origin labeling law, and Canada pledged to quickly impose tariffs on U.S. exports.
The decision set annual retaliatory authorization at $781 million from Canada and $227 million from Mexico. The ruling cannot be appealed, and retaliatory tariffs on U.S. exported products could be in place as early as late next week.
This ruling is the final step of a trade dispute several years in the making over the U.S. COOL law mandating disclosure of born, raised, and slaughtered information on meat labels. That law was challenged by Canada and Mexico, who ultimately persuaded the WTO that the legislation accorded unfavorable treatment to Canadian and Mexican livestock because, among other things, it required segregation of live animals.
In a joint statement early Monday afternoon, Canadian trade minister Chrystia Freeland and agriculture minister Lawrence MacAulay said their government "has made every effort to convince the United States to comply with its international trade obligations," but if COOL is not repealed, "Canada will quickly take steps to retaliate."
The Canadian Cattlemen's Association, Canadian Pork Council, National Cattle Feeders' Association and Canadian Meat Council reiterated their position that there is no acceptable action short of full repeal.
"Our patience is exhausted," the groups said in a statement. "There is no further negotiation to be done and no compromise is acceptable. Canadian livestock producers and meat processors expect the U.S. to do nothing less than repeal COOL or face the immediate imposition of retaliatory tariffs on U.S. goods to the same extent as the damage we have endured."
Canada has issued a draft list of U.S. exports that may face retaliatory tariffs. Items range from, but are not limited to, live animals and meat products to chocolate, pasta, and wine. Canadian officials under the previous administration indicated the products facing tariffs would change to target different members of Congress, and the new administration elected in October has indicated they would "follow through with an aggressive response" to the dispute.
The authorized retaliatory amount is more than 10 times what the U.S. Trade Representative's Office had proposed as an appropriate level, about $90 million. Tim Reif, the USTR's general counsel, said retaliation will not only harm the U.S., but Canada and Mexico as well.
"We are disappointed with this decision and its potential impact on trade among vital North American partners," Reif said. "We will continue to consult with members of Congress as they consider options to replace the current COOL law and additional next steps. In the meantime, if Canada and Mexico take steps to raise import duties on U.S. exports, it will only harm the economies of all three trading partners."
The House voted in June to repeal the law, but the Senate has yet to act. In a statement Monday morning, Senate Agriculture Committee Chairman Pat Roberts, R-Kansas, said he will "continue to look for all legislative opportunities to repeal COOL."
"How much longer are we going to keep pretending retaliation isn't happening? Does it happen when a cattle rancher, or even a furniture maker, is forced out of business? We must prevent retaliation, and we must do it now before these sanctions take effect," Roberts said. "The WTO has warned us multiple times, and Congress has ignored the warning. This is no longer a warning. Retaliation is real. Now more than ever, we need to repeal COOL."
Prior to the WTO announcement, lawmakers told Agri-Pulse that repeal was a possible outcome, depending on the size of the retaliatory figure. Sen. Joni Ernst, R-Iowa, today said the ruling "sends a clear message that it is time to repeal this policy," and many other Senate Republicans share similar sentiments, hoping to avoid economic retaliation while the matter is under GOP leadership.
In July, Sen. Debbie Stabenow of Michigan, the ag committee's top Democrat, introduced (along with North Dakota Republican John Hoeven) a bill that would create a voluntary COOL program, but Canada and Mexico expressed opposition to that plan, and instead pushed for full repeal. In a statement today, Stabenow said it is "disappointing that this common-sense compromise was blocked in the Senate. However, I have always said I would not allow retaliation to take effect. It is critical that we work together to find a solution before the end of the year."
Sen. Heidi Heitkamp, D-N.D., was a cosponsor on Hoeven and Stabenow's bill, and she said the ruling "signals that we need a compromise - one that maintains country of origin labels, while still complying with trade obligations." She added that she will "keep pushing for a voluntary solution."
U.S. agriculture and meat groups, for the most part, also called for repeal.
National Cattlemen's Beef Association President Philip Ellis said tariffs could prove costly to U.S. beef producers, potentially resulting in immediate losses of 10 cents per pound.
"The COOL rule has been a failure on all accounts. It has cost our livestock industry billions in implementation; it has violated our trade agreements with two of our largest export markets; it has resulted in the closure of several U.S. feedlots and packing facilities and it has had no effect on the price or demand for U.S. beef," Ellis said. NCBA wants the Senate to repeal COOL "before retaliation damages the entire U.S. economy and irreparably harms our strongest trading relationships," he said.
National Pork Producers Council President Ron Prestage said Congress needs "to recognize the imminent harm our economy faces" and "repeal the labeling provision for beef, pork and poultry now."
Barry Carpenter, president and CEO of the North American Meat Institute, said the ruling was "another well-deserved lump of coal" for the U.S. this holiday season. He called mandatory COOL "one of the most costly and cumbersome rules ever imposed on the agricultural sector.
"As the Canadian and Mexican governments prepare to impose these tariffs we are reminded of the sage prophet, Pogo, who said, 'We have met the enemy and he is us.'" Carpenter said, referring to a character in popular comic strip from the 1950s and 60s. "The only way to remove this lump of coal in the United States' Christmas stocking is swift repeal of mandatory COOL."
American Farm Bureau Federation President Bob Stallman also called on the Senate to repeal the provision. He said his organization supports a COOL law "that meets WTO requirements... but the risk of retaliation by Canada and Mexico is too great. U.S. farmers and ranchers could suffer a serious blow if Congress does not act quickly."
Business interests outside of agriculture have also been paying close attention to the COOL saga since the retaliatory tariffs are not confined to agricultural products. Linda Dempsey, National Association of Manufacturers vice president of international economic affairs, said repeal "is the only solution remaining that will protect U.S. manufacturing jobs."
"At a time of global economic weakness and fierce competition, manufacturers need policies that ensure a level playing field and enhance global opportunities, not ones that create new barriers for our exports," she said.
After the ruling was announced, the U.S. Chamber of Commerce sent a letter to all members of Congress encouraging them to include COOL repeal language in the upcoming omnibus appropriations bill. In the letter, Bruce Josten, the Chamber's executive vice president for government affairs, said retaliation is "intolerable even in the short term. Once retaliation is applied, it could take years for American farmers, ranchers, and companies to recover lost market share."
Randy Gordon, president of the National Grain and Feed Association, stressed the larger trade implications of U.S. non-compliance with trade law.
"It is important that the United States adhere to its WTO obligations and set an example for the rest of the world, particularly as it pursues significant new trade accords under the Trans-Pacific Partnership and other initiatives," Gordon said, calling repeal "the only policy option available" to prevent sanctions.
John Linder, chair of the National Corn Growers Association's Trade and Biotechnology Action Team, also urged Congress to "bring the U.S. into compliance," saying lawmakers "must act to fix COOL now."
A statement from Roger Johnson, president of National Farmers Union, a strong supporter of COOL, criticized the WTO process, calling the ruling "yet another symptom of the inefficiencies and ineffectiveness of the WTO."
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"Time and again the WTO process has undermined U.S. sovereignty and the right of American consumers to know the origin of their food," said Johnson. "The WTO rules without precedent and continues to undermine laws and regulations that benefit society. The U.S. tried to ensure COOL regulations were in compliance, but received insufficient guidance and consequently could be on the hook for exaggerated damages."
Danni Beer, president of the U.S. Cattlemen's Association, said the ruling could be a starting point for a discussion on a voluntary COOL label.
"The ability to keep COOL and an accurate 'U.S. Beef' label is still a realistic option and producers across the country must now stand strong in support of the Hoeven-Stabenow voluntary COOL approach," Beer said in a statement.
Under WTO rules, the countries imposing retaliatory tariffs - in this case, Canada and Mexico - must wait at least 10 business days after the authorized retaliatory amounts are released before taking action. With that in mind, the earliest retaliation could be imposed is Dec. 18, the same day Congress is currently scheduled to adjourn for 2015. Any action on COOL, be it full repeal or directing USDA to redefine the problematic "product of the U.S." wording implicated in this dispute, will likely be attached to a broader bill rather than in a standalone measure.