Ag Policy Blog

Here's a novel element I doubt will be raised today as the House Agriculture Committee moves to repeal country of origin labeling:

We're letting roughly 7.6% of the U.S. beef slaughter dictate the labeling to the 92.4% of cattle born, raised and slaughtered in the U.S. About 4% of cattle slaughtered in the U.S. come from Canada and about 3.6% come from Mexico. In total, the U.S. imports about 2.3 million cattle annually, virtually all of which come from those two countries. The annual cattle slaughter is roughly 30 million head a year. In other words, more than 92% of cattle slaughtered in the U.S. are "Born, Raised and Slaughtered in the U.S."

http://www.ers.usda.gov/…

http://usda.mannlib.cornell.edu/…

The U.S. imports about 5 million feeder pigs, virtually all from Canada. The country's hog slaughter in 2014 was just under 103 million hogs. So 4.7% of the hog slaughter had "Born in Canada, Raised and Slaughtered in the U.S." The other 95.3% of the hog slaughter was "Born, Raised and Slaughtered in the U.S."

Remember, this issue was not about imported meat we might get from Canada, Mexico, Uruguay, Brazil, Argentina or Australia, but Canada and Mexico alleged discrimination of the treatment of imported live animals, according to Canada and Mexico. USDA could have solved that problem with a GIPSA case against the packers for discriminating against that livestock, but for some reason USDA refused to push that issue, probably because GIPSA has few teeth any longer to bring cases against packers.

Still, this effort to essentially wipe out any knowledge of the origin of meat is being done to placate less than 8% of the beef on the retail shelves and less than 5% of the pork.

And with that, DTN's Washington Insider looked at COOL this morning as well:

This week's ruling by the World Trade Organization that U.S. country of origin labeling (COOL) rules discriminate against Canadian cattle and hogs and Mexican cattle marked an important battle in a long-running dispute over North American meat trade. However, it does not resolve the problem posed by mandatory labels on meat specifying where livestock were born, raised and slaughtered.

What happens next is not likely to find consistency between a law designed as a trade deterrent and the obligations the United States agreed for fair and open borders throughout North America. But it may be the beginning of the end for this continental irritant which has stained the U.S. reputation for a willingness to compete. It just may take a while longer for those things to happen. And before it's over, politics and process will have to play out.

Some members of Congress want to quickly repeal COOL. For example, House Agriculture Committee Chairman Mike Conaway, R-Texas, held a news conference Tuesday promising a markup of legislation to repeal the law today. The bill has 61 co-sponsors. The committee likely will agree to a repeal bill, but there is inadequate time on the House calendar for floor consideration before Congress adjourns Friday for a one-week Memorial Day recess.

In the Senate, where the pace of action often cannot be distinguished from inaction, no such accelerated timeline for COOL appears to be likely, even though both Canada and Mexico, the plaintiffs in the WTO case, threatened to retaliate against selected U.S. imports. Conaway has alerted the Senate of this possibility and has urged the upper changer not to underestimate the potential for damage to the U.S. economy. "As retaliation by Canada and Mexico becomes a reality, it is more important now than ever to act quickly to avoid a protracted trade war with our two largest trade partners," Conaway said.

Repeal of the COOL law appears to be the preferred option, at least among Republicans and many in the agriculture sector. However, other farm and commodity groups, as well as a number of congressional Democrats, may fight moves to repeal the law. For example, House Agriculture Committee ranking member Collin Peterson, D-Minn., says he does not support COOL repeal, adding that Congress still has time to consider its options before the WTO sanctions are approved. That may be true, but what are those options?

Congress has been wrestling with COOL since the idea was first codified in the 2002 farm bill. The measure has gone through a number of iterations in the past 13 years, none of which were found to meet U.S. international trade obligations. One would think that in that period, the best minds in two administrations and Capitol Hill would have been able to draft country of origin language that would pass WTO muster, assuming that such a task was achievable.

Agriculture Secretary Tom Vilsack has warned since late 2014 that USDA was out of regulatory proposals that both met the congressional intent of COOL and complied with WTO rules, so perhaps COOL's objectives are inconsistent with the WTO's.

Markets are not providing a way out, either. USDA has reported that complying with COOL requirements would cost U.S. beef and pork producers, processors and retailers more than they likely would recoup from any additional domestic sales. USDA also found that consumers may want to know the origin of their food, but that interest doesn't mean greater domestic sales of U.S. beef and pork.

With this fourth trouncing of COOL before the WTO, several steps lie ahead that will drag the timeline out further. First, the WTO's decision must first be formally adopted, and that is not expected until the end this month, at the earliest. Canada and Mexico then will request permission for retaliation, and the United States is sure to object. The matter then would be referred to an arbitrator, who would have 60 days to deliberate.

After the arbitrator issues a decision, the complaining countries then could request formal authorization from the WTO's Dispute Settlement Body (DSB) to retaliate. If the DSB grants such authorization, Canada and Mexico would be cleared to impose retaliatory measures, which have been estimated at $2 billion annually, subject to WTO approval.

True believers in competitive markets might see the COOL saga as a failed effort to give the U.S. livestock industry a competitive advantage over cattle and hog producers in Canada and Mexico. Even supporters of COOL would concede that it hasn't turned out as they hoped.

Washington Insider believes it is time to cool the rhetoric as soon as we can and end the defense of a measure that is proving indefensible.

Follow me on Twitter @ChrisClaytonDTN.

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