Last-minute COOL changes a burn for Canada

Up against the World Trade Organization’s Thursday deadline to bring its country-of-origin labelling (COOL) law into compliance with trade obligations, the U.S. government has chosen to make matters worse for Canadian producers, Canada warns.

The U.S. Department of Agriculture said Thursday it has published a new final COOL rule in the U.S. Federal Register, taking immediate effect but including a six-month period of “industry education and outreach” for affected U.S. meat processors.

“USDA remains confident that these changes will improve the overall operation of the program and also bring the mandatory COOL requirements into compliance with U.S. international trade obligations,” U.S. Agriculture Secretary Tom Vilsack said in a release.

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Canada’s International Trade Minister Ed Fast, Agriculture Minister Gerry Ritz and livestock producer groups still aren’t buying it.

“These changes will not bring the United States into compliance with its WTO obligations,” Fast and Ritz said in a statement Thursday. “These changes will increase discrimination against Canadian cattle and hogs and increase damages to industry on both sides of the border.”

COOL, in place in the U.S. since 2008, was ruled out of order by the WTO’s Dispute Settlement Body (DSB) in 2011 and WTO Appellate Body in 2012 for discriminating against Canadian and Mexican livestock and meat.

USDA said its new final rule “modifies” COOL’s labeling provisions for muscle cuts of meat, to require meat labels’ origin designations to include even more specific information about where each of the production steps (born, raised, slaughtered) occurred. The new rule also removes the previous rule’s allowance for commingling of muscle cuts.

Where the COOL regulations since 2008 have allowed “Product of the U.S.” labels on cuts from animals born, raised, and slaughtered in the U.S., USDA’s new rule would require such cuts’ labels to read “Born, Raised, and Slaughtered in the U.S,”

For another example, if an animal is born in Canada, but raised in both Canada and the U.S. before slaughter, the shortest label allowed under the new rule would read “Born in Canada, Raised and Slaughtered in the U.S.”

Dropping the allowance for commingling of muscle cuts of different origin, meanwhile, will stop processors from labelling cuts of animals from the U.S., Canada and Mexico with the less-specific “Product of the U.S., Canada and Mexico.”

“We cannot wait”

Canada, Fast and Ritz said, will now consider “all options at its disposal, including, if necessary, the use of retaliatory measures. We will continue to stand with Canadian cattle and hog producers against these unfair measures and we will not stop until we succeed.”

The Canadian Pork Council on Thursday urged the Canadian government to publish a list of possible targets for retaliatory tariffs right away, rather than wait for the WTO to grant the go-ahead for retaliation.

“The U.S. is gaming the system at our expense; their behaviour and the bad faith reflected by the new COOL rule is appalling,” CPC vice-chairman Rick Bergmann said in a release, noting the previous COOL rule alone has cost Canadian hog and beef cattle producers over $1 billion a year.

“Canadian producers have been going out of business by the hundreds,” said Bergmann, a hog prducer at Steinbach, Man. “We cannot wait for another year or more while Washington continues to game the system.”

Publishing possible retaliatory measures now, he said, will “ensure that the U.S. administration, and legislators who promote protection through regulation, realize that there are costs attached to their irresponsible actions which cause widespread damage to their neighbours and most important trading partners.”

The Canadian Cattlemen’s Association agreed a list of retaliatory tariff targets should come sooner rather than later. “USDA has demonstrated that they have no intention of attempting to end the discrimination and it is time they experience some consequences,” CCA president Martin Unrau said.

“USDA’s statement that their amendment complies with the WTO is absurd,” said Unrau, a producer at MacGregor, Man. “It will require additional segregation by eliminating the ability to commingle cattle of different origins.”

The CCA — which has estimated cattle producers’ losses to COOL since 2008 at about $25 to $40 per head, or about $640 million a year — expects USDA’s amended rule will increase the impact of COOL to about $90 to $100 per head.

Canada’s federal opposition New Democrats said Thursday USDA’s new rule “proves that the federal government has not been successful in standing up for Canadian beef producers.”

“The WTO ruling has established that this policy is not about food safety or consumer choice,” NDP agriculture critic Malcolm Allen said in a release. “This is not about domestic food security, but is a protectionist measure designed to block north-south trade.”

“Our governments and our industry have invested substantial resources in trying to resolve this matter without retaliation, to no avail,” Manitoba Beef Producers president Trevor Atchison said. “But Canada must protect itself if the U.S. refuses to comply with international trade law.”

What the rulings said

The November 2011 ruling from the WTO Dispute Settlement Body panel found USDA’s previous COOL law violated parts of the WTO’s Agreement on Technical Barriers to Trade (TBT), breached Washington’s WTO obligations and “does not fulfil its legitimate objective” of consumer education.

The WTO Appellate Body last year agreed that COOL’s record-keeping and verification requirements “create an incentive for processors to use exclusively domestic livestock, and a disincentive against using like imported livestock.”

The Appellate Body said COOL “lacks even-handedness” by imposing “a disproportionate burden on upstream producers and processors of livestock, as compared to the information conveyed to consumers through the mandatory labelling requirements for meat sold at the retail level.”

COOL to date has required that a “large amount of information must be tracked and transmitted by upstream producers for purposes of providing consumers with information on origin,” the Appellate Body said, but found “only a small amount of this information is actually communicated to consumers in an understandable or accurate manner.”

Related stories:
Canada rips USDA’s plan for more specific COOL labels, March 8, 2013
Canada prepares to target U.S. goods in COOL spat, May 17, 2013

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