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CAA Reports – for Oct. 4, 2010

As I write this column, I am enroute to Geneva, Switzerland, to attend the oral submissions of the WTO challenge of the mandatory country-of-origin labelling (COOL) legislation implemented in the U. S. in 2008.

COOL has reduced the competitiveness of Canadian live cattle in the U. S. market, which has in turn, negatively affected our domestic pricing.

The CCA has devoted considerable time and resources on behalf of Canadian producers in assisting the Canadian government legal team in preparation for this important challenge.

The interim COOL rule was implemented in the fall of 2008, which resulted in very few U. S. processors willing to process Canadian cattle. As a result, Canadian fed and feeder cattle prices fell significantly, relative to U. S. prices. Messaging from the Canadian industry to the CCA was clear: all efforts must be made to see this rule reversed and the situation corrected.

Even before COOL was implemented, the CCA anticipated the impact and had asked the Canadian government to challenge COOL at the WTO. The Canadian government acted by officially filing a complaint in late 2008 and consultations between the two governments followed. In early 2009, the U. S. implemented the final rule with some increased flexibilities for U. S. processors. A few U. S. plants resumed processing Canadian cattle once the final rule was implemented, but only on specific days and at larger Canadian versus U. S. price spreads than before COOL.

Unfortunately, new uncertainty was introduced into the U. S. market almost simultaneously with the final rule due to what is now known infamously as “the Vilsack letter.”

The rule requires that meat products be labelled at retail to indicate country of origin. The difficulty for the Canadian cattle and beef industry is not that beef processed in Canada must carry a “made in Canada” label, but that beef from cattle born in Canada and processed in the U. S. must bear a different label than U. S.-born and raised product.

This rule effectively requires Canadian-born cattle to be segregated both in U. S. feedlots and at U. S. packing houses. It adds significant costs and has made Canadian cattle much less attractive to U. S. processors and feeders.

Initial calculations showed the cost of COOL to the Canadian industry at close to $90 per head. With the flexibilities offered in the final rule, that cost has come down, but COOL continues to cost Canadian cattle producers dearly. The CCA has worked closely with the Canadian government throughout the preparation of Canada’s WTO submissions. In our view the government has taken on this case on industry’s behalf and we need to ensure the defence is as complete as possible.

To that end, the CCA has expended considerable time and resources in gathering both economic

by Travis Toews

and anecdotal data required for preparation of the case. The CCA’s legal counsel from Washington D. C., also provided significant assistance to the legal team, and we engaged a prominent economist from the University of California to prepare an economic analysis on the impact of COOL.

A few of us from the CCA as well as our legal counsel and economist participated in the COOL working group, tasked with assisting the capable Canadian government lawyers in preparation of the submissions. From my observation, the case would have been significantly weaker and almost certainly not successful without CCA involvement.

The CCA will continue to work on this WTO case through to its conclusion and producers should be aware that as important as September’s oral hearings are, they are only a step in the process. Next month, we will work with the legal team to provide written responses to the panel’s questions and written rebuttals to the U. S. and third-party statements. A second round of oral hearings is set for December, followed by further submission of written information. A final panel decision is scheduled for July 2011 and we fully expect an appeal process after that.

Assuming we eventually get a decision in our favour, the work of obtaining change in U. S. legislation will begin. We hope the U. S. will decide that complying with a WTO ruling will be in its best interest, but if the U. S. chooses to disregard a WTO judgment against it, then the CCA will work with the Canadian government regarding retaliatory options.

Obviously, these efforts will continue to require significant time and financial resources, but I feel strongly that it must be done and that these are resources that are well deployed on behalf of Canadian cattle producers.

In spite of the challenges COOL has imposed on Canadian live cattle, there remain good opportunities for Canadian beef. The Beef Information Centre (BIC) has been successfully working with small and mid-sized U. S. retailers, restaurant chains and foodservice distributors, some of whom have been willing to carry Canadian beef exclusively.

The BIC has also had success in working the U. S. Hispanic community. This group utilizes cuts such as skirts, flaps and chuck rolls, which provides opportunity to increase carcass value. Significant potential for growth remains for Canadian beef in the U. S. market as we look to differentiate our product using the Canadian Beef Advantage

Efforts to improve our offshore market access opportunities continue but the U. S. will remain our most important export market for live cattle and beef in the foreseeable future.

COOL has stretched the resources of the CCA in recent months, however, the significant ramifications this issue has on our industry will require continued engagement from the CCA in defending the interests of Canadian cattlemen.

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TravisToews ispresidentof theCanadian Cattlemen’s Association

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