Jun 22, 2015 - 11:00am

Why Canada and Mexico Have the Whip Hand in the COOL Dispute


Senior Vice President for International Policy

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Cattle buyers and farmers wait for the next group of steers to enter the auction arena. Photo Credit: Luke Sharrett/Bloomberg

As Trotsky supposedly said, you may not be interested in war but war is interested in you.

So it is with the dispute over the U.S. Country of Origin Labeling (COOL) rule for meat: You may never have heard of it, but it could hit your job, wallet or pocketbook as soon as August – and hard.

If Congress fails to address this dispute swiftly, Canada and Mexico could slap steep tariffs on more than $3 billion worth of U.S. agricultural products and manufactured goods as soon as late summer. Tens of thousands of American jobs could be at risk.

The House of Representatives understands the threat: It approved a bill to repeal the rule by an overwhelming bipartisan vote of 300-131 on June 10. Unfortunately, a proposal for “voluntary” labeling now being circulated in the Senate would not avert the threat.

In May, the United States lost its final appeal in the COOL dispute, which was initiated in 2009. The World Trade Organization (WTO) ruled yet again that the U.S. COOL rule for meat violates U.S. trade obligations by imposing new costs on Canadian and Mexican cattlemen and pork producers in a discriminatory, trade-distorting manner.

The United States is out of options. To avoid trade retaliation that would hit U.S. farmers, workers and companies hard, there is only one path forward: Congress must repeal the COOL rule for meat. The House approved a bill to do just that: H.R. 2393, the “Country of Origin Labeling Amendments Act of 2015.”

However, some senators are circulating a legislative proposal that would fall short of a full repeal. It appears the “voluntary” labeling rule they are supporting would still require the segregation of cattle and hogs at processing plants based on where they were born or raised. The rule would thus continue to discriminate against Canadian and Mexican producers.

Here’s the rub, though: The only opinion that matters at this point is the opinion of the governments of Canada and Mexico. The United States has lost this dispute: We lost on the substance; we issued a revised COOL rule that was subsequently found to be even more discriminatory, and then we lost the appeal.

The WTO has authorized Canada and Mexico to retaliate. The only remaining question, now under arbitration in Geneva, is the precise dollar amount of the retaliation.

At this stage, any successor program to the current COOL rule would have to win approval from Canada and Mexico. Otherwise, Ottawa and Mexico City will simply proceed with their retaliation. And their position is crystal clear: The proposal circulating in the senate for a “voluntary” labeling rule will not suffice.

The threat to U.S. exports and jobs is magnified by the fact that Canada and Mexico are by far our largest export markets. Trade with our two North American neighbors reaches $1.3 trillion annually. Trade with Canada and Mexico supports nearly 14 million U.S. jobs.

America has been down this road before, and it’s painful. Once retaliation begins, it could take years for American farmers, ranchers and companies to recover lost market share.

Given that more than 95% of the world’s consumers live outside our borders, we flaunt our country’s trade obligations at our peril. American farmers, workers and companies will not be able to sell their goods and services to those consumers if we fail to live up to these rules ourselves.

Given that Canada and Mexico will be in a position to impose WTO-authorized trade retaliation within just two months, Congress must approve legislation repealing the COOL rule for meat before the August recess. We urge the Senate to act now – before it’s too late.

 

About the Author

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.