Washington Insider-- Monday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Canada Reiterates Intent to Retaliate Unless U.S. Fixes COOL Law

Canada plans to seek clearance from the World Trade Organization take retaliatory tariff measures against the United States if a WTO panel rules against the U.S. country of origin labeling law for meat and meat products, according to Canadian Agriculture Minister Gerry Ritz. The WTO panel's decision is expected in April.

"If this is what's required to have fair trade, this is the route we must take," Ritz said during a media conference call from Washington last week. Ritz said he fully expects the WTO to rule again in Canada's favor. The WTO recently ruled COOL is a violation of U.S. trade obligations, and the decision is under appeal.

Both Canada and Mexico have threatened retaliatory tariffs on U.S. products if the law is not changed. Ritz said COOL is costing Canada's beef and pork industry C$1 billion (US$804 million) a year. That provides a general idea of the size of the retaliation the United States should expect from Canada. Mexico has yet to quantify the amount of retaliation it might seek if the WTO appeals panel rules against the United States. (Also see longer item below>)

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House Panel Critical of U.S. Shift on Cuba Policy

President Obama's decision to ease trade and travel restrictions on Cuba came under fire during a House Foreign Affairs Committee hearing last week, where a number of members claimed that the administration had kept Congress in the dark regarding its plans.

The administration has issued regulations to implement the changes, which include making travel to Cuba easier and loosening restrictions on some exports. U.S. and Cuban officials also have started discussions on reopening embassies. One Treasury Department official said that even with the regulatory changes, most transactions between the United States and Cuba, including most imports and exports, remain prohibited.

In response to another panel member, Roberta Jacobson, assistant secretary of State for the Western Hemisphere, said that nothing in the policy shift is a concession to the Cuban government. "[W]e have diplomatic relations with lots of governments around the world with whom we sharply disagree. It's a channel, it's a mechanism," she said, adding that it is "not the Good Housekeeping seal of approval."

Public opinion appears to support the president's action. A poll conducted shortly after Obama announced the Cuba policy shift in December found that 68 percent of those responding supported ending the trade embargo with Cuba (up 11 points from 2009) and 74 percent support ending travel restrictions to Cuba (a jump of 19 points during the same period). It thus appears that the changes the administration is undertaking are likely to move forward, even if that movement is slow.

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Washington Insider: Canadian Push on COOL

Canadian Agriculture Minister, Gerry Ritz was in Washington recently rattling economic sabers against the U.S. country of origin labeling law. He told the press repeatedly that he expects Canada and Mexico will win their current World Trade Organization WTO case on the issue, and that he will work to impose economic sanctions if that happens and if changes in the law are not made. He said he expects the WTO to rule in April.

"If this is what's required to have fair trade, this is the route we must take," Ritz told the press.

The WTO recently ruled COOL to be a violation of U.S. trade obligations and the United States has appealed that decision.

"Retaliation is not Canada's preferred option," Ritz said. "We would prefer a fair solution to be found outside the WTO process, and sooner rather than later. An appropriate way to fix this issue would be to repeal the red meat sections of COOL immediately so we can put the WTO and retaliation issues to bed."

Ritz pointed out that $44 billion in agriculture and food products cross the border each year and argued that COOL is costing Canada's beef and pork industry $1 billion a year. He said those damages would be addressed when trade issues have been resolved.

The Canadians have not been shy in mentioning the importance of Canadian markets to U.S. producers and have pointed out that 35 U.S. states have Canada as a primary export market, including $2 billion in beef and pork sales to Canada. Trade action would take a heavy toll on states such as California, with $600 million in trade, and Texas, with $300 million in trade, he said.

The recent COOL rules, unveiled by USDA in May 2013, require meat producers to specify on retail packaging where each animal was born, raised and slaughtered in order to qualify for the top label. They also bar the mixing of muscle cuts from different countries under a general label.

Clearly Ritz intended his recent trip to Washington to up the ante on U.S. politicians, and to insure that warnings regarding Canadian intentions are clear. He called COOL “a political solution for a problem that does not exist, and said it is creating huge rifts in [the] North American livestock system."

Ritz said he held bilateral discussions with representatives from the U.S. House and Senate Agriculture committees and noted that Congress had requested a proposal for a legislative fix from Secretary of Agriculture Tom Vilsack. He called the request, "a line in the sand that puts more pressure on the White House to “fix this flawed legislation that is endangering American jobs."

Finally, Ritz said that, "We will do what it takes to stand up for an integrated North American livestock industry and we will not rest until the job is complete."

Observers now suggest that the COOL issue could be resolved by the WTO yet this year, but that it could take some time before the matter is addressed legislatively. And, they predict, it may take the actual imposition of Canadian sanctions to move Congress to rewrite the law.

Nevertheless, it is clear now that Canada expects the WTO to approve large, targeted sanctions if the United States does not change COOL. Given the history and political sensitivity of this issue, it is still murky what an effective, acceptable legislative fix might be, especially given Secretary Vilsack’s reluctance to provide significant leadership on the issue. Washington Insider believes.

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(GH/CZ)

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