WTO Details COOL Penalties

Canada, Mexico Granted $1B in Retaliatory Tariffs Against US

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Combined, the United States' two largest trading partners are now legally able to hit U.S. goods with more than $1 billion in tariffs if country-of-origin labeling isn't eliminated or drastically changed. (DTN file photo by Katie Micik)

CHICAGO (DTN) -- The World Trade Organization on Monday may have put a nail in the coffin of country-of-origin labels for meat products in the U.S.

A WTO arbitration panel based in Geneva, Switzerland, came back Monday with a ruling that Canada could impose about $781 million (CAN $1.05 billion) in retaliatory tariffs against the U.S. while Mexico could impose $227.76 million in similar tariffs against the U.S.

Combined, the United States' two largest trading partners are now legally able to hit U.S. goods with more than $1 billion in tariffs if COOL isn't eliminated or drastically changed.

The penalties are a culmination of the battle between the U.S., Canada and Mexico over country-of-origin labels (COOL) after Canadian and Mexican cattle and hog producers argued that U.S. COOL rules discriminated against Canadian and Mexican livestock.

COOL opponents praised the WTO ruling and declared Congress must immediately eliminate COOL as a law.

"We have known for some time that the country-of-origin labeling law violates our international trade obligations," said House Agriculture Committee Chairman Michael Conaway, R-Texas. "The WTO has ruled that we face over $1 billion in annual retaliation if the Congress doesn't act immediately to repeal this law."

The House passed a bill in June with an overwhelming bipartisan vote of 300-131 to eliminate the law. The Senate has not acted and senators have been effectively waiting on the WTO ruling to commit to a change in the law.

COOL's staunchest supporters, the National Farmers Union, denounced the ruling, calling the WTO process "inefficient and ineffective." NFU called on Congress to pass a voluntary COOL bill promoted by some members of the Senate.

"Today's decision to allow Canada and Mexico to impose $1.01 billion in retaliatory tariffs is yet another symptom of the inefficiencies and ineffectiveness of the WTO," said Roger Johnson, president of NFU. "Time and again, the WTO process has undermined U.S. sovereignty and the right of American consumers to know the origin of their food," said Johnson. "Congress now only has one clear path forward for ensuring U.S. regulations are in compliance with the WTO while preserving a meat label with integrity, and that solution is voluntary COOL."

Monday's WTO decision is a far cry from the $90 million figure provided to the panel by the U.S. Trade Representative (USTR) in early August. Johnson said such a high number is representative of the WTO's ineffectiveness to provide sufficient guidance for ensuring laws are in compliance.

Philip Ellis, president of the National Cattlemen's Beef Association, called for immediate action by the Senate or retaliation against U.S. exports will soon follow.

"The WTO today ruled that the U.S. COOL rule has cost Canadian and Mexican livestock producers in excess of $1 billion over the past seven years, and has authorized that amount in retaliatory tariffs," said Ellis. "If the Senate does not act, U.S. beef exports will face a 100% tariff in these countries, severely diminishing about $2 billion of beef exports annually."

The National Association of Manufacturers also called on Congress to take quick action. The manufacturers' lobby said a broad array of businesses could be affected unless COOL is repealed.

"At a time of global economic weakness and fierce competition, manufacturers need policies that ensure a level playing field and enhance global opportunities, not ones that create new barriers for our exports. Repeal of these provisions is the only solution remaining that will protect U.S. manufacturing jobs," said Linda Dempsey, vice president of international economic affairs of the National Association of Manufacturers.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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Chris Clayton