Washington Insider--Thursday

No Middle Ground on COOL

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

Appropriations Process Still Bogged Down

After the November 2014 election gave Republicans control of both houses of Congress, it was hoped that the legislative branch would fix its relatively miserable performance in actually passing needed legislation, a logjam attributed to each party controlling one chamber. Those hopes appear to have been premature.

Democrats in both houses plan to fight Republicans' plans to use sequestration law to reduce spending on domestic programs while giving defense spending a pass. Unless and until the GOP majority agrees to hold a so-called budget summit with Democratic leaders, Democrats say they'll block, or try to block, every appropriations bill that is brought to a vote. In response, Senate Majority Leader Mitch McConnell, R-Ky., and House Speaker John Boehner, R-Ohio, say they have no plans to convene a budget summit.

According to reporting by The Hill, unless someone blinks, none of the 12 annual spending bills will be approved this summer, leaving Congress once again on the brink of a shutdown in late September. Sticking to their scripts of the past several years, each side claims the other is to blame for the stand-off. Each side likewise predicts voters will punish the malefactors for their inaction by turning them out of office. If only...

***

Multilateral Discussions Also At Standstill

The World Trade Organization has scheduled a July 31 meeting to set a way forward for concluding the now 13-year-old Doha Development Round. However, it appears increasingly unlikely that there will be much of a concrete nature to discuss at next month's get-together.

At an informal meeting earlier this week, the WTO's Agricultural Negotiating Committee members continued to disagree over the best way to increase market access for farm goods, and indicated they are unlikely to agree before July 31 on how to reduce agricultural tariffs and farm subsidies.

The impasse continues despite six months of intensive consultations ahead of a planned Dec. 15-18 Ministerial Conference in Nairobi, Kenya. WTO Agriculture Committee Chairman John Adank said members are a "long way from where we should be" and he would hold another meeting of the negotiating committee at a later date. The Doha Round will turn 14 years old in November. Given that 2016 is a U.S. election year in which little is expected to be accomplished, Doha likely will get a lot older before it runs its course.

***

Washington Insider: No Middle Ground on COOL

It seems clear that Canada and Mexico hold the whip hand in the dispute over the U.S. country of origin labeling law and that they intend to make any effort to continue the policy costly for the congressional districts represented by COOL supporters.

Canada's list of retaliatory measures "was designed to get some attention," John Masswohl, director of government and international relations for the Canadian Cattlemen's Association told a panel discussion group in Washington this week. "We've looked at the congressional districts, states and members of Congress that tend to support COOL and what products are made in those areas."

Canada seeks to implement some $2.4 billion in annual trade tariffs against a long list of U.S. products, including beef, pork, apples, rice, corn, maple syrup, wine, jewelry, wooden furniture and mattresses, if the United States doesn't comply with a ruling issued last month by the World Trade Organization.

The WTO ruled that COOL, which requires U.S. meat packers to list on retail packaging where each animal was born, raised and slaughtered, discriminates against cattle and hog imports from Canada and Mexico. This violates U.S. international trade obligations.

Mexico hasn't publicly announced what U.S. goods it would target, but has increased the amount it will seek in damages from $653 million to $713 million.

The Office of the U.S. Trade Representative still argues that it will object to the requests "at the appropriate time." The office is claiming that the annual values of the sanctions "appear to be substantially inflated," although one private publication estimated recently that Canada and Mexico could impose tariffs in the first year that "could be as much as $10 billion," far higher than estimates USTR says are "inflated."

The main message of speakers at an event held this week at the National Press Club in Washington is that Mexico and Canada are no longer looking for a compromise. They are insisting the United States repeal COOL completely, CCA's Masswohl and Kenneth Smith Ramos, the minister counselor of trade and NAFTA for the Mexican Embassy in Washington, told the press.

The House voted on June 10 for legislation that would rescind COOL rules for beef, pork and poultry. The next steps are up to the Senate.

"If the Senate thinks there's a middle path on this, that's a very risky strategy going forward," Masswohl said. "We expect by the end of this summer we will be authorized to put tariffs on however much the WTO authorizes."

The top Democrat on the Senate Agriculture Committee, Debbie Stabenow of Michigan, has said repeal isn't the way forward. She is working on legislation that would balance U.S. trade obligations with consumers' right to have more information about their food. Agriculture is Michigan's second largest industry and would be significantly affected by tariffs on its beef, pork and apple exports.

Although the Senate strategy is uncertain, Ramos said proposed COOL alternatives have yet to address the issue of segregating livestock based on country of origin. "There should be no discrimination or devaluing of the [meat] product as it crosses the border from Canada and Mexico in to the U.S., and that is why repeal is the only option," Ramos said.

One key, highly controversial aspect of the COOL policy is its "100 percent" domestic content requirement to achieve the top label indicating a product of the United States. This means meat from imported feeders, even if fattened and slaughtered in the United States, must settle for a lesser label. The WTO dispute settlement group noted this distinction was not seen as valuable by consumers, but added expensive handling costs for the industry.

Observers suggest it is very unlikely the United States can escape WTO sanctions on this issue without a fundamental change in policy.


Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN's Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the U.S. Ag Policy, U.S. Farm Bill and DTN Ag News sections on their News Homepage.

If you have questions for DTN Washington Insider, please email edit@telventdtn.com

(GH/CZ)