On Monday morning (December 7), the World Trade Organization announced that Canada and Mexico have the right to place well over $1 billion annually in retaliatory tariffs on U.S. exports.
The trade dispute, which has been winding through the WTO appeals process for years, stems from Canada and Mexico’s objection to the U.S. Country of Origin Labeling (COOL) law. The law requires that U.S. consumers have access to labels on meat showing where the animals were born, raised and slaughtered.
In siding with Canada and Mexico, the WTO said the “COOL measure … accorded less favourable treatment to imported livestock than to like domestic livestock. The Appellate Body concluded that the least costly way of complying with the COOL measure was to rely exclusively on domestic livestock, creating an incentive for US producers to use exclusively domestic livestock and thus causing a detrimental impact on the competitive opportunities of imported livestock. The Appellate Body found further that the recordkeeping and verification requirements imposed a disproportionate burden on upstream producers and processors compared to origin information conveyed to consumers.”
Further, the ruling “determines that the annual level of nullification or impairment of benefits accruing to Mexico as a result of the COOL measure is $227.758 million” annually. Canada is entitled to just north of $780 million annually.
“We have known for some time that the Country of Origin Labeling law violates our international trade obligations,” said Texas Rep. Mike Conaway, chairman of the House Agriculture Committee. “The WTO has ruled that we face over $1 billion in annual retaliation if the Congress doesn’t act immediately to repeal this law.”
In a press release, the House Agriculture Committee said, “on June 10th, House of Representatives approved H.R. 2393, a bill to amend the Agriculture Marketing Act of 1946, by a recorded vote of 300-131. The legislation will effectively repeal country of origin labeling requirements for beef, pork, and chicken, while leaving intact the requirements for all other covered commodities. The governments of Canada and Mexico have stated repeatedly that enactment of this legislation will mitigate the need for any retaliatory actions fundamentally ending this case, once and for all.”
Products at risk
If the issue isn’t resolved to Canada’s liking, the nation has announced it will retaliate not just against U.S. pork and beef but a wide range of U.S. agricultural and manufactured products. To inflict extra pain on U.S. producers and markets, Canada and Mexico are also allowed to ramp up tariffs against U.S. products at certain times of the year.
And the Canadian government is making it clear it is willing to bring down the hammer. A statement from the Canadian trade and agriculture ministers says “If the U.S. Senate does not take immediate action to repeal COOL for beef and pork, Canada will quickly take steps to retaliate. Canada continues to work with our partners in the United States, and in the U.S. Senate, to urge the full repeal of the discriminatory COOL policy for beef and pork.” The WTO has “repeatedly ruled that COOL discriminates against Canadian and Mexican cattle and hogs and violates the trade obligations of the United States. Country of origin labeling harms Canadian and Mexican livestock producers as well as U.S. processors and producers. It also disrupts the highly integrated North American meat industry supply chain.”
The National Farmer Union called for Congress to immediately pass a voluntary COOL law to “render the WTO decision moot.”
“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, NFU president. “Time and again the WTO process has undermined U.S. sovereignty and the right of American consumers to know the origin of their food. 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.
“The WTO rules without precedent and continues to undermine laws and regulations that benefit society. The U.S. tried to ensure COOL regulations were in compliance, but received insufficient guidance and consequently could be on the hook for exaggerated damages.”