WASHINGTON, April 15, 2015 – Interested parties await a decision from the World Trade Organization (WTO) on the controversial U.S. country-of-origin labeling (COOL) rule, a decision that could open the door for retaliation from Canada and Mexico and potentially set the stage for congressional action.
The U.S. is appealing a WTO compliance panel’s decision, on a complaint filed by the two countries, that the COOL’s meat provisions – requiring labels that says where an animal was born, raised and slaughtered – are protectionist and violate global trade rules. The WTO says it will rule on the appeal by May 18.
The appeal is the final step in the WTO process before plans for retaliatory tariffs to compensate for losses caused by the COOL rule can be officially discussed. Canadian officials, however, say they hope they will not have to actually impose their threatened list of retaliation.
Masswohl – who says he’s “100 percent” convinced the U.S. will lose its appeal -- described Canada’s potential retaliatory list as “strategic,” targeted to hit especially hard Congressional leaders and those U.S. lawmakers who have been “particularly unhelpful” from the Canadian perspective on COOL. He didn’t mention specific senators or representatives, but did note states such as California, Minnesota, and the Dakotas were targeted.
Mexico has kept quiet on both the dollar amount of the tariffs it will seek and the products that may be targeted. If precedent is to be believed, the U.S. can expect duties on a wide variety of products. During a trucking dispute that ended in 2011, Mexico levied more than $2 billion in broad-reaching retaliatory tariffs, including an increased tariff on grapes specifically to target then-Speaker of the House Nancy Pelosi, D-Calif.
In Canada’s case, the potential retaliatory list might be better described by what isn’t it on it rather than what is. Aside from the many agricultural products involved in COOL discussions, Canada’s proposed retaliation – originally published for comment in June of 2013 – could involve a 100 percent tariff on products like “swivel seats with variable height adjustment” and “ethyl alcohol and other spirits, denatured, of any strength.” Depending on how that’s interpreted, “ethyl alcohol and other spirits” could refer to anything from ethanol to whiskey.
Masswohl also noted that Canada’s stated $1.1 billion price tag on COOL retaliatory tariffs was originally released in 2012, so it could climb higher if and when retaliation is authorized. He noted that from Canada’s perspective, the USDA’s attempt to fix COOL in May 2013 “made the impact worse,” pushing the dollar figure even higher. It would be difficult to gauge how much higher, he said, until an analysis is completed and submitted to the WTO, which would authorize the economic extent of allowed sanctions.
But many in the U.S. hope that retaliation will be stopped before it can be implemented. Potential retaliation would surely result in increased calls for complete COOL repeal. In an email to Agri-Pulse, House Agriculture Committee Chairman Mike Conaway, R-Texas, said it has been known “from the start” that COOL “would impose significant costs with no benefits.” He went on to pledge action if the current rule proves to “run afoul of our WTO commitments.”
“We will soon hear the final verdict of the WTO appellate panel and if the U.S. once again loses,” Conaway said, “the Committee will take decisive action to avoid further damage.”
Masswohl said that should the ruling come down against the U.S., he expects Canada and Mexico to begin the retaliatory process almost immediately. After a 60-day arbitration process, the WTO would issue figures for Canadian and Mexican retaliation that are not subject to appeal. Pending any delays in the WTO process – which are frequent due to the high workload of WTO arbitrators – Masswohl said he would expect a ruling on potential retaliation at some point in the summer.
“What I believe will happen is that the United States Congress will not let the train go over the cliff. I believe that common sense will prevail,” Masswohl said. “I believe that they will make a legislative change that will be satisfactory to Canada and Mexico and will enable us to agree that we do not need to put these tariffs in place and we can go back to life the way it used to be and get back to doing business together.
“Often both sides in a dispute genuinely believe they’re in the right. Not always, but often,” Masswohl added. “I don’t believes in this case USTR (U.S. Trade Representative) believes it’s in the right. I know it’s making the best case it possibly can, but I don’t think anybody – including anybody in the U.S. administration – believes that the United States is in compliance with this.”
Last month, National Farmers Union President Roger Johnson presented the findings of a recent econometric study showing that Country-of-Origin Labeling (COOL) did not have a negative impact on Canadian cattle exports to the U.S. at a U.S. House Committee on Agriculture hearing. Johnson also urged the committee to wait for the WTO to rule on COOL, as Canada and Mexico cannot retaliate if no damages are found.
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