Nov 25, 2011

COOL, Part Two

The cattle industry has been wasting a lot of time, cash and political resources on several industry issues that are just unnecessary. I would hate to think just how many resources have been spent by the various Ag associations battling over the proposed Grain Inspection, Packers and Stockyards Act (GIPSA) rule amendment, the consistent rub over the beef checkoff, and the ongoing legal battle over the Country of Origin Labeling (COOL) over the past 10 years. The sum must be astounding.

And it seems like they never go away. This past week, the World Trade Organization (WTO) made their final decision regarding COOL that dealt with both the actual statutory provisions and a letter sent by Secretary of Agriculture Tom Vilsack when he asked packers and processors to voluntarily apply more stringent conditions for their labels.

WTO said the country of origin labeling program is inconsistent with U.S. WTO trade obligations since it gives less than favorable treatment to imported Canadian cattle and hogs than to similar domestic products. WTO said the program doesn’t achieve the legitimate objective of providing consumers with information regarding the origin of products. The program is not legal under WTO rules, but it also doesn’t do what it was intended to do. WTO said that Vilsack’s letter to packers was an unreasonable administration of COOL and constituted another violation of WTO regulations.

The Canadian and Mexican livestock groups say that the COOL laws put in place three years ago have imposed unfair costs on their exports, reducing their competitiveness. Canadian producers claim it costs them $45 a head to access U.S. live cattle markets and the regulation has cost them $400 million a year.

Both Canada and Mexico had problems with the COOL regulations and filed a dispute with WTO saying the laws that were implemented had a protectionist objective. The U.S. will have 60 days to file an appeal.

Now, the folks at the Office of the U.S. Trade Representative (USTR) have a big decision to make. Do they want to appeal the WTO decision, or simply comply with the decision? No one is arguing that the beef or pork produced from imported hogs and cattle shouldn’t be labeled.

It appears that this situation may get down to political will. National Cattlemen’s Beef Association, National Pork Producers Association and the National Meat Association, along with many other producer groups, never wanted COOL and will want to find a simple way to comply. Then there is a handfull of other Ag groups that support the rule and had to get help from a few consumer groups to get the regulations in place. They will ask USTR to appeal the WTO decision. But, after the GIPSA incident, these groups may not have any political capital to pursue.

Colin Woodall at the National Cattlemen’s Beef Association said this WTO ruling solidifies their concerns that COOL would have extensive trade implications as was expressed during the 2008 farm bill deliberations. U.S. livestock producers have yet to see any financial benefit from COOL provisions. In many cases, ranches which feed imported cattle have incurred significant discounts, which have not been offset by benefits that the proponents of COOL claimed would be available. Just as important, cattlemen have yet to see any positive reaction from consumers.

Doug Wolf, president of the U.S. National Pork Producers Council, said their organization opposed COOL when congress considered the rule because of costs, which far outweigh any benefits, and the trade implications. The U.S. should comply with the WTO ruling or risk retaliation from, and a trade war with, Canada and Mexico. It would seem ludicrous that the U.S. would want to have a trade war with Canada and Mexico, the two largest consumers of U.S. beef products.

It’s ironic that few in the cattle and hog industries wanted the regulation and that consumers really don’t care that much where their products come from, just as long as they are safe and wholesome.

Imported meat products will still be required to be labeled. The industry will resume the battle over livestock segregation and whether or not cattle and hogs are meat products, and the conversation will be back to significant transformation that cattle are raw material, not a finished consumer product. The born and raised issue will be back.

I would expect to see the meat industries and livestock industries in North America reach a quiet resolution to conform to the WTO decision. It appears that everyone will be tired of politics that will be required to appeal the decision. And we all know that the House and Senate are incapable of making any reasonable decisions. — PETE CROW