The WTO has made its final-final decision in Canada’s favour on U.S. labelling laws. It now appears that U.S. legislators in the House of Representatives will vote next month on a bill to repeal it.
But Canada’s COOL fight isn’t over.
Support for repealing the legislation is less secure from the U.S. Senate where the agricultural leadership continues to express support for some sort of consumer information labelling. And the Obama administration has indicated a continued willingness to explore every option but the one vociferously promoted by Canada and Mexico.
So the Canadian government has issued an ultimatum of sorts: repeal COOL within three months — or else. An all-out trade war could ensue with retaliatory tariffs worth up to $3 billion annually on a long list of American goods that includes everything from meat to orange juice, wooden office furniture and communion wafers.
But first, Canada must show details to the WTO of the type and value of harm it has endured as a result of the offending country’s policies before it can receive approval to go ahead with those tariffs. And if the offending country disagrees with the complainant’s submission, it can request arbitration, under which the WTO dispute settlement process reviews both parties’ submissions and imposes a binding ruling.
It should be noted that there are conflicting assessments of how much damage has been done to Canadian livestock producers as a result of the U.S. labelling laws.
The Canadian meat industry asserts the U.S. law has reduced demand and increased the cost of accessing the U.S. market by at least a billion a year — to which the Americans and the WTO will now be saying “prove it.”
Presumably, some of that work documenting the actual impacts has been done — at least enough for the WTO to determine Canada has a case. And it has ruled in Canada and Mexico’s favour four times since 2009. So that’s promising.
However, an economic analysis commissioned by U.S. producer groups that supports COOL laws released earlier this year challenges the notion that Canadian access to the U.S. market has been impaired and that prices have suffered as a result.
After tracking animal movement across the border, the price spreads between U.S.- and Canadian-origin cattle and actual prices using Mandatory Price Reporting data, by C. Robert Taylor, says the fed cattle basis actually declined post-COOL. “In fact, the price basis is substantially lower in the six years since implementation of COOL than it was the preceding four years by class, grade, and purchase arrangement,” he said.
Taylor also casts doubt on whether the import of slaughter cattle was negatively affected once “the confounding effects of domestic and imported captive supply of slaughter cattle, or macroeconomic and beef demand uncertainty during the time period” are considered.
As for feeder cattle, he said USDA monthly data on imports did not show “COOL having a significant negative effect” on imports relative to placements in U.S. feedlots.
“The weight of credible economic and qualitative evidence demonstrates that COOL has had no demonstrable impact on the Canadian or Mexican cattle industries,” he said.
Maybe he’s right. Maybe he’s not. But that debate is now just beginning.
Much has been said about a recent USDA-commissioned study of the impact of COOL on U.S. consumers, producers and packers that found it had little impact on consumer demand, but imposed billions in implementation costs on meat producers, processors and retailers.
The economists who did that study cautioned they didn’t factor in the likelihood that implementation costs would dissipate over time as the industry adjusts. They acknowledge their estimates are likely overestimated.
That’s all very interesting. But because it is focused on the domestic impacts, it is irrelevant, except for one point. The USDA analysis found the COOL legislation remains politically popular with consumers — even though it likely increases the price of meat.
For the sake of argument, let’s say the Canadians do prove to the WTO that COOL is measurably hurting the Canadian meat industry, and let’s assume the Harper government gets the go-ahead to impose billions of dollars’ worth of tariffs on imported U.S. goods.
Now, when is that federal election happening again? The last time we checked it was Oct. 19.
So, a government that’s already riding low in the polls would have to be pretty committed — or something else — to impose tariffs on goods imported from Canada’s biggest trading partner that increase the price of food and other items just as consumers get ready to vote. It is unlikely the timing of all this has escaped the U.S. administration’s notice.
Nope, this isn’t over yet. Far from it.