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Canada can retaliate on COOL

But the tariffs will be lower than it wanted

In a ruling released earlier this week, Canada and Mexico got about one-third of the clout they sought from the World Trade Organization to impose retaliatory tariffs on American products because of country-of-origin labelling.

But Canadian officials say the ability to penalize imported U.S. goods to the tune of C$1,054,729 is enough to pressure U.S. politicians to change the law that discriminates against Canadian-born livestock sold into the U.S.

The award is large enough to get U.S. legislators’ attention, said John Masswohl, director of government and international relations for Canadian Cattlemen’s Association.

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“What we want is for the U.S. Senate to be motivated to repeal COOL,” Masswohl said.

In a decision handed down Dec. 7, the WTO’s Dispute Settlement Body said Canada could now “request authorization to suspend concessions and related obligations in the goods sector under the GATT 1994 at a level not exceeding $1,054,729 million annually.”

One more step

That means Canada and Mexico, which were authorized to impose tariffs on U.S. goods worth about C$228 million, now must submit to the WTO for final approval a list of items they plan to target.

Canada had sought $3 billion a year in damages. The office of the United States Trade Representative had claimed that COOL only cost Canadian producers about US$43.2 (C$58.36) million a year. The arbitration panel accepted one of its arguments, ruling that compensation was only owed for losses caused by lower prices on exports to the United States and not lower prices in the domestic markets caused by a buildup of meat and livestock.

There is no appeal to the WTO’s final decision.

  • More on the Manitoba Co-operator: Trudeau prefers to avoid COOL retaliation on the U.S.

Chrystia Freeland, Canada’s newly appointed Liberal minister of international trade, and Lawrence MacAulay, minister of agriculture and agri-food welcomed the decision.

“If the U.S. Senate does not take immediate action to repeal COOL for beef and pork, Canada will quickly take steps to retaliate,” they said in a statement.

“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.”

Canadian livestock groups were jubilant, saying the panel has vindicated what they have argued all along — that the labelling laws have had a staggering effect on cattle and hog producers.

Impatient

COOL legislation was first passed in the U.S. in 2002 and the program was implemented in 2008.

“Our patience is exhausted. There is no further negotiation to be done and no compromise is acceptable. Canadian livestock producers and meat processors expect the U.S. to do nothing less than repeal COOL or face the immediate imposition of retaliatory tariffs on U.S. goods to the same extent as the damage we have endured,” a statement from the Canadian Meat Council says.

At every step of the WTO investigation of Canada’s and Mexico’s complaint about COOL, “the WTO has repeatedly found that the U.S. is in breach of its WTO obligations,” the groups said in a statement. “The only revision the U.S. has made, in 2013, increased the negative impact on Canadian farmers and meat processors.”

In 2013, the former government released a long list of food and consumer products that could be hit with retaliatory tariffs. Former agriculture minister Gerry Ritz said Canada would aim its tariffs at goods from states whose politicians frustrated attempts to repeal COOL.

The Canadian duty list will include beef, pork, apples, rice, corn, maple syrup, wine, jewelry, wooden furniture and mattresses.

Ritz assured food manufacturers that American-supplied ingredients they need for their products wouldn’t be hit with tariffs, says Chris Kyte, president of the Food Manufacturers of Canada. He was responding to charges by the Food and Consumer Products Council that retaliatory tariffs could lead to the closure of food-processing plants across the country.

Items on Canada’s proposed retaliation list “will impact on manufacturers across the country,” FCPC said. For consumers it could mean another $40 to $75 a month to the cost of their groceries.

Impact on consumers

The duty would have the biggest impact on foreign multinationals that mainly import finished product into Canada rather than make products domestically, Kyte said.

He hopes that the WTO tariff will be hefty enough to finally prod the U.S. Congress into eliminating COOL as Canada has been urging for the last six years. “It should motivate business groups to join to the campaign to end COOL. We need some movement in the right direction.”

The U.S. House of Representatives in June passed a bill to repeal COOL, but the Senate has not yet voted on it.

“We are disappointed with this decision and its potential impact on trade among vital North American partners,” said Tim Reif, general counsel for the Office of the U.S. Trade Representative. “We will continue to consult with members of Congress as they consider options to replace the current COOL law and additional next steps.”

– with files from Reuters

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