Canada could retaliate if the U.S. fails to comply with COOL ruling, but expert says picking a fight with your neighbour requires serious thought
It’s illegal under international trade rules and is estimated to have cost producers billions in lost sales, but Canada doesn’t have a lot of options for ending the pain caused by the American country-of-origin labelling (COOL) legislation.
A recent report by the Canadian Pork Council estimates the sector has lost nearly $2 billion in revenue since Washington enacted COOL legislation in 2009.
“We have a huge trade with the U.S. and it’s disrupted a huge amount of our operations,” said Barry Prentice of the Asper School of Business.
“And of course we see producers going out of business in Manitoba.”
The World Trade Organization has twice ruled against the U.S. on the issue of COOL, saying it is little more than a trade barrier. But that hasn’t spurred Canada’s southern neighbour into action.
Under current trade agreements, Canada has the right to take retaliatory action in other sectors if the U.S. doesn’t comply by the May 23 deadline. But Prentice said Ottawa will want to avoid taking that sort of action.
“Do you really want to go to war with your biggest trading partner?” he asked.
It’s not only Canadian pork and beef producers that have been impacted by COOL. American meat processors, pork producers, and cattle feedlot operators have also opposed COOL, notes Kevin Grier, a senior market analyst with the George Morris Centre.
“The real reason for COOL was to impede the flow of livestock, and it was successful beyond any cowboy’s dream,” he said, explaining cow-calf operators in the American Northwest were the driving force behind policy.
Representatives of the Canadian pork industry hope that by working with their American counterparts, enough pressure can be applied to U.S. legislators to revoke the law. But Prentice said not all of COOL’s damage can be reversed, calling the loss of integration in the North American market the most tragic aspect of the U.S. law.
“That’s really the backwards step,” he said.
But he also noted not all of the pork industry’s troubles — and perhaps not even all of the $2 billion referred to in the CPC report — can be attributed directly to COOL.
“We have to remember that other things have happened,” Prentice said. “There was the rapid rise of the value of the Canadian dollar and that made us less competitive.”
But the general manager of the Manitoba Pork Council notes that the flow of weanlings has been dramatically reduced since the legislation was enacted and only one major American processor is still buying Canadian pigs.
“The reality is that there are walls around the marketplace,” said Andrew Dickson. “Yes, (other) factors still play a role within the context of those walls, but the walls are pretty important.”
Whether those walls come down remains to be seen, but Prentice expects Washington will eventually get around to complying, in some form or another, with the World Trade Organization ruling.
“In the end, I think what we’ll see is some kind of adjustment,” said Prentice. “Either COOL disappears or gets modified so it’s no longer a barrier. The trouble is the damage has already been done.”