Lower Supplies Ease COOL Effects

Declining pork and beef supplies in the United States have temporarily eased the impact on Canadian farmers of mandatory country-of- origin labelling (COOL), says market analyst Kevin Grier of the George Morris Centre.

However, when U.S. supplies increase, Grier predicts Canadian prices will again fall below U.S. levels as U.S. packers renew their reluctance to buy Canadian cattle and hogs.

And it’s not only U.S. COOL that should worry Canadians, Grier says.

“If COOL is not defeated (in the current complaint Canada and Mexico have filed at the World Trade Organization), it could become a barrier to trade that impacts many nations.”

He points to measures already taken by the European Union and South Korea.

The George Morris Centre prepared reports about the impact of COOL on Canadian prices after packers and retailers were forced in late 2008 to label meat to identify the country in which animals were born, raised and slaughtered.

In the first three months of COOL, Canadian cattle prices dropped by $3 to $4 per hundredweight below U.S. prices, weaner and feeder pig prices by $3 to $4 each and market hog prices by $10 each.

Canadian exports to the U.S. dropped by 60 per cent for pigs, and stayed down for 2009, while Canadian cattle exports dropped by 40 per cent and in 2009 were about 20 per cent below pre-COOL levels.

Grier says predictions that Canadian meat exports to the U.S. and other countries would increase did not come true, so the full burden of COOL fell on Canadian farmers. Some went out of business; almost all Canadian farmers cut back.

On the other hand, there were no benefits for either U.S. or Canadian consumers, Grier says, and COOL “served no commercial interests.”

The World Trade Organization appointed a panel to deal with the Canadian and Mexican complaints about the U.S. COOL rules and it has finished gathering testimony and evidence and is expected to issue a ruling this year.

There could, however, still be months and perhaps years of wrangling ahead, even if Canada and Mexico win this case. There could be appeals and even if the U.S. loses appeals, the U.S. might still retain COOL rules and then await the outcome of further WTO negotiations to determine what penalties would be appropriate to impose on the U.S.

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