A ‘COOL’ response from Canada and Mexico

Country of origin labeling (COOL) has been contested by Canada and Mexico since December 2008, with the U.S.’s final appeal being denied by the World Trade Organization (WTO) in the last several months. The finding of the WTO was that the COOL provisions discriminated against Canada, Mexico and other countries from a technical perspective because the information required of slaughterhouses and processors was substantially greater than that disseminated to the public. This translates to a conclusion that imported products received less favorable treatment than domestic products; thus the U.S. violated its WTO obligation.

There has certainly been a growing trend in the United States to provide information about the source of food, which I think we can all agree is a good thing, and something to which the public is entitled. The question is: What information does the public want? A simple declaration or the option to say: “raised, slaughtered, processed in the U.S.”; “raised, slaughtered and processed in a third country”; “raised, slaughtered and processed in the United States, Canada and Mexico.” The latter seems like a reasonable approach, as few consumers would focus on a label offering so much confusing verbiage.

{mosads}Canada and Mexico, after multiple wins at the WTO, have now been granted authority to retaliate. What does that actually mean? We did some research and discovered that at least 36 states would be impacted in that their exports to Canada and Mexico would be subject to tariffs. Pig products, fowl, apples, chocolate, prepared foods and cereal, bread, pastry, cakes, biscuits and wine are among the products exported. Wine is the largest export from California, Washington, New York and Oregon, as an example. This could be as high as $3 billion dollars.

In 2002, Congress enacted mandatory country of origin labeling with provisions requiring retailers of certain meat products to inform consumers of the products’ countries of origin. This was revisited in the 2008 farm bill, and the 2002 statute was amended. Within months after the COOL implementing rule was published in 2008 by the U.S. Department of Agriculture (USDA), Canada and Mexico challenged the rule at the WTO. One of the primary areas of contention was the banning of comingling of meat from imported and domestic livestock animals by country of origin, which raised the cost of utilizing the imported livestock.

My friend, John Prato, the consul general for Canada in New York City, makes a compelling argument for why we need to rethink issues with Canada regarding such things as COOL and Buy America. In essence, he says — which I believe is from the heart — is that Canada is our closest ally in terms of defense, security, trade and geography, and they deserve, at least clarity when it comes to our positions on COOL and Keystone and a full hearing on Buy America.

I should note that in addition to Canada and Mexico, Argentina, Australia, Brazil, China, Columbia, Japan, Korea, New Zealand, Peru and Chinese Taipei all joined in these proceedings.

Rep. Mike Conaway (R-Texas), the House Agriculture Committee chair, proposed legislation that would repeal the offending COOL provisions; it passed the House overwhelmingly on June 11, 2015. Where it goes in the Senate is much less clear.

There is an inherent conflict when you are pushing for trade promotion authority (TPA) and the Trans-Pacific Partnership (TPP) as urgent matters when, in fact, the administration (and I would note that this is not particular to the Obama administration) is upholding protectionists measures like COOL. That being said, the Canadian approach to dairy doesn’t withstand that test either.

This issue needs to be resolved either legislatively or administratively, otherwise the negative economic impact to the 36 states mentioned above will likely be dramatic. Given that the Canadian economy is softening, and given the weakness of the Canadian currency, the likelihood is that when tariffs are added to these products, there will be a substantial decline in demand in Canada.

There is no upside for the U.S. In this case, more U.S. workers will be injured by the decline in exports.

Owens represented New York’s North Country from 2009 until retiring from the House in 2015. He is now a senior strategic adviser in the Washington office of McKenna, Long and Aldridge and a partner in the Plattsburgh, N.Y. firm of Stafford, Owens, Piller, Murnane, Kelleher & Trombley, PLLC.