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Facing costly tariffs, United States puts end to trade dispute over country-of-origin labeling

by Ilene Grossman ~ January 2016 ~ Stateline Midwest »

Within days after a World Trade Organization decision in December authorizing substantial retaliatory tariffs on U.S. exports to Canada and Mexico, the long-simmering trade dispute over country-of-origin labeling ended.
After several years of discussion that produced no solution, the U.S. Congress and the Department of Agriculture responded to the ruling by abolishing the labeling requirement. Canada is the largest trading partner for every state in the region, so this will be a relief for many Midwestern livestock and other agricultural producers, who were likely to see their exports to Canada drop as the tariffs raised prices for their products.
Country-of-origin labeling, or COOL, required that packaged meats include a label showing where the animal was born, raised and slaughtered. After a challenge by Canada and Mexico over the labeling requirement for beef and pork products, the WTO ruled in 2011 that COOL ran counter to U.S. trade obligations.
The U.S. made some changes to the COOL regulations, but subsequent challenges by Canada and Mexico were also upheld, and appeals by the U.S. were denied. In May 2015, the WTO issued its final ruling and began a process to determine the amount of retaliatory tariffs that Canada and Mexico would be able to apply. In December, the WTO’s Dispute Settlement Body authorized Canada to impose duties of $782 million (in U.S. dollars) annually on U.S. imports, and allowed Mexico to levy duties of $228 million.
These amounts, while substantial, were less than both countries had sought for damages to their respective livestock industries and meat exports to the United States. Most of this impact was because U.S. buyers discounted the price of Canadian and Mexican beef to counter the costs of segregating the imports.
Canada previously had prepared a list of U.S. products on which retaliatory duties could be levied. In addition to live cattle and hogs and fresh and frozen meats, the list included pasta, cereal, bread, apples, cherries, wine and other products.
Some of these tariffs would have had a direct impact on Midwestern states. For example, duties on cherries and apples would impact Michigan, while tariffs on pasta would have affected North Dakota wheat growers.
Canada’s newly elected government announced that it would pursue retaliatory tariffs if the U.S. Congress did not repeal the labeling requirement.
The U.S. House of Representatives repealed COOL in June, and the Senate, which had been unable to reach agreement on repeal, approved the change in December. On December 18, U.S. Secretary of Agriculture Tom Vilsack announced that “effective immediately, USDA is not enforcing COOL requirements for muscle cut and ground beef and pork outlined in the January 2009 and May 2013 final rules.”
Vilsack added that USDA will work to quickly amend the COOL regulations to bring them into compliance with this order.

 

Article written by Ilene Grossman, CSG Midwest staff liaison for the Midwestern Legislative Conference Midwest-Canada Relations Committee.