Sign of thaw emerges in Canada-U.S. battle over COOL regulations

WASHINGTON—Signs of a thaw have emerged in a developing trade battle between Canada and the United States.

The Canadian government has won a powerful friend in its fight against punishing U.S. meat-import regulations that have evoked warnings of a broader trade war between the countries.

An American congressional committee has requested a stop to labelling rules that have seriously damaged Canadian meat exports and prompted the federal government to threaten retaliation.

In a note attached to a major spending bill, the House of Representatives’ appropriations committee chairman referred to the Canadian threat and asked the U.S. Department of Agriculture (USDA) to back off.

Country-of-origin labelling (COOL) rules are blamed for complicating the process of bringing in meat from Canada, and for reducing such exports to the U.S. by half since 2008.

“The (budget) agreement does not approve of USDA’s continued implementation, enforcement, and the associated spending related to the mandatory country of origin labeling regulation for certain meat products during the pending World Trade Organization (WTO) dispute with Canada and Mexico,” said the letter from chairman Hal Rogers of Kentucky.

The congressional committee can’t actually force the executive agency to drop the rule—but it does have control over that agency’s budget.

The Canadian government expressed optimism over the news.

A spokesperson from Ottawa said the government will continue fighting the regulation at the WTO but, in the meantime, would be pleased to see U.S. lawmakers drop the requirement in their upcoming Farm Bill.

The issue has pitted U.S. farmers, and their allies in Congress, against Canadian competitors and their American allies, such as the meat-processing plants they work with.

It has also provoked a political backlash.

In year-end interviews, Agriculture Minister Gerry Ritz had said Canada’s pledge to retaliate against a wide range of U.S. products from orange juice to bread if COOL wasn’t scrapped or amended was no idle threat.

“This is not a game of chicken here. This is a game of reality,” Ritz told The Canadian Press. “They are hurting our industry to the tune of $1-billion per year.”

The effect of the labelling policy, first implemented in 2008, has been to cut Canadian cattle and hog shipments to the U.S. in half.

The rules require detailed labels about the origins of beef, pork and chicken sold in U.S. stores.

That drives up the price tag of Canadian exports, undermining their competitiveness.

The letter from Rogers referred to such Canadian threats.

“On June 7, 2013, Canada issued a list of U.S. products (agricultural and non-agricultural exports to Canada) that would face higher tariffs totalling up to ($1.1-billion). Mexico is expected to issue a similar list of U.S. exports totalling several hundred million dollars,” said that section of the note, which was sent earlier this month without drawing public attention.

“If the complainants do prevail (at the WTO), industry may be forced to change their labels and practices once again and the Nation will suffer the economic impact of approximately ($2-billion) in retaliation actions affecting agriculture and non-agriculture jobs and industries across the U.S.

“It is strongly recommended that USDA not force increased costs on industry and consumers and that the Department delay implementation and enforcement of the final rule … until the WTO has completed all decisions related to cases.”

That particular aspect of Rogers’ 139-page letter was first reported this week by Inside U.S. Trade.

The publication has since reported that U.S. lawmakers are expected to vote as early as next week on a measure to repeal the country-of-origin labelling system in a public congressional meeting related to the Farm Bill.

It said opponents want to repeal the labelling law even before the WTO issues a decision on it.

A WTO compliance panel is set to meet Feb. 18-19 to determine whether the labelling rules comply with U.S. trade obligations.

The Canadian government also hopes a settlement might be reached before then.

“We believe the U.S. has a timely opportunity to do what’s best for both our countries and fix COOL in the current Farm Bill. Until it is fixed, COOL will continue to hurt producers and processors on both sides of the border,” said a statement from James Watson at Agriculture and Agri-Food Canada.

“COOL has significantly disrupted the North American supply chain, created unpredictability in the market and imposed additional costs on producers on both sides of the border.”