COOL Ruling Could Impact Pork Exports

In this file:

· COOL Ruling Could Impact Pork Exports

· COOL Ruling Could Benefit Weanling Producers

· Canada Hopes for Negotiated Resolution of M-COOL Dispute

· KAP welcomes WTO ruling on COOL law

· CME: Reacting to the WTO ruling

· N.S. reaction mixed on COOL ruling

COOL Ruling Could Impact Pork Exports

Steve R. Meyer, Ph.D., Paragon Economics, Inc.

National Hog Farmer - Nov 21, 2011

The World Trade Organization (WTO) made official on Friday its finding that the United States' country-of-origin labeling (COOL) law violates WTO rules. The WTO panel commented on two separate issues: The actual U.S. statutory provisions and a letter issued by Secretary of Agriculture Vilsack that suggested voluntary labeling procedures that were more restrictive than the actual USDA rules.

The panel found that the COOL program is a technical regulation that is "inconsistent with the United States' WTO obligations," since it accords less favorable treatment to imported Canadian cattle and hogs than to like domestic products. Further, the panel found that COOL does not fulfill its legitimate objective of providing consumers with information on origin. Both factors constitute violations of WTO rules.

The Vilsack letter's suggestions for voluntary action, according to the panel, go beyond certain obligations under the COOL program and, thus, are an unreasonable administration of COOL.

As noted, the ruling dealt with Canada's challenge to the COOL law and resulting regulations. Canada was later joined by a number of other countries that export products covered under COOL, including important pork markets Japan, Mexico, Korea, China, Australia and Taiwan.

The United States will almost certainly appeal the decision, but most observers believe the result will not change, thus paving the way for Canada, Mexico and, possibly, other countries to place punitive tariffs on U.S. goods. The United States will have a year after the appeal ruling is received to make changes to the law to avoid the retaliatory tariffs.

There is no guarantee that U.S. pork will be on the retaliation list, but it is pretty logical that it will be, especially for Canada. Mexico exports very little pork to the United States, but does export a lot of feeder cattle and will have some discretion over what goods it places the tariffs on. Add to that the fact that Mexico's pork producer associations are virtually always looking for ways to block imports from the United States and it seems pretty likely we will be hit there as well.

The tariffs could be avoided, but I think that would require a repeal of the COOL law – or at least amendment of the COOL law. There is some hope that an administrative fix (i.e., change the rules) can be accomplished by USDA, although I'm not sure how we could change the rules enough to satisfy WTO and still be within the law. There is little interest in Congress to do anything at present, but that may change as the date for punitive action draws nigh.

September Exports Up 37% ...

http://nationalhogfarmer.com/marketpreview/cool-ruling-could-impact-pork-exports-1121/?YM_MID=1274402&YM_RID=

COOL Ruling Could Benefit Weanling Producers

Written by Kelvin Heppner - Portage Online (Canada)

Tuesday, 22 November 2011

Southern Manitoba weanling producers are among those who could benefit the most from the WTO's ruling on country-of-origin labeling.

The WTO has ruled the American policy, which came into effect in the fall of 2008, discriminates against foreign livestock.

"This is another step forward in trying to repair some of the damage done by COOL," says Karl Kynoch, Chair of the Manitoba Pork Council.

"In Manitoba here, it devastated the weanling industry. Packers refused to buy pigs that had originated out of Canada, so that really reduced the market for weanlings. Some of our weanling industry ended up closing their barns because they had no market to go south," he says.

Kynoch says Manitoba-born weanlings are still being sold at a $10 to $15 discount due to COOL.

"Right now we still have about 3 million going south, where we used to have 4.5 million. So we had a huge reduction in the number going south. Another difference is that the weanlings that go south are still being discounted heavily," he says.

He notes Manitoba Pork is not looking for a complete removal of the COOL legislation...

http://www.portageonline.com/index.php?option=com_content&task=view&id=24672&Itemid=469

Canada Hopes for Negotiated Resolution of M-COOL Dispute

Gerry Ritz - Canada Minister of Agriculture and Agri-Food

Farmscape for November 22, 2011 (Episode 4015)

Canada's Agriculture Minister is hopeful last week's WTO ruling that U.S. Mandatory COOL discriminates against foreign livestock will open the door to a negotiated settlement of the dispute.

Implemented in 2008, Mandatory U.S. Country of Origin Labelling requires American processors to label a range of food products, including beef and pork, according to their country of origin.

In a ruling released Friday the World Trade Organization found the legislation provides imported livestock less favorable treatment than like domestic livestock and is inconsistent with U.S. trade obligations.

Agriculture Minister Gerry Ritz recalls, when the labelling law was implemented, the impact on the Canadian and American livestock industries was immediately negative.

Clip-Gerry Ritz-Canada Minister of Agriculture and Agri-Food:

To comply with the mandatory labelling program the U.S. livestock industry must segregate Canadian animals, process Canadian livestock on a clean separate line and package and label the meat separately.

These additional handling procedures of course mean additional costs which are passed on to producers.

Some processors have simply refused to buy Canadian animals while others are only willing to buy on certain days or at a deeply discounted price...

http://www.farmscape.com/f2ShowScript.aspx?i=23812&q=Canada+Hopes+for+Negotiated+Resolution+of+M-COOL+Dispute

KAP welcomes WTO ruling on COOL law

By Jordan Maxwell - The Daily Graphic (Canada)

Nov 22, 2011

Doug Chorney, president of the Keystone Agricultural Producers, welcomed a WTO ruling on the U.S Country of Origin Labelling law (COOL), a law passed in 2008 which unfairly scrutinized Canadian products.

"This is a welcome finding. We certainly are pleased for the sake of our beef and hog producers. This is going to be very important but we have to be cautiously optimistic because it still requires the appeal process to be not invoked by the U.S. They have 50 days to choose to appeal or not appeal," said Chorney.

The WTO's ruling found that Canadian products were treated less favourably than U.S. products; created unnecessary obstacles for international trade and did not fulfill a legitimate objective.

In 2002, the U.S. introduced a farm bill which created new mandatory labelling requirements for products such as beef, lamb, pork, fish, shellfish, fruits and vegetables, and peanuts that would be sold in U.S retail stores.

The Manitoba government, in conjunction with the federal government, argued that these laws defied WTO agreements; however, the law was made official in 2008 and harmed Canadian live-animal exports.

According to the Manitoba Pork Council, Chorney said that "the price that farmers received in some cases when down to nothing."

"When you add freight to the purchase price and farmers had no choice but to do shipping which is not sustainable. Farmers and businesses fail because of that. There were one-million market hogs being shipped to the U.S and but later declined by 50 per cent," he added.

What's more, Agriculture minister Stan Struthers said in a release that in 2007, 4.5-million feeder pigs provided $191 million while slaughter pigs relinquished close to $178 million.

But when COOL was implemented, Manitoba hog and cattle exports sharply dropped and Struthers said that this continues to be the case.

In the first year, the exports of slaughter hogs declined 64 per cent compared to the previous year. Meanwhile, a 19 per cent drop in exports was reported for feeder pigs.

"Manitoba hog producers were affected even more than anybody else because they were so integrated with the U.S market. It was a big impact," Chorney said.

KAP hopes the WTO's favourable ruling will bring about the elimination of trade impediments between Canada and the US and the unnecessary costs producers and exporters have been burdened with under COOL...

http://www.portagedailygraphic.com/ArticleDisplay.aspx?e=3377561

CME: Reacting to the WTO ruling

CME Group

via PorkNetwork - November 22, 2011

A dispute panel of the World Trade Organization (WTO) officially ruled on Friday that the United States’ Country-of-Origing labeling program violates WTO agreements. The announcement confirms what has long been expected by industry observers and makes official what had been rumored since last summer. The WTO ruling dealt with both the actual statutory provisions (ie. the MCOOL law and regulations enforcing it) as well as a letter sent by Secretary of Agriculture Tom Vilsack in which he asked packers and processors to voluntarily apply more stringent conditions for particular labels.

The panel ruled on the complaint filed by Canada but the ruling applies to more countries. Included among them are some major markets for U.S. pork and beef such as Mexico, Korea, China, Australia and Taiwan.

The WTO said in its ruling that the country-of-origin labelling (COOL — it did not include the “mandatory” language that we have used in the past) program is “inconsistent with the United States’ WTO obligations” since it give less favorable treatment to imported Canadian cattle and hogs than to similar domestic products. In addition, the panel said that the program does not the legitimate objective of providing consumers with information regarding the origin of products. So not only is the program illegal under WTO rules, according to the WTO it doesn’t even do what it was intended to do.

In addition to the actual program, the WTO said the Secretary Vilsack’s letter was an unreasonable administration of COOL and thus constituted another violation of WTO regs.

Where do we go from here? The United States has historically appealed virtually all unfavorable WTO rulings and we don’t see any reason that practice will change with this case. That appeal process will take, according to our sources, six to eight months ending with a final ruling from WTO. If that ruling remains negative — and we believe that is likely — the U.S. will have a year to rectify the situation or face possible retaliatory tariffs. It is our understanding that those tariffs could be imposed by any of the parties to the complaint, not just Canada.

The real question lies in what the Americans must do during that one year period to avoid the tariffs. Can we change some regulations to make the program WTO palatable or must the authorizing legislation be changed? The former is obviously much easier but it seems unlikely that regulations can be eased and still have anything that agrees with the MCOOL legislation. If that means the legislation itself must be changed or repealed, the challenge gets larger. How many laws do you recall being repealed? Just how interested is Congress in messing with MCOOL given the seismic issues on its plate at present?

There is no guarantee that retaliatory tariffs will fall on U.S. beef and pork. Both producer organizations and many, many producers of those products opposed MCOOL from the beginning and were thus allies of producers from the complainant countries. But some, most notably Mexico, are always looking for a way to block imports from the U.S. and MCOOL has impacted imports of cattle and hogs from Canada and cattle from Mexico. Retaliating on similar products makes a lot of sense whether we like it or not.

Through September, Canada and Mexico are the number one and two markets for U.S. beef and the number three and two markets for U.S. pork, respectively. Retaliatory tariffs will not stop those shipments but will reduce them no doubt. Congressional action last week has put even more doubt that the entire GIPSA rule will be enacted — at least in FY 2012. Last Thursday both the House and Senate approved the conference report on a spending bill that included FY12 agriculture appropriations. The President signed the bill Friday. This is the culmination of budget work that began last summer. You might recall that in June the House passed an agricultural appropriations budget that precluded GIPSA from working on rules enforcing the livestock title of the 2008 Farm Bill — the part that included the Congressional mandate for GIPSA to write rules on five specific topics. That feature made it into the “conference report” — ie. the merger of the House and Senate versions — that passed both houses last Thursday...

http://www.porknetwork.com/pork-news/latest/CME-Reacting-to-the-WTO-ruling-134319398.html

N.S. reaction mixed on COOL ruling

By COLLEEN COSGROVE - The Chronicle Herald (Canada)

November 22, 2011 - 4:38am

A trade victory for Canadian livestock producers spurred mixed reaction among Nova Scotia industry experts.

While the World Trade Organization’s ruling Friday against United States country-of-origin labelling regulations — known as COOL — was applauded, producers such as Sandie Troop of Bruce Family Farm near Bridgetown and Chris De Waal of Getaway Farm in Canning say the issue cements their decision to operate in a local, direct market.

Relying on the export market, they say, is risky and unsustainable.

"There is a growing demand for that connection between rural and urban, so people know where their food is coming from and where it’s being grown. The local movement has so much momentum and so much support," De Waal told The Chronicle Herald on Monday.

"It doesn’t make sense for Nova Scotia producers to keep beating their heads against the wall, relying on exports and jumping through hoops."

Implemented at the request of the U.S. in 2008, COOL required packers to track the origin of the meat from production to retail. As a result, administrative costs rose on both sides of the border and soon trade to Canada’s largest foreign market weakened. Paired up with the lingering effects of the bovine spongiform encephalopathy crisis, H1N1 and weak pricing, cattle exports dropped 23 per cent and hog exports dropped 36 per cent from 2007 to 2009.

The Canadian Pork Council said the regulations cost the industry millions, while the cattle industry lost $400 million annually thanks to COOL, the Canadian Cattlemen’s Association reports.

In Nova Scotia, the number of hog operations plunged from its peak at 60 producers to just 10 in less than two years, Pork Nova Scotia chairman Terry Beck said in an interview Monday.

In anticipation of lower market prices, Beck, a hog producer from the Kingston area, quit shipping his breeding sows to the U.S. in 2009, just two years after entering the market. The ruling, he said, should reopen market opportunities for producers like himself who got out.

"(COOL) put a lot more little pigs on the market in Canada because there wasn’t as many moving across the border," Beck said. "The majority of (Nova Scotia producers) ship outside of the province, so when we’re facing that much competition from the Prairie producers, it got tough."

Although sympathetic to producers forced out of the business by the regulation, Troop said the family business avoided any COOL-related headaches by sticking to a local, niche market. She suggests it is an approach all producers should consider...

http://thechronicleherald.ca/business/35507-ns-reaction-mixed-cool-ruling