COOL’s Collateral Damage
Jul 03, 2013
By Bill Horan: Rockwell City, Iowa
Among the many tragedies of war is collateral damage: deaths and casualties of non-combatants who happen to be in the wrong place at the wrong time as well as the destruction of civilian property.
Nations at war try to keep collateral damage to an absolute minimum. At least the civilized ones do.
Trade wars also can deliver collateral damage—and in a new dispute with Canada and Mexico, the Obama administration is preparing to let innocents suffer. American consumers and farmers are about to pay a steep price.
The problem centers on a regulation abbreviated as COOL, which stands for "country-of-origin labeling." Despite the name, there’s nothing calm or trendy about COOL, because it forces packagers and retailers to obey strict labeling rules that describe where livestock was born, raised, and slaughtered.
That may sound reasonable. Why shouldn’t people know where their meat comes from? In its practical application, however, COOL bans the commingling of meat produced in different countries.
Canada and Mexico have rightly objected, saying that this amounts to illegal protectionism even as it masquerades as a consumer right. They’ve complained about losses totaling hundreds of millions of dollars.
Those losses won’t affect only foreigners. They’ll filch from American pocketbooks too, as the cost of meat rises in grocery stores and restaurants.
This is crazy—the sort of job-killing policy that will make our sluggish economy recovery slow down instead of speed up.
We’re also throwing our regulatory regimes out of whack. Harmonized regulations should be a broad goal of trade policy, especially as the United States embarks on ambitious but sensitive trade talks with the European Union. Yet COOL ignores all of this, building artificial regulatory barriers to the flow of goods and services across borders.
And it gets worse. COOL violates America’s obligations as a member of the World Trade Organization. We’re "protecting" our markets from Canadian and Mexican meat without an adequate reason, such as public health. Now the WTO will let Canada and Mexico retaliate, making it harder for us to export certain American products.
In June, Canada released a long list of products that soon may face punitive tariffs because of COOL. Many involve meat, but lots don’t. In all, the targets come from 37 different product sectors. They include everything from cherries and cheese to chocolate and frozen orange juice. A number of items aren’t even agricultural, such as jewelry, steel tubes, and "swivel seats with variable height adjustment."
One of the targets on the list is close to my heart: corn. That’s what I grow here in Iowa. As with most American corn farmers, about one-third of my corn goes overseas, in a variety of forms.
If Canada slaps a special tariff on U.S. corn, it will hurt my bottom line. I’ll have a harder time selling what I grow to our northern neighbors. So will other corn farmers, upsetting the laws of supply and demand. What we grow ultimately will fetch lower prices.
This makes no sense. I don’t raise livestock or produce meat. Why should I suffer in a dispute over how meat is labeled? Why should factory workers who produce "swivel seats with variable height adjustment" watch their customer base erode? Why should American consumers pay higher prices to put food on their tables?
Well, that’s the nature of collateral damage. It’s an unintended consequence—though, in this particular case, the result is wholly predictable. The Obama administration, which likes to talk about its commitment to global trade, really ought to know better.
Canada’s list of retaliatory targets is still unofficial. Mexico has not yet published its own list, but will: A statement in May threatened that "the imposition of retaliatory measures" are just a matter of time.
Ottawa released its list in a last-ditch attempt to encourage a better solution. Mexico City will have the same idea in mind. Washington should heed these fair warnings before it’s too late.
The lesson should be obvious: In a trade war, everybody loses.
Bill Horan grows corn, soybeans and other grains with his brother on a family farm based in North Central Iowa. Bill volunteers as a board member and serves as Chairman for Truth About Trade & Technology (www.truthabouttrade.org). Follow us: @TruthAboutTrade on Twitter | Truth About Trade & Technology on Facebook.