Icy Relations over COOL Intensify

December 18, 2015 05:40 AM
Icy Relations over COOL Intensify

Congress overwhelmingly passed a $1.5 trillion year-end spending bill today that eliminates the United States’ Country-of-Origin Labeling (COOL) law for beef and pork, which has never been popular with Canada or Mexico. Had Congress not repealed the legislation by the end of today, U.S. dairy exporters could have become subject to retaliatory tariffs, according to the U.S. Dairy Export Council (USDEC).

“As the year comes to a close, most U.S. dairy product prices are trading near multiple-year lows,” says Mary Ledman, dairy economist with the Daily Dairy Report and president of Keough Ledman Associates Inc., Libertyville, Ill. “The United States cannot afford to lose its competitive access to two of its largest dairy export markets.”

COOL legislation harks back to the 2008 farm bill, which contained legislation that required retailers to inform consumers where various meats, fish, shellfish, nuts, fruits, and vegetables originated. USDA published an interim COOL rule August 1, 2008, and then a final rule January 15, 2009.

“Soon after implementation, Canada and Mexico filed suit with the World Trade Organization, charging that COOL discriminated against livestock that originated in Canada or Mexico,” says Ledman. In 2011, the World Trade Organization (WTO) ruled that COOL resulted in Canadian and Mexican livestock being treated less favorably than U.S. livestock.

“The United States appealed the WTO decision in 2012, but lost,” Ledman notes. “In May 2013, USDA amended the COOL requirements to require specific information regarding where animal sources of affected meat were born, raised, and slaughtered. Again, Canada and Mexico filed suit with WTO.”

Then in 2014, WTO again ruled in favor of Canada and Mexico. The following June, the United States lost its second appeal. The U.S. House of Representatives responded quickly by repealing COOL in the same month (June 2015) for beef, pork, and chicken.

While the U.S. Senate never followed suit, the $1.5-trillion spending bill passed today repeals mandatory country-of-origin labeling for beef and pork, preventing retaliatory tariffs. Had Mexico implemented retaliatory tariffs, it would not have been the first time that the country placed retaliatory tariffs on U.S. dairy products in response to a trade dispute, says Ledman. In 2011, U.S. cheese exports were subject to a 25 percent tariff, she notes.

“This would not be the first time that Mexico has placed retaliatory tariffs on U.S. dairy products in response to a trade dispute,” says Ledman. “In 2011, U.S. cheese exports were subject to a 25 percent tariff.” In 2013, Canada published a list of products, including cheese, that could face trade retaliation under the COOL dispute.

“It is critical not to underestimate the importance of the Mexican and Canadian dairy product markets to the U.S. dairy industry,” says Ledman. January through October 2015 nonfat dry milk exports to Mexico totaled 457 million pounds, up 26 percent compared to last year, and year-to-date nonfat dry milk exports to Mexico accounted for 44 percent of all U.S. nonfat dry milk exports, she notes. In addition, Mexico is the largest market for U.S. cheese, with year-to-date exports reaching 168 million pounds, or 28 percent of total U.S. cheese exports.

Ledman adds that January through October cheese exports to Canada totaled 24 million pounds, or 4 percent of U.S. total cheese trade. “While this may seem paltry, in a year of bulging supply, every trade matters,” says Ledman. Canada is also the second-largest export market for U.S.-produced whey proteins. 

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