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%
U.S. pork export figures for September were released by USDA's Foreign Agricultural Service and Economic Research Service and they were excellent (Figure 1). Total U.S. exports of 441.751 million pounds, carcass weight equivalent, made September the fourth largest export month ever. That total was 37% larger than last year. U.S. exports amount to 3.712 billion pounds, carcass weight equivalent, year to date. That total is 21% larger than last year and puts us on a pace to see about 22% of total carcass weight output shipped beyond our borders.
Japan remains our largest muscle meat export customer and highest value export market. Mexico is second in muscle cuts and by far our largest variety meat market. Total tonnage going to Mexico exceeds all other destinations. China/Hong Kong is the third largest destination for U.S. pork this year with carcass weight shipments growing by 88%. Canada remains our fourth largest market, but has a very slim lead over Korea. September's shipments to Korea were in a "normal" range, but the foot-and-mouth-disease-driven surge last spring has increased our shipments to Korea by 129% through September.
Be Thankful
Finally, allow us to wish all of you a very happy Thanksgiving holiday. While virtually all business matters have been a challenge this year, we still have so much to be thankful for. Make sure to pause awhile to contemplate your blessings. Among ours are a loving and bountiful God, family, friends, a rewarding livelihood . . . the list is very long . . . just as it is for many of you! Enjoy those blessings this week and every week.
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Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com