Country-of-Origin Labeling for Meat in Controversy Again

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The 30-day comment period for the Agricultural Marketing Service (AMS) of USDA proposed revised rules for country-of-origin labeling (COOL) for meat ended on April 14.   AMS will review the comments received with a focus on May 23 for implementation of new rules required by a WTO ruling that the current regulations disadvantage imported animals.  The Canadian government has already indicated that it considers the revised rules more discriminatory against meat from imported animals that the current ones found at fault in the WTO case.

The issues at hand are fairly narrow – do the rules put Canadian and Mexican live animals at a competitive disadvantage and do the labels provide adequate information to consumers?  The issue is not about labeling laws; the U.S.  government has the right to require labels stating sources of origin and the WTO ruling reconfirmed that.  Whether or not consumers read the labels is also not an issue.  The cost of COOL for the U.S. livestock production and meat processing industries is not up for debate.  Congress passed the law as part of the 2002 and 2008 farm bills and the President signed them; changing the law is up to them.

The Canadian and Mexican governments filed cases at the WTO claiming their animals were disadvantaged by treatment not consistent with commitments of the U.S. government as a member of the WTO.  In June 2012, the WTO Appellate Body affirmed a previous WTO Panel’s finding that record keeping and verification result in processors segregating animals and create incentives to process exclusively domestic livestock and disincentives to process imported ones.  The least costly way of complying is to rely exclusively on domestic livestock and thus has a detrimental impact on the competitive opportunities of imported livestock.

The AMS proposed rule addresses only the labels for muscle cut covered commodities and information for consumers.  Muscle cut covered commodities derived from animals slaughtered in the U.S. would be required to have origin designations and specify the country location of production steps of birth, raising, and slaughter of the animal from which the meat is derived.  Under the current regulations, muscle cuts from animals that were born, raised, and slaughtered in the U.S. are simply designated as ‘‘Product of the U.S.’’  Muscle cuts of animals raised in Canada and only slaughtered in the U.S. are now labeled “Product of Canada and the U.S.”  Muscle cuts from animals born and partially raised in Canada and finished and slaughtered in the U.S. would be labeled “Born in Canada, raised and slaughtered in the U.S.”  These labels are designed to more closely align the information collected with the information actually provided consumers and justify the record-keeping and verification requirements of the law.

The proposed rule would also eliminate the allowance for any commingling of muscle cut covered commodities of different origins.  Under the current regulations, muscle cuts from animals born, raised, and slaughtered in the U.S. can be commingled during a production day with muscle cuts from animals born in Canada and raised and slaughtered in the U.S. and labeled as “Product of the U.S., and Canada”.  Commingling is eliminated to provide more specific labels to consumers.

Imported muscle cut commodities would continue to have their origin as declared at time of import.  They could have more detailed information about production steps if records are maintained to substantiate the claims.

The issue most talked about by Canadian and Mexican producers and U.S. processors, the cost of separating animals of different origins at slaughter, was not addressed in the new proposed rule.  This was made more of an issue by elimination of the commingling option.

Also raised by some groups was only labeling products for retail sale as required by U.S. law.  There is no requirement to label for restaurants and institutional uses.  Consumers are not getting information for a substantial part of their consumption.  That would require action by Congress.

Canadian Agriculture Minister Gerry Ritz has been vocal in recent weeks about the failure of the proposed rule to resolve the issues.  He is reported to be “very disappointed” with the proposed rule from AMS because it did not address Canada’s biggest concern of live cattle and hogs shipped to the U.S. for slaughter and feeder animals sent to the U.S. for finishing.  He has said that their calculations show about $1 billion per year in lost trade due to COOL, and they will request that much in annual retaliation from the U.S.  The actual level will be set by the WTO.

Losing a trade case at the WTO is important, and not settling it quickly after it is lost is even more important.  We should have learned that from the Brazilian cotton and export credit case.  WTO panel members often look at U.S. programs much differently than the industry in the U.S.  When the original panel concluded that the U.S. was not meeting its commitments and the Appellate Body agreed, the U.S. government had to strike a deal or accept the retaliation.

That is an important point.  The WTO cannot force a country to change trade policies.  The worst that can happen is the U.S. loses an equivalent amount of trade access to Canada.  That is what the EU did when they lost the beef hormone case to the U.S.

In this circumstance, the U.S. has more to lose than some access to Canadian markets.  Perennial problem countries like Russia are watching what we do.  If the U.S. does not respect WTO commitments on meat trade, why should they?  With the U.S. pork and young chicken industries about 20 percent trade dependent and beef 10 percent, we cannot ignore the trade implications of the situation.

At this time, the differences will not be easily overcome.  The American Meat Institute, which is opposed to any type of mandatory COOL, suggested that if AMS promulgates the final rule as proposed or a similar one, AMS should not make the rule effective until the WTO has had an opportunity to determine whether the new rule satisfies U.S. WTO obligations.  The Canadian and Mexican governments will undoubtedly respond at the WTO.  Letting the dust settle a little rather than bulling ahead, looks like a reasonable option.

Ross Korves is a Trade and Economic Policy Analyst with Truth About Trade & Technology (www.truthabouttrade.org). Follow us: @TruthAboutTrade on Twitter | Truth About Trade & Technology on Facebook.

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Ross Korves

Ross Korves joined Truth About Trade and Technology in 2004 as the Economic and Trade Policy Analyst. Researching and analyzing economic issues important to agricultural producers, Ross provides an intimate understanding regarding the interface of economic policy analysis and the political process. Mr. Korves served the American Farm Bureau Federation as an Economist from 1980 – 2004. He served as Chief Economist from April 2001 through September 2003 and held the title of Senior Economist from September 2003 through August 2004. Born and raised on a southern Illinois hog farm and educated at Southern Illinois University, Ross holds a Masters Degree in Agribusiness Economics. His studies and research have expanded internationally through his work in Germany as a 1984 McCloy Agricultural Fellow and study travel to Japan in 1982, Zambia and Kenya in 1986 and Germany in 1987.

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