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Cool's Impact Heats
Up
Mandatory
Country of Origin Labeling Law continues to raise questions,
increase costs and alienate U.S. trading partners.
by:
Wes Ishmael |
When proponents of the mandatory
Country of Origin Labeling Law—ultimately enacted last September
and implemented in March—first proposed the legislation, they
might have thought it a simple notion: Just label meat products
with the country of their origin so that consumers can decide if
they want to purchase that particular piece of meat.
Though seemingly straightforward, this notion presumed such
labeling is easy and trouble-free. In fact, verifying,
documenting and labeling the source of origin of all meat sold
in the U.S. at retail—the law does not apply to meat sold
through food service—is costly and burdensome.
USDA estimates first-year costs at $2.5 billion. But, sharing
their members experience with labeling seafood for
country-of-origin where the law has already been in force, Deb
White, Associate General Counsel for the Food Marketing
Institute told folks at the this year’s annual meeting of the
National Cattlemen’s Beef Association (NCBA) that labeling
seafood has cost 10 times more than USDA predicted.
Retailers must assume a bevy of new product categories and
labels to comply with the law. And, there is no indication that
consumers are willing to pay more for seafood or meat from the
U.S. or anywhere else.
For beef packers, complying with the law means dedicating entire
shifts at certain plants to slaughtering Canadian and Mexican
cattle so that these carcasses can be segregated and labeled
properly. The added cost of that makes cattle from NAFTA
partners—Canada and Mexico—worth less. There’s no savings for
consumers, though, because of the added cost.
Say tough luck to our NAFTA partners. Besides being significant
U.S. customers, the cattle and beef the U.S. imports from them
allows the U.S. industry to work more efficiently and cost
effectively.
“CattleFax estimates that, at the very least, it would cost
cattle producers $50 to $60 per head if we lost the NAFTA export
markets,” said Erin Daley, U.S. Meat Export Federation (USMEF)
Economist in February. “In addition to the large volume of
variety meats that we export to Mexico, rounds are a very
popular item in that market. Rounds also make up a large portion
of our exports to eastern Canada. It would be very hard to
absorb these products into the domestic market.”
Daley explained during the annual NCBA meeting that Mexico and
Canada accounted for about $2 billion in U.S. beef export
purchases last year – about 60% of the worldwide 2008 total.
Plus, Daley pointed out decreased exportation to NAFTA partners
would mean even more excess capacity in the U.S. beef processing
industry, a decrease in industry inefficiency and more
difficulty for U.S. beef to compete in global markets.
That’s one reason NCBA issued this statement in May, about a
week after both Canada and Mexico filed formal complaints with
the World Trade Organization (WTO) on the grounds that COOL is
inconsistent with the USA’s WTO obligations:
“The National Cattlemen’s Beef Association (NCBA) is extremely
concerned about the impact of COOL on our relationships with our
top two trading partners. Beef trade with Mexico was worth
nearly $1.4 billion in 2008, and trade with Canada came in at
$716 million. Together, the markets account for 58% of our beef
export trade.”
COOL Makes Outside Cattle Worth Less
According to the Canadian Cattlemen’s Association (CCA) in
December, “The combined impact of the lower prices for Canadian
cattle with the increased cost of transporting them greater
distances, plus processing on fewer days, is estimated to be
about $90 per animal. The price that Canadian meat packing
companies are willing to pay is influenced by their U.S.
competitors; therefore the $90 per head loss applies to all
Canadian cattle regardless of whether they are exported to the
U.S. The new U.S. COOL law results in approximately a
$400-million annual loss to the Canadian cattle industry.”
Though information from Mexico is tougher to come by, cattlemen
there indicate the COOL law is costing them at least $100 per
head.
In December the Canadian government requested formal
consultation with WTO regarding COOL. At the time, Brad Wildeman,
CCA president explained, “We hope that the initiation of this
formal process will encourage the U.S. to adopt greater
flexibility in how COOL is administered. Ultimately we want the
U.S to abide by our trade agreements that require Canadian
cattle to be treated as favorably as US cattle.”
Instead, when Agriculture Secretary Tom Vilsack implemented COOL
in March, he threatened to impose even tougher sanctions than
those defined by the law.
In a letter to industry representatives, Vilsack wrote, “The
Department of Agriculture will be closely reviewing industry
compliance with the regulation and its performance in relation
to these suggestions for voluntary action. Depending on this
performance, I will carefully consider whether modifications to
the rule will be necessary to achieve the intent of Congress.”
Among the suggested voluntary actions, Vilsack emphasized, “In
order to provide consumers with sufficient information about the
origin of products, processors should voluntarily include
information about what production step occurred in each country
when multiple countries appear on the label.”
Yet, the law does not require labeling to that depth. To do so
obviously requires exponentially more paperwork, especially
since the law expressly prohibits a national animal
identification system that would give meaning to COOL.
So it was in May that Canada and Mexico filed suit with WTO.
“It is disappointing that we couldn’t reach a solution with the
United States (U.S.) – especially since Canada is the top buyer
of U.S. agriculture exports year after year,” said Wildeman.
“But there really seems to be no other option left for Canada.
The CCA and our federal government have worked hard via
diplomatic means and advocacy, but it appears achieving
resolution to this problem isn’t very high on the U.S. priority
list. It’s an unfortunate situation, but I am pleased that our
government is clearly articulating Canada’s position and
standing up for our cattle producers.”
Travis Toews, CCA Vice President and Foreign Trade Chair, added,
“This impasse is exactly why we established trade agreements
years ago. We’ve tried first to mitigate and reason our
differences out, but ultimately if the U.S. continues this
disincentive for our cattle, we will have to seek a ruling under
the WTO. My hope is that just initiating this case will cause
the U.S. to reconsider whether this law is worth a battle with
their best customer.”
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