A story about country of origin labelling

China and the US recently reached a deal in which the US will immediately begin importing cooked poultry products from China, and China totally is going to revisit their ban on US beef this summer. Totally. (As you probably guessed, I'm not enthusiastic about this deal.)

However, this reminds me of a story, about how we still don't have working country of origin labeling for meat:

For a long, long time packaged food required a country of origin label ("COOL"), but this label was not required for foods in a "natural state": fruits, vegetables, meats, and seafood (fish are sometimes considered "meat" in food law, sometimes not).

The 2002 Farm Bill extended COOL requirements to fruits, vegetables, legumes, and most meats and seafood (IIRC turkey and cured ham were exempted), but the pushback from Canada and from US meat packers led Congress to suspend implementation for everything except seafood (this led to a minor trade war with Vietnam and a still-ongoing WTO case about what is and isn't a catfish). The politics here are kind of convoluted: US meat packers and canadian ranchers are against COOL, while US ranchers and Canadian meat packers are for it (in general the ranchers and packers of a given country will always be on different sides of most questions).

Roughly, the issue is about who has to pay for all the record-keeping COOL requires (there's a lot more involved than just putting a label on the package, particularly since parted or ground meat generally comes from a pretty wide array of sources – should the packers or the husbanders be responsible?). Ranchers want the packers to pay, and packers want the ranchers to pay. In addition, US packers, who take a lot of Canadian cattle, don't want to have to worry about their supply chain diversity, while Canadian packers, who take very few imported cattle, liked the competitive advantage that gave them. US ranchers rightly thought that a "US born raised and slaughtered" label would increase the retail value of their cattle, but worried that they would be stuck with the bill for keeping the records. Canadian ranchers considered it a way to make Canadian cattle worth less than they were before. The question of inspection and enforcement was never concretely addressed, and the underlying complaint was that Canadian ranchers or packers would have to pay more for the inspections than the Americans would, for multiple reasons (they have to pay to bring the inspectors out there; Canadian cattle are generally ranched in much more open arrangements, which are more expensive to inspect; Canada already has an origin inspection regime which would now double the regulatory burden; etc.)

The 2008 Farm Bill renewal managed to get a consensus among most of the lobbies to reduce the record-keeping required but keep the basic labelling provisions. COOL requirements were extended to most meats (but not beef), and some herbs (ginseng, IIRC, for some weird reason).

On like the literal last day of the GWB administration, the USDA issued a full set of legal requirements (including a controversial change that re-strengthened the record-keeping requirements, to meat packers' chagrin). Incoming Ag secretary Vilsack wrote a now-famous in meat circles letter ("the Vilsack letter") that confirmed that interpretation. A lot of numbers were thrown around, but a number both sides could more or less agree on was that the recordkeeping required under COOL would add about $150 to the cost of a cow (which is roughly $1000 or so, depending). The format of the labelling was left very open, and the packers were responsible for getting the information to the retailers (hence the recordkeeping worries). Vilsack suggested distinguishing between 1. country of birth, 2. country of raising, and 3. country of slaughter, but this was not absolutely required.

As things stood in early 2009:

As soon as the Obama admin took office, Mexico and Canada requested consultations (incidentally, the actual mechanism Canada and Mexico used was GATT combined with ARO, not NAFTA). Their argument was that the Agreement on Rules of Origin (ARO) prohibited the US from passing COOL laws that cost Canadian companies more to comply with than US companies. (Their actual complaint was the Americans would prefer American beef, but that wasn't a valid legal argument so they went with the cost differential.)

They had to go through this process rather than just raise tariffs because of NAFTA. Canada can't just raise tariffs arbitrarily to influence US law like it could before our free trade agreement.

Later in 2009, the WTO's Dispute Settlement Body empaneled a body to hear the case. Like I mentioned above, this was basically the two halves of the beef industry fighting each other: American cattlemen and Canadian packers wanted COOL; American packers and Canadian cattlemen did not. (And, no surprise, the packers are a more powerful lobby in the US, and the ranchers are a more powerful lobby in Canada.) The COOL proponents argued that COOL is compatible with NAFTA and GATT (which IMO it is), while the COOL opponents argued that COOL is not compatible with ARO. So the DSB was essentially trying to figure out which of the multiple and sometimes contradictory trade agreements had supremacy in the case. This also meant determining if Vilsack's letter was a "measure", a "regulation", or merely "guidance".

The initial DSB punted, essentially, and judged it based on the very basic Technical Barriers to Trade (TBT) agreement (which is a subset of GATT), but did find the promulgated COOL rule to be a "regulation", meaning it fell under GATT rules. They also found that COOL was not intended to provide consumers with information, but to favor the purchase of American meat.

The USTR appealed in 2012 to the WTO's Appellate Body (AB). The AB agreed that COOL disfavors Canadian cattle, but disagreed that COOL was not intended to inform consumers. As it was not intended as a discriminatory measure and so could not be sanctioned under GATT (though Mexico and Canada were then allowed to enact compensatory measures, either a tariff on US beef or a similar COOL regime).

Canada and Mexico then sought clearance under GATT to follow through with their compensatory tariff regimes, and were awarded last month the right to raise tariffs up to $3.7 billion dollars a year against US exports. The House has just decided to forestall this trade war by dropping COOL laws.

So that's how we got there, and it's why trade policy – particularly as regards ag – is just not for amateurs.

© 2017 Weldon Goree. Home