The World Trade Organization ruled against the U.S. for the fourth and final time in an ongoing dispute between the United States, Canada and Mexico regarding the U.S. country of origin labeling (COOL) program.
Retaliation by Canada and Mexico will soon become a reality, meaning economically devastating tariffs on a broad spectrum of U.S. exports, from meat and fruit to jewelry, furniture and biofuels. Ripple effects will be felt in nearly every industry, every state and every consumer’s wallet. This is why COOL for beef, pork and chicken — nothing more than a failed government experiment— must be repealed.
In 2002, Congress enacted a mandatory country of origin labeling requirement for meat products. Following amendments made to the 2008 farm bill to address questions of workability regarding the original statute, the Department of Agriculture finalized implementing regulations in 2009. In a recently released congressionally mandated study, the USDA estimated it would cost approximately $2.6 billion for the livestock and meat industry to comply with COOL rules. These rules required livestock from outside the U.S. to be segregated through each step of production, raising the cost of utilizing imported livestock.
Canada and Mexico quickly filed suit at the WTO, claiming these rules are discriminatory and diminish the value of their livestock. The WTO agreed and ruled against the U.S. three times. The U.S. is awaiting the appellate body’s fourth decision, expected this month.
The USDA’s Agricultural Marketing Service, which enforces COOL, has repeatedly said COOL is not a food safety program, but rather a marketing program. However, as a marketing program it is a failure. According to a 2012 Kansas State University study, typical U.S. consumers are unaware of country of origin labeling and do not look for meat origin information when purchasing beef, pork and chicken products.
High compliance costs; no increase in demand. Surely if consumers want this information they’d be willing to pay, right? Wrong! Multiple economic studies show no evidence suggesting mandatory country of origin labeling in the U.S. retail meat markets has increased consumer demand. This isn’t shocking given that the label, if you can even find it, provides no useful information because the program has nothing to do with food safety or animal health.
Other academic studies completed after passage of the 2002 farm bill revealed the potential for only a small premium based on origin labeling, but consumers interested in the origin information were only willing to pay if viewed as a food-safety assurance. All meat offered for sale in the United States must be inspected and passed, and bear a label attesting to this authorized by the USDA Food Safety and Inspection Service, thus negating any potential premium or increased consumer demand for COOL.
For decades, many business owners have voluntarily labelled or branded their meat products to distinguish their product and charge a premium. For example, the grocery chain Safeway markets its “Rancher’s Reserve” beef with a voluntary label, and my home state of Texas has a successful “Go Texan” marketing program to distinguish products made in the Lone Star State. Companies voluntarily market their products to add value, but a costly government mandate yields no benefit if consumers are not willing to pay.
Aside from compliance costs, COOL hurts much more than just the agriculture industry. If the WTO rules against the U.S., and Canada and Mexico retaliate against U.S. exports, the effects could be damaging to a broad spectrum of U.S. industries. In June 2013, Canada published an extensive list of U.S. products that could be subject to retaliation. While Mexico has not published a list, news outlets have reported that retaliation from Canada and Mexico could reach $2 billion.
According to the U.S. Chamber of Commerce, trade with Canada and Mexico supports nearly 14 million U.S. jobs. Ninety-five percent of the world population resides outside of the U.S., and if compliance standards are not met, these American workers will be unable to sell their goods and services across trade barriers, and the U.S. could lose its reputation as a reliable trade partner. American businesses, small and large, can ill afford to pay the penalty for this failed experiment.
Other U.S. industries have testified to the long-term effects that trade retaliation reaps. This past March, the House Agriculture Committee held a subcommittee hearing, led by Rep. David Rouzer, R-N.C., to look into potential ramifications of the WTO decision. U.S. wine makers discussed the retaliatory sanctions they faced resulting from the U.S. loss in the Mexican trucking dispute and to this day they are fighting to get back only a portion of the market they lost.
In light of Monday’s ruling by the WTO, it is more important now than ever to act quickly to avoid a protracted trade war with our two largest trade partners. After hearing from members of the agriculture and business communities, it is the Agriculture Committee’s intent to be ready with a legislative solution this week to repeal COOL for beef, pork and chicken. We must act quickly to prevent the irreparable damages of retaliation, both to our economy and the trade relationship with Canada and Mexico.