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CME: M-COOL a Legitimate Policy?

by 5m Editor
8 October 2009, at 9:23am

US - This week’s Daily Livestock Reports feel like “All Canada all the time“ but there was more market-impacting news from north of the border yesterday, write Steve Meyer and Len Steiner in their Daily Livestock Report for 7 October.

The Government of Canada launched a formal World Trade Organization (WTO) trade dispute action over the US mandatory country-of-origin labeling (M-COOL) by requesting a formal WTO trade panel. The request is the second step in the WTO dispute settlement policy after two rounds of “consultations“ failed to resolve the dispute.

At issue is the US requirement that many retail food products be labeled as to their origin. The original law was part of the 2002 Farm Bill but the program was delayed several times — primarily due to the efforts of US livestock and meat groups— before finally being enacted after several changes were made via the 2008 Farm Bill.

Canada’s objection deals specifically with the regulations regarding labels on meat products which they claim in a press release to be “...so onerous that they affect the ability of our cattle and hog exporters to compete fairly in the U.S market.“

Secretary of Agriculture Tom Vilsack and US Trade Representative Ron Kirk responded that they “... believe that our implementation of COOL provides information to consumer in a manner consistent with our [WTO] commitments.“

An interesting point in the US press release is this: “Countries have agreed since long before the existence of the WTO that country of origin labeling is a legitimate policy. It is common for other countries to require that good be labeled as to their origin.“ That statement is true. But the real issue is in the debate over the US M-COOL law is the definition of “origin.“ The past labeling to which Secretary Vilsack and Trade Rep Kirk refer generally applied to the country of final manufacture or the country of “substantial transformation.“ A television manufactured in Japan using parts from China, Taiwan and Korea was labeled “Product of Japan“ not “Product of Japan, China, Taiwan and Korea.“ The M-COOL law has no such requirement. With the exception of cattle that are sometimes transshipped through Canada on their way to the continental US from Hawaii, if an animal has ever spent time outside of the US, product from that animal must carry the other country’s name on its label, even if most of it’s body weight was added in the US or the final processing is done in the US And that is the issue that the WTO panel must decide: Is this new, broader concept of origin legitimate under world trade rules?

The charts above show that monthly imports of feeder pigs and cattle and slaughter hogs and cattle began trending downward in early 2008 as US feeders and processors began to secure new sources of supply in anticipation of the law’s restrictions and costs commencing on September 30, 2008. The impact has clearly been greatest for Canadian market hogs, the imports of which are over 70 per cent lower so far in 2009. Feeder cattle imports have also reached their lowest levels since BSE-related import restrictions ended in 2005 and feeder pig imports continue to decline, partly due to M-COOL and partly due to the continuing downsizing of Canada’s swine breeding herd.