click image to zoom The clock is finally and officially ticking on U.S. policymakers regarding mandatory country-of-origin labeling. The U.S. has until May of next year to bring the labeling rules on meat into compliance with the ruling handed down earlier this year by a World Trade Organization (WTO) Dispute Settlement Body. The WTO arbitrator stated that 10 months from the July 23, 2012 adoption of the appellate panel’s report was a reasonable time period for the U.S. to meet the requirements. So May 23, 2013 is the date on which, if the U.S. is not in compliance, Canada and Mexico may commence taking retaliatory action against the United States.
A statement from Canada’s Trade Minister, Ed Fast, and Agriculture Minister, Gerry Ritz said, in part, that “The WTO Appelate Body has recognized the integrated nature of the North American supply chain and marked a clear win for our livestock industry.” Further, they said they were “particularly pleased” that the WTO set a compliance period much closer to the period requested by Canada than the much longer period (18 months) that the U.S. had requested.
The challenge for American officials is to figure out just how to change the current U.S. rules to meet the WTO ruling. U.S. Trade Representative Ron Kirk was quoted by a MeatPoultry.com article saying that the U.S. remains committed to providing consumers with country-of-origin information about meat and poultry (we have no idea why he threw poultry into that statement since the U.S. imports practically no poultry products) but that they would indeed be brought into compliance. Our contacts indicate that federal officials are trying to re-write the rules for MCOOL to meet the WTO requirements. Based on our knowledge of the enabling legislation and the Final Rule which took effect in March 2009, we think that will be difficult, meaning that a resolution to this issue would have to come from Congress in the form of an amended law. And we all know how effective Congress is at passing virtually anything these days. “Small” things like MCOOL — at least they are small in the eyes of DC — almost always require some vehicle to carry them through the process. The Farm Bill would be a logical vehicle for an ag/food issue such as MCOOL but action on a Farm Bill does not seem imminent. If a one-year Farm Bill extension is passed, some other vehicle will have to be found.
MCOOL’s major impact was on the labeling of product derived from imported animals. The differentiation requirements forced packers to segregate product and, in most cases, handle animals imported for direct slaughter and animals born in Canada or Mexico and then fed in the U.S. on specific days. These segregation practices as well as adding stock-keeping units for the differently labeled product increased costs. Canadian and Mexican producers have argued that those costs were taken out of prices paid for their animals, thus causing economic harm.
The charts at right show weekly import data for hogs (we only bring pigs in from Canada) and cattle with the vertical red line in each chart indicating the implementation of MCOOL in 2009. MCOOL is obviously not the only factor driving imports. Canada’s competitiveness has been harmed by the strength of the Canadian dollar. Drought conditions in Mexico have forced more cattle to U.S. ranches and feedlots. Southern packers market beef from Mexico-born cattle to largely Hispanic markets. A resolution to the WTO case and better relationships with our neighbors are both positive outcomes but don’t expect any big changes in imports come May 23, 2013.