ICOW convention addresses COOLWritten by Emilee Gibb
Casper – “We need to look at this as a clean slate. We need to have a strategy for what it is that our cattle industry is going to do when we face this opportunity to address a new Congress and a new administration,” said Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF) Chief Executive Officer Bill Bullard.
Bullard gave an address during the 2016 Independent Cattlemen of Wyoming (ICOW) meeting on Nov. 4-5, where he discussed the importance of reinstating the country of origin labeling (COOL) law.
“We have to restore mandatory country of origin labeling. We know it facilitates competition,” said Bullard.
He explained that COOL enables consumers to initiate comparative forces in the marketplace.
“Only if a consumer can look at a grocery store shelf, exercise preference and decide which country they want their beef produced in can they send demand signals upstream in the supply chain,” stressed Bullard.
Use of a system where consumers can voice preferences is critical to creating a competitive marketplace, explained Bullard.
“COOL is the only tool available to independent cattle producers so we can actually compete at the grocery store level where demand signals are initiated by virtue of a consumer expressing choices in the marketplace,” he said.
With the recent agreement to import fresh beef from Brazil, Bullard expects imports to far exceed the ruled 88 million pounds and to outcompete domestic production.
“They’re now expected to import about 209 million pounds in 2017. The cost of production is significantly less in Brazil,” asserted Bullard. “They will export as much beef as they can supply in our market, and they will supplant domestic production in the process.”
Bullard explained that COOL functioned as predicted in showing consumer preference.
“The Grain Inspection, Packers and Stockyards Administration did a study, and they found that consumers would pay more for USA beef than they would for Mexican and Canadian beef. That’s exactly what we expected country of origin labeling to do,” he said.
Bullard noted that the World Trade Organization (WTO) criticized COOL due to the negative impacts it had on Canadian beef prices.
“Folks, that’s exactly what we expected to happen in a competitive marketplace,” said Bullard. “As consumers express a preference for USA beef, retailers are going to charge more for it or simply, they will charge less for the Canadian product.”
He cautioned that without consumer preference for domestic beef, the U.S. beef industry is at a disadvantage to countries with lower-priced cattle.
“In 2016 in the spring, Brazilian fed steers were valued at about $69 per hundredweight, but the U.S. steer was valued at the time around $121 per hundredweight,” said Bullard. “Clearly, they have a distinct advantage in our market. We need to address this and recognize this.”
Throughout its span, opposition to the COOL claimed that it would disadvantage cattle producers, said Bullard.
Although first proposed in 2004, COOL was not implemented with enforcement until March 2009. The law included a loophole that allowed meat packers to use a multiple country label.
“All they had to do was include one foreign animal in their entire day’s production,” explained Bullard. “One day’s production could be mislabeled as a product of three countries.”
He noted that as a result, producers did not receive much benefit from early COOL.
“In November 2009, Kansas State University came out with a study saying that COOL was of no benefit whatsoever to cattle producers or to consumers,” continued Bullard.
After a ruling by the World Trade Organization (WTO) against the U.S. saying that COOL was not in compliance with international trade law, the rules were changed to a three-part program that identified where the animal was born, raised and slaughtered.
“We finally had country of origin labeling that indeed distinguished our product from all of the imported products, and we saw cattle prices at that time begin to rise more than any time in history,” said Bullard.
In October 2014, WTO received a complaint against COOL. In response, the U.S. Secretary of Agriculture recommended that Congress repeal COOL because it was not in compliance with international trade law in April 2015.
Bullard noted, “An economic study showed again that country of origin labeling was no benefit to producers or to consumers.”
“We need to go back to this new Congress and this new administration and tell them that we need mandatory country of origin labeling. We need Congress to address the criticisms that WTO has against us,” said Bullard.
Bullard noted that WTO received a complaint against the exemptions in the COOL law that resulted in Canada tracking the origins of 100 percent of cattle exported to the U.S., while 67 percent of the products from those animals were not required to be labeled.
“There was an exemption for food service establishments and exemptions for processed food items,” said Bullard. “We can readily correct those and essentially take away from WTO the argument they used to convince Congress to repeal COOL.”
WTO also received a complaint against the three-step rules for classifying where an animal was born, raised and slaughtered, using the example of an animal that was born and raised in early life in the U.S., sent to Canada and raised, then sent back to the U.S. for slaughter.
“In other words, if an animal were actually raised in part in more than one country, the three-step process rules did not address them. We can address that as well in a new COOL law,” concluded Bullard.
Ag groups split in opinions toward World Trade Organization’s recent COOL rulingWritten by Saige Albert
On Oct. 20, the World Trade Organization (WTO) released its latest decision concerning mandatory Country of Original Labeling (COOL).
CME Group reported, “While COOL supporters such as Senate Agriculture Committee Chairperson Deb Stabinow tried to trumpet WTO’s allowance that providing country of origin information to consumers is a legitimate policy goal, this was another resounding defeat for this method of doing so.”
In their report, the WTO cited increased segregation and detrimental impacts, as well as increased burdens on a number of segments of the livestock industry.
“In particular, the compliance panel concluded that the amended COOL measure increases the original COOL measure’s detrimental impact on the competitive opportunities of imported livestock in the U.S. market because it necessitates increased segregation of meat and livestock according to origin; entails a higher recordkeeping burden; and increases the original COOL measure’s incentive to choose domestic over imported livestock,” stated WTO.
They further continued, “The detrimental impact caused by the amended COOL measure’s labeling and recordkeeping rules could not be explained by the need to convey to consumers information regarding the countries where livestock were born, raised and slaughtered.”
National Farmers Union President Roger Johnson said, “We were instrumental, as an organization, in having COOL be a part of the 2002 Farm Bill and having it adopted again in the 2008 Farm Bill.”
“This is an issue for us for two reasons,” he continued. “First, consumers are more and more concerned about where their food comes from. Secondly, producers are proud of what they produce.”
COOL helps to provide that information, Johnson continued.
“This issue has faced numerous legal, legislative and WTO challenges in the last four or five years since 2009,” Johnson said. “In the legal arena, we have won three straight court decisions.”
Johnson also marked success in keeping COOL in the most recent farm bill, despite efforts to remove the language.
“That leaves us with the WTO – the third of the big challenges we have been faced with,” he said. “We want the USDA and U.S. Trade Representative to appeal this decision on COOL. Every decision that was initially rendered was modified on appeal, and we have no reason to expect anything other than that.”
“I think there is a strong conviction that the COOL statute needs to remain in place,” Johnson added. “We are willing to talk about details and how it is implemented, but in all of the decisions rendered on this case, and they have always said the law is ok.”
Annie Bier of the U.S. Cattlemen’s Association (USCA) added, “The biggest thing that we thought, as cattle producers, is the WTO still said we can do this. We are grateful for that.”
Bier noted that it is important for consumers to have access to the information that is available.
“We know that packers sort over 100 brand names. We sort for maturity, quality, grade and more,” she said. “We don’t think the addition of keeping track of country of origin is costly, either.”
“It was never the intent of the law to be protectionist,” Bier said. “We just want our consumers to have full information and let the free market system work.”
Concerns with the ruling
Patrick Woodall of Food and Water Watch noted that the key information that can be gleaned from the ruling deal with the issue of benefits.
“The ruling significantly overstates the costs and understates the benefits of COOL,” Woodall said. “This is the grounds for appeal. New COOL represents a clear improvement on the information and accuracy on what is provided to consumers.”
At the same time, Woodall also believes segregation costs are “massively overstated” by considering labeling combinations that are both impractical and unlikely.
“There are a host of hypothetical examples of multi-country schemes to justify the wide variety of potential labels, but many are hypothetical and silly,” he explained. “For example, one scenario has Canada exporting livestock to Mexico where they would be raised and imported to the U.S. for slaughter.”
Woodall continued, “Canada estimated fewer than 20 live cattle per year being exported to Mexico.”
Johnson added that the presumption that cattle are “globe trotters” is not the case in practice.
“We can work through this in any number of ways,” Johnson said. “Undoubtedly, the result of the appeal is going to be at least somewhat different than the current decision. It is foolish to talk about repealing laws and denying consumers information when we believe there is legal standing for appeal.”
After the ruling, American Farm Bureau (AFBF) President Bob Stallman commented, “Americans prefer to buy food products that they know were grown and raised by America’s farmers and ranchers, and AFBF supports a COOL program that conforms to appropriate parameters and meets WTO requirements.”
However, Stallman added, “A World Trade Organization compliance panel ruling that U.S. COOL regulations are not in compliance with previous WTO decisions means that there must be further work to craft an accepted COOL program.”
Farm Bureau will carefully review the decision and then determine further recommended actions, he said, adding, “We will work with the Office of the U.S. Trade Representative and USDA to reach the goal of an effective COOL program for meats that conforms to international trade rules.”
Those agriculture groups that have expressed opposition to a mandatory COOL program for quite some time have noted that the retaliatory measures possible will impact producers.
“The announcement by the WTO dispute panel on the U.S. Country of Origin Labeling rule brings us all one step closer to facing retaliatory tariffs from two of our largest trading partners,” said Bob McCan, president of the National Cattlemen’s Beef Association (NCBA). “Our producers have already suffered discounts and faced the closure of a number of feedlots and packing plants due to the effects of this short-sighted regulation.”
McCan called COOL a “failed program” and cited potential to cost the beef industry and the U.S. economy with no benefit for producers.
“NCBA has maintained that there is no regulatory fix to bring the COOL rule into compliance with our WTO obligations or that will satisfy our top trading partners,” he continued. “We look forward to working with Congress to find a permanent solution to this issue, avoiding retaliation against not only beef but a host of U.S. products.”
At this point, the U.S. has 60 days to appeal the WTO decision, and Agriculture Secretary Tom Vilsack told DTN on Oct. 27 that the Obama administration likely won’t appeal the ruling until sometime in January.
“We’ve received indications from the WTO that we probably should wait until January to make that decision because they are not capable of processing any additional appeals, based on the level of work at the WTO that is currently in the queue,” Vilsack said in an interview. “We have some time in which to make that decision.”
The appeal will be subject to expedited review and decision process, meaning a decision could be made by as soon as spring 2015.
Should the appeal find in favor of the Canada and Mexico again, CME Group noted that the retaliatory tariffs could be into effect by late 2015 or early 2016.
Livestock industry debates US response to WTO ruling on country of origin labelingWritten by Christy Martinez
The dispute settlement panel proceedings were initiated in 2008, when Canada and Mexico filed a complaint with the WTO alleging that U.S. COOL requirements were designed to achieve a protectionist objective, and argued that COOL requirements breached WTO obligations by discriminating against Canadian and Mexican livestock exports to the U.S.
The countries alleged in their WTO complaint that their respective livestock industries were at a competitive disadvantage by COOL because of higher segregation costs at the point of harvest for foreign cattle.
Panel rules on COOL
The dispute panel’s extensive report affirmed the right of the U.S. to require country of origin labeling for meat products, but disagreed with specific implementation measures.
In November 2011, WTO ruled largely in favor of Canada, Mexico and other countries that joined in to file the complaint, and the U.S. has until March 23 to respond, either by adopting COOL to become WTO compliant or by appealing to the WTO panel.
On Feb. 17 the U.S. Cattlemen’s Association (USCA)said it supports a “vigorous appeal” of the WTO dispute settlement panel’s ruling. USCA President Jon Wooster of San Lucas, Calif. says his organization is actively engaged in the matter, and will continue working with the Obama administration as the appeals process unfolds.
Truth in labeling
“Contrary to the misinformation some groups insist on spreading, the dispute settlement panel affirmed the right of the United States to require country of origin labeling for meat,” says USCA Director Emeritus Leo McDonnell in a statement from USCA. “The bottom line is that our foreign competitors and the packing industry want to weaken the eligibility requirements for the ‘A’ label, ensuring their meat supply is a generic product that can be marketed under the guise of the U.S. born, raised and processed label. Their argument is that feeding or processing a live animal is substantial transformation and that the meat derived from that carcass qualifies for the ‘A’ label. The ‘A’ label meat is the most desired category by consumers, packers and retailers, and it provides price discovery for all categories of meat. Differentiation of product and branding of product provides for a more competitive pricing structure that ultimately benefits all producers.”
“What gets entirely lost in this argument is the consumer’s right to truth in labeling and U.S. cattle producers who have a right to differentiate their product in the retail case,” continues McDonnell. “Following the dispute panel’s ruling, some U.S. cattle groups have urged the administration not to appeal, and have stated publicly that the solutions lie in making statutory changes to, or weakening, the COOL law. This fractured message undermines U.S. cattle producers.”
Nineteen U.S. Senators, led by Tim Johnson (D-SD) and Mike Enzi (R-WY), sent a letter to the Obama administration urging it to maintain its support and defense of COOL at the WTO level.
However, Kansas State University ag economist Glynn Tonsor cautions that Canada and Mexico are important beef export markets for the U.S., and he says that international response to the COOL debate in general may not necessarily be meat retaliation.
“If the U.S. chooses to fight the ruling, Mexico could put additional tariffs on pork exports, which wouldn’t be good, because that makes pork more expensive for the U.S. to export into Mexico, and that would adversely hurt beef, as well,” says Tonsor, adding that tariffs could also be put on non-agriculture products. “There might be a commodity more politically sensitive than a meat product that would still be within the WTO response allowances that Canada and Mexico would be allowed to put a tariff on that might force the U.S. meat industry to answer to a non-meat segment in the U.S. – it may not be just a meat-oriented discussion as we go forward.”
Perception is reality
In a statement from USCA, USCA Director and COOL Committee Chairwoman Danni Beer says, “Perception is reality. Go to your local grocery store and take a look at the meat labels in the retail case. You’ll discover that retailers are demanding meat labeled as U.S. origin, and that’s because consumers are demanding it and purchasing it. Whether consumers prefer a product of the U.S. over one from Canada is their decision to make, and the ability to identify the difference in origin should be readily available to consumers so they can make informed purchases.”
“I am optimistic that the WTO appeals process will ultimately keep the consumers’ best interests in mind. I applaud the amount of resources and attention the Obama administration has devoted to this issue, and I am confident the administration will mount a vigorous appeal to the dispute panel’s flawed decision,” continues Beer.
Tonsor says his opinion is that Canada and its accompanying countries are being reasonable.
“The WTO ruling was highly expected, and going forward I would encourage the U.S. to recognize that fighting it is probably unwise,” he says. “I think the free market can address the issue of providing information such as origin. I don’t think we need to do it in a way that’s non-WTO compliant.”
“I think Canada and the others are not only reasonable in filing the complaint, but even reasonable in what they’re expecting in terms of changes going forward,” adds Tonsor.
Report: consumers correlate origin and quality
A newly released study titled Navigating the Product Mindset: Food Industry Report analyzes the differences between consumer and manufacturer perceptions regarding the make-up of today’s food industry.
The study found that the vast majority of manufacturers that were polled believe there is a distinct correlation between the perceived quality of unprocessed food products and the country of origin. The study also finds that more than 50 percent of consumers also believe the country of origin of food products will become more important over the next five years.
Origin labels explained
Under COOL, there are four categories of country of origin labels to be applied to muscle cuts, and a fifth label is reserved for ground meat.
Label “A” is reserved for “U.S. Origin” meat and is applied to meat derived only from animals born, raised and slaughtered in the U.S. Label “B,” or the “Multiple Countries of Origin” label, is used on meat derived from animals not exclusively born, raised and slaughtered in the U.S. Label “C” is used for meat derived from animals imported into the U.S. just prior to slaughter. Label “D” is used for foreign country of origin meat. The ground meat labels list all “reasonably possible” countries of origin of the animals from which the meat is derived.
US Trade Representative decides to appeal ruling against country of origin labelingWritten by Christy Martinez
While the Dispute Panel’s findings took issue with certain implementation rules, the panel did affirm the right of the U.S. to label food products with country of origin.
U.S. Senators Mike Enzi and Tim Johnson, (D-SD), applauded the decision to file an appeal, saying they see the move as an effort to ensure the law is implemented as intended, and the U.S. Cattlemen’s Association (USCA) agrees.
“We disagree with the panel’s assessment that the law offers less favorable treatment to meat products imported from Canada and Mexico, and USCA membership feels strongly that those aspects of the ruling should be re-examined by a higher authority,” said USCA President Jon Wooster in response to the news.
“Recent reports show that exchange rates have affected trade flows in beef and cattle from Canada,” continued Wooster. “The CME Group published an analysis titled ‘Feeder Cattle From Mexico Aid U.S. Supplies’ on March 21, 2012. This analysis provides evidence that COOL is not a deterrent to imports. According to the report, in 2011 the U.S. imported about 1.4 million head of feeder cattle from Mexico, up about 190,000 head or 15 percent more than the year prior. It’s notable that neither Canada or Mexico have referenced this fact in the COOL debate.”
“The USTR has a strong appeals case, and it is USCA’s intention to support the appeal,” noted Wooster.
USCA also supports efforts by Senators Tim Johnson (D-SD) and Mike Enzi, along with 17 other U.S. Senators who sent a letter last fall urging the USTR to appeal the ruling and to continue supporting the consumers’ right to labeling.
R-CALF USA, a long-time supporter of mandatory COOL, said they are thankful the USTR chose to defend the COOL law, which the organization refers to as “constitutionally passed.”
“We’re in a no-win situation regarding this frontal attack on our COOL law because our nation should not tolerate for an instant a foreign entity’s efforts to undermine our constitutionally-passed domestic laws in the first place,” said R-CALF USA Region VI Director and COOL Committee Chair Mike Schultz.
Appeal sparks NCBA
However, the National Cattlemen’s Beef Association (NCBA) has issued a statement expressing concerns that the appeal will do more harm than good.
“We are very disappointed in this decision. Instead of working diligently to bring the United States into WTO compliance, our government has opted to engage in an appeal process, which jeopardizes our strong trade relationship with Canada and Mexico, the two largest importers of U.S. beef,” said NCBA vice president Bob McCann. “An appeal is the wrong answer and a waste of valuable resources. This appeal will do nothing but escalate tension with our valuable trade partners and will prolong an issue that could be resolved quickly. We should be working toward a solution instead of creating a bigger problem.
“NCBA will engage with Canada and Mexico to prevent any retaliatory action that could occur from this unfortunate decision made by the U.S. government. Cattlemen deserve a government that fights for and protects our opportunities. We need a government that not only demands WTO compliance of our trade partners, but one that ensures the United States is abiding by these same guidelines.”
The Country of Origin Labeling (COOL) rule makes it mandatory for grocers to label where their beef, pork, chicken and ground beef originate. Animals born, raised, and processed in the U.S. can only be labeled as U.S. origin. Meat from other countries must be labeled a mixed origin product.
The mandatory version of COOL went into effect in March 2009. Six months later, Canada filed a complaint with WTO, and Mexico quickly followed suit. The two countries’ trade officials said cattle and hog exports dropped sharply, and argued that U.S. mandatory COOL amounted to an illegal, non-tariff trade barrier.
U.S. Senators Mike Enzi and Tim Johnson, D-S.D., sent a letter in December 2011 with 17 other Senators asking United States Trade Representative Ron Kirk and Agriculture Secretary Tom Vilsack to appeal the decision of the WTO that ruled against the implementation of the U.S. COOL law. The law would require all imported goods to indicate the country in which the product originated and provides consumers with information about where their food comes from.
On Nov. 18, 2011 a WTO Dispute Settlement Panel (DSP) ruled on complaints from Canada and Mexico. While the DSP ruled that the U.S. has the right to require COOL, it ruled that the labeling provides less favorable treatment to imported meat from Canada and Mexico. Johnson and Enzi worked together to write the original COOL law in 2002 and have worked tirelessly over the years to defend the law.
COOL takes effect, compliance training continuesWritten by Christy Hemken
USDA Agriculture Marketing Service (AMS) Public Affairs Specialist Billy Cox says March 16 began a six-month period of industry education and outreach. “The goal is to help retailers fully understand what the law is about and how they’re supposed to label their products to be in compliance with the law,” he explains of the transition period.
Retailers are subject to COOL implementation when the invoice cost of all purchases of perishable agricultural commodities exceeds $230,000 during a calendar year. The term “perishable agricultural commodity” means fresh and frozen fruits and vegetables.
“There are products already in the food supply chain before the law took effect, so we’re waiting for those to move through, as well as give the industry a chance to understand the law,” says Cox.
The law allows country-of-origin information to be provided to consumers by means of a label, stamp, mark, placard or other clear and visible sign on the covered commodity at the final point of sale to consumers.
He says AMS has already done a number of outreach sessions with the industry, and is working directly with the industry to answer questions and hold one-on-one meetings.
“Right now compliance is too early to tell,” he says. “We should know in three to six months how meat processors will react to this, and then we’ll have a better feel for how things are working within the industry.”
USDA will contract with various groups such as state departments of agriculture to monitor COOL labeling compliance. The agency will also conduct industry audits, and Cox says fines will be up to $1,000 per offense.
In Wyoming COOL compliance will be monitored by the Wyoming Department of Agriculture’s (WDA) Consumer Health Services Department.
“If USDA runs this part of COOL like it did seafood, we’ll go to some training and they’ll explain what to look for and how to write up violations,” says WDA Consumer Health Services Manger Dean Finkenbinder.
Although Finkenbinder has been in contact with USDA regarding the training, he doesn’t yet know when it will take place. “We won’t do any inspections until we go through the training,” he says.
After the seafood training, Finkenbinder says USDA gave the WDA a list of establishments to check for proper labeling. “I suspect that’s how they’ll do it this time, and we’ll most likely conduct those inspections along with our regular ones.”
Although the WDA was only sent to three establishments to check the seafood labeling, Finkenbinder expects the most recent list of commodities will involve many more locations.
According to AMS, cooperative agreements are in place with 42 states with enforcement infrastructure to assist with retail surveillance reviews. The agency says retail surveillance reviews will begin by April 2009 and for those states not entering into a cooperative agreement AMS will conduct the reviews itself. AMS will begin audits of firms that supply retailers with covered commodities in July 2009.