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MCOOL: A Canadian Perspective

Click here to listen to part 1, part 2, part 3, part 4, or part 5 of the 5-part World of Agriculture series on Canada’s perspective of MCOOL.

In 2008, Canada filed a complaint with the World Trade Organization over USDA’s mandatory country-of-origin labeling or MCOOL rule, as outlined in the 2002 farm bill. Canada alleged that the rule requires imported cattle to be tracked separately throughout the production system, which violates the Technical Barrier to Trade Agreement the United States signed to become a WTO member. That TBT Agreement does not allow foreign products to be treated differently from domestic products, and a WTO panel found that Canada’s allegations were correct. The United States had until May 23, 2013 to issue a final rule placing its country-of-origin labeling situation into compliance with its requirements as a WTO member.

Director of Government and International Relations with the Canadian Cattlemen’s Association John Masswohl says the final rule from USDA merely complicated the matter by trying to be more specific about where animals are born, raised and slaughtered. Masswohl contends that adding separate information about those three steps complicates the tracking process and incurs more costs to packers, which are passed on to Canadian cattlemen. In fact, Masswohl says producers are already operating at a loss due to the way cattle prices are set in Canada.

Because of the way the marketplace works, even the prices in Canada are based off the U.S. prices. So, even if you don’t export the cattle, you still get the price discount because that’s just the way the market works.

Masswohl says U.S. packers have little economic incentive to use Canadian cattle. He describes how Tyson Foods has reacted to the rule at the four of its slaughterhouses which have historically accepted Canadian cattle.

Three out of those four will no longer take Canadian cattle. We can now only sell Canadian cattle to Tyson at their facility up in Pasco, Washington.
So if you happen to be a cattle producer from Saskatchewan or Manitoba that used to ship down into Nebraksa, it’s quite a much farther distance to have to ship them into Washington state.
And in additiona to that, they only take them certain days of the week, so you can imagine the competition for those trucks on that certain day of the week, and the congestion at the border has added a lot of additional cost.

Necessarily, more production steps incur more costs on the part of the packer, who passes those costs to producers. Masswohl says there’s even more in the final rule that doesn’t work out for Canadians: the removal of a provision allowing meat from different countries to be mixed together.

Under the commingling provision, if you did have certain days where you had some U.s.-born cattle and some Canadian-born cattle, at least you could minimize your tracking by calling all of them “Canada/US.”
What this is now saying is “No more commingling. Commingling is not allowed, and you have to identify all of those production steps.”
When I mentioned $25-$40 per head, that was down from what was intially happening before they brought in the commingling provision. In that scenario, we were up around $90-$100 per head.

Masswohl says the initial outcry alleviated some pressure on Canadian cattlemen; USDA introduced a provision allowing commingling of foreign and domestic meat in situations such as boxed beef. Canadian cattlemen were already suffering with an automatic loss of $90-$100 per head due to Canada’s cattle price market being tied to U.S. prices, but the introduction of the commingling provision brought the discount down to a somewhat more manageable $20-$40 per head.

But in 2009, the administrations changed. Under USDA Secretary Tom Vilsack, the commingling provision was removed in the final rule. That decision, coupled with the stricter tracking requirements also in the final rule, will have consequences, as Member of the Canadian Parliament and Chair of its International Trade Committee Rob Merrifield points out.

The way they were going to “comply” was to make it even more difficult on the labeling. So, they’re just playing a silly game, and it has consequences.
I believe there is a way around it, but it’s yet to be seen if USDA is going to go along with this, and I’ll be working with our Congressional counterparts on the ag aommittees in the Senate as well as the House to put forward a proposal that might avoid a war.
No one wins in a war, including America.

Canada’s most immediate option for rebuking USDA’s final rule is retaliation through the WTO. Retaliation consists of a roughly $1 billion budget with which Canada can levy prohibitively high tariffs on American goods. Masswohl says the list includes sweet corn and swivel chairs, and will be aimed specifically at states and industries represented by Congressmen and Senators who supported MCOOL. He adds that Iowa in particular will be singled out for retaliation.

Iowa has been one of those states that has not been helpful on this dispute. Both of your United States Senators have been very strong supporters of this mandatory country of origin labeling law; your former governor and current Secretary of Agriculture has not been at all helpful.
So, Iowa is going to receive some special attention on that retaliation list.

But the most serious retaliation is not a statement from one government to another, but a necessary part of trade: Canada has now begun looking for other markets in which to sell its beef. Member of the Canadian Parliament Rob Merrifield explains the gravity of this development.

We are working very agressively at getting international markets other than the United States.
We just had Japan open up bone-in meat over the age of 30 [days], which is a tremendous market for Canada; china is looking at it,
many Asian countries are looking to Canada to supply their beef.
But that’s not what’s in the best interest of Canada and America.

And as Merrifield says, it doesn’t have to be this way. Both he and Masswohl have theories on how to better implement the same idea. Masswohl says a Congressional amendment could grease the skids.

If they want to maintain mandatory country of origin labeling, which, as I kind of said at the outset, we don’t have a problem with that, but as long as all meats produced in the United States were eligible for a single label, that would resolve the dispute.
Another thing would be to make it voluntary country of origin labeling for meat produced in the United States.

Merrifield’s solution is even simpler. He says the dispute could be resolved with the inclusion of a single word.

I believe the answer is so simple.
All you would have to put in on a label is “Made in North America.” So just add the word “North.”
And I believe Mexico would agree with that, so would Canada, and so would America.
And, make certain that the protocol on food safety is adhered to in all of those three jurisdictions to the standard that America needs, which is already the case.
Problem solved. It doesn’t add $100 to processing of a carcass of an animal in any of the countries.

This week, Merrfield says he will begin discussing a fix to the rule with his American counterparts.