WTO ruling weighs on livestock futures

by Erica Shaffer
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Canada and Mexico may impose $1 billion in retaliatory tariffs.

WASHINGTON – Worries about potential meat trade retaliation by Canada and Mexico dragged down live cattle futures Dec. 7. The World Trade Organization ruled against the United States’ country of origin labeling policy, and authorized Canada and Mexico to impose retaliatory tariffs of $1 billion.

Live cattle futures spot December closed 2.650 cents lower at 121.625 cents per lb., and February down 2.075 cents to 127.150; while spot December and February hog futures closed 1.575 cents lower at 55.475 cents and 57.525 cents, respectively.

Canada reiterated its demands for the repeal of COOL, arguing the policy harms livestock producers in Canada, Mexico and the US.

“Since 2011, the World Trade Organization [WTO] has repeatedly ruled that COOL discriminates against Canadian and Mexican cattle and hogs and violates the trade obligations of the United States,” Agriculture Minister Lawrence MacAulay and International Trade Minister Chrystia Freeland, said in a joint statement. “The government of Canada has made every effort to convince the United States to comply with its international trade obligations.

“We are pleased that on June 10, 2015, the US House of Representatives repealed COOL for beef and pork. The government of Canada has urged the US Senate to do the same, but it has not yet done so.”
That may be about to change. Sen. Pat Roberts, chairman of the Senate Agriculture Committee, said he would continue to search for legislative opportunities to repeal COOL.

“How much longer are we going to keep pretending retaliation isn’t happening?” Roberts said in a statement. “Does it happen when a cattle rancher, or even a furniture maker, is forced out of business? We must prevent retaliation, and we must do it now before these sanctions take effect.”

However, advocates of COOL urged lawmakers to leave the labeling law intact.

“Congress should take no action to repeal COOL or weaken it by converting it to a voluntary program,” Bill Bullard, CEO of R-CALF USA, said in a statement. “Instead, Congress should direct our US Trade Ambassador to negotiate a diplomatic solution to Canada’s and Mexico’s complaints by deploying the United States’ substantial negotiating skills. After all, this is precisely how the United States resolved country-to-country disputes before the US began ceding its sovereignty to the unelected and un-appointed tribunal at the WTO.”

Bullard added that Congress should also direct Agriculture Secretary Tom Vilsack “to immediately begin promulgating new COOL rules to close some of the loopholes identified in the WTO dispute that are effectively limiting the effectiveness of COOL.”

But meat industry stakeholders countered that meat and poultry producers already have suffered financial losses because of COOL and retaliation will only make it worse for them.

The National Pork Producers Council cited research by Iowa State Univ. economist Dermot Hayes that showed the average US pork producer currently is losing money on each hog marketed.

“America’s pork producers need congressional lawmakers to recognize the imminent harm our economy faces,” said Dr. Ron Prestage, NPPC president. “Retaliation has been authorized, and our exports to the No. 1 and No. 2 markets will suffer and so will US farmers, business people and consumers.”

In a statement, Barry Carpenter, president and CEO of the North American Meat Institute said Canada and Mexico will likely impose tariffs before Christmas.

“The only way to remove this lump of coal in the United States’ Christmas stocking is swift repeal of mandatory COOL,” Carpenter said.

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