 |
| Photo courtesy of USDA. |
Canada and Mexico have started formal processes in the World Trade Organization to seek authorization to impose prohibitive tariffs on possibly billions of dollars of U.S. exports.
This follows a decision by the Appellate Body of the World
Trade Organization (WTO) that certain U.S. country-of-origin-labeling
regulations (COOL) discriminate against imported products in violation of WTO
rules. The issue began as a “minor”
section of the 2002 farm bill, one of those “must pass” mammoth pieces of
legislation that attract all types of special-interest provisions. Some NGOs and smaller farmer and rancher
organizations pushed for the legislation (especially some cattle ranchers and
swine producers in the northern United States who were distressed at the sight
of live cattle and swine from Canada arriving for processing in the United States). The legislation mandated labeling meat
processed in the United States from imported animals following a complicated
series of rules based on where the animal had been born, raised, and
processed. The effect, no doubt
intentional, was to create a price penalty paid for Canadian and Mexican cattle
compared to local cattle.
The United States imported hundreds of thousands of cattle
and equally large amounts of swine from Canada because of differences in
growing seasons, grazing, and feed availability. Although Mexico was not particularly a
target, the United States also imported nearly a million head of cattle from
Mexico. It is worth noting the United
States exported more than $1 billion of beef to Canada and Mexico, as the
production and consumption in North America is highly integrated.
Implementation of the new rules was effectively stalled
under the Bush Administration, which was more responsive to strong farm-state
opposition than the Obama Administration, which implemented the rules in 2009,
accompanied by a letter
from Secretary of Agriculture Tom Vilsack, threatening sanctions if certain
flexibility in the rules was used.
The effect of the rules was to force U.S. processors to
purchase Canadian or Mexican animals only on certain days of the week, which
increased the expense of processing the live animals compared to locally born
and raised animals, or to not purchase them at all. This had the effect of reducing the imports
from Canada and Mexico as well as the perverse effect of helping cause the
closure of packing plants in the northern United States and Texas, thus raising
costs for ranchers in those areas (since they have to pay the additional cost
to transport their animals to more distant plants).
Canada and Mexico challenged both the new rules and the
Vilsack letter in the WTO (interestingly, neither bothered to challenge under
the NAFTA dispute resolution process, a comment on the perceived
ineffectiveness of that system). After
extensive briefing and hearings, Canada and Mexico won their cases before a WTO
panel and the Appellate Body in 2012.
The United States in September 2013 announced cosmetic compliance by
changing the rules to a system even more onerous on imports, leading to the
recent request to the WTO by Canada and Mexico to declare the U.S. response
insufficient. If successful, this would be followed by a request for WTO
authorization for retaliation by the two countries against imports to the United
States. In a recent dispute on trucking
services, Mexico imposed tariffs of $2.4 billion on U.S. exports, carefully
targeted to the congressional districts of the legislators responsible for the
law, so presumably the retaliation will take a similar form this time if it
occurs.
* The
author, in addition to teaching international trade law at Georgetown, is a
private practitioner who is counsel to, among others, the National Cattlemen’s
Beef Association, representing approximately 200,000 U.S. cattle ranchers. Any views expressed in this piece are solely
the responsibility of the author.
0 comments:
Post a Comment