COOL is vanquished but unintended consequences may happen

Your humble writer is prepared to eat crow on the repeal of the US Country of Origin Labelling (COOL) bill.

Your humble writer is prepared to eat crow on the repeal of the US Country of Origin Labelling (COOL) bill. I was skeptical that the US congress would give in to any pressure to actually repeal a piece of legislation that they implemented ostensibly for the good of American citizens. Sure COOL was nothing more than protectionist legislation disguised as consumer information. But in politics, perception trumps reality hence the US congress passed the bill almost seven years ago – it was a classic piece of political expediency. The negative impact on Canadian livestock and meat exports came to fruition. The ultimate cost to date has been estimated at hundreds of billions of dollars and will never be recovered.

It should be noted that the history of COOL almost paralled the tenure of Democratic President Obama. Prior to his regime Republican Presidents, Congressmen and Senators were able to delay and derail the implementation of COOL. But as soon as the Democratic Party came to power, COOL was quickly implemented under pressure from party friendly vested interests and lobbyists. There was no hope of changing COOL with the unfriendly Obama regime in power, so the World Trade Organization (WTO) trade dispute mechanism was the industry’s only hope to get some attention on the issue. The fact that the US government used every possible obstructionist tactic to delay and derail the WTO process was indicative of their negative attitude towards Canada (Obama’s anti-Keystone pipeline decision confirmed that perception). Add into that the usual politician’s predilection never to admit to making a mistake and one could assume it was going to be a long drawn out process.

My own view was that although the previous Conservative federal government went along with the WTO process, that, in the end, no Canadian government was going to retaliate against its biggest trading partner to the tune of billions of dollars of retaliatory tariffs. In that regard, the COOL issue from a Canadian perspective was helped by Obama’s procrastination and opposition to the Keystone pipeline. I believe that situation hardened the government’s backbone to pursue COOL at the WTO. Certainly former Ag Minister Ritz rattled the sabre at every opportunity although I am not sure the Obama administration noticed such bravado that much. With the defeat of the Conservative government, I expect there was some real concern within the industry that the new Liberal government would have the same resolve about COOL and applying retaliatory tariffs. In the end they did, perhaps they too wanted to get back at the US government for their infamous anti-Keystone decision. What probably helped most was that the US Congress inserted the COOL repeal amendment into a trillion dollar American spending omnibus bill. I expect that the Obama administration was not willing to jeopardize that critical bill by opposing a COOL repeal, which, in the scheme of American governance, doesn’t really mean much, therefore COOL was politically expendable. So there we have it – COOL is gone.

The question that now looms is what will happen now that the floodgates to the export of cattle, hogs and pork to the USA is wide open again. On the surface, it appears that a fully reopened American market will see renewed competition for Canadian livestock and meat with producer and feedlot prices increasing to the benefit of the industry. But as the old saying goes – be careful what you wish for! Much has changed since the battle against COOL started all those years ago – particularly in the beef packing industry. Meat processing in Canada is more costly than in the US and needs to survive on economies of scale and a lower loonie. However, over the past few years cattle supply has decreased, but was mitigated because COOL discouraged large live exports to the US. That helped Canadian packing plants. Now that COOL is gone, live cattle exports may increase significantly and if Canadian plants want them, they will have to compete against a high US dollar. That’s all fair enough in a free market. But there is a dark side – if Canadian plants can’t compete and their costs increase as plant throughput decreases – there is an inevitability – those plants may close. That would be a disaster for the Canadian cattle industry.

So here it now stands – the industry has won an important trade battle with the repeal of COOL. But it may lose something more important in the near future because of it. For the Canadian cattle and beef marketing business, the next few years will be interesting indeed.

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