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COOL not cool for pork producers

U.S. labelling rule cost industry billions

By: Martin Cash

Tuesday, Jan. 15, 2013 at 8:18 AM | Comments: 0

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Andrew Dickson

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KEN GIGLIOTTI / WINNIPEG FREE PRESS ARCHIVES The World Trade Organization ruled Country of Origin Labelling, which had a damaging effect on the Canadian pork industry, must end by May 23. The industry is demanding retaliatory tariffs if the U.S. does not comply.

The Canadian pork industry has lost about $2 billion since 2008 -- about a third of that from Manitoba -- because of mandatory Country of Origin Labelling (COOL) by the United States, according to a report produced by the Canadian Pork Council released Monday.

The World Trade Organization has ruled COOL contravenes trade laws and has given the U.S. until May 23 to comply with its ruling.

Now the Canadian pork industry is getting its ducks in a row to make sure the U.S. complies. But in case the U.S. actions are not satisfactory, officials from the Canadian hog industry made no bones about the fact it will lobby Canada's trade department to impose retaliatory tariffs.

"In the event the U.S. does not come into compliance or find resolution to the COOL dispute, the report's findings that the current annual rate of damage accumulation -- almost $500 million -- can be used to estimate retaliatory tariffs on U.S. exports to Canada," stated CPC's chairman, Jean-Guy Vincent.

The differential labelling requirement of COOL requires the segregation of imported livestock, which creates additional costs for U.S. processors and producers, who then insisted on paying less for imported livestock.

In fact, many processors just cancelled their Canadian orders.

Andrew Dickson, general manager of the Manitoba Pork Council, said COOL has had a huge effect on the industry in Manitoba, which represents about one-third of the total Canadian hog and pork industry.

He said while the industry was hit by skyrocketing feed costs this year, the COOL issue caused many barns in Manitoba to close.

Dickson said an example of the immediate impact that occurred was the giant Smithfield Foods plant in Sioux Falls, S.D., which had been taking about one million Manitoba hogs per year, but immediately stopped taking the Canadian animals in the spring of 2008 when COOL regulations came into effect.

"Luckily, Maple Leaf's Brandon plant started a second shift at about the same time, or we really would have been in trouble," he said.

The study, produced by Alberta government agricultural economist Ron Gietz, showed that in addition to the close to $2 billion in lost sales of live pigs, the COOL regulations were also responsible for another $356 million in decreased pork sales to the U.S. and another $85.3 million in suppressed prices for feeder pigs.

Dickson is on his way to Minneapolis and Des Moines, Iowa, this week for a couple of major hog industry events where he'll be talking with stakeholders there. He said there are many supporters in the U.S. hog industry for the elimination of the regulations.

"The U.S. hog industry has never been supporters of COOL," Dickson said. "They want Canadian weanlings and Canadian pigs."

COOL came into effect mostly on the promptings of some western U.S. cattlemen, who believed Canadian cattle was bringing prices down.

But now that there is a WTO decision and the U.S. has run out of options to appeal, the Canadian Pork Council released its nine-page study and is starting the process of encouraging the U.S. to comply.

"Our desired resolution is to eliminate the cause of the segregation," said CPC's past chairman, Jurgen Preugschas. "We want all meat harvested in the U.S. to be eligible for one label, regardless where the animal was born."

While several industry officials said they are giving the U.S. the benefit of the doubt it will comply with the WTO ruling, they are not sitting around idly until May 23.

"We will continue to press government loud and hard for swift and effective retaliatory tariffs on U.S. goods in the event of non-compliance," Preugschas said.

Industry officials said it was too early for the Canadian government to show its cards, but Peter Clark of Grey, Clark, Shih and Associates, a trade adviser to the CPC, said the Canadian government would not be limited to tariffs on the hog and pork industry but could hit a changing "carousel" of U.S. exports to Canada.

martin.cash@freepress.mb.ca

ESTIMATES of COOL damages on Canada's pork industry:

-- $1.98 billion in accumulated damages to the Canadian hog industry up to the end of October 2012 due to lost sales including:

-- 10.4 million fewer slaughter hogs sold to U.S. processors;

-- 5.2 million fewer finishing pigs (more than 23 kilograms but less than 50 kilograms when exported) and 4.3 million fewer weanlings (less than seven kilograms);

-- $536.5 million in lost processed pork sales to the U.S.;

-- $85.3 million in losses to the Canadian industry because of price suppression since COOL was instituted.

-- source: Canadian Pork Council report by Ron Gietz

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