U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Publishing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

93–967 PDF 2015

HEARING TO EXAMINE THE IMPLICATIONS OF 

POTENTIAL RETALIATORY MEASURES 

TAKEN AGAINST THE UNITED STATES IN 

RESPONSE TO MEAT LABELING 

REQUIREMENTS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON LIVESTOCK AND FOREIGN 

AGRICULTURE 

OF THE

COMMITTEE ON AGRICULTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MARCH 25, 2015 

Serial No. 114–8 

( 

Printed for the use of the Committee on Agriculture 

agriculture.house.gov 

COMMITTEE ON AGRICULTURE 

K. MICHAEL CONAWAY, Texas, Chairman 

RANDY NEUGEBAUER, Texas, 

Vice Chairman 

BOB GOODLATTE, Virginia 

FRANK D. LUCAS, Oklahoma 

STEVE KING, Iowa 

MIKE ROGERS, Alabama 

GLENN THOMPSON, Pennsylvania 

BOB GIBBS, Ohio 

AUSTIN SCOTT, Georgia 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

SCOTT DESJARLAIS, Tennessee 

CHRISTOPHER P. GIBSON, New York 

VICKY HARTZLER, Missouri 

DAN BENISHEK, Michigan 

JEFF DENHAM, California 

DOUG LAMALFA, California 

RODNEY DAVIS, Illinois 

TED S. YOHO, Florida 

JACKIE WALORSKI, Indiana 

RICK W. ALLEN, Georgia 

MIKE BOST, Illinois 

DAVID ROUZER, North Carolina 

RALPH LEE ABRAHAM, Louisiana 

TOM EMMER, Minnesota 

JOHN R. MOOLENAAR, Michigan 

DAN NEWHOUSE, Washington 

COLLIN C. PETERSON, Minnesota, Ranking 

Minority Member 

DAVID SCOTT, Georgia 

JIM COSTA, California 

TIMOTHY J. WALZ, Minnesota 

MARCIA L. FUDGE, Ohio 

JAMES P. MCGOVERN, Massachusetts 

SUZAN K. DELBENE, Washington 

FILEMON VELA, Texas 

MICHELLE LUJAN GRISHAM, New Mexico 

ANN M. KUSTER, New Hampshire 

RICHARD M. NOLAN, Minnesota 

CHERI BUSTOS, Illinois 

SEAN PATRICK MALONEY, New York 

ANN KIRKPATRICK, Arizona 

PETE AGUILAR, California 

STACEY E. PLASKETT, Virgin Islands 

ALMA S. ADAMS, North Carolina 

GWEN GRAHAM, Florida 

BRAD ASHFORD, Nebraska 

SCOTT C. GRAVES, Staff Director 

ROBERT L. LAREW, Minority Staff Director 

SUBCOMMITTEE ON LIVESTOCK AND FOREIGN AGRICULTURE

DAVID ROUZER, North Carolina, Chairman 

BOB GOODLATTE, Virginia 

STEVE KING, Iowa 

SCOTT DESJARLAIS, Tennessee 

VICKY HARTZLER, Missouri 

TED S. YOHO, Florida 

TOM EMMER, Minnesota 

DAN NEWHOUSE, Washington 

JIM COSTA, California, Ranking Minority 

Member 

STACEY E. PLASKETT, Virgin Islands 

FILEMON VELA, Texas 

RICHARD M. NOLAN, Minnesota 

CHERI BUSTOS, Illinois 

(II) 

(III) 

C O N T E N T S 

Page 

Conaway, Hon. K. Michael, a Representative in Congress from Texas, opening 

statement .............................................................................................................. 5 

Prepared statement .......................................................................................... 5 

Costa, Hon. Jim, a Representative in Congress from California, opening statement ...................................................................................................................... 3 

Goodlatte, Hon. Bob, a Representative in Congress from Virginia, prepared 

statement .............................................................................................................. 6 

Rouzer, Hon. David, a Representative in Congress from North Carolina, opening statement ........................................................................................................ 1 

Prepared statement .......................................................................................... 2 

WITNESSES

Weber, John P., President-Elect, National Pork Producers Council, Dysart, 

IA ........................................................................................................................... 7

Prepared statement .......................................................................................... 8 

Wenk, Christopher W., Executive Director of International Policy, U.S. Chamber of Commerce, Washington, D.C. ................................................................... 18 

Prepared statement .......................................................................................... 19 

Johnson, Roger, President, National Farmers Union, Washington, D.C. ........... 23 

Prepared statement .......................................................................................... 24 

Supplementary material .................................................................................. 71 

Dempsey, Linda M., Vice President of International Economic Affairs, National Association of Manufacturers, Washington, D.C. ................................... 48 

Prepared statement .......................................................................................... 49 

LaFaille, Tom, Vice President and International Trade Counsel, Wine Institute, Washington, D.C. ........................................................................................ 52 

Prepared statement .......................................................................................... 52 

Smith, Michael T., Special Projects Manager, Harris Ranch Company, Selma, 

CA .......................................................................................................................... 54

Prepared statement .......................................................................................... 56 

Bodor, Alison, Executive Vice President, National Confectioners Association, 

Washington, D.C. ................................................................................................. 57 

Prepared statement .......................................................................................... 58 

SUBMITTED MATERIAL

Blum, Hon. Rod, a Representative in Congress from Iowa, submitted statement ...................................................................................................................... 71 

Figel, Brad, Vice President, Public Affairs, Mars, Incorporated, submitted 

letter ...................................................................................................................... 72

Mosely, Ben, Vice President, Government Affairs, USA Rice Federation, submitted letter .......................................................................................................... 73 

(1) 

HEARING TO EXAMINE THE IMPLICATIONS 

OF POTENTIAL RETALIATORY MEASURES 

TAKEN AGAINST THE UNITED STATES IN 

RESPONSE TO MEAT LABELING 

REQUIREMENTS 

WEDNESDAY, MARCH 25, 2015 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON LIVESTOCK AND FOREIGN AGRICULTURE, COMMITTEE ON AGRICULTURE, Washington, D.C. 

The Subcommittee met, pursuant to call, at 9:02 a.m., in Room 

1300 of the Longworth House Office Building, Hon. David Rouzer 

[Chairman of the Subcommittee] presiding. 

Members present: Representatives Rouzer, Goodlatte, DesJarlais, 

Hartzler, Yoho, Emmer, Newhouse, Conaway (ex officio), Costa, 

Vela, and Nolan. 

Staff present: Caleb Crosswhite, Haley Graves, Jessica Carter, 

John Goldberg, Patricia Straughn, Scott C. Graves, Faisal Siddiqui, 

John Konya, Andy Baker, Mary Knigge, Mike Stranz, Rob Larew, 

and Nicole Scott. 

OPENING STATEMENT OF HON. DAVID ROUZER, A 

REPRESENTATIVE IN CONGRESS FROM NORTH CAROLINA 

The CHAIRMAN. This hearing of the Subcommittee on Livestock 

and Foreign Agriculture to examine the implications of potential 

regulatory measures taken against the United States in response 

to meat labeling requirements, will come to order. 

Good morning. I would like to start out by quickly thanking Mr. 

Bryan Blinson for attending today’s hearing. Mr. Blinson serves as 

the Executive Director for the North Carolina Cattlemen’s Association, and as all of you all know, I represent southeastern North 

Carolina. And, Mr. Blinson, great to have you here with us this 

morning. 

As we have all observed, the United States is fortunate to have 

the safest, highest quality, most abundant, diverse, and affordable 

food supply in the world. Like most Members who represent rural 

districts, I understand the critical importance of trade, both for our 

domestic prosperity as well as the moral obligation to support global food security. 

While my district has not always benefited from the trade agreements the United States has entered into, my constituents and I 

understand the potential benefits that can be derived from fair 

trade agreements. And I emphasize the concept of fairness because 

2 

I have been critical of agreements that open our domestic markets 

to products produced in my district, while not necessarily gaining 

international market access for those same products. When countries, or blocks of countries like the European Union, impose nontariff trade barriers on U.S. agricultural products, and encourage 

other nations to adopt similarly protectionist policies, one can question whether such agreements are in fact fair. I also understand 

that to criticize other nations for imposing protectionist barriers to 

our products means that we must likewise be critical of our own 

policies that do the same. 

In 2002, and I happened to be on the staff of Senator Jesse 

Helms at that point in time when we were working on the 2002 

Farm Bill, the Congress of the United States adopted a discriminatory country-of-origin labeling requirement for meat products. As a 

staff member for Senator Helms during that conference negotiation, I can attest to the fact that those folks who opposed this mandate warned that the policy might not comply with our trade agreements, and would likely not withstand a challenge in the WTO. 

Those concerns have proven to be well-founded considering the 

United States Country-of-Origin Labeling Program for beef and 

pork was almost immediately challenged by Canada and Mexico, 

and has lost at every level in the WTO thus far. 

Now, in the next few weeks, we expect to hear the results of our 

final appeal, and if we lose there, we will likely face substantial retaliatory sanctions. While we do not know for certain what the 

WTO appellate body will decide, observers believe that there is little likelihood that the appellate body will reverse their earlier decision. 

This Subcommittee has a responsibility to review the potential 

impacts of retaliation by Canada and Mexico if those countries are 

authorized to do so. As such, I have asked members of the business 

community to testify today on what that retaliation may look like 

and what this will mean for our economy. 

Secretary Vilsack has stated publicly that if the United States 

loses the appeal, country-of-origin labeling cannot be fixed administratively. The law will need to be changed. As a Subcommittee, we 

need to understand the ramifications of inaction and be prepared 

to move quickly after the WTO decision is announced to avoid retaliation. 

[The prepared statement of Mr. Rouzer follows:] 

PREPARED STATEMENT OF HON. DAVID ROUZER, A REPRESENTATIVE IN CONGRESS

FROM NORTH CAROLINA

Good morning. 

I would like to start by quickly thanking Mr. Bryan Blinson for attending today’s 

hearing. Mr. Blinson serves as the Executive Director for the North Carolina Cattlemen’s Association. We are happy to have him join us today and appreciate all his 

hard work on behalf of North Carolina’s cattlemen. 

As we have all observed, the United States is fortunate to have the safest, highest 

quality, most abundant, diverse, and affordable food supply in the world. Like most 

Members who represent rural districts, I understand the critical importance of 

trade, both for our domestic prosperity as well as the moral obligation to support 

global food security. 

While my district has not always benefited from the trade agreements the United 

States has entered into, my constituents and I understand the potential benefits 

that can be derived from fair trade agreements. I emphasize the concept of ‘‘fairness’’ because I have been critical of agreements that open our domestic markets 

3 

to products produced in my district while not necessarily gaining international market access for these same products. When countries—or blocks of countries like the 

European Union—impose non-tariff trade barriers on U.S. agricultural products, 

and encourage other nations to adopt similarly protectionist policies, one can question whether such agreements are in fact fair. 

I also understand that to criticize other nations for imposing protectionist barriers 

to our products means that we must likewise be critical of our own policies that do 

the same. 

In 2002, the Congress of the United States adopted a discriminatory country-oforigin labeling requirement for meat products. As a staff member for a Senate Agriculture Committee Member during the 2002 Farm Bill conference, I can attest to 

the fact that those folks who opposed this mandate warned that the policy might 

not comply with our trade commitments and would likely not withstand a challenge 

in the WTO. 

Those concerns have proven to be well-founded considering the United States 

COOL program for beef and pork was almost immediately challenged by Canada 

and Mexico, and has lost at every level in the WTO thus far. 

In the next few weeks, we expect to hear the results of our final appeal and if 

we lose there, we will likely face substantial retaliatory sanctions. 

While we do not know for certain what the WTO appellate body will decide, observers believe that there is little likelihood that the appellate body will reverse the 

earlier decision. 

This Subcommittee has a responsibility to review the potential impacts of retaliation by Canada and Mexico if those countries are authorized to do so. As such, I 

have asked members of the business community to testify today on what that retaliation may look like and what this will mean for our economy. 

Secretary Vilsack has stated publicly that if the United States loses the appeal, 

country-of-origin labeling cannot be fixed administratively. The law will need to be 

changed. As a Subcommittee, we need to understand the ramifications of inaction 

and be prepared to move quickly after the WTO decision is announced to avoid retaliation. 

With that, I want to thank our witnesses that are here today and recognize the 

Ranking Member, Mr. Costa of California, for his opening remarks. 

The CHAIRMAN. With that, I want to thank our witnesses that 

are here today and recognize the Ranking Member, Mr. Costa of 

California for his opening remarks. Mr. Costa. 

OPENING STATEMENT OF HON. JIM COSTA, A 

REPRESENTATIVE IN CONGRESS FROM CALIFORNIA 

Mr. COSTA. Thank you very much, Chairman Rouzer, and Members of the Subcommittee, and our Chairman who is here with us 

this morning. We do have a group of distinguished individuals on 

our panel, and I am pleased that they are going to be able to give 

an opportunity to let us get a better sense of the challenges we face 

when the World Trade Organization will rule on the appeal that 

has been made. 

I think many of us who have been around for a while are familiar with the Mandatory Country-of-Origin Labeling rules, whether 

you refer to it as MCOOL or COOL, it is all the same. The fact 

is is that the debate has been going on for decades as to whether 

Country-of-Origin Labeling is an experiment that can or cannot 

work. Having worked with various elements of both the pork and 

the beef and the poultry, and other industries that have been impacted, the challenges facing Mandatory Country-of-Origin Labeling it was destined not to work for a number of factors. And while 

the supporters have argued the opposite, we have to look at the 

facts. I think we have seen increase in production costs, we have 

seen impacts to cost to consumers that are factoring in meat purchasing. 

4 

What I would like to hear today from our witnesses is how we 

move beyond the eventual ruling that we believe will be forthcoming. One thing is for certain, the World Trade Organization, the 

WTO, is set to release its decision on the United States’ appeal in 

conjunction with the ruling, and the countries of Canada and Mexico are posed to react. To that end, we need to talk about the potential reaction, and as the Chairman indicated here of the Subcommittee, the fact that Secretary Vilsack has indicated that no 

Administrative action, if we have an adverse ruling, as many of us 

expect that we will have, is going to resolve the issue. And, therefore, we will have to move with legislation. 

It is incumbent upon this Subcommittee and the full Committee 

then to take action. The challenges to our trading partners are significant. And for those of us who believe that trade is critical for 

our country’s economic well-being, and especially for our agricultural economy throughout the 50 states, we can look at some harsh 

retaliation efforts that will take place if, in fact, what many of us 

conclude will occur in the next several months. As a matter of fact, 

and I suspect some of the witnesses will testify to this point, the 

Canadian Government has already published a list of commodities 

that will be subject to retaliatory measures. Estimates say that the 

impact could well be over $1 billion in California alone. We annually export a great deal. In California, our agricultural exports last 

year totaled over $18.5 billion, so this is significant. 

I remember very clearly, only a few years ago, when we had a 

similar issue on trade with the Mexican Government on the trucking dispute, devastating effects, as we saw the Mexican Government take action on a host of issues involving agricultural products 

that we import—or export, excuse me, to Mexico. It was estimated 

that those retaliatory tariffs cost U.S. agriculture over $2.6 billion. 

Of course, it was Mexico’s right to take that action. And it also impacted jobs, and when we have a recovering economy, jobs are critical. No one wants that, I don’t believe. No one wants to see any 

retaliatory efforts made by Canada or Mexico. And I know that— 

or I sense, in talking with officials of those two governments, that 

they don’t want to impose these proposed retaliation tariffs. 

So I am pleased that this hearing is taking place this morning. 

It gives us an opportunity to establish a record as to the potential 

impacts. And I would also like the witnesses to suggest how you 

think we might want to go about with legislation in the event that 

action takes place, as many of us believe that it will. However, it 

is important that once this process is complete, that the Congress 

resolve this issue. 

In closing, Mr. Chairman, I have heard from the livestock industry, the pork producers, as well as people from the wine and tree 

and other manufacturing processing industries throughout California who are very concerned about the potential retaliatory effects that could be taken by Canada and Mexico. It is time we get 

to work. 

And again, thank you, Mr. Chairman, for calling this hearing of 

the Subcommittee. Thank you, Mr. Chairman, of the full Committee, because you and I talked about this issue over the last several years, and I know it concerns you as well. So I look forward 

to listening to the testimony. 

5 

The CHAIRMAN. Thank you, Mr. Costa. 

I would now like to recognize the Chairman of the full Committee, Chairman Conaway. 

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A 

REPRESENTATIVE IN CONGRESS FROM TEXAS 

Mr. CONAWAY. Thanks, Chairman Rouzer, and, David, thank you 

for those kind comments. 

I just want to do a couple of things. One, congratulate you on 

your chairmanship, and you are chairing your very first official 

hearing. You bring great talent and a wealth of background and experiences to the tasks, and I have great confidence in you and Mr. 

Costa that you will get this done. 

I also want to thank our witnesses for coming here today to help 

us understand some of the retaliatory impacts that may occur if we 

fail to act, and in fact, the WTO rules against the appeal that is 

out there. This debate surrounding Mandatory Country-of-Origin 

Labeling precedes my term in Congress, although as a freshman, 

one of my first Floor speeches related to agriculture was related to 

this topic. In spite of the reservations that cattlemen and pork producers expressed at the time this was being considered that it 

wouldn’t work and that we would suffer consequences as a result 

of it. Congress decided to go ahead and try to implement it, at 

great costs, and in my view, unquantifiable benefits as a result of 

this process. In addition to that, the impact has been that our 

North American livestock market has been fractured unnecessarily, 

and again for no good reason. 

So as we examine the impacts of retaliation, if we lose the appeal, I hope that the Members will also recognize the failure of this 

experiment, and work together to avoid the economic damages that 

will be felt by American businesses both inside and outside agriculture. 

So with that, Mr. Chairman, good luck on your role as Chairman 

of this Subcommittee, and I look forward to your leadership. I yield 

back. 

[The prepared statement of Mr. Conaway follows:] 

PREPARED STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE IN

CONGRESS FROM TEXAS

Thank you, Chairman Rouzer and Ranking Member Costa, for holding this important hearing. 

Thank you, also to all of our witnesses for taking your time to be here today and 

helping us understand the consequences we face if we fail to act and the WTO appellate body ultimately finds against the United States as the previous panels have. 

The debate surrounding mandatory country-of-origin labeling for meat precedes 

my being a Member. In fact, as a freshman Member of this House, one of my very 

first Floor speeches related to agriculture was on this very topic. 

Considering the discussions that took place prior to the initial passage of COOL 

in 2002, mainstream cattlemen and pork producers have raised concerns that this 

policy would likely not withstand legal challenges in the WTO. Yet we proceeded 

to implement a program with enormous costs and no quantifiable benefits. Our 

North American livestock market has been unnecessarily fractured by this policy, 

but I believe that the damage can be repaired. 

As we examine the impacts of retaliation if we lose this appeal, I hope that all 

Members will recognize the failure of this experiment and work together to avoid 

the economic damages that could be felt by American businesses both inside and 

outside of agriculture. 

Once again, I thank Chairman Rouzer for holding this hearing and yield back. 

6 

The CHAIRMAN. Thank you, Mr. Chairman. I appreciate your confidence and look forward to working in this role as well. 

The chair would request that other Members submit their opening statements for the record so the witnesses may begin their testimony, and to ensure that there is ample time for questions. 

[The prepared statement of Mr. Goodlatte follows:] 

PREPARED STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN CONGRESS

FROM VIRGINIA

Chairman Rouzer and Ranking Member Costa, thank you for holding this critical 

hearing to examine the implications of potential retaliatory measures to be taken 

against the United States in response to meat labeling requirements under the 

mandatory country-of-origin labeling requirement. As you know, our nation now 

stands at a cross roads as we face the daunting impacts of international trade retaliation as the World Trade Organization’s (WTO) Appellate Body is scheduled to rule 

shortly on whether the U.S. mandatory Country-of-Origin (COOL) rule violates 

World Trade Organization (WTO) obligations. 

The COOL provisions, as originally written, have raised many concerns among 

producers, processors, suppliers and retailers. In response, I have long called for a 

voluntary program that is market driven, recognizes existing labeling programs, 

minimizes record-keeping, allows flexibility, trade compliant and is cost-effective. 

As you know, in 2002, Congress enacted mandatory country-of-origin labeling 

(COOL) provisions requiring retailers of certain meat products to inform consumers 

of a product’s country-of-origin. In June of 2003, when I chaired the House Committee on Agriculture one of the first hearings on COOL portended the serious widespread impacts, as I was able to note at that time, ‘‘This hearing reinforces my belief that we are moving forward with an idea that will have a negative impact on 

our producers, and little or no benefit for those it was intended to help.’’ 

In 2005, I was led to introduce voluntary country-of-origin labeling (VCOOL) legislation, which would have established a voluntary program to allow producers to 

work with processors and retailers to provide labeling information in the marketplace in such a way that informs consumers and benefits producers. As I noted 10 

years ago, ‘‘this approach benefits consumers and producers and is preferable to a 

mandatory program that is more likely to hurt the people it was intended to help.’’ 

It has now been nearly 13 years since enactment of the 2002 Farm Bill and yet 

there is still a lack of consensus about how the COOL provisions could be implemented not only in a cost effective manner but in a manner compliant with our 

trade obligations. Even the U.S. Department of Agriculture estimated implementation costs stand at roughly $2.6 billion, with each affected commodity producer paying $370, intermediary firms paying $48, 219 each, and retailers paying $254,685 

a piece. 

In November 2014, Secretary of Agriculture Vilsack said that USDA analysis 

shows that there is no regulatory fix that will allow COOL regulations to be consistent with the COOL law and also satisfy the WTO rulings. The WTO’s Appellate 

Body decision anticipated this spring will once again rule against the U.S. due to 

discrimination against imported livestock. Canada and Mexico have clearly stated 

that they will request WTO authorization to suspend concessions with the United 

States, through retaliation, in the form of raising tariffs on U.S. products that they 

import. 

My home, the Commonwealth of Virginia could face tariffs on $331 million worth 

of exports, including targeted retaliation already proposed by Canada impacting 22 

key state exports such as bread and pastries $17 million, fresh chilled poultry parts 

$6 million, prepared cocoa and chocolate products of $4 million, impacting my Congressional district, and as importantly restricting worldwide global trading markets. 

The stated intent of those who advocate a mandatory COOL scheme has been to 

benefit producers, which is a worthy goal. Unfortunately, United States’ continued 

failure to bring the Country-of-Origin Labeling (COOL) rules into compliance with 

its WTO obligations is threatening the U.S. economy and exports to our two largest 

trading partners. With the threat of retaliation looming for wide range of our nation’s agricultural as well as manufactured products, Congress must move quickly 

to address these WTO-inconsistent provisions—to preserve both our standing in 

world international trade markets and sustain economic capacity for our nation. 

The CHAIRMAN. The chair would like to remind Members that 

they will be recognized for questioning in order of seniority for 

7 

Members who were present at the start of the hearing, after that, 

Members will be recognized in order of their arrival. I appreciate 

Members’ understanding. 

The witnesses are asked to limit their oral presentation to 4 minutes. All written statements will be included in the record. 

I would like to welcome our witnesses to the table. First, we have 

Mr. John Weber, President-Elect, National Pork Producers Council; 

Mr. Christopher Wenk, Executive Director of International Policy, 

U.S. Chamber of Commerce; Mr. Roger Johnson, President, National Farmers Union; Ms. Linda Dempsey, Vice President of International Economic Affairs, National Association of Manufacturers; 

Mr. Alison—pardon me, Mr. Tom LaFaille, Vice President and 

International Trade Counsel of the Wine Institute. I almost 

skipped you there. My apologies. Ms. Alison Bodor, Executive Vice 

President, National Confectioners Association; and Mr. Michael 

Smith, Special Projects Manager, Harris Ranch Company, Selma, 

California. 

Mr. Weber, please begin when you are ready. 

STATEMENT OF JOHN P. WEBER, PRESIDENT-ELECT, 

NATIONAL PORK PRODUCERS COUNCIL, DYSART, IA 

Mr. WEBER. Mr. Chairman, I appreciate the opportunity to represent NPPC at this hearing today. 

Exports add significantly to the bottom line of each U.S. pork 

producer. U.S. exports of pork and pork products totaled 2.18 million metric tons in 2014, representing over 1⁄4 of our total production. These exports add more than $63 to the value of each and 

every hog marketed. Mexico and Canada are our second and third 

largest foreign markets for pork, with U.S. exports totaling $1.55 

billion and $904 million respectively. 

Our exports to Canada since the implementation of the U.S.-Canada Free Trade Agreement in 1989 have grown over 20 times. Our 

pork exports to Mexico since NAFTA in 1994 have grown by over 

12 times. We cannot afford to have these exports disrupted, nor can 

workers in allied sectors. 

The U.S. pork industry supports an estimated 550,000 domestic 

jobs, mostly in rural areas, and about 110,000 of these are the result of pork exports. The loss of the Mexican and Canadian markets, valued at $2.4 billion, could, therefore, cost over 16,000 nonfarm jobs. But these job losses are only those that relate to pork 

exports. According to a CRS report, it has been estimated that retaliation by both Mexico and Canada could target between $1 billion and $2 billion in exports from the United States. Other estimates suggest it could exceed $2 billion, and Canada and Mexico 

will likely seek an even higher number; perhaps as much as a combined total of $4 billion. If it comes to this, a WTO panel will ultimately decide the actual number. But any of these figures could result in a devastating blow to tens of thousands of people in our sector and others. 

Canada has published a list of over three dozen categories of 

products that could be hit. Mexico has not yet made public its list, 

but our experience with retaliation by Mexico resulting from its 

successful challenge to the U.S. ban on Mexican trucking suggests 

8 

that its list will be at least as long, and likely quite similar to the 

trucking retaliation. That retaliation totaled $2.4 billion. 

We understand that Mexican importers are already looking for 

alternative sources of supply for products on the list. There is no 

way we can compete with products from other countries when our 

products are subject to steep retaliatory duties. 

Regrettably for us, pork is on Canada’s target list and will likely 

be on Mexico’s. Because COOL involves agricultural products, retaliation is inevitably going to fall heavily on U.S. agriculture. If 

the situation were reversed, the United States would retaliate 

against imported products in the same sector. When the European 

Union refused to lift its illegal ban on imports of U.S. beef in the 

hormone dispute, we retaliated against European food products. 

But that dispute, involving trade of $93 million, pales in comparison with the Country-of-Origin Labeling case in terms of the scope 

of the retaliation involved. 

Because the damage to U.S. exports will be multiplied across our 

economy, the economic effect will greatly exceed whatever retaliation is ultimately authorized by WTO, and will hurt many Americans that had nothing to do with implementing COOL. Not only 

will innocent bystanders be harmed, the economy as a whole will 

suffer. Professor Dermot Hayes of Iowa State University calculates 

that the effect of $2 billion in retaliation would be 17,000 lost U.S. 

jobs. Retaliation of $4 billion would double this figure. Estimates 

of state-by-state job losses are contained in Attachment 1 of the 

NPPC written statement. 

We expect the WTO to once again rule against the United States 

in mid-May. Congress must be prepared to repeal the offending 

parts of the statute to bring the U.S. into compliance with WTO 

rules. Congress should not allow retaliation against pork producers 

and other sectors of the U.S. economy. 

Thank you. 

[The prepared statement of Mr. Weber follows:] 

PREPARED STATEMENT OF JOHN P. WEBER, PRESIDENT-ELECT, NATIONAL PORK

PRODUCERS COUNCIL, DYSART, IA 

Introduction 

The National Pork Producers Council (NPPC) is an association of 43 state pork 

producer organizations that serves as the global voice for the nation’s pork producers. The U.S. pork industry represents a significant value-added activity in the 

agriculture economy and the overall U.S. economy. Nationwide, more than 68,000 

pork producers marketed more than 111 million hogs in 2013, and those animals 

provided total gross receipts of more than $20 billion. Overall, an estimated $21.8 

billion of personal income and $35 billion of gross national product are supported 

by the U.S. hog industry. Economists Daniel Otto, Lee Schulz and Mark Imerman 

at Iowa State University estimate that the U.S. pork industry is directly responsible 

for the creation of nearly 35,000 full-time equivalent pork producing jobs and generates about 128,000 jobs in the rest of agriculture. It is responsible for approximately 111,000 jobs in the manufacturing sector, mostly in the packing industry, 

and 65,000 jobs in professional services such as veterinarians, real estate agents 

and bankers. All told, the U.S. pork industry is responsible for more than 550,000 

mostly rural jobs in the United States. 

The U.S. Pork Industry is Dependent on Exports 

Exports add significantly to the bottom line of each U.S. pork producer. U.S. exports of pork and pork products totaled 2.18 million metric tons in 2014, representing over 1⁄4 of U.S. production. These exports add more than $63 to the value 

of each hog marketed. 

9 

1http://fas.org/sgp/crs/misc/RS22955.pdf.. 2http://www.international.gc.ca/media_commerce/comm/news-communiques/2013/06/ 

07a.aspx?lang=eng 3 Congressional Research Service Report R40449. 

4 ‘‘The Role of Exports in the United States Economy,’’ The U.S. Department of Commerce, 

May 13, 2014. 

Mexico and Canada are the second and third largest foreign markets, respectively, for U.S. pork, with U.S. exports totaling $1.55 billion and $904 million, respectively. 

U.S. exports to Canada since the implementation of the U.S.-Canada Free Trade 

Agreement in 1989 have grown by over 20 times, while pork exports to Mexico since 

NAFTA in 1994 have grown by over 12 times. 

The U.S. pork industry cannot afford to have these exports disrupted and nor can 

workers in allied sectors. The U.S. pork industry supports an estimated 550,000 domestic jobs, most in rural areas, and about 110,000 of these are the result of pork 

exports. The loss of the Mexican and Canadian markets valued at $2.4 billion could, 

therefore, cost over 16,000 non-farm jobs. But these job losses are only those that 

relate to pork exports. According to a CRS report,1 it has been estimated that retaliation by both Mexico and Canada could target between $1 billion and $2 billion in 

exports from the U.S. Other estimates suggest it could exceed $2 billion, and Canada and Mexico will likely seek an even higher number, perhaps as much as a combined total of $4 billion. If it comes to this, a WTO panel will ultimately decide the 

actual number. 

But any of these figures could result in a devastating blow to tens of thousands 

of people in the U.S. pork sector and others. Canada has published a list 2 of over 

three dozen categories of products that could be hit. Mexico has not yet made public 

its list, but U.S. experience with retaliation by Mexico, resulting from its successful 

challenge to the U.S. ban on Mexican trucking, suggests that its list will be at least 

as long and likely quite similar to the trucking retaliation list. That retaliation totaled $2.4 billion. It has been rumored that Mexican importers are already looking 

for alternative sources of supply for products on the list. There is no way the United 

States can compete with products from other countries when U.S. products are subject to steep retaliatory duties. 

Regrettably for the U.S. pork industry, pork is on Canada’s target list and will 

likely be on Mexico’s. Because COOL involves agricultural products, retaliation is 

inevitably going to fall heavily on U.S. agriculture. If the situation were reversed, 

the United States would retaliate against imported products in the same sector. 

When the European Union refused to lift its illegal ban on imports of U.S. beef in 

the hormone dispute, the United States retaliated against European food products. 

But that dispute, involving trade of $93 million,3 pales in comparison with the 

COOL case in terms of the scope of retaliation involved. 

Because the damage to U.S. exports will be multiplied across the economy, the 

economic effect will greatly exceed whatever retaliation is ultimately authorized by 

the WTO and will hurt many Americans who had nothing to do with implementing 

the COOL law. Not only will innocent bystanders be harmed, the economy as a 

whole will suffer. Professor Dermot Hayes of Iowa State University calculates that 

the effect of $2 billion in retaliation would be 17,000 lost U.S. jobs. Retaliation of 

$4 billion would double this figure. Estimates of state-by-state job losses are contained in Attachment 1. 

The Commerce Department recently reported 4 that nearly 30 percent of gross domestic product (GDP) growth over the last 5 years has been the result of export 

growth. Moreover, two of the three export markets that contributed the most to this 

export growth are Mexico and Canada. Retaliation by them would needlessly put 

a brake on an element of the U.S. economy that has been performing well. 

The Cost of Retaliation is Not Worth the Insignificant Benefits from COOL 

So what, one may ask, does our nation gain from COOL as it is presently constituted? 

• COOL imparts no useful health or safety information to consumers. No health 

or safety rationale for COOL has ever been advanced by USDA, because, quite 

simply, there is none. Imported meat products are already subject to the same 

strict sanitary requirements applied to domestically produced meat. 

• COOL imposes additional costs on processors that are passed onto consumers. 

Moreover, the need for the Department of Agriculture to ensure compliance 

means COOL adds costs to the taxpayer. USDA’s analysis of its final rule estimated first-year implementation costs to be approximately $2.6 billion for those 

affected. Of the total, each commodity producer would bear an average estimated cost of $370, intermediary firms (such as wholesalers or processors) 

10 

5 Congressional Research Service RS22955. 

6http://www.gpo.gov/fdsys/pkg/FR-2013-05-24/pdf/2013-12366.pdf 

$48,219 each and retailers $254,685 each.5 When USDA announced the modification of the COOL rule in May 2013 in a vain effort to comply with the adverse WTO ruling, it said that that change in the regulation alone would cost 

an estimated $123.3 million, with a range of $53.1 million to $192.1 million, and 

that 33,350 establishments owned by 7,181 firms will be either directly or indirectly affected by this rule. Of these establishments/firms, USDA estimated that 

6,849 qualified as small businesses.6

• COOL has caused trade tensions with two of the largest trading partners of the 

United States, and now it appears that retaliation by them will result in significant additional costs to the U.S. economy in lost exports and jobs. 

Because the WTO does not and could never have an enforcement arm, sanctioned 

retaliation tailored to bring rights and obligations back into balance is the only permissible recourse to address trade measures that have been judged not to comply 

with internationally accepted rules if nations do not act to bring those measures 

into compliance. 

The United States has been the global leader in the creation of both a rules-based 

global trading system and a dispute settlement process within that system that is 

fair and balanced. The rules COOL has been found to violate are those the United 

States helped write and those the United States demanded other countries abide by 

in their treatment of U.S. exports. The United States is quick to applaud when panels find in its favor and quick to insist that U.S. trading partners bring offending 

measures into conformity with those rules. 

The United States should be equally quick to do so itself. 

Background 

COOL became effective on Sept. 30, 2008, under an interim final rule published 

by USDA. USDA published a final rule with several changes to the interim final 

rule in January 2009, and the final rule took effect March 16 of that year. 

The following table provides an overview of the rule and its complexity with respect to determining the appropriate label at the retail level. 

11 

Muscle Cuts & Ground Meat 

Categories COOL Statutory Definition AMS Final Rule (January 2009) COOL Label at Retail Level 

United States Country-of-Origin 

[Category A or Label A] 

‘‘beef [or] . . . pork . . . derived 

from an animal that was . . . exclusively born, raised, and slaughtered in the United States’’ 

For beef and pork, means: 

‘‘(1) From animals exclusively born, raised, and slaughtered in the 

United States; (2) From animals born and raised in Alaska or Hawaii and transported for a period of not more than 60 days through Canada to the United States and slaughtered in the United States; . . .’’ 

Product of the US(A). 

Multiple Countries of Origin [Category B or Label B] ‘‘beef [or] . . . pork . . . derived from an animal that is— 

(i) not exclusively born, raised and 

slaughtered in the United States; 

(ii) born, raised or slaughtered in 

the United States; and 

(iii) not imported into the United 

States for immediate slaughter’’ 

For muscle cuts of beef and pork ‘‘derived from animals that were born in 

Country X or (as applicable) Country Y, raised and slaughtered in the United States, and were not derived from animals imported for immediate slaughter [defined as ‘consignment directly from the port of entry to a recognized slaughtering establishment and slaughtered within 2 weeks from the date of entry’], the origin may be designated as Product of the United States, Country X, and (as applicable) Country Y.’’ 

For muscle cuts of beef and pork ‘‘derived from animals born, raised, and 

slaughtered in the U.S. that are commingled during a production day with muscle cuts [of beef and pork from animals born outside the U.S., raised and slaughtered in the U.S., and not imported for immediate slaughter], the origin may be designated as Product of the United States, Country X, and (as applicable) Country Y.’’ 

Product of the U.S., Country X and 

Country Y (if applicable). 

For muscle cuts of beef and pork ‘‘derived from animals that are born in 

Country X or Country Y, raised and slaughtered in the United States, that are commingled during a production day with muscle cut[s of beef and pork] derived from animals that are imported into the United States for immediate slaughter . . ., the origin may be designated as Product of the United States, Country X, and (as applicable) Country Y.’’ 

‘‘In each case, the countries may be listed in any order. In addition, the 

origin declaration may include more specific information related to production steps provided records to substantiate the claims are maintained and the claim is consistent with other applicable Federal legal requirements.’’ 

Imported for Immediate Slaughter 

[Category C or Label C] 

‘‘beef [or] . . . pork . . . derived 

from an animal that is imported into the United States for immediate slaughter’’ 

‘‘If an animal was imported into the United States for immediate slaughter [defined as ‘consignment directly from the port of entry to a recognized slaughtering establishment and slaughtered within 2 weeks from 

the date of entry’], the origin of the resulting [beef and pork] derived from that animal shall be designated as Product of Country X and the United States.’’ 

Product of Country X, U.S. 

12 

Muscle Cuts & Ground Meat 

Categories COOL Statutory Definition AMS Final Rule (January 2009) COOL Label at Retail Level 

Foreign Country-of-Origin [Category 

D or Label D] 

‘‘beef [or] . . . pork . . . derived 

from an animal . . . not born, raised, or slaughtered in the United States’’ 

‘‘Imported [beef and pork] for which origin has already been established 

as defined by this law (e.g., born, raised, and slaughtered or produced) and for which no production steps have occurred in the United States, shall retain their origin, as declared to U.S. Customs and Border Protection at the time the product entered the United States, through retail sale.’’ 

Product of X. 

Ground Beef or Pork ‘‘notice . . . for ground beef, ground 

pork . . . shall include a list of all [or] . . . all reasonably possible countries of origin of such ground beef, ground pork, . . .’’ 

‘‘The declaration for ground beef, ground pork . . . shall list all countries 

of origin contained therein or that may be reasonably contained therein. In determining what is considered reasonable, when a raw material from a specific origin is not in a processor’s inventory for more than 60 days, that country shall no longer be included as a possible country-oforigin.’’ 

Product of U.S., Country X, [and as 

applicable] Country Y, Country Z. 

Source: Congressional Research Service Report RS22955. 

13 

Canada and Mexico initiated separate dispute settlement cases in December 2008. 

The two cases were combined in May 2010 because of the similarity of the claims. 

See Attachment 2 for a full timeline of actions in this case. A WTO summary of key 

findings by various WTO bodies can be found in Attachment 3 and at the WTO 

website: https://www.wto.org/english/tratope/dispu_e/cases_e/ds384_e.htm. 

In short, Canada and Mexico both stated that they were not challenging mandatory country-of-origin labeling as such; they were arguing that COOL requirements, 

as implemented, act as a protectionist trade barrier that distorts competition between imported and domestic meat products. A major complaint involved the reservation of the ‘‘Product of the United States’’ label for animals that were born, 

raised and slaughtered in the U.S. They argued that this unfairly denied the use 

of that label to products from animals that were exported to the U.S. at a young 

age and subsequently raised and slaughtered in the United States. Mexico pointed 

out that 70 percent of the weight and value of the feeder cattle it exports to the 

U.S. is added within U.S. territory. 

In July 2012, the WTO ruled against the United States, with the WTO Appellate 

Body finding that COOL ‘‘does not impose labeling requirements for meat that provide consumers with origin information commensurate with the type of origin information that upstream livestock producers and processors are required to maintain 

and transmit.’’ 

The United States then attempted to come into compliance with the WTO ruling 

by amending the regulation and requiring the industry to provide more information. 

A table comparing the two is provided here: 

Category 2009 Label 2013 Label 

A (U.S.) Product of the United States Born, Raised, and Slaughtered in the 

United States 

B (Multiple) Product of the United States and X; or, 

Product of the United States, X, and Y 

Born in X, Raised and Slaughtered in the 

United States; or, Born in X, Raised in 

Y, Slaughtered in the United States. 

C (Imm. Slaughter) Product of X and the United States Born and Raised in X, Slaughtered in the 

United States 

D (Foreign) Product of X Product of X 

Commingled (A) + 

(B) 

Product of the United States and X Prohibited 

Commingled (B) + 

(C) 

Product of the United States and X; or 

Product of X and the United States 

Prohibited 

In August 2013, Canada and Mexico formally initiated WTO compliance proceedings to challenge USDA’s amended COOL rule. Canada and Mexico stated that, 

like its predecessor, the new regulation discriminates against meat products derived 

from livestock from their respective countries and, therefore, violates WTO rules. 

On Oct. 20, 2014, a WTO compliance panel agreed with most the Canadian and 

Mexican claims, finding that the amended COOL rule ‘‘accords imported [Canadian 

and Mexican] livestock treatment less favorable than that accorded to like domestic 

livestock.’’ The U.S. subsequently appealed that ruling, and the WTO Appellate 

Body is expected to rule on that appeal in May. 

The WTO is likely once again to find that COOL violates WTO principles. Once 

that happens, Mexico and Canada will request the WTO to allow them to place retaliatory tariffs on U.S. pork and many other U.S. products. Absent Congressional 

or regulatory action to eliminate offending elements of the COOL statue, Canada 

and Mexico can be expected to retaliate against U.S. exports during the second part 

of this year. 

U.S. Agriculture has Unfortunate Experience with Retaliation 

On March 16, 2009, Mexico announced it would retaliate against the United 

States for the cancellation of the Cross-Border Trucking Demonstration Program. 

This action was taken as a result of a ruling by a neutral NAFTA dispute settlement panel, which found that the U.S. trucking restrictions were in breach of its 

NAFTA obligations. The Mexican announcement raised tariffs on 89 different U.S. 

products, ranging from many agriculture goods (pork, apples, soups and sauces, 

cheese, pears, pet food, potatoes, nuts, almonds, strawberries, onions, pistachios, 

peanuts, wine and various other fruits and vegetables) to such items as jewelry. 

These totaled $2.4 billion (2008 value) in U.S. exports. Perhaps no U.S. sector was 

as hard hit as the potato industry, which saw immediate losses in market share to 

Canada and prices to growers plummet. Potato producers learned the hard way that 

once a market is lost to competitors, it is hard and takes time to recapture. Sometimes a market is lost for good. 

14 

Mexico later decided to revise the list of affected products on Aug. 18, 2010, and 

raised the number of products to 99 valued at $2.03 billion (2009 value), with tariffs 

ranging from 5–25 percent. Sixteen products were dropped from the original list and 

26 products were added to the revised list. This ‘‘carrousel’’ form of retaliation added 

additional uncertainty to markets and further harm to affected U.S. producers. 

On July 6, 2011, the U.S. and Mexico signed a formal agreement, allowing Mexican trucks to operate in the U.S. as part of a pilot program, which resulted in the 

Mexican government phasing out the retaliatory tariffs. 

Conclusion 

The U.S. pork industry expects the WTO to once again rule against the United 

States in mid-May. Congress must be prepared to repeal the offending parts of the 

statue to bring the U.S. into compliance with WTO rules. Congress should not allow 

retaliation against pork producers and other sectors of the U.S. economy. 

ATTACHMENT 1 

Estimated American Job Losses Due to Retaliation for COOL by Canada 

and Mexico 

Job Losses from $2 Billion 

Retaliation 

Job Losses from $4 billion in 

Retaliation 

Alabama 108 215 

Alaska 0 0 

Arizona 874 1,749 

Arkansas 130 260 

California 828 1,657 

Colorado 230 460 

Connecticut 141 283 

Delaware 24 48 

Florida 93 186 

Georgia 227 454 

Hawaii 1 2 

Idaho 79 158 

Illinois 406 812 

Indiana 828 1,657 

Iowa 598 1,197 

Kansas 418 837 

Kentucky 74 148 

Louisiana 598 1,197 

Maine 34 68 

Maryland 135 270 

Massachusetts 307 614 

Michigan 1,473 2,945 

Minnesota 245 491 

Mississippi 204 409 

Missouri 287 573 

Montana 14 28 

Nebraska 437 874 

Nevada 79 157 

New Hampshire 74 147 

New Jersey 249 497 

New Mexico 44 88 

New York 367 734 

North Carolina 226 452 

North Dakota 163 326 

Ohio 460 920 

Oklahoma 81 162 

Oregon 63 125 

Pennsylvania 382 764 

Rhode Island 22 44 

South Carolina 224 447 

South Dakota 158 317 

Tennessee 448 896 

Texas 4,234 8,468 

Utah 99 198 

Vermont 52 104 

Virginia 152 305 

Washington 333 666 

West Virginia 9 18 

Wisconsin 283 565 

Wyoming 4 8 

15 

Estimated American Job Losses Due to Retaliation for COOL by Canada 

and Mexico—Continued 

Job Losses from $2 Billion 

Retaliation 

Job Losses from $4 billion in 

Retaliation 

Total 17,000 34,000 

Source: Dr. Dermot Hayes, Iowa State University. 

Based on trade in products likely to be included in Canada’s and Mexico’s retaliation lists, as 

determined by the COOL Coalition. 

ATTACHMENT 2 

Major COOL Developments & WTO Dispute Settlement Case 

May 13, 2002 COOL provisions are enacted in the 2002 Farm Bill to take effect on September 30, 

2004 (P.L. 107–171, § 10816). 

October 30, 2003 USDA’s Agricultural Marketing Service (AMS) publishes in the Federal Register the 

proposed rule on COOL. The comment period, initially to close December 29, 

2003, is extended to February 27, 2004. 

January 23, 2004 Implementation of COOL for covered commodities except fish and shellfish is delayed until September 30, 2006, per enactment of the FY 2004 omnibus appropriations act (P.L. 108–199, Division A, § 749). 

October 5, 2004 AMS publishes in the Federal Register the interim final rule on COOL for fish and 

shellfish. 

April 4, 2005 COOL labeling for fish and shellfish takes effect. 

November 10, 2005 Implementation of COOL for all other covered commodities is delayed until September 30, 2008, per enactment of the FY 2006 agriculture appropriations act 

(P.L. 109–97, § 792). 

May 22, 2008 Amendments to the 2002-enacted COOL provisions become law in the 2008 Farm 

Bill (P.L. 110–246, § 11002), to take effect on September 30, 2008. 

August 1, 2008 AMS publishes in the Federal Register the interim final rule to implement COOL 

for all covered commodities except fish and shellfish, to take effect on September 

30, 2008. 

December 16, 2008 Canada, joined by Mexico, holds consultations on COOL with the United States. 

January 15, 2009 AMS publishes the final rule to implement COOL for all covered commodities, to 

take effect on March 16, 2009. 

February 20, 2009 Secretary of Agriculture sends letter to meat and food industry representatives urging the voluntary adoption of three labeling changes. 

March 16, 2009 COOL’s final rule for all covered commodities takes effect. 

June 5, 2009 Canada holds consultations with the United States to resolve differences on COOL. 

October 7, 2009 Canada requests the establishment of a World Trade Organization (WTO) dispute 

settlement (DS) panel to consider its complaint on the U.S. COOL program. Mexico follows with a comparable request on October 9. 

November 19, 2009 WTO establishes a DS panel to consider complaints made by Canada and Mexico on 

the U.S. COOL program. 

November 18, 2011 WTO DS panel releases final report that concludes that some features of U.S. COOL 

discriminate against foreign livestock and are not consistent with U.S. WTO trade 

obligations. 

March 23, 2012 The United States appeals the WTO DS panel’s conclusions. 

March 28, 2012 Canada and Mexico also appeal some of the DS panel’s conclusions. 

June 29, 2012 The WTO’s Appellate Body (AB) issues its report, upholding the DS panel finding 

that U.S. COOL does not favorably treat imported livestock but reversing the 

other finding that COOL does not provide sufficient information to consumers on 

the origin of meat products. 

July 10, 2012 Canada, Mexico, and the United States withdraw consideration of the AB report 

from the Dispute Settlement Body (DSB) agenda to provide more time to consult 

on the 90 day reporting requirement that was missed by the AB. 

July 23, 2012 WTO’s DSB adopts the AB report and the DS panel report, as modified by the AB 

report. 

August 22, 2012 30 day deadline for the United States to inform the DSB about how it plans to implement the WTO findings. 

August 31, 2012 United States informs the DSB that it intends to comply with the WTO recommendations and rulings, and states its need for a ‘‘reasonable period of time’’ to 

do so. 

October 4, 2012 With Canada, Mexico, and United States unable to agree on what a reasonable period of time should be and on who the arbitrator should be, the WTO’s Director 

appoints an arbitrator to determine this. 

December 4, 2012 WTO’s arbitrator announces his determination that the ‘‘reasonable amount of time’’ 

for the United States to implement the DSB’s recommendations and rulings is 10 

months from when the AB and DS panel reports were adopted (i.e., May 23, 

2013). 

March 12, 2013 AMS issues a proposed rule to modify certain COOL labeling requirements for muscle-cut commodities to bring them into compliance with WTO’s findings and to improve the COOL program’s overall operation. 

16 

Major COOL Developments & WTO Dispute Settlement Case—Continued 

April 11, 2013 Deadline for interested parties to submit comments to AMS on proposed COOL rule. 

May 23, 2013 Deadline for the United States to comply with the WTO’s findings on U.S. COOL. 

May 24, 2013 At the DSB meeting, the United States notifies that it had complied with the WTO 

findings on COOL by issuing a final rule on May 23. No compliance proceeding 

was initiated by Canada or Mexico. 

June 7, 2013 Canada releases an itemized tariff list of products that could be targeted in a retaliatory action against the United States. 

July, August, September 

2013 

In July, U.S., Canadian, and Mexican meat industry organizations file suit against 

USDA to block the May 2013 COOL rule. They file a motion for a preliminary injunction against implementing the rule in August. In September, the District 

Court for the District of Columbia denies the group’s request to halt the implementation of the COOL rule. 

August 19, 2013 Canada and Mexico notify the DSB that they will request the establishment of a 

compliance panel at the August 30 meeting of the DSB. 

August 30, 2013 The United States objects to the establishment of a compliance panel. The request 

will be made again at the September DSB meeting on September 25, and the 

United States will not be able to object to its formation. 

September 27, 2013 The DSB selects the members of the compliance panel, the same members that 

served earlier on the COOL dispute settlement panel. 

February 18–19, 2014 The WTO’s compliance panel hears the COOL case. 

October 20, 2014 The WTO releases the compliance panel report. Parties have 60 days to appeal. 

November 28, 2014 The United States appeals the findings of the compliance panel report. 

February 16–17, 2014 Appellate Body hears the U.S. appeal of the compliance panel report. 

May 18, 2015 Expected date of Appellate ruling on the U.S. appeal. 

Main source: Congressional Research Service RS22955. 

ATTACHMENT 3 

WTO SUMMARY OF KEY FINDINGS OF THE DISPUTE SETTLEMENT PANEL, THE APPELLATE

BODY AND THE COMPLIANCE PANEL

Summary of Key Findings of the Initial Dispute Settlement Panel Report, 

November 18, 2011 

This dispute concerns: (i) the U.S. statutory provisions and implementing regulations setting out the United States’ mandatory country-of-origin labeling regime for 

beef and pork (‘‘COOL measure’’); as well as (ii) a letter issued by the U.S. Secretary 

of Agriculture Vilsack on the implementation of the COOL measure (‘‘Vilsack letter’’). 

The Panel determined that the COOL measure is a technical regulation under the 

TBT Agreement, and that it is inconsistent with the United States’ WTO obligations. In particular, the Panel found that the COOL measure violates Article 2.1 of 

the TBT Agreement by according less favorable treatment to imported Canadian 

cattle and hogs than to like domestic products. The Panel also found that the COOL 

measure does not fulfil its legitimate objective of providing consumers with information on origin, and therefore violates Article 2.2 of the TBT Agreement. 

As regards the Vilsack letter, the Panel found that the letter’s ‘‘suggestions for 

voluntary action’’ went beyond certain obligations under the COOL measure, and 

that the letter therefore constitutes unreasonable administration of the COOL measure in violation of Article X:3(a) of the GATT 1994. The Panel refrained from reviewing the Vilsack letter under the TBT Agreement, as it found that this letter is 

not a technical regulation under that agreement. 

In light of the above findings of violation, the Panel did not consider it necessary 

to rule on the claims under Article III:4 of the GATT 1994 (national treatment) or 

on the non violation claims under Article XXIII:1(b) of the GATT 1994. 

Summary of Key Findings of the Appellate Body Regarding the U.S. Appeal 

of the Panel Report 

The appeal concerned primarily the COOL measure (the U.S. statutory provisions 

and implementing regulations setting out the United States’ mandatory country-oforigin labeling regime for beef and pork), and the Panel’s findings that this measure 

is inconsistent with Articles 2.1 and 2.2 of the TBT Agreement. The United States 

appealed both findings. Canada appealed certain aspects of the Panel’s analysis 

under Article 2.2, and requested the Appellate Body to complete the legal analysis 

in the event that it reversed the Panel’s finding under Article 2.2. Canada also 

raised conditional appeals with respect to the COOL measure under Articles III:4 

and XXIII:1(b) of the GATT 1994. Although Canada originally also sought to have 

the Appellate Body make certain rulings with respect to the Vilsack letter, Canada 

withdrew these requests following the United States’ assertion that this measure 

had been withdrawn. 

17 

The Appellate Body upheld, albeit for different reasons, the Panel’s finding that 

the COOL measure violates Article 2.1 of the TBT Agreement by according less favorable treatment to imported Canadian cattle and hogs than to like domestic cattle 

and hogs. The Appellate Body reversed the Panel’s finding that the COOL measure 

violates Article 2.2 of the TBT Agreement because it does not fulfil its legitimate 

objective of providing consumers with information on origin, and was unable to complete the legal analysis and determine whether the COOL measure is more trade 

restrictive than necessary to meet its objective. 

In its analysis under Article 2.1 of the TBT Agreement, the Appellate Body agreed 

with the Panel that the COOL measure has a detrimental impact on imported livestock because its record-keeping and verification requirements create an incentive 

for processors to use exclusively domestic livestock, and a disincentive against using 

like imported livestock. The Appellate Body found, however, that the Panel’s analysis was incomplete because the Panel did not go on to consider whether this de 

facto detrimental impact stems exclusively from a legitimate regulatory distinction, 

in which case it would not violate Article 2.1. 

In its own analysis, the Appellate Body found that the COOL measure lacks evenhandedness because its record-keeping and verification requirements impose a disproportionate burden on upstream producers and processors of livestock as compared to the information conveyed to consumers through the mandatory labeling requirements for meat sold at the retail level. That is, although a large amount of 

information must be tracked and transmitted by upstream producers for purposes 

of providing consumers with information on origin, only a small amount of this information is actually communicated to consumers in an understandable or accurate 

manner, including because a considerable proportion of meat sold in the United 

States is not subject to the COOL measure’s labeling requirements at all. Accordingly, the detrimental impact on imported livestock cannot be said to stem exclusively from a legitimate regulatory distinction, and instead reflects discrimination 

in violation of Article 2.1. For these reasons, the Appellate Body upheld the Panel’s 

finding under Article 2.1. 

In its analysis under Article 2.2 of the TBT Agreement, the Appellate Body found 

that the Panel properly identified the objective of the COOL measure as being ‘‘to 

provide consumer information on origin’’, and did not err in concluding that this is 

a ‘‘legitimate’’ objective. The Appellate Body found, however, that the Panel erred 

in its interpretation and application of Article 2.2. This was because the Panel appeared to have considered, incorrectly, that a measure could be consistent with Article 2.2 only if it fulfilled its objective completely or exceeded some minimum level 

of fulfillment, and to have ignored its own findings, which demonstrated that the 

COOL measure does contribute, at least to some extent, to achieving its objective. 

The Appellate Body therefore reversed the Panel’s finding that the COOL measure 

is inconsistent with Article 2.2, but was unable to determine whether the COOL 

measure is more trade restrictive than necessary to fulfil a legitimate objective within the meaning of Article 2.2. 

As the conditions on which Canada’s appeals with respect to Articles III:4 and 

XXIII:1(b) of the GATT 1994 were made were not satisfied, the Appellate Body 

made no findings under these provisions. 

At its meeting on 23 July 2012, the DSB adopted the Appellate Body report and 

the panel report, as modified by the Appellate Body report. 

Findings of the Compliance Panel with Respect to the Challenge by Canada 

and Mexico that the Revised U.S., Cool Regulation Complies with the 

Dispute Settlement Body Recommendations 

The compliance panel found that the amended COOL measure violates Article 2.1 

of the TBT Agreement because it accords to Canadian and Mexican livestock less 

favourable treatment than that accorded to like U.S. livestock. In particular, the 

compliance panel concluded that the amended COOL measure increases the original 

COOL measure’s detrimental impact on the competitive opportunities of imported 

livestock in the U.S. market, because it necessitates increased segregation of meat 

and livestock according to origin; entails a higher record-keeping burden; and increases the original COOL measure’s incentive to choose domestic over imported 

livestock. Further, the compliance panel found that the detrimental impact caused 

by the amended COOL measure does not stem exclusively from legitimate regulatory distinctions. In this regard, the compliance panel followed the approach of the 

Appellate Body in the original dispute by taking into account the amended COOL 

measure’s increased record-keeping burden, new potential for label inaccuracy, and 

continued exemption of a large proportion of relevant products. These considerations 

confirmed that, as with the original COOL measure, the detrimental impact caused 

by the amended COOL measure’s labeling and record-keeping rules could not be exVerDate Mar 15 2010 16:15 May 28, 2015 Jkt 041481 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 P:\DOCS\114-08\93967.TXT BRIAN
18 

plained by the need to convey to consumers information regarding the countries 

where livestock were born, raised, and slaughtered. 

The compliance panel determined that the complainants had not made a prima 

facie case that the amended COOL measure is more trade restrictive than necessary 

within the meaning of Article 2.2 of the TBT Agreement. In reaching this conclusion, the compliance panel found that the amended COOL measure makes a considerable but, given the exemptions from coverage, necessarily partial contribution to 

its objective of providing consumer information on origin. 

The compliance panel further found that the amended COOL measure had increased the ‘‘considerable degree of trade-restrictiveness’’ found in the original dispute. The compliance panel also assessed the risks non-alignment of the objective 

would create in terms of consumer interest in, and willingness to pay for, different 

types of country-of-origin information. Additionally, the compliance panel reviewed 

four alternative measures proposed by the complainants and concluded that either 

they would not make an equivalent contribution to the relevant objective as the 

amended COOL measure would, or they were not adequately identified so as to enable meaningful comparison with the amended COOL measure. As a result, the 

compliance panel was not able to conclude that the amended COOL measure is 

more trade restrictive than necessary in the light of the proposed alternative measures. 

The compliance panel found that the amended COOL measure violates Article 

III:4 of the GATT 1994 based on its finding that the amended COOL measure increases the original COOL measure’s detrimental impact on the competitive opportunities of imported livestock in comparison with like U.S. products. In this regard, 

the compliance panel relied on the same considerations that informed its finding of 

detrimental impact under Article 2.1 of the TBT Agreement. However, consistent 

with Appellate Body jurisprudence, it was not necessary in order to find a violation 

under Article III:4 of the GATT 1994 for the compliance panel to determine whether 

the detrimental impact stemmed exclusively from legitimate regulatory distinctions. 

The CHAIRMAN. Thank you, Mr. Weber. 

Mr. Wenk. 

STATEMENT OF CHRISTOPHER W. WENK, EXECUTIVE 

DIRECTOR OF INTERNATIONAL POLICY, U.S. CHAMBER OF 

COMMERCE, WASHINGTON, D.C. 

Mr. WENK. Chairman Rouzer, Members of the Subcommittee, the 

U.S. Chamber is taking part in today’s important hearing as cochair, alongside the NAM (National Association of Manufacturers) 

of the COOL Reform Coalition. Launched 1 year ago, the COOL 

Reform Coalition includes companies and associations from a wide 

variety of sectors, including agriculture, agrifood and manufacturing that are advocating for U.S. compliance with obligations it 

has undertaken in the WTO agreements relating to the topic of this 

hearing. 

COOL requirements are common and are often fully compatible 

with WTO agreements; however, an unambiguous series of rulings 

by WTO panels has recognized the U.S. COOL rule for muscle cuts 

of meat imposes real economic costs on the meat industry by forcing segregation of cattle and hogs, and requiring costly tracking 

systems and record-keeping. By imposing new costs exclusively on 

Canadian and Mexican producers has a discriminatory trade impact. This dispute has been unfolding for years and is now entering 

its final stage. 

Why does this matter? Canada and Mexico are by far the largest 

markets for U.S. exports. Trade with our neighbors has reached 

$1.3 trillion annually. U.S. merchandise exports to Canada and 

Mexico rose by 66 percent over the past 5 years, topping $550 billion last year. 

19 

As noted, the COOL Reform Coalition is seeking U.S. compliance 

with its obligation under the WTO agreements. Our coalition is 

building on years of work by a variety of organizations representing ranchers, farmers, and food and agriculture businesses 

impacted by the COOL rule for muscle cuts of meat. Broad industry groups such as the Chamber have joined the debate over COOL 

to signal our concern about the broad impact retaliation could have 

on a wide variety of industries, including many well removed from 

agriculture. The Governments of Canada and Mexico have indicated they are fully prepared to proceed with WTO authorized retaliation against U.S. exports of agricultural, agrifood, and manufactured goods as soon as this summer, pending the outcome of the 

final appeal. 

WTO-authorized retaliation by these two vital trading partners 

could result in billions of dollars of losses across multiple sectors. 

Many U.S.-made products will be subject to the steep tariffs that 

would effectively bar them from Canadian and Mexican markets. 

A consensus has emerged that Congressional action is required 

to avert retaliation, and time for Congress to do so is running out. 

The WTO appellate body will release its final ruling no later than 

May 18, at which time it will be made public. Expert opinion is 

unanimous. This last ruling will confirm the U.S. is violating obligations it has undertaken as the member of the WTO. Over the 

past several years, the avenues open to the United States to avoid 

retaliation have dwindled. Our coalition proposed and advocated 

for several approaches, which are no longer feasible. Given the period of as little as 60 days between the announcement of the final 

ruling in May, and retaliation by Canada and Mexico, the only way 

to avert costly retaliation is for Congress to approve legislation repealing the COOL rule for muscle cuts of meat. For these reasons, 

the Chamber strongly urges Congress to move swiftly to approve 

legislation repealing the COOL requirements for muscle cuts of 

meat due to the imminent and all but certain adverse ruling by the 

WTO appellate body in May. Failure to do so would cost tens of 

thousands of American jobs, and jeopardize mutually beneficial 

trade relationships with our two closest neighbors and largest export markets. 

The U.S. Chamber of Commerce and members of the COOL Reform Coalition appreciate the Committee’s attention to this vital 

matter, and look forward to working with this Committee to reach 

this goal. 

Thank you for the opportunity to testify today. 

[The prepared statement of Mr. Wenk follows:] 

PREPARED STATEMENT OF CHRISTOPHER W. WENK, EXECUTIVE DIRECTOR OF

INTERNATIONAL POLICY, U.S. CHAMBER OF COMMERCE, WASHINGTON, D.C. 

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than three million businesses of all sizes, sectors, 

and regions, as well as state and local chambers and industry associations. 

More than 96% of Chamber member companies have fewer than 100 employees, 

and many of the nation’s largest companies are also active members. We are therefore cognizant not only of the challenges facing smaller businesses, but also those 

facing the business community at large. 

Besides representing a cross-section of the American business community with respect to the number of employees, major classifications of American business—e.g., 

20 

manufacturing, retailing, services, construction, wholesalers, and finance—are represented. The Chamber has membership in all 50 states. 

The Chamber’s international reach is substantial as well. We believe that global 

interdependence provides opportunities, not threats. In addition to the American 

Chambers of Commerce abroad, an increasing number of our members engage in the 

export and import of both goods and services and have ongoing investment activities. The Chamber favors strengthened international competitiveness and opposes 

artificial U.S. and foreign barriers to international business. 

Positions on issues are developed by Chamber members serving on committees, 

subcommittees, councils, and task forces. Nearly 1,900 businesspeople participate in 

this process. 

On the occasion of this hearing of the House Agriculture Committee on ‘‘the implications of potential retaliatory measures taken against the United States in response to meat labeling requirements,’’ I am pleased to testify on behalf of the U.S. 

Chamber of Commerce and our members. The Chamber is the world’s largest business federation, representing the interests of more than three million businesses of 

all sizes, sectors, and regions, as well as state and local chambers of commerce and 

industry associations. 

The Chamber is taking part in today’s hearing as co-chair—alongside the National 

Association of Manufacturers (NAM)—of the COOL Reform Coalition. Launched 1 

year ago, the COOL Reform Coalition includes companies and associations from a 

wide variety of sectors—including agriculture, agrifood, and manufacturing—that 

are advocating for U.S. compliance with obligations it has undertaken in the World 

Trade Organization (WTO) agreements relating to the topic of this hearing. 

Country-of-origin labeling (COOL) requirements are common, and as promulgated 

in many countries and for many products, they are often fully compatible with the 

World Trade Organization (WTO) agreements. At least 70 countries have some kind 

of country-of-origin labeling requirement. In the United States, mandatory COOL 

rules require most retailers to provide country-of-origin labeling for fresh fruits and 

vegetables, fish, shellfish, peanuts, pecans, macadamia nuts, ginseng, meat and 

poultry. 

The dispute under discussion today only involves muscle cuts of meat. It arose 

because, 2 decades after the North American Free Trade Agreement (NAFTA) entered into force, U.S. meat producers and their counterparts in Canada and Mexico 

have come to treat North America as an integrated market—just as U.S. manufacturers do. 

It often makes good economic sense for cattle to be born, raised, and slaughtered 

in different places across the continent—north or south of the 49th parallel, or north 

or south of the Rio Grande. Taking these realities into account, the WTO has recognized the U.S. COOL rule for muscle cuts of meat imposes real economic costs on 

the meat industry by forcing segregation of cattle and hogs and requiring costly 

tracking systems and record keeping. These costs are real, and they make labeling 

requirements for meat different than for, say, almonds or apples, which are grown 

in one spot. 

The WTO Dispute 

This dispute has been unfolding for years, and it is now entering its final stage. 

The COOL rule for muscle cuts of meat is required by the 2002 Farm Bill as amended by the 2008 Farm Bill. In late 2009, less than 1 year after the COOL rule for 

muscle cuts of meat took effect, Canada and Mexico began the process of challenging 

it at the WTO. They argued that COOL reduces the value and number of cattle and 

hogs shipped to the U.S. market; by imposing new costs exclusively on Canadian 

and Mexican producers, it has a discriminatory, trade-distorting impact. 

In July 2012, the WTO Dispute Settlement Body adopted an Appellate Body ruling that the COOL rule for muscle cuts of meat violated the WTO Technical Barriers to Trade (TBT) Agreement because it treats imported Canadian cattle and 

hogs, and imported Mexican cattle, less favorably than domestic livestock. 

A deadline of May 23, 2013, was set for the U.S. Department of Agriculture 

(USDA) to bring U.S. regulations into alignment with obligations the United States 

has undertaken in the WTO agreements. On that date, USDA published a revised 

rule. Government officials of both Canada and Mexico stated that the revisions were 

inadequate. On September 25, 2013, Canada and Mexico requested the establishment of a compliance panel to determine whether the revised rule is compliant with 

obligations the United States has undertaken in the WTO agreements. 

On October 20, 2014, a WTO compliance panel report again found the United 

States had failed to comply with its WTO obligations. In fact, it found the revised 

rule was even more discriminatory than the earlier version. The following month, 

the United States appealed this decision, and the WTO Appellate Body expects to 

21 

circulate its ruling on the appeal no later than May 18, at which time it will be 

made public. 

In other words, the end of this long and winding road is within sight. The pain 

for U.S. agriculture and industry, however, could be just beginning. 

Trade with Canada, Mexico is Vital to U.S. 

The importance of the U.S. trade relationship with Canada and Mexico for American workers, farmers, ranchers, and companies of all kinds is worth bearing in 

mind. A trade dispute with a minor commercial partner can be damaging; a trade 

dispute with the two largest markets for U.S. exports could be highly damaging. 

Consider the dimensions of our economic ties to Canada and Mexico today: 

Trade 

• Since the North American Free Trade Agreement (NAFTA) entered into force 

in 1994, trade with Canada and Mexico has risen nearly fourfold to $1.28 trillion in 2013, and the two countries buy about 1⁄3 of all U.S. merchandise exports. 

• The trade boom continues. U.S. merchandise exports to Canada and Mexico rose 

by 66% over the past 5 years, reaching $552 billion in 2014. In fact, our North 

American neighbors provided 39% of all growth in U.S. merchandise exports in 

the 2009–2014 period. 

• Canada (population 36 million) again edged the EU (population 500 million) as 

the top market for U.S. goods exports in 2014. U.S. merchandise exports to 

Mexico (population 125 million) were nearly double those to China (population 

1.4 billion), which is the third largest national market for U.S. exports. 

• In fact, the United States in 2014 had a trade surplus in manufactured goods 

($21.6 billion (http://www.trade.gov/mas/ian/build/groups/public/@tg_ian/ 

documents/webcontent/tg_ian_003368.pdf)) with Canada and Mexico, just as it 

has for the past 4 years. In 2013, the U.S. services trade surplus with Canada 

and Mexico reached $45 billion (http://www.bea.gov/itable/). The U.S. remains 

a significant net importer of petroleum from its North American neighbors. 

Jobs 

• Trade with Canada and Mexico supports nearly 14 million U.S. jobs, and nearly 

5 million of these net jobs are supported by the increase in trade generated by 

NAFTA, according to a comprehensive economic study (http:// 

www.uschamber.com/reports/opening-markets-creating-jobs-estimated-us-employment-effects-trade-fta-partners) commissioned by the U.S. Chamber. 

• The expansion of trade unleashed by NAFTA supports tens of thousands of jobs 

in each of the 50 states and more than 100,000 jobs in each of 17 states, according to the same study. 

Manufacturing 

• Canadians and Mexicans purchased U.S. manufactured goods valued at $486 

billion in 2014, generating more than $40,000 in export revenue for every American factory worker. To put this in context, these export earnings are equivalent 

to about half the annual earnings—including pay and benefits—of the typical 

American factory worker ($77,500). 

Agriculture 

• NAFTA has been a bonanza for U.S. farmers and ranchers. U.S. agricultural 

exports to Canada and Mexico rose by nearly 50% between 2007 and 2013, increasing from $27 billion to nearly $40 billion. Canada was the largest agricultural export market of the United States until it was overtaken by China in 

2013, and U.S. agricultural exports to Mexico have quintupled since NAFTA entered into force. 

Services 

• With new market access afforded by NAFTA, U.S. services exports to Canada 

and Mexico have tripled, rising from $27 billion in 1993 to $93 billion in 2013. 

Among the services industries that are benefiting are: audiovisual; finance; insurance; transportation, logistics, and express delivery services; and software 

and information technology services. 

Small Businesses 

• Canada and Mexico are the top two export destinations for U.S. small- and medium-size enterprises, more than 125,000 of which sold their goods and services 

in Canada and Mexico in 2011 (latest available). 

22 

The Consequences of Noncompliance 

As noted, the COOL Reform Coalition is seeking U.S. compliance with its obligations under the WTO agreements. Our coalition is building on years of work by a 

variety of organizations representing ranchers, farmers, and food and agriculture 

businesses impacted by the COOL rule for muscle cuts of meat. 

Broad industry groups such as the Chamber have joined in the debate over COOL 

to signal our concern about the broad impact retaliation could have on a wide variety of industries, including many well removed from agriculture. The governments 

of Canada and Mexico have indicated they are fully prepared to proceed with WTOauthorized retaliation against U.S. exports of agricultural, agrifood, and manufactured goods as soon as this summer, pending the outcome of the final appeal. 

WTO-authorized retaliation by these two vital U.S. trading partners could result 

in losses in the billions of dollars across multiple sectors including, but not limited 

to, food production, agriculture, and manufacturing. Many U.S.-made products 

would be subjected to steep tariffs that would effectively bar them from the Canadian and Mexican markets. As noted, the stakes are especially high because these 

are by far our largest export markets. 

Our coalition website (www.COOLReform.com) offers a map that shows the products likely to face retaliation and the states where these agricultural and manufactured goods are produced. It is based on information provided by the governments 

of Canada and Mexico, indicating their explicit intentions to retaliate should the 

United States fail to comply with its trade obligations, driving home the potential 

cost to communities all across the United States. 

Earlier experiences underscore how painful retaliation could be for American 

workers, farmers, and companies. After a dispute settlement panel ruled in Mexico’s 

favor in the cross-border trucking dispute several years ago, Mexico levied steep retaliatory duties on $2.4 billion worth of U.S. goods. The impact was devastating for 

tens of thousands of American workers and farmers. Many of the same products are 

likely to be targeted in the event retaliation goes forward in the COOL dispute. 

One prominent COOL supporter told a recent press conference that ‘‘undoubtedly 

the result of [an] appeal is going to be somewhat different’’ from the October ruling. 

He further said ‘‘there is strong legal standing to resolve the dispute,’’ and he said 

the United States ‘‘may win on appeal.’’ 

This is highly unlikely. Not only have WTO panels issued multiple adverse rulings, the most recent WTO panel report finds the United States has violated not 

just one but two agreements—the bedrock GATT 1994 agreement, which is the cornerstone of the WTO and the global rules-based trading system, and the TBT agreement. As noted, the report found the latest, revised version of the COOL rule was 

even more discriminatory than its predecessor. In any event, there will be no denying the immediacy of the problem when the final ruling is released within approximately 8 weeks. 

The U.S. Must Meet its WTO Obligations 

It is clearly in the long-term economic interests of the United States to comply 

with the rules of the international trading system. After all, our country did more 

than any other to write these rules, from the General Agreement on Tariffs and 

Trade in 1947 to the creation of the WTO in 1995. 

A host of studies shows the United States derives tremendous benefits from the 

open international trading system. One widely cited study shows that trade liberalization under these rules has boosted the income of the average American household 

by about $10,000 annually. 

As a nation, the United States flaunts its obligations under the rules-based trading system at our peril. Since the WTO was created in 1995, other countries have 

brought a number of disputes against the United States to the WTO, and the United 

States has lost a number of these. The United States has always (eventually) 

amended its laws or changed its practices to conform to these adverse rulings. The 

United States has done so because it is in the country’s interest to do so. 

Further, American workers, farmers, and companies rely on these rules to secure 

access to overseas markets. Just a few months ago, a WTO panel ruled against 

India in a dispute brought by the United States relating to Indian restrictions on 

the importation of U.S. agricultural products. As U.S. Trade Representative Michael 

Froman said at the time: ‘‘This victory affirms the Administration’s commitment to 

ensuring WTO Members play by the rules, and that America’s farmers, workers and 

businesses get the fair shot they deserve to sell Made-in-America goods under WTO 

rules.’’ 

Today, the shoe is on the other foot. More than 95% of the world’s consumers live 

outside our markets, but American farmers, workers, and companies will not be able 

23 

to sell their goods and services to those consumers if we fail to live up to these rules 

ourselves. 

The Goal of the Coalition 

A consensus has emerged that Congressional action is required to avert retaliation, and time for Congress to do so is running out. The WTO Appellate Body has 

announced it will circulate its ruling on the final U.S. appeal no later than May 18. 

WTO-authorized retaliation by Canada and Mexico could be authorized as soon as 

60 days thereafter. 

As we learned in the U.S.-Mexico cross-border trucking dispute, export sales of 

products targeted for retaliation can be lost even before authorized retaliation goes 

into effect. Sourcing managers planning future purchases will take into account likely retaliation and shift to vendors in other jurisdictions in response to the mere possibility of higher tariff-related costs in their supply chains. Once these sourcing relationships are lost, it can be years for companies to recover lost market share. 

Over the past several years, the avenues open to the United States to avoid retaliation have dwindled. Our coalition proposed and advocated for several approaches 

which are no longer feasible. Given the period of as little as 60 days between the 

announcement of the final ruling in May and retaliation by Canada and Mexico, the 

only way to avert costly retaliation is for Congress to approve legislation repealing 

the COOL rule for muscle cuts of meat. 

For these reasons, the Chamber strongly urges Congress to move swiftly to approve legislation repealing the COOL requirements for muscle cuts of meat due to 

the imminent and all-but-certain adverse ruling by the WTO Appellate Body in 

May. Failure to do so could cost tens of thousands of American jobs and jeopardize 

mutually beneficial trade relationships with our two closest neighbors and largest 

export markets. 

The U.S. Chamber of Commerce and members of the COOL Reform Coalition appreciate the Committee’s attention to this vital matter and look forward to working 

with the Committee to reach this goal. 

The CHAIRMAN. Mr. Johnson. 

STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL 

FARMERS UNION, WASHINGTON, D.C. 

Mr. JOHNSON. Thank you, Mr. Chairman, for the opportunity to 

testify on County-of-Origin Labeling, and the status of the WTO 

dispute. 

U.S. producers overwhelmingly support COOL. They are proud of 

what they produce. Consumers demand more and more information 

about the food that they purchase. 

In July of 2013, AMI, NCBA, NPPC, and others representing 

meatpackers, went to court to block USDA’s revised COOL rule. 

The packers essentially argued that their First Amendment right 

to free speech included their right to not tell consumers what they 

didn’t want consumers to know. Ultimately, courts found in favor 

of USDA and in favor of the COOL label. 

Now, as to the WTO dispute, USDA issued a final rule to implement COOL in 2009. Canada and Mexico challenged that law and 

rules of the WTO, claiming that COOL created a trade-distorting 

impact by reducing the value and number of cattle and hogs 

shipped to the U.S. In 2011, the WTO dispute settlement body 

found that COOL does not provide enough accurate information to 

consumers, objecting to commingling and to confusing language. 

The appellate body also found that the objective of COOL was, in 

fact, legitimate under WTO rules. The appellate body finally found 

that record-keeping and verification requirements were disproportionate with the information conveyed to consumers. 

In response, 2 years ago, USDA changed the rules to require labels that show each production step and prohibited commingling. 

Canada appealed, and WTO, last October, found that the revised 

24 

rule improved the amount of information to consumers, but still required collection of too much information. The panel also noted 

that COOL was the least trade-restrictive measure to achieve the 

objectives of consumer disclosure. Both Canada and the U.S. subsequently appealed. 

Its ruling is now expected in May 18. Given the narrowing of the 

scope of the issues in each successive WTO decision, it is entirely 

feasible that the appellate body may rule in favor of the U.S. If the 

body rules against the U.S., the WTO process provides for arbitration, after which potential sanctions could be authorized. In that 

case, a recent study by Auburn University’s Dr. Taylor is important 

because it concludes that Canadian and Mexico beef producers suffered no damage as a result of COOL. That study is attached to 

my testimony. 

Canada has been threatening retaliation, as we all know. Dr. 

Taylor, however, using mandatory price reporting data reported by 

the meatpackers, recently found that ‘‘COOL did not directly cause 

the declines in livestock exports to the U.S., which largely coincided with the substantial economic downturn that sapped demand 

for more expensive meat products.’’ The report issued three main 

and substantial findings. First, fed-cattle prices basis actually declined after COOL went into effect, meaning Canadian cattle producers and U.S. cattle producers received the same price for the 

same product after COOL as before COOL. Second, COOL did not 

negatively impact imports of slaughter cattle. And third, COOL did 

not significantly affect imports of feeder cattle. 

Dr. Taylor’s study was very robust, and directly contradicts the 

study that the Canadians had entered into the WTO record using 

proprietary data that is, frankly, not publicly available. The robust 

study conducted by Dr. Taylor demonstrates that Canada and 

Mexico’s argument of restricted market access to the U.S. market 

as a result of COOL is simply not true. Importation of cattle from 

other markets is subject to a number of other variables that are 

independent of COOL. COOL has not had a negative impact on the 

Canadian industry. This study is extremely important when assessing retaliatory claims made by Canada and Mexico. 

I would urge you to wait until we get a final decision from the 

WTO before any legislation is considered. 

Thank you. 

[The prepared statement of Mr. Johnson follows:] 

PREPARED STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION, 

WASHINGTON, D.C. 

Introduction 

On behalf of family farmers, ranchers, and rural members of National Farmers 

Union (NFU), thank you for the opportunity to testify regarding the Country-of-Origin Labeling (COOL) law and the results of the pending World Trade Organization 

(WTO) dispute. NFU was organized in Point, Texas in 1902 with the mission of improving the well-being and economic opportunity for family farmers, ranchers, and 

rural communities through grassroots-driven advocacy. That mission still drives 

NFU’s work today. As a general farm organization, NFU represents agricultural 

producers across the country and in all segments of the livestock industry, including 

many cow/calf operators. The U.S. has the largest fed-cattle industry in the world 

25 

1 USDA 2012 Census of Agriculture. 

and the largest production of high-quality, grain-fed beef. More than 35 percent of 

farm operations in the U.S. are classified as beef cattle operations.1

Although Congress passed the first COOL laws for food in the 2002 Farm Bill, 

labeling laws have existed in the U.S. since 1890. Tariff laws have required nearly 

all imports to display labels so that the consumer can identify the country-of-origin. 

For over 100 years, most agricultural commodities were excluded from the labeling 

laws. For decades, both consumers and farm organizations such as NFU have advocated that imported food ought to display the country-of-origin just like nearly every 

other product imported into the U.S. Farmers and ranchers support COOL because 

they are proud of the fruits, vegetables, nuts, and meat they produce. Consumers 

demand more and more information about the food they purchase and COOL gives 

them one more tool to make informed decisions. Over 10 years of consumer polling 

demonstrates that the vast majority of consumers want country-of-origin labels (Appendix A). 

Since well before passage of the law or implementation of the first label, COOL 

has had its critics including those who filed a lawsuit in the U.S. District Court for 

the District of Columbia. In July of 2013, the American Meat Institute, the National 

Cattlemen’s Beef Association and the National Pork Producers Council and several 

other trade associations representing meatpackers and feedlot operators went to the 

courts in an attempt to block USDA’s revised COOL rule. They challenged the labels 

were a violation of the COOL statute and their First Amendment rights. Despite 

the vast consumer support and the long history of origin labels, the meat industry 

argued that their First Amendment right to free speech included their right not to 

tell consumers what they did not want consumers to know! Ultimately, the District 

Court, a three-judge panel of the D.C. Circuit Court, and the en banc court all found 

in favor of USDA and the COOL label. Earlier this year, the North American Meat 

Institute agreed to drop the lawsuit after the D.C. Circuit Court denied their petition for a rehearing on the statutory claim. 

WTO Dispute 

In 2009, the U.S. issued a final rule to implement COOL as directed by the 2008 

Farm Bill. The regulations resulted in labels that were misleading and confusing, 

such as ‘‘Product of U.S., Canada’’ or ‘‘Product of Canada, U.S.’’ NFU and many others supported a more detailed and accurate label that included information on 

where the animal was born, raised, and slaughtered. Prior to implementation of the 

final rule, Canada and Mexico challenged the law and interim regulations at the 

WTO claiming that COOL was inconsistent with the U.S.’s trade obligations by creating a trade-distorting impact by reducing the value and number of cattle and hogs 

shipped to the U.S. COOL implementation occurred just as the economy entered the 

Great Recession. Many factors influenced the cattle industry, outside of agriculture, 

including the value of the dollar as compared to the loony, large decreases in household incomes and consumer uncertainty. Income constrained consumers eat less beef 

and pork. In fact, price elasticity is one of the highest for any single food category; 

consumers are more sensitive to changes in beef prices as compared to other food 

products. 

In 2011, the Dispute Settlement Body issued its report. The panel found that the 

COOL measure does not fulfil its legitimate objective of providing consumers with 

information on origin under Article 2.2 because the label did not provide enough information to consumers regarding the country-of-origin, which was later overturned 

by the Appellate Body. The label did not provide enough information on each production step because the label allowed for commingling and was needlessly confusing. 

In 2012, the U.S. and Canada appealed certain issues covered in the panel report 

to the WTO Appellate Body. The Appellate Body found that the objective of COOL 

was, in fact, legitimate under WTO rules. This Appellate Body decision thus narrowed the scope of noncompliance with U.S. WTO obligations. The Appellate Body 

found that the record-keeping and verification requirements were disproportionate 

with the information conveyed to consumers on labels. All of the information that 

was required to be tracked was not communicated to consumers in an understandable manner or was inaccurate altogether. The costs of the regulation exceeded the 

benefit from disclosure in large part because the labels were so poor at communicating the information that was tracked by packers. Warnings of segregation costs 

have been massively overstated. Packers already have many tracking requirements 

including marketing traits such as Angus or grass-fed, USDA grades, and food safety. 

26 

In response to the WTO findings, the U.S. Department of Agriculture (USDA) 

made changes to the COOL requirements to comply with the WTO requirements. 

This included requiring labels that show each production step and prohibited the 

commingling of muscle cuts of meat from different origins. This provided much more 

specific and accurate information to consumers. After implementation of the revised 

final rule, Canada requested the establishment of a compliance panel. 

The compliance panel report was distributed in October of 2014. The panel found 

that the revised rule resulted in an improvement in the amount of information that 

was conveyed to consumers, but the remaining exemptions and the lack of precision 

for labeling of meat from animals with origins from more than one country meant 

the COOL measures still required collection of more information than what was distributed to consumers. The panel also noted that COOL was the least trade restrictive measure to achieve the objectives of consumer disclosure. 

Both Canada and the U.S. have appealed the compliance panel report to the Appellate Body. The Appellate Body is expected to issue its ruling by May 18. Given 

the narrowing of the scope of issues with the COOL measure, it is entirely feasible 

that the Appellate Body may rule in favor of the U.S. Once the WTO Appellate Body 

issues its report, and only at that time, would any governmental or legislative action 

be appropriate. 

Once the WTO Appellate Body issues its report, the WTO dispute resolution process has another phase for arbitrations. Arbitration must be completed within 60 

days of the report. Only after the arbitration phase would sanctions be authorized. 

Arguments would be heard by the arbitrator regarding the extent of the damages. 

Canada and Mexico would be required to prove the extent to which they suffered 

damages from market access restrictions, at which point their claims of $1 to $2 billion would be heavily scrutinized. 

Critics of COOL, including the Canadian Government, have pressured Congress 

for reform of the law. Yet under the guise of reform, they have pushed for repeal 

of all or portions of the law that have no bearing on the WTO dispute, such as removing labels from chicken. As critics of the law have continued to point out, the 

U.S. has agreed to abide by the obligations of the WTO agreement. As the WTO 

dispute resolution process is still very much underway, Congressional action is not 

required at this time. It is highly unconventional for Congress to intervene in the 

WTO process until the WTO issues its final decision. 

Economic Analysis on Impacts to Cattle Industry 

Given Canada’s shocking estimates of authorized retaliation, C. Robert Taylor, 

PhD, Alfa Eminent Scholar at Auburn University, analyzed Mandatory Price Reporting (MPR) data, which is required to be reported by the meatpackers. Dr. Taylor 

conducted a longitudinal, multivariate econometric analysis (Appendix B). His analysis found that, ‘‘COOL did not directly cause the declines in livestock exports to 

the United States, which largely coincided with a substantial economic downturn 

that sapped demand for more expensive meat products.’’ The report issued three 

main and substantial findings: (1) Fed cattle price basis) declined after COOL went 

into effect (meaning Canadian cattle producers and U.S. cattle producers received 

the same price for the same product after COOL as before COOL; (2) COOL did not 

negatively impact imports of slaughter cattle; and (3) COOL did not significantly affect imports of feeder cattle. 

The study used more robust data sources than the reports submitted to the WTO 

by Daniel Sumner, PhD, and Se ́bastien Pouliot, PhD. Sumner and Pouliot used proprietary data provided to them by the Canadian Cattlemen’s Association, a staunch 

opponent of COOL. Dr. Taylor’s analysis used the same metrics of cattle exports’ 

market access as the Sumner and Pouliot studies, including the difference between 

Canadian and U.S. cattle prices, the share of imported cattle processed in U.S. 

slaughterhouses, and the share of Canadian feeder cattle placed on U.S. feedlots. 

Each of these indicators was analyzed qualitatively and econometrically using MPR 

data and monthly trade statistics. The econometric analysis was much more robust, 

providing conclusive evidence that the previous analysis done had reached erroneous conclusions. The analysis addressed omitted variable bias and model specification limitations. The Sumner and Pouliot analyses failed to account for comparable cattle purchase arrangement techniques (negotiated purchase, captive supplies, and packer-owned cattle). Sumner and Pouliot also failed to compare cattle 

of similar grades. 

Fed Cattle Price Basis Declined After COOL Went Into Effect 

The weekly MPR data showed that the price basis was generally lower by class, 

grade, and purchase arrangement after COOL implementation than the previous 4 

years (Appendix B). If the claims of substantial segregation costs for COOL compliVerDate Mar 15 2010 16:15 May 28, 2015 Jkt 041481 PO 00000 Frm 00030 Fmt 6633 Sfmt 6621 P:\DOCS\114-08\93967.TXT BRIAN
27 

2 Compiled by Consumer Federation of America. 

ance rang true, the industry would expect to see an increase in the price basis after 

COOL went into effect. Table 1 of the report (Appendix [D]) shows the price basis 

by class, grade, and purchase arrangement before and after COOL implementation 

computed as paired averages. Due to the differences in purchase arrangements domestically and in Canada, comparisons must include analysis of the types of purchase arrangements. Imported slaughter cattle are often purchased under a forward 

contract, but domestic acquisitions are usually under formula arrangements or the 

cash market. The weekly prices received for imported and domestic slaughter steers 

and heifers averaged over all grades and purchase arrangements generally moved 

together (small basis) except for in 2008 and 2009 when import prices were well 

above domestic prices and in 2011 and 2014 when import prices were well below 

domestic prices. The differences are not due to COOL, but rather are due to different arrangements dominating domestic and import slaughter cattle purchases. 

For instance, forward contracts accounted for 54 percent of imports, but only eight 

percent of domestic slaughter over the past 10 years. 

COOL Did Not Negatively Impact Imports of Slaughter Cattle 

Sumner and Pouliot reported finding that COOL negatively impacted imports of 

slaughter cattle, but in statistical terms, this finding is not robust. Their model suffered from omitted variable bias and confounded results. Taylor reports that with 

the addition of weekly captive supply and more observations dating back to 1995 

(to account for the ban due to Bovine spongiform encephalopathy), the results of the 

Sumner and Pouliot regression gives statistically insignificant results. Taylor’s finding is more robust than the Sumner and Pouliot finding. Including captive supplies 

of both domestic and foreign slaughter cattle is necessary because studies have 

shown that captive supplies have a negative effect on acquisition price, which could 

impact the number of head slaughtered. Additionally, captive supplies may directly 

impact trade and confound interpretation of binary variables (such as COOL) in 

econometric models. 

COOL Did Not Significantly Affect Imports of Feeder Cattle 

Because feeder cattle are especially responsive to changes in weather, economic 

conditions and lifecycle variability, numerical comparisons of imports of feeder cattle 

is very sensitive to the time period chosen. In the 3 years prior to full implementation of COOL, an average of 10,416 feeder cattle were imported monthly to the U.S. 

Since that time, the number has fallen to 7,456 feeder cattle imported per month. 

Yet, the base for comparison paints a misleading picture. The average number of 

imports over 1990 to 2003 was 7,047. Using a similar model to Sumner and Pouliot, 

Dr. Taylor found no significant impact of COOL on either Canadian or Mexican 

feeder cattle imports. Over the period from 2013 to 2014, U.S. imports of Canadian 

feeder cattle are the highest they have been in 20 years, with the exception of 2001 

and 2002 when Alberta suffered an extreme drought, causing a spike in U.S. imports. 

Conclusion 

The robust analysis conducted by Dr. Taylor demonstrates that Canada and Mexico’s argument of restricted market access to the U.S. market as a result of COOL 

is simply not true. The importation of cattle from other markets is subject to a number of other variables that are independent of COOL. COOL has not had a negative 

impact on the Canadian cattle industry. This study is extremely important when assessing the retaliation claims made by Canada and Mexico. If Canada and Mexico 

cannot prove damages, they will not be authorized to retaliate. 

APPENDIX A 

Consumers Overwhelmingly Support Country-of-Origin Labeling 2

Poll Year Question Response 

Fresh Trends 2002 Percent who feel that fresh produce items, 

packages or displays should be labeled to 

identify country-of-origin 

86% 

National Farmers 

Union 

2004 Do you think food should be labeled with 

country-of-origin information? 

82% Yes 

28 

Consumers Overwhelmingly Support Country-of-Origin Labeling 2—Continued

Poll Year Question Response 

Public Citizen 2005 Do you favor or oppose requiring the meat, 

seafood, produce and grocery industries to 

include on food labels the name of the 

country where the food is grown or produced? 

85% Favor 

Food & Water Watch March 2007 Should the food industry be required to provide [country-of-origin] information, or 

should the food industry be allowed to decide on their own? 

82% Required 

Consumers Union July 2007 Imported foods should be labeled by the country-of-origin. 92% Agree 

Zogby August 2007 Consumers have a right to know the countryof-origin of the foods they purchase. 94% Agree 

Consumers Union November 2008 Country-of-origin labeling for products should 

always be available at point of purchase. 

95% Agree 

Consumers Union October 2010 Consumers would prefer to have a country-oforigin label on the meat that they buy. 93% Agree 

Consumer Federation 

of America 

May 2013 Food sellers should be required to indicate on 

the package label the country-of-origin of 

fresh meat they sell. 

90% Agree 

Food sellers should be required to indicate on 

the package label the country or countries 

in which animals were born, raised and 

processed. 

87% Agree 

[APPENDIX B] 

Dr. Robert Taylor’s Powerpoint Presentation on Impacts of COOL on Cattle 

Trade 


11409001.eps
29 


11409002.eps 11409003.eps
30 


11409004.eps 11409005.eps
31 


11409006.eps 11409007.eps
32 


11409008.eps 11409009.eps
33 


11409010.eps 11409011.eps
34 


11409012.eps 11409013.eps
35 

3The three factors in the SP analyses are: (a) the price basis, defined to be the price received 

for imported cattle minus the price of like cattle of domestic origin, (b) the ratio of imported 

Continued 

APPENDIX C 

Preliminary Estimates of the Impacts of U.S. Country-of-Origin Labeling 

(COOL) on Cattle Trade 

C. Robert Taylor 

January 13, 2015 

Summary 

The United States Mandatory Country-of-Origin Labeling (COOL) regime has not 

impaired cattle export market access to the United States. In 2008, the United 

States enacted and implemented COOL as part of the 2008 Farm Bill to ensure consumers could know the country-of-origin of many meat, fruit, vegetable and nut 

products that they purchase. This longitudinal multivariate econometric analysis 

found that COOL did not directly cause the declines in livestock exports to the 

United States, which largely coincided with a substantial economic downturn that 

sapped demand for more expensive meat products. 

In 2009, Canada and Mexico challenged the COOL provisions related to muscle 

cuts of beef and pork as an alleged barrier to trade at the World Trade Organization 

for purportedly compromising their export opportunities and market access to the 

United States for live cattle and hogs. According to these countries, the cost of implementing COOL discouraged U.S. meatpacking and processing companies from 

purchasing livestock of non-U.S. origin and, as a result, reduced the prices of these 

livestock exports. In response to the WTO dispute, University of California-Davis 

professor Daniel Sumner and, in earlier submissions, with Iowa State University 

professor Se ́bastien Pouliot provided analysis bolstering these contentions (referred 

collectively as SP). 

This study uses more robust data sources to assess the impact of COOL on market access and found that COOL has not had a significant negative effect on the 

price paid for imported slaughter cattle relative to comparable domestic cattle, 

COOL has not had a statistically significant negative effect on imports of feeder cattle relative to U.S. feeder cattle placements, and COOL has not had a negative impact on imported cattle for immediate slaughter. 

This analysis uses the same metrics of cattle exports’ market access as the SP 

analyses (including the difference between Canadian and U.S. cattle prices; the 

share of imported cattle processed in U.S. slaughterhouses; the share of Canadian 

feeder cattle placed on U.S. feedlots).3 Each of these indicators was analyzed qualiVerDate Mar 15 2010 16:15 May 28, 2015 Jkt 041481 PO 00000 Frm 00039 Fmt 6633 Sfmt 6621 P:\DOCS\114-08\93967.TXT BRIAN

11409014.eps
36 

cattle slaughtered in the U.S. to cattle of domestic origin, and (c) the ratio of imported feeder 

cattle to U.S. placements of feeder cattle in domestic feedlots. 4 A series of legal and political difficulties have bedeviled implementation of Country-of-Origin 

Labeling (COOL) of beef and selected other food products since U.S. Congress mandated labeling 

in the Farm Security Act of 2002 then revised in the Food, Conservation, and Energy Act of 

2008. 5See Tomson, Bill. ‘‘Canada’s estimate of COOL damages: $1.4B per year.’’ Politico. December 

24, 2014. 

tatively and econometrically with weekly Mandatory Price Reporting (MPR) as well 

as monthly trade statistics. It also addresses several problems with omitted variable 

bias in the SP analysis, especially the failure to account for comparable cattle purchase arrangement techniques (negotiated purchases, captive supplies and packerowned cattle) and comparing cattle of similar grades. The study uses data from the 

U.S. Department of Agriculture (USDA) for Mandatory Price Reporting (MPR) weekly data (from September 2005 to November 2014), USDA monthly data (1995 to 

2014), USDA/U.S. Census Bureau trade data (1995 to 2014), monthly CanFax data 

(of limited availability) and USDA weekly data on Canadian feeder cattle prices 

(2005 to 2014). 

Fed Cattle Price Basis Declined after COOL Went Into Effect: COOL did 

not increase the price basis for imported slaughter cattle according to a more thorough analysis of MPR data; in fact, the price basis is substantially lower in the 6 

years since implementation of COOL than it was the preceding 4 years by class, 

grade, and purchase arrangement. 

COOL Did Not Negatively Impact Imports of Slaughter Cattle: Qualitative 

and econometric analysis of MPR and monthly trade and price data cast considerable doubt on assertions that COOL negatively affected imports of slaughter cattle. 

Econometric results are sensitive to model specification, estimation technique, and 

time period. The SP analyses are subject to omitted variable bias, in part, because 

it did not recognize the confounding effects of domestic and imported captive supply 

of slaughter cattle, or macroeconomic and beef demand uncertainty during the time 

period when COOL was being revised and implemented. 

COOL Did Not Significantly Affect Imports of Feeder Cattle: Using a comparable model to the SP model specification estimated with USDA monthly data on 

imports of 400–700 lb cattle did not show COOL having a significant negative effect 

of imports of feeder cattle from either Canada or Mexico relative to placements in 

U.S. feedlots. 

The weight of credible economic and qualitative evidence demonstrates that 

COOL has had no demonstrable impact on the Canadian or Mexican cattle industries. Moreover, the analysis did not find that COOL resulted in substantial costs 

to beef packers, which would have been seen in lower reported prices. Finally, the 

robustness of the study provides more conclusive evidence that the SP analysis on 

behalf of the Canadian livestock and packing industry reached erroneous conclusions due to omitted variable and model specification limitations, and to disregard 

of the packers’ own transaction data as reported under MPR. 

Introduction 

American consumers overwhelmingly support Country-of-Origin labeling (COOL) 

to ensure that they know the source of their food. Farmers want to be able to differentiate their products in an increasingly international marketplace. This widespread support led to the enactment and implementation of Mandatory Country-ofOrigin Labeling in the 2008 Farm Bill.4

Canada and Mexico immediately challenged COOL at the World Trade Organization (WTO) as a barrier to trade and the WTO dispute has continued since late 

2008. In 2013, the United States strengthened the consumer disclosure on COOL 

labels to comply with the original WTO dispute resolution report. It is worth noting 

that the WTO has consistently ruled in favor of the legitimacy of the goal of COOL 

labeling and that COOL labels serve their intended purpose of informing U.S. consumers. Canada and Mexico have contended that the COOL measures (as originally implemented and as strengthened in 2013) unfairly discriminated against livestock imports and gave an advantage to domestic livestock producers and that the compliance costs of COOL effectively create a barrier to export market access (in both volume and price of exported livestock). The Canadian Government continues to allege 

that the COOL label itself has reduced livestock export market access to the United 

States by $1.4 billion annually.5

Key considerations in determination of whether COOL negatively affected Canada 

and Mexico’s cattle industry are: (a) the price basis, defined to be the price received 

for imported cattle minus the price of like cattle of domestic origin, (b) the ratio of 

37 

6http://www.canfax.ca/Faqs.aspx. 7See United States Court of Appeals for the District of Columbia Circuit. No. 13–5281. American Meat Institute, et al. v. USDA, et al. 8http://www.meatami.com/ht/a/GetDocumentAction/i/87821. 9Paired comparison means that averages were computed only for weeks in which there was 

a domestic and an import transaction recorded in a category. There were many weeks in which 

no negotiated cash transactions were reported for imported slaughter cattle. 

imported cattle slaughtered in the United States to cattle of domestic origin, and 

(c) the ratio of imported feeder cattle to U.S. placements of feeder cattle in domestic 

feedlots. This report addresses each of these economic indicators with a more thorough econometric analysis and finds that COOL has not impaired livestock market 

access to the United States. 

In a consulting report done for the Canadian Cattlemen’s Association (CCA) and 

the Canadian government, with Canadian cattle market data provided by CCA, 

Sumner and Pouliot and Sumner (SP) found ‘‘significant evidence of differential impacts of COOL through widening of the price bases and a decline in ratios of imports 

to total domestic use for both fed and feeder cattle.’’ Veracity of the PS report cannot 

be determined because much of the Canadian data on which their econometric analyses were based is not publicly available, and public use of the data is controlled 

by CCA.6 This study and subsequent studies by Sumner (collectively referred to as 

SP throughout) that relied on proprietary industry-controlled data were the basis 

for Canada’s WTO challenge to the U.S. COOL measure. Not only is the data inaccessible but it was supplied to the authors by an industry group that is adamantly 

opposed to COOL and is a plaintiff in a COOL lawsuit against the USDA.7

Moreover, SP did not mention, let alone utilize, Mandatory Price Reporting (MPR) 

data as reported by U.S. beef packers to the Agricultural Marketing Service (AMS) 

of USDA, instead relying largely on data provided to them by CCA. MPR data are 

highly detailed, including origin, import or domestic, of cattle slaughtered in the 

U.S. and is thus a statistically and economically rich and robust data set for analyzing COOL. The time period covered by MPR data covers about 4 years prior to 

the implementation of the interim final COOL rule on September 29, 2008, and 6 

years since, thus spanning the period in which COOL was defined, redefined and 

implemented and came into full force on March 16, 2009. 

Since the MPR information comes directly from the beef packers, the MPR price 

and basis trends reflect actual operational slaughter costs and can definitively shed 

light on the beef packers’ political rhetoric and repeated public assertions about the 

costs of COOL to the U.S. packing industry. 

The Difference between Canadian and U.S. Slaughter Cattle Prices (the 

Basis) Narrowed After COOL Implementation 

The detailed weekly MPR data show that the price basis was generally lower, not 

higher, by class, grade, and purchase arrangement after COOL was implemented in 

late 2008, compared to the 4 previous years. The use of the beef packers’ own MPR 

data belie the claims that the cost of COOL compliance would create substantial 

segregation costs.8 If these claims were true, the price basis would increase postCOOL compared to pre-COOL. Instead, the price differential between imported and 

domestic steers narrowed significantly since COOL went into effect after adjusting 

for inflation and expressed in U.S. dollars. 

Table 1 shows the basis by class, purchase arrangement, and grade before and 

after COOL, computed as paired 9 averages. As can be seen, the basis declined for 

most of these categories after COOL was implemented. Categories in which the 

basis widened accounted for less than 15% of recorded import slaughter. Adjusted 

for inflation, the post-COOL basis changes shown in Table 1 would be even smaller 

compared to pre-COOL averages. 

Table 1. Price Basis by Purchase Arrangement, Grade and Class, Paired 

Comparisons Before and After Full Implementation of COOL, MPR Data, 

U.S. Dollars/cwt Dressed Weight 

Class Purchase 

Arrangement Grade 

Before COOL 

(weeks ending 

9/5/2005– 

10/29/2008) 

After COOL 

(weeks ending 

11/6/2008– 

1/12/2015) 

Steer Formula Net 0–35% Choice ¥$2.49 $0.23 

35–65% Choice ¥$3.26 ¥$2.14 

65–80% Choice ¥$4.60 ¥$3.78 

Over 80% Choice ¥$7.26 ¥$6.90 

38 

10 Comments on Guidelines for Voluntary Country-of-Origin Labeling Program, 

SparksCompanies, Inc., April 2003. 11 Informa Economics, Update of Cost Assessments for Country-of-Origin Labeling—Beef & 

Pork (2009), June 2010. 12http://www.cattle.ca/market-access/wto-disputes/. 

Table 1. Price Basis by Purchase Arrangement, Grade and Class, Paired 

Comparisons Before and After Full Implementation of COOL, MPR Data, 

U.S. Dollars/cwt Dressed Weight—Continued 

Class Purchase 

Arrangement Grade 

Before COOL 

(weeks ending 

9/5/2005– 

10/29/2008) 

After COOL 

(weeks ending 

11/6/2008– 

1/12/2015) 

Forward Contract Net 0–35% Choice ¥$2.91 ¥$2.47 

35–65% Choice ¥$3.96 ¥$3.30 

65–80% Choice ¥$4.63 ¥$3.80 

Over 80% Choice ¥$5.47 ¥$3.01 

Negotiated Grid Net 0–35% Choice $1.76 ¥$1.43 

35–65% Choice $0.57 ¥$1.03 

65–80% Choice $0.14 ¥$1.67 

Over 80% Choice ¥$1.54 ¥$2.71 

Heifer Formula Net 0–35% Choice ¥$1.59 ¥$0.03 

35–65% Choice ¥$2.86 ¥$1.70 

65–80% Choice ¥$4.51 ¥$2.81 

Over 80% Choice ¥$6.89 ¥$4.84 

Forward Contract Net 0–35% Choice ¥$4.91 ¥$1.25 

35–65% Choice ¥$1.65 ¥$4.02 

65–80% Choice ¥$2.53 ¥$5.20 

Over 80% Choice ¥$4.07 ¥$2.27 

Negotiated Grid Net 0–35% Choice ¥$4.04 $6.25 

35–65% Choice ¥$0.25 ¥$0.43 

65–80% Choice $0.41 ¥$2.47 

Over 80% Choice $1.82 ¥$2.39 

Mixed Steer & Heifer Formula Net 0–35% Choice ¥$2.74 $0.97 

35–65% Choice ¥$2.06 ¥$2.85 

65–80% Choice ¥$3.32 ¥$2.92 

Over 80% Choice ¥$5.06 ¥$4.85 

Forward Contract Net 0–35% Choice ¥$7.04 $3.78 

35–65% Choice ¥$1.58 $0.49 

65–80% Choice ¥$0.48 $0.79 

Over 80% Choice ¥$2.81 $1.47 

Negotiated Grid Net 0–35% Choice $1.72 $0.55 

35–65% Choice $1.70 ¥$0.04 

65–80% Choice $2.37 ¥$1.14 

Over 80% Choice $1.72 ¥$1.60 

This analysis includes the important purchasing arrangement data element that 

has a significant impact on cattle prices. The omission of purchasing arrangements 

as a contributing factor to the basis yields analytical and model bias that incorrectly 

finds that COOL has negatively impacted the basis. 

For example, the SP study concluded that ‘‘after controlling for other factors that 

affect the basis, COOL widened the basis by 30 percent (Model 1) and 90 percent 

(Model 2).’’ Another study done for the packers by Informa Economics, Inc. (pre- viously Sparks Commodities) claimed a cost of $15–$18 per head for USDA’s initial 

proposal 10 and a cost to packers and processors of $10–$18 per head under the final 

rule. Informa claimed that under the final rule, ‘‘. . . COOL costs . . . (would) have 

a burdensome and differential cost impact is at the packer/processor level.’’ 11 CCA 

claims even larger impacts, ‘‘The combined impact of the lower prices and the increased cost of transporting livestock greater distances resulted in a loss of about $90 

per animal.’’ 12

The SP analyses draw conclusions from a simple econometric analysis that is data 

dependent, including proprietary data and omitting key variables. But an estimation 

of the econometric model specification used by SP with MPR weekly average price 

data rather than the CCA data shows that COOL did not have a significant negative effect on the price basis. This analysis uses the packers’ own MPR transaction 

information which demonstrates that a more thorough model specification and data 

set reveals that COOL did not increase the basis between domestic and imported 

slaughter cattle prices, instead the price differential declined after COOL went into 

effect. 

39 

Basis comparisons must go beyond comparison of average basis, graphically or numerically or econometrically, and distinguish between class, grade and purchase arrangement to avoid invalid conclusions. Forward contracts dominate import slaughter cattle acquisitions, but not domestic acquisitions. There have been extended periods when pricing under forward contracts were both better than, and worse than, 

average pricing under formula arrangements or the residual cash market. 

Figure 1 shows the weekly price received for imported and domestic slaughter 

steers and heifers averaged over all grades and purchase arrangements. 

Fig. 1. Average Prices Paid for Slaughter Steers & Heifers of Imported & 

Domestic Origin, MPR Data 

Domestic and imported prices generally moved together, with a small basis, except for notable exceptions in 2014 and 2011 when import price was well below domestic price, and in late 2008 and early 2009 when import price was well above domestic price for an extended period (Figure 1). These differences are not due to 

COOL but to different purchase arrangements dominating domestic compared to import slaughter cattle acquisition. Forward contracts accounted for 54% of imports 

but only 8% of domestic slaughter over the past 10 years (Figure 2). 

Fig. 2. Slaughter Steers and Heifers Acquired under Forward Contracts as 

a % of Total Slaughter by Origin, MPR Data 

Formula (marketing agreements) and negotiated acquisitions dominate domestic 

but not import slaughter. Most marketing agreements have a base price tied to a 

negotiated price, while forward contracts are generally tied to futures market prices 

for cattle and/or exchange rates. Negotiated prices thus dominate domestic acquisitions, while futures prices dominate import acquisitions. When cash and futures 

market prices diverge, as they do from time-to-time, the average prices for imported 


11409015.eps 11409016.eps
40 

13The base price in most marketing agreements is tied in one-way or another to price in the 

residual cash market for slaughter cattle. 

slaughter cattle can diverge from the average domestic price because of the purchase arrangement between packer and feeder. 

Figure 3 compares the difference between average prices received under forward 

contracts compared to formula arrangements for fed cattle of domestic and import 

origin. As can be seen, the differences are about the same for imported and domestic 

slaughter cattle. Thus, a simple comparison of price basis averaged over all purchase arrangements (see Figure 1) may give the illusion of a negative effect of 

COOL on the price basis when, in fact, the differences are affected by price fluctuations in futures markets (forward contracts) relative to the residual cash market 13

and not due to COOL. 

Fig. 3. Price Differences Between Forward Contract and Marketing Agreement Cattle, Imports Compared to Domestic, MPR Data 

Quality differences may also be important in explaining changes in cattle trade 

over time. MPR data reveal that that grade of domestic slaughter steers and heifers 

has trended upward faster than the grade of imported cattle has improved. Figure 

4 shows the percent of steers and heifers grading at least 65% Choice. Those of domestic origin in this grade category have approximately doubled from 30% to 60%, 

while those of foreign origin have been quite variable but not trending as strongly 

as those of domestic origin. To the extent that packers desire to acquire high quality 

animals, they no longer need to rely on imported cattle to the extent that they did 

in the era prior to implementation of COOL. 


11409017.eps
41 

Fig. 4. Percentage of Steer & Heifer Slaughter Grading at Least 65% Choice, 

All Purchase Arrangements, MPR Data 

Thus there is no legitimate empirical evidence, based on actual transaction data 

as reported by the packers, to support claims that implementation of COOL created 

substantial segregation costs and caused the price of imported slaughter cattle to 

decline relative to the price of cattle of domestic origin. 

COOL Did Not Lower the Ratio of Imported Slaughter Cattle to Domestic 

Slaughter 

Statistical, econometric and qualitative analyses do not provide strong support to 

the contention that COOL reduced slaughter of imported cattle. Econometric results 

are mixed, depending on data set, observation period, and included variables. The 

more comprehensive data sets analyzed here demonstrate that COOL itself had little if any impact on the share of imported cattle slaughtered by U.S. beef packers. 

Figure 5 shows monthly U.S. and Canadian cattle trade for the past 20 years, 

while Figure 6 shows slaughter of imported cattle, primarily Canadian, relative to 

slaughter of steers and heifers of domestic origin, as identified in the weekly MPR 

data. 


11409018.eps
42 

Fig. 5. U.S. Imports of Canadian Cattle, FAS and USDA Data, Monthly 

Fig. 6. Imported Slaughter Steers and Heifers as a Percentage of Domestic 

Slaughter, MPR Data 

An SP-like model estimated with MPR data has a significant negative coefficient 

on the COOL binary variable. However, addition of weekly captive supply (as a % 

of total slaughter) negates this result. Models estimated with monthly data on the 

ratio of imports of Canadian slaughter cattle over 700 lbs to total U.S. slaughter 

are mixed, depending on observation period. Based on monthly data since Sept. 

2005, beginning of the observation period used by SP, results show a significant 

negative coefficient on the COOL binary variable. However, estimating a similar 

model with observations going back to 1995 and allowing for the ban due to BSE, 

gives insignificant results. 

In statistical terms, the SP finding that COOL negatively impacted imports of 

slaughter cattle is not a ‘‘robust’’ result because of confounded results and omitted 

variable bias. 

Aside from econometric games, numerical and visual comparison (Figures 5 and 

6) of pre and post-COOL imports do not provide compelling evidence to support the 


11409019.eps 11409020.eps
43 

14Slide 5 at http://canfax.ca/CFX_forum_2014/pdf/CFX2014_speaker_Perillat.pdf. 15http://www.beefusa.org/CMDocs/BeefUSA/Resources/Statistics/annualcattlenumbersand 

beefproduction774.pdf 16 Rather than use the MPR data on the ratio of slaughter cattle imports to domestic slaughter, SP constructed a data series for fed cattle slaughter based, in part, on their ‘‘prediction’’ 

of feeder imports. Since they did not report their constructed data, or even mean values, the 

validity and relevance of their analysis is unclear. Figure 3 in their report apparently charts 

their constructed data for the fed cattle import ratio. The vertical axis in this chart is not labeled, but assuming that the chart represents percentages, visual inspection suggests and average of 2–4%. This, however, is higher than the actual ratio from MPR data, which has an average of 2.0% for the same time period. 

contention that COOL has or will destroy the Canadian cattle industry. For the past 

several decades, about 4⁄5 of Canadian cattle have been slaughtered at Canadian 

beef packers and that has not changed since COOL went into effect. Nor has the 

share of Canadian slaughter cattle processed at U.S. plants declined significantly. 

The total Canadian beef cattle exports to the United States has not trended downward, particularly considering the buildup and historically high Canadian cattle 

herd before the BSE ban 14 relative to the declining U.S. cattle herd during that period.15

Annual data on Canadian cattle slaughter reveal that the ratio of exports of 

slaughter cattle to the U.S. to slaughter in Canadian plants was 21.2% pre-COOL 

and 20.5% post-COOL, an insignificant decline. Monthly trade data show that imports of Canadian cattle over 700 lbs for slaughter, which includes some cattle put 

in U.S. feedlots for finishing as well as cattle that go directly to slaughter, fell by 

a lesser amount, from 3.0% of U.S. slaughter to 2.7%. 

MPR data reveal that the ratio of import to domestic steer and heifer slaughter 

was 2.4% pre-COOL and 1.7% after COOL was implemented.16 However, it is noteworthy that this was not a slow downward trend but a shift that occurred in early 

2008, a year before COOL was fully implemented. This shift may well have been 

triggered not by impending COOL implementation, but by macro economic conditions translating into beef and cattle demand uncertainty as well as to the Canadian 

dollar and the Peso weakening by 20–30% relative to the U.S. dollar during the developing world financial crisis. 

Figure 7 shows weekly exchange rates for the Canadian dollar and Mexican Peso 

for the past 10 years. Vertical lines in the chart bracket the period during which 

interim and final COOL were being implemented. As can be seen, both the Canadian dollar and the Mexican Peso weakened dramatically during this period. Both 

currencies were at their weakest when COOL went into full force in mid-March of 

2009. 

Fig. 7. Canadian Dollar and Mexican Peso Exchange Rates per U.S. Dollar 

Due to these substantial currency fluctuations, comparison of imported cattle 

prices in other currencies to domestic prices in U.S. dollars can be deceiving. Moreover, econometric models with price basis in Canadian dollars and the (change in 

the) currency exchange rate as a potential explanatory variable, as done by SP, may 

not fully account for currency fluctuations and are inappropriate to the extent that 

captive supply contracts with Canadian feeders are priced in U.S. dollars. 

The contention that imports will make up a smaller share of slaughter capacity 

because of COOL also suffers from a logical fallacy that is revealed by more thorough analysis. SP’s theoretical argument is that COOL reduces the U.S. domestic 


11409021.eps
44 

17Some academic studies have argued that the strong negative relationship between captive 

supplies is correlation, not causation. However, public statements made by the CEO of IBP in 

1988 and 1994, that captive supplies gave IBP ‘‘leverage’’ in the residual cash market, and 

sworn testimony by the Head buyer for IBP/Tyson strongly supports causality. See, Taylor, C.R., 

‘‘Buyer Power Litigation in Agriculture: Pickett v. Tyson Fresh Meats, Inc.,’’ Antitrust Bulletin, 

Vol. 53, No. 2, Summer 2008: 455–474. 18 As a hypothetical illustration of the potential market and trade distortion of captive supply, 

suppose that a large domestic packer has a blanket marketing agreement with a large domestic 

captive feeder, normally acquiring 100 million pounds weekly. The packer also acquires imported slaughter cattle on the cash market, normally accounting for 10 million pounds weekly. 

The marketing agreement extends indefinitely and guarantees the feeder a buyer, but not a 

price. Contracts between packers and retailers are not publicly transparent, but are known to 

dominate the industry. Suppose that the packer has such a long-term contract with a retailer 

at a stated price, but volume is not specified exactly. The packer normally provides 110 million 

pounds to the retailer. What happens if demand softens to 100 million pounds? Because of the 

captive arrangement, the packer must abandon the import market and supply the retailer with 

cattle only from the large captive domestic feeder. Without these captive arrangements, we 

would expect the packer to acquire cattle from domestic as well as foreign feeders, say 95 million 

pounds domestically and 5 million pounds from imported suppliers. Thus, captive arrangements 

can distort trade and confound interpretation of binary variables in econometric models that do 

not account for captive supplies, domestic and imported. 19Lack of consistent time-series data on plausible macro economic variables to include in a 

model for import or domestic slaughter, particularly proxies for ‘‘uncertainty,’’ unfortunately limits how far one can go with statistical and econometric analyses. 

demand for imported slaughter cattle, thus explaining the significant negative coefficient in their econometric model of the import ratio. The corollary to their theory, 

which they did not consider, is that the demand for slaughter cattle of domestic origin should increase. Thus, one would expect that a COOL binary variable included 

in an SP-like econometric model of U.S. cattle slaughter would have a significant 

positive coefficient. But this is not the case, as a SP-like reduced form model with 

U.S. slaughter of fed cattle as the dependent variable, estimated with MPR data, 

has a significant negative sign, just like it does in the model estimated with the import ratio as the dependent variable and the same set of independent variables. This 

inconsistent statistical finding casts doubt on SP’s attribution of a significant negative coefficient on their COOL binary variable to COOL, per se. The estimated coefficient may be confounded by a host of variables, omitted or included, and thus not 

represent any causal net effect of COOL. 

Additionally, the use of various marketing arrangements by powerful buyers in 

the beef packing industry affects cattle prices. Changes in market power confound 

both statistical and qualitative analyses of COOL. SP assert that ‘‘. . . allowing for 

market power by U.S. buyers would not impact the results qualitatively.’’ At best, 

this assertion is true only if market power, by U.S. or Canadian buyers, did not 

change. To the extent that market power changed, and there are compelling reasons 

supporting a change in buyer power, statistical results based on the SP model specification are subject to omitted variable bias. 

Domestic and foreign captive supplies of slaughter cattle are highly plausible variables to include in a model intended to estimate effects of COOL for two reasons. 

First, study after study has shown that captive supplies have a negative effect on 

acquisition price and may thus indirectly influence head slaughtered.17 Second, captive supplies commit packers to future slaughter of cattle and may thus directly affect trade.18

Augmenting the SP model specification with captive supply variables negates the 

negative significance of the COOL binary variable and shows that import captive 

supply (as a % of total imports) has a highly significant POSITIVE effect on the import head ratio while domestic captive supply (as a % of total domestic slaughter) 

has a highly significant NEGATIVE effect on the import head ratio. 

MPR data show that captive supplies of imported slaughter cattle, as a percent 

of total imports, were near 100% through 2007. Beginning in early 2008, before 

COOL was implemented, imported captive supplies dropped to an average of about 

75% but fluctuated from 20% to 100% through 2012, returning to about 100% in 

early 2013 (Figure 8). The drop in imported captive supplies occurred months before 

interim COOL was implemented and almost a year before mandatory COOL and 

may have been triggered by packers’ uncertainty over beef demand during turbulent 

economic times that occurred along with implementation of COOL.19 Although domestic as well as imported captive supplies vary considerably week to week, a 

strong upward trend is apparent in domestic captive supply from about 35% 10 

years ago to 70% now. However, the trend in domestic captive supply (as a percent) 

dropped off somewhat during early 2008 at the same time that import captive supply fell sharply. 

45 

20 Economic theory suggests that beef packers would not fully integrate vertically by ownership or through captive arrangements in the face of demand uncertainty. We can expect them 

to integrate for demand that they expect to occur with high probability, but not necessarily to 

integrate for demand that may be highly uncertain. If a packer is fully integrated vertically and 

the uncertain demand is not realized, the packer is nevertheless legally committed to slaughter 

the captive animals, thus resulting in financial losses to the packer. With partial vertical integration, the packer can meet contracted retail commitments in the presence of low demand, but 

walk away from the cash market for slaughter animals. Thus we can expect packers to reduce 

captive commitments during periods of relatively high demand uncertainty to the extent permitted by contract terms. Such a reduction is expected to occur not instantly, but over a period 

of weeks or months. 21http://ageconsearch.umn.edu/bitstream/46435/2/ward28-1%5B1%5D.pdf. 22 http://www.cattlenetwork.com/cattle-news/Canada-cattle-report-Packers-cushioned-bylarge-captive-supplies-168180546.html. 23Tyson claims that they sold their Canadian cattle business because of COOL, but this appears to be pretext. Instead, Tyson appears to have shed its Canadian subsidiaries because of 

business considerations. Statements in Tyson’s SEC filings leading up to their sale indicate financial losses on their Lakeside packing and cattle feeding operations. U.S. cattle feeders suffered huge losses beginning in late 2007 and extending through 2009, so Tyson likely also suffered huge losses on their Lakeside feedlots that accounted for about 20% of their Canadian 

slaughter. More recently, Tyson’s motive in announcing (October of 2013) that they would no 

longer buy Canadian slaughter cattle but would continue to buy Canadian born animals sent 

to U.S. feedlots is unclear. 

Fig. 8. Captive Supply Percent of Canadian Imports of Slaughter Steers & 

Heifers, MPR Data 

Expectations that beef demand would be lower due to macro economic events during the period when COOL was being implemented may have triggered packers’ cutbacks in aggregate captive commitments.20

Public data are not available on the extent of captive supplies of Canadian cattle 

that are slaughtered in Canada. These arrangements for slaughter in Canada may 

also affect trade and confound interpretation of coefficients in a SP-like econometric 

model. 

A detailed analysis in 2008 by the Canadian National Farmers Union (CNFU) 

points to captive supply problems on both sides of the border, concluding that ‘‘. . . dramatically increased levels of captive supply in both Canada and the U.S. have 

had price-depressing effects in both countries.’’ How fluctuations in Canadian and 

U.S. captive supply arrangements affect price and trade cannot be determined without reliable data. One study reports that captive supplies in Alberta accounted for 

50–60% of slaughter in Alberta in 2006,21 while more recent news reports mention 

that Canadian captive supply is ‘‘large.’’ 22 Canadian captive supply data are maintained by the CCA based on packers voluntary reporting, but such data are not publicly available. 

Tyson’s sale of their Canadian Lakeside cattle feeding and slaughtering operations also confound interpretation of econometric results.23 Their exit reduced the 

number of meaningful buyers in Canada from three to two, which may have also 

affected prices (including the Alberta-Nebraska feeder price differential) and trade. 

The shift from three to two buyers is well beyond levels of market concentration 

that raise antitrust concern. 

The 2008 CNFU report raises concerns about exertion of increased market power 

with Tyson’s sale to an existing Canadian packer. 

Fundamental ‘‘generational’’ change is also occurring in both the U.S. and Canadian cattle industry, change that cannot be accounted for in econometric models 

without meaningful and consistent time series data on quite complex socioeconomic 

factors responsible for such changes. 


11409022.eps
46 

In summary, econometric and qualitative analyses do not strongly support the 

contention that COOL has negatively impacted imported slaughter cattle relative to 

slaughter of cattle of domestic origin. At best, the econometric evidence is weak and 

lacks robustness. 

COOL Did Not Affect the Ratio of Imported Feeder Cattle to Domestic 

Feedlot Placements 

COOL did not have a significant negative effect on either Canadian or Mexican 

feeder cattle imports. Feeder cattle placements are especially responsive to weather, 

economic and cattle cycle variability. Numerical comparison of imports of feeder cattle from Canada is sensitive to the time period chosen. A severe drought in Alberta 

and other parts of Canada that spanned 2 years, 2001–02, resulted in a spike of 

feeder cattle moving to the U.S. During September–November of 2002, Canada exported over eight times more feeder cattle than in the same months in 2001, and 

over 16 times more than in 2000. In the 3 years prior to full implementation of 

COOL, an average of 10,416 feeders were imported monthly, which fell to 7,456 

feeders since. However, the average over 1990–2003 was 7,047, slightly lower than 

post-COOL. Imports of feeder cattle from Mexico have continued to rise (Figure 9). 

Fig. 9. U.S. Imports of Feeder Cattle from Canada and Mexico, 400–700 lbs., 

FAS and USDA Monthly Data 

SP’s econometric analysis did not show a significant negative effect of COOL on 

the feeder cattle price basis. A similar model estimated with USDA data shown in 

Figure 10 did not show a significant negative effect of COOL on the feeder cattle 

price basis. Exchange rates, transportation costs, and seasonality econometrically 

explain most of the variation in the feeder cattle price basis. 


11409023.eps
47 

Fig. 10. U.S. Price Basis for Alberta Feeder Steers & Heifers Relative to Nebraska Feeders, 500–600 lbs., U.S. Dollar/cwt, USDA Data 

SP did report a significant negative effect of COOL in their model purporting to 

represent Canadian feeder cattle imports, however, this finding is compromised because their constructed data for the ratio of Canadian feeder cattle imports appears 

to include other cattle. SP’s Figure 3 shows the feeder import ratio fluctuating between about 0.5% and 9.0%, averaging roughly above 2%. Yet, USDA data show the 

ratio of imported Canadian 400–700 lb cattle to U.S. feedlot placements to average 

only 0.4% over the time period used for the PS chart. 

SP-like econometric models estimated monthly USDA data with the dependent 

variable defined to the imports of 400–700 lb cattle divided by U.S. feedlot placements does not show a significant negative effect of COOL on either Canadian or 

Mexican feeder cattle imports. In fact, U.S. imports of Canadian feeder cattle in 

2013–14 are the highest they have been in the past 20 years (Figure 9), excluding 

the period in 2001–02 when extreme drought in Canada caused a spike in imports. 

[APPENDIX D] 

Table 1. Price Basis by Purchase Arrangement, Grade and Class, Paired 

Comparisons Before and After Full Implementation of COOL, MPR Data, 

U.S. Dollars/cwt Dressed Weight 

Class Purchase 

Arrangement Grade 

Before COOL 

(weeks ending 

9/5/2005– 

10/29/2008) 

After COOL 

(weeks ending 

11/6/2008– 

1/12/2015) 

Steer Formula Net 0–35% Choice ¥$2.49 $0.23 

35–65% Choice ¥$3.26 ¥$2.14 

65–80% Choice ¥$4.60 ¥$3.78 

Over 80% Choice ¥$7.26 ¥$6.90 

Forward Contract Net 0–35% Choice ¥$2.91 ¥$2.47 

35–65% Choice ¥$3.96 ¥$3.30 

65–80% Choice ¥$4.63 ¥$3.80 

Over 80% Choice ¥$5.47 ¥$3.01 

Negotiated Grid Net 0–35% Choice $1.76 ¥$1.43 

35–65% Choice $0.57 ¥$1.03 

65–80% Choice $0.14 ¥$1.67 

Over 80% Choice ¥$1.54 ¥$2.71 

Heifer Formula Net 0–35% Choice ¥$1.59 ¥$0.03 

35–65% Choice ¥$2.86 ¥$1.70 

65–80% Choice ¥$4.51 ¥$2.81 

Over 80% Choice ¥$6.89 ¥$4.84 

Forward Contract Net 0–35% Choice ¥$4.91 ¥$1.25 

35–65% Choice ¥$1.65 ¥$4.02 

65–80% Choice ¥$2.53 ¥$5.20 

Over 80% Choice ¥$4.07 ¥$2.27 

Negotiated Grid Net 0–35% Choice ¥$4.04 $6.25 

35–65% Choice ¥$0.25 ¥$0.43 


11409024.eps
48 

Table 1. Price Basis by Purchase Arrangement, Grade and Class, Paired 

Comparisons Before and After Full Implementation of COOL, MPR Data, 

U.S. Dollars/cwt Dressed Weight—Continued 

Class Purchase 

Arrangement Grade 

Before COOL 

(weeks ending 

9/5/2005– 

10/29/2008) 

After COOL 

(weeks ending 

11/6/2008– 

1/12/2015) 

65–80% Choice $0.41 ¥$2.47 

Over 80% Choice $1.82 ¥$2.39 

Mixed Steer & Heifer Formula Net 0–35% Choice ¥$2.74 $0.97 

35–65% Choice ¥$2.06 ¥$2.85 

65–80% Choice ¥$3.32 ¥$2.92 

Over 80% Choice ¥$5.06 ¥$4.85 

Forward Contract Net 0–35% Choice ¥$7.04 $3.78 

35–65% Choice ¥$1.58 $0.49 

65–80% Choice ¥$0.48 $0.79 

Over 80% Choice ¥$2.81 $1.47 

Negotiated Grid Net 0–35% Choice $1.72 $0.55 

35–65% Choice $1.70 ¥$0.04 

65–80% Choice $2.37 ¥$1.14 

Over 80% Choice $1.72 ¥$1.60 

The CHAIRMAN. Ms. Dempsey. 

STATEMENT OF LINDA M. DEMPSEY, VICE PRESIDENT OF 

INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL 

ASSOCIATION OF MANUFACTURERS, WASHINGTON, D.C. 

Ms. DEMPSEY. Chairman Rouzer, Members of the Subcommittee, 

thank you for the opportunity to be here on behalf of the National 

Association of Manufacturers; the nation’s largest industrial association, representing over 14,000 manufacturers in every state in 

the country. 

Last year, U.S. manufacturing output reached a record of $2.1 

trillion, supported over 12 million jobs, and, of course, relies substantially on inputs from our nation’s farmers and agriculture producers for many of our food and beverage products. 

I am also appearing today as co-chair of the COOL Reform Coalition, along with my colleague, Mr. Wenk, from the U.S. Chamber. 

Let me focus on five points. First, trade and U.S. manufactured 

exports are a critical source of growth for U.S. manufacturing and 

other industries in America. U.S. manufactured exports reached a 

record level last year of $1.4 trillion, supporting millions of jobs. 

That growth has been supported by decades of—since the creation 

of the World Trade Organization and other market-opening trade 

agreements under which the United States and other nations agree 

to play by a basic set of rules. Second, Canada and Mexico are by 

far the nation’s largest export markets for our nation’s manufacturers. Last year alone, they purchased $485 billion in manufactured 

goods from the United States. Third, the United States’ continued 

failure to bring the COOL rule for meat into compliance with its 

WTO obligation is threatening substantial quantities of manufacturing goods exports to our two closest trading partners. There is 

wide expectation that the WTO will, in fact, rule again that this 

rule is out of compliance with the basic rules. 

They have been found out of compliance not just once already, 

but three times. Canada has put forth a proposed retaliatory list, 

which includes many manufactured products such as steel pipes, 

49 

1www.COOLReform.com. 

heating appliances, office furniture, and mattresses. Mexico has not 

set forth what products it would put on its list, but manufacturers 

have already witnessed firsthand Mexican retaliation in the trucking case, where Mexico imposed tariffs as high as 45 percent on 

many products, resulting in lost sales and lost jobs. Manufactured 

goods were listed on Mexico’s trucking retaliation list, including office equipment and a wide range of home appliances. Fourth, to be 

successful globally, manufacturers needed a respected and enforced 

global trading system. The United States led the world in writing 

these rules, including the creation of the WTO in 1995, where binding dispute settlement was a primary U.S. objective. Enforcement 

of the rules-based trading system has already helped American 

workers, farmers, and manufacturers secure access to overseas 

markets, and grow our exports and jobs here in the United States. 

If countries including the United States do not live up to their obligations, the system will be weakened, and our businesses and our 

workers will face the penalty. Fifth, and finally, time is running 

out. It is imperative that Congress act quickly, or else put at risk 

very substantial levels, some believe billions, in U.S. exports to 

Canada and Mexico, and the industries and jobs of tens of thousands of workers that produce those goods. 

With the threat of retaliation looming for our nation’s manufacturers, the NAM and the COOL Reform Coalition urge Congress to 

bring the United States back into compliance with its WTO obligations fully and quickly through the repeal of these WTO inconsistent meat labeling provisions. 

Thank you for the opportunity to testify today. I look forward to 

working with the Committee to resolve this important issue. 

[The prepared statement of Ms. Dempsey follows:] 

PREPARED STATEMENT OF LINDA M. DEMPSEY, VICE PRESIDENT OF INTERNATIONAL

ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF MANUFACTURERS, WASHINGTON, D.C. 

Chairmen Rouzer, Ranking Member Costa, and Members of the Subcommittee on 

Livestock and Foreign Agriculture, thank you for the opportunity to testify on behalf 

of the National Association of Manufacturers. 

My name is Linda Dempsey, and I am the Vice President of International Economic Affairs for the National Association of Manufacturers (NAM). The NAM is the 

nation’s largest industrial association and voice for more than 12 million women and 

men who make things in America. Manufacturing in the U.S. supports more than 

17 million jobs, and in 2014, U.S. manufacturing output reached a record of nearly 

$2.1 trillion. It is the engine that drives the U.S. economy by creating jobs, opportunity and prosperity. The NAM is committed to achieving a policy agenda that 

helps manufacturers grow and create jobs. 

I am also appearing today as co-chair of the COOL Reform Coalition,1 along with 

the U.S. Chamber of Commerce. Launched a year ago, the COOL Reform Coalition 

includes companies and associations from across the U.S. economy, including a variety of manufacturing sectors, that advocate for U.S. compliance with the international obligations it has undertaken in the World Trade Organization (WTO) 

agreements relating to the topic of this hearing. 

U.S. manufactured exports are a critical source of growth for manufacturing and 

other industries throughout all 50 states. U.S. manufactured goods exports reached 

their highest level ever last year, totaling $1.4 trillion, which supports millions of 

U.S. jobs. That growth has been supported over the past decades by the creation 

of the WTO and other market opening trade agreements, under which the United 

States and other nations agreed to reduce tariff and non-tariff barriers. 

The United States’ continued failure to bring the Country-of-Origin Labeling 

(COOL) rules for muscle cuts of meat into compliance with its WTO obligations is 

50 

threatening U.S. manufactured goods exports to our two largest trading partners, 

Canada and Mexico. The COOL rules, which were put in place more than 6 years 

ago, have already been found out of compliance with the WTO obligations that the 

United States itself helped create—not just once, but three times. With the threat 

of retaliation looming for our nation’s manufacturers, we and the COOL Reform Coalition urge that Congress move quickly to eliminate these WTO-inconsistent provisions. 

I. Background on the COOL Dispute 

The challenge before us today is not a new one. Indeed, it has been more than 

6 years in the making, with attempts to impose COOL rules on muscle cuts of meat 

found to be out of compliance with international rules time and again. 

The 2002 Farm Bill, subsequently amended by the 2008 Farm Bill, established 

U.S. Mandatory COOL rules that require most retailers to provide country of labeling for fresh fruits and vegetables, fish, nuts, meat and poultry, among other products. These provisions were implemented through an Interim Final Rule of the U.S. 

Department of Agriculture on July 28, 2008. 

Less than 5 months later, Canada challenged the rule for muscle cuts of meat at 

the WTO, arguing that COOL has a trade-distorting impact by reducing the value 

and number of cattle and hogs shipped to the U.S. market. Mexico joined the complaint soon thereafter. 

In November 2011, the WTO dispute settlement panel established to review the 

complaint found that the COOL rule violated U.S. commitments under the WTO 

Technical Barriers to Trade (TBT) Agreement because the rule treats imported Canadian cattle and hogs, and imported Mexican cattle, less favorably than domestic 

livestock. The United States appealed this ruling in March 2012 to the WTO Appellate Body. The WTO Appellate Body ruled in June 2012 and also found that the 

COOL rule violated U.S. obligations not to discriminate in its technical regulations. 

The United States requested a reasonable period of time to bring the rule into 

international compliance and the U.S. Department of Agriculture published revised 

rules nearly a year after the WTO Appellate Body ruling in May 2013. The Canadian and Mexican governments objected to the revised rules, and in August 2013 

sought yet another review—a so-called compliance panel—to determine whether the 

revised COOL rule was WTO compliant. 

In October 2014, the WTO compliance panel report found the United States to be 

in continued violation of its WTO obligations under the TBT Agreement, but also 

in violation of the basic GATT 1994 agreement for discriminating against products 

imported into the United States. In fact, the WTO compliance panel found that the 

revised rule was even more discriminatory than the earlier version by requiring additional segregation. The United States appealed the decision in December, and a 

final WTO decision is expected this spring. 

Given the earlier findings, including the most recent finding that the revised rule 

is more discriminatory, it is widely expected that the WTO Appellate Body will find 

that these rules discriminate against imports from Canada and Mexico. As a result, 

both Canada and Mexico will be authorized to retaliate against billions of dollars 

of U.S. exports. 

II. Impact of Retaliation on U.S. Exports, Industries and Jobs 

This past year, the NAM and U.S. Chamber of Commerce joined with other broad 

industry groups and individual companies to form the COOL Reform Coalition to 

urge action to avoid WTO-authorized retaliation on a wide variety of U.S. non-agricultural exporting industries. 

Canada and Mexico are by far the United States’ largest export markets, and purchased a record $485 billion in manufactured goods in 2014. Those exports support 

millions of U.S. jobs. WTO-authorized retaliation by two of the largest U.S. trading 

partners could result in billions in tariffs affecting multiple sectors of the U.S. economy, threatening the livelihoods of American families. 

Canada has put forward a proposed retaliatory list. The list includes agricultural 

products such as beef, pork, cheese and fresh fruit. But the impact would be much 

broader: steel pipes, heating appliances, office furniture and mattresses are among 

the manufacturing products on the proposed list. 

Mexico has not set forth what products could be included on its list. But the impact on U.S. companies is expected to be severe, if history serves as our guide. Mexico imposed tariffs as high as 45 percent on 99 U.S. products after a North American Free Trade Agreement (NAFTA) dispute settlement panel sided with Mexico 

on a dispute over cross-border trucking in March 2009. More than $2.5 billion of 

U.S. exports to Mexico were affected, resulting in lost sales and lost jobs. Agricultural and manufactured goods were both listed on Mexico’s trucking retaliation list, 

51 

2See Office of the United States Trade Representative (USTR), ‘‘Snapshot of WTO Cases Involving the United States’’ (May 22, 2014), https://ustr.gov/sites/default/files/ 

Snapshot%20May.pdf. 3 NAM, Trading up with TPA: Manufacturers Need New Trade Agreements for Jobs, Growth 

and Competitiveness (February 2015), http://www.nam.org/Data-and-Reports/Reports/Trading-Up-With-TPA-(Full-Report).pdf. 

ranging from potatoes, pork, cheese and red wine to office equipment and home appliances (refrigerators, dish washers, washing machines). Many companies reported 

that once they lost sales to Mexico because of the retaliatory tariffs, they lost that 

customer for the foreseeable future. Those lost sales were devastating to businesses, 

workers and their communities across the U.S. economy. 

As well, there are broader systemic concerns. The dispute is also about U.S. international leadership and whether the United States will meet the international obligations that it has voluntarily undertaken—and indeed created—as a founding 

member of the WTO. 

Since the WTO was created in 1995, there have been about 490 complaints. The 

United States has brought over 113 complaints, most of which it has won or favorably settled. The United States has been the respondent in over 140 cases, of which 

it has been found out of compliance in about 1⁄3 of the cases.2

It is very much in the long-term economic interests of the United States to live 

by the rules of the international trading system and to ensure that other countries 

do the same. We led the world in writing these rules first in the General Agreement 

on Tariffs and Trade (or GATT) in 1947 and then with the creation of the WTO in 

1995, where binding dispute settlement was a primary U.S. objective. 

Enforcement of the rules-based trading system has helped American workers, 

farmers, and manufacturing companies secure access to overseas markets and grow 

exports and jobs in the United States. From barriers to grain in the European 

Union, shelf life restrictions in Korea to automotive restrictions, discriminatory 

taxes, and raw material and rare earth export restrictions in China, the WTO dispute settlement system is vital to America’s access to world markets. 

As explained in the NAM’s recent report, Trading up with TPA,3 growing U.S. 

manufacturing exports to win more of the nearly $12 trillion in annual world trade 

in manufactured goods will provide substantial new opportunities to our nation’s 

manufacturers and help sustain and grow American jobs. To be successful globally, 

our exporters need a respected and enforced global trade system. If countries, including the United States, do not live up to their obligations, the system will be 

weakened and our exporters will face even more onerous barriers. 

III. Action to Repeal WTO-Inconsistent COOL Provisions is Needed Now to 

Avoid Retaliation 

Our nation’s exporters are running out of time. Once a final WTO decision is announced, retaliation by Canada and Mexico could be authorized as soon as 60 days 

thereafter. 

Even before retaliation is in place, U.S. exporters will lose sales, as we did during 

the cross-border trucking dispute with Mexico. Just as in the United States, customers oftentimes plan months in advance and once a decision is made will seek 

to import from countries that are not targeted for retaliation. As a result, America’s 

exporters will start losing sales immediately even if we allow a brief period of noncompliance after final adjudication. 

Failure to act quickly to bring the United States into compliance will put at risk 

billions of dollars of U.S. exports to Canada and Mexico and the industries and the 

jobs of tens of thousands of workers that produce those goods. 

IV. Conclusion 

The NAM’s primary objective, as a co-chair of the COOL Reform Coalition, has 

always been to avoid retaliation by Canada and Mexico and to prevent a loss of export sales by our nation’s manufacturers. In that capacity, we have urged Congress 

to create a process to be able to quickly bring the U.S. into compliance with its 

international obligations by a final ruling. Congress has not acted. 

With the threat of retaliation looming for our nation’s manufacturers, time has 

run out. The NAM and the COOL Reform Coalition urge Congress to bring the 

United States back into compliance with its WTO obligations fully and quickly 

through the repeal of these WTO-inconsistent provisions. 

Thank you for the opportunity to appear today. I look forward to working with 

the Committee to resolve this important issue. 

The CHAIRMAN. Mr. LaFaille. 

52 

STATEMENT OF TOM LAFAILLE, VICE PRESIDENT AND 

INTERNATIONAL TRADE COUNSEL, WINE INSTITUTE, 

WASHINGTON, D.C. 

Mr. LAFAILLE. Mr. Chairman, Ranking Member Costa, and Members of the Subcommittee, my name is Tom LaFaille with the California Wine Institute. We represent 1,000 California wineries and 

related businesses. We appreciate your leadership on this important issue. 

COOL represents an enormous threat to California exports and 

U.S. exports of wine. Whether you are a wine consumer or not, 

there is a winery in every state in the United States, including the 

Chairman’s home State of North Carolina, with Biltmore Estate 

Winery that exports. We have estimated that it is a $120 billion 

industry, which created over 800,000 jobs, largely in rural areas. 

So wineries represent an important economic factor around the 

country. Globally, U.S. exports of wine reached $1.5 billion last year. It 

was slightly down due to the strong dollar and the West Coast port 

shutdown. Retaliatory tariff, whether by Mexico or Canada, would 

represent a significant additional challenge on top of the challenges 

we face. Wine Institute works to fight—to work against tariff trade 

barriers, tariff barriers, as well as non-tariff barriers, but it is a 

country’s tariff that is the most significant factor in determining a 

market’s export potential. 

We estimate that COOL-related damages to the U.S. wine indus- try could reach upwards of $500 million. We know that retailers 

will soon begin buying elsewhere, price-sensitive consumers will 

shop elsewhere, and it will take years to gain back the current 

market share that we have. 

We learned this the hard way with Mexico’s two previous tariff retaliations. In 2007, we had sales of $22 million in exports to Mexico. After the retaliation, they quickly dropped to $11 million. That 

is a 50 percent drop in 1 year. And even after the tariffs were 

eliminated in 2011, it took another 3 years, to this year, before our 

exports finally reached the 2007 levels. So we know that retaliation 

will cause enormous loss of sales and U.S. jobs. So we urge Congress to act quickly once the WTO’s decision is made, in order to 

prevent retaliation. 

Thank you for your leadership and your efforts to grow U.S. exports. 

[The prepared statement of Mr. LaFaille follows:] 

PREPARED STATEMENT OF TOM LAFAILLE, VICE PRESIDENT AND INTERNATIONAL

TRADE COUNSEL, WINE INSTITUTE, WASHINGTON, D.C. 

Chairman Rouzer, Ranking Member Costa, Members of the Subcommittee: 

Thank you for the opportunity to share our views on the important topic of Country-of-Origin Labeling (COOL) and the ramifications of Canada and Mexico imposing retaliatory tariffs on American wine exports. 

Wine Institute is the premier organization of 1,000 wineries and businesses in the 

United States (U.S.) and around the world. California wine represents 90% of U.S. 

wine production, 90% of U.S. exports and contributes over $120 billion annually to 

the U.S. economy. 

Wine Institute conducts a comprehensive export marketing campaign that communicates California as an aspirational place with beautiful landscapes, iconic lifestyle, great wine and food and as an environmental leader. With U.S. wine exported 

53 

to more than 125 countries, Wine Institute’s work in 25 countries, supported by the 

U.S. Department of Agriculture’s (USDA) Market Access Program (MAP), conveys 

these messages across the globe through a full slate of activities including international trade shows and trade missions, retail and on-premise tastings for trade, 

media and consumers and a global social media campaign and consumer site 

DiscoverCaliforniaWines.com. 

We also work closely with other U.S. industry groups, the U.S. government and 

the international wine community—including the Canadian and Mexican Governments and their winemakers in the World Wine Trade Group and the Asia-Pacific 

Economic Cooperation Wine Regulatory Forum—to lower tariff and non-tariff trade 

barriers and to grow exports for our mostly small and medium sized, family run 

businesses. 

WWTG 

In light of the U.S.’s collaborative work with Canada to reduce barriers to trade 

and create a level playing field, it is most unfortunate that Canada has now chosen 

to involve wine and other products in an unrelated trade dispute. Wine Institute 

strongly opposes retaliatory tariff increases on any country’s wines in response to 

a dispute, such as COOL, that does not involve wine. 

In fact, wine producers in the World Wine Trade Group (WWTG), a multinational 

organization that includes government and industry representatives of the U.S. and 

Canada have undertaken to follow the principle that wine should not be used for 

retaliation in trade disputes relating to other products. Wine Institute urges Canada 

to abide by the principles to which its own industry agreed in WWTG. 

U.S. Wine Exports 

With Canada the No. 1 and Mexico the No. 6 market for U.S. wine exports, 

COOL-related retaliatory tariffs would have an enormously negative economic impact on our winemakers and grapegrowers. Sales of U.S. wines to Canada have 

grown steadily in recent years. Globally, 2014 U.S. wine exports totaled $1.49 billion 

in revenues, the second highest dollar value for U.S. wine exports and a 64% increase from 5 years ago. Our exports did suffer a slight decline last year because 

of the strong U.S. dollar and the West Coast port slowdown. Combined with those 

two challenges, a significant tariff increase in Canada would be another tough challenge for U.S. winemakers. 

Last year in Canada, U.S. wine exports reached $487 million, a 7% increase over 

2013. California sales have experienced strong growth in all the major markets 

across Canada over the past few years. Retail sales now exceed a record six million 

cases and $1 billion with the strongest increases in the provinces of Quebec and Alberta. Canadian consumers have confidence in the quality and value offered by California and our wines are successful in all price segments. 

U.S. wineries are also experiencing similar success in Mexico, our sixth largest 

export market. In 2014, U.S. wine exports to Mexico totaled $24 million, a 13% increase over 2013. 

COOL 

Canada’s preliminary retaliation list targets a broad spectrum of commodities that 

will affect every state in the country, potentially delivering a paralyzing blow to 

U.S. winemakers, other farm and food economies and rural households. Under 

World Trade Organization (WTO) rules, retaliatory tariffs would likely be placed on 

the value of the products as entered into the retaliation country. 

Canada calls it a surtax on imports, which would mean that a bottle of wine entering into Canada with an import value of $10 would be hit with a $10 surtax. The 

resulting doubling of price for our wine in Canada will, no doubt, drive a large percentage of our customers away. In fact, we believe that if this cloud of uncertainty 

concerning a dramatic increase in the price of U.S. wine is allowed to persist, Canadian and Mexican wine buyers will soon begin looking elsewhere to stock their grocery and liquor store shelves. 

A Canadian tariff of this nature could cut off the vast majority of U.S. wine exports to Canada and cost U.S. winemakers hundreds of millions of dollars in lost 

sales. Adding to this harm, our market share will take many years to gain back. 

Consequently, the cost of winning back shelf space and market share over the years 

following the end of retaliatory tariffs will also be substantial. 

A difficult but important lesson can be drawn from Mexico’s previous retaliatory 

tariffs. In two past trade disputes with the U.S., Mexico retaliated against U.S. 

products costing the U.S. millions of dollars in lost sales and lost market share. In 

2009, Mexico imposed a 20% tariff on wine due to the trucking dispute. This was 

the second retaliation imposed by Mexico on U.S. wine in 7 years, the first conVerDate Mar 15 2010 16:15 May 28, 2015 Jkt 041481 PO 00000 Frm 00057 Fmt 6633 Sfmt 6621 P:\DOCS\114-08\93967.TXT BRIAN
54 

cerning a WTO dispute over the Byrd Steel Dumping Amendment, which the U.S. 

repealed in 2007. In 2007, U.S. wine exports to Mexico reached a high of $24 million in revenues to wineries. Following Mexico’s retaliatory tariffs, U.S. wine exports dropped to $18 

million in 2010, a 25% loss in sales. While Mexico eliminated its retaliatory tariffs 

in 2011, it took another 3 years to 2014 before U.S. wine exports returned to just 

the level where they were in 2007. 

From this experience, it is certain that: 

1. Retaliatory tariffs dramatically harm U.S. wine exports; and 

2. It will take U.S. wineries many years, if not decades, to recover from another 

country’s retaliatory tariffs. 

Conclusion 

In closing, COOL-related retaliatory tariffs will result in an enormous loss of sales 

for U.S. wineries, estimated to be in the hundreds of millions of dollars. Since the 

strong growth of U.S. wine exports to Canada and Mexico over the past decade has 

in part been due to USDA’s Market Access Program, it would be most unfortunate 

now for Congress to allow another U.S. law such as COOL to undo these hardfought export gains. 

For these reasons, Wine Institute respectfully requests that Congress act quickly 

to address this critical matter. Thank you very much for your continued leadership 

and efforts to resolve this dispute and to grow U.S. exports. 

TOM LAFAILLE, 

Vice President and International Trade Counsel, 

Wine Institute. 

The CHAIRMAN. Thank you very much. 

I am going to yield about 15, 20 seconds to Mr. Costa here to introduce Mr. Smith. 

Mr. COSTA. Thank you very much, Mr. Chairman, for that privilege. 

It is indeed my honor to introduce Mr. Smith of Harris Farms. 

I have worked with Harris Farms Company for decades. They have 

developed a reputation not only in California but across the country as one of the premiere producers of beef, from the grazing, to 

the feedlot, to the processing, and to the value-added. They export 

a great deal of beef products, and have pioneered opening new markets in Asia and elsewhere, and it is indeed our honor to have Mr. 

Smith, representing Harris Farms, here this morning. Thank you, 

Mr. Smith. 

STATEMENT OF MICHAEL T. SMITH, SPECIAL PROJECTS 

MANAGER, HARRIS RANCH COMPANY, SELMA, CA 

Mr. SMITH. No, Congressman, thank you. 

Last year, I had the privilege to be asked to testify before this 

Subcommittee on the state of the beef industry, and at that time, 

I identified Mandatory Country-of-Origin Labeling as a critical 

issue for the beef industry, and one that really needed Congress to 

act upon. Now, 1 year later, I find myself here at this Subcommittee again, asking one more time that Congress take up this 

legislation, which, in its simplest form, is a solution looking for a 

problem, but in reality, it is just bad public policy. And I don’t 

think I need to remind you that the clock is ticking. 

COOL has plagued our industry for years. Its supporters point 

to surveys showing that Americans want to know where their beef 

comes from, but most surveys fail to provide an accurate measure 

of how consumers actually vote, which is with their pocketbook. 

As a family-owned, functionally-integrated cattle feeder and beef 

processor, Harris Ranch has experienced firsthand the cost associVerDate Mar 15 2010 16:15 May 28, 2015 Jkt 041481 PO 00000 Frm 00058 Fmt 6633 Sfmt 6601 P:\DOCS\114-08\93967.TXT BRIAN
55 

ated with implementing COOL. From burdensome record-keeping 

of live animals, to sorting and segregating of carcasses in the coolers, to operating dedicated fabrication sets to separate the myriad 

of beef products generated from each and every carcass. Cattle producers are currently experiencing discounts ranging from $35 to 

$60 per head. They were applied for no other reason than Countryof-Origin Labeling. These discounts are hitting U.S. cattlemen, cattle feeders and processors that purchase cattle of Canadian and 

Mexican origin. 

In the southern tier States of California, Arizona, New Mexico, 

and Texas, cattle producers often purchase feeder cattle from Mexico to graze on pastures, or place them in feedlots to finish in the 

United States. Mexican-origin cattle are extremely important to the 

southern tier states because they provide production efficiencies associated with keeping cattle pens full, bunk space occupied, and 

quite frankly, blood on the floor. They provide a consistent supply 

of fed cattle for beef processing facilities, and especially those that 

are located near the border. 

I would turn to the fundamental question at hand. Why do we 

have COOL? I think everybody would agree, that question is especially important when you consider the WTO case. If Canada and 

Mexico win the most recent appeal, which we honestly believe they 

will, they will be allowed to retaliate not only against our industry, 

but many others as well, some of whom you have heard from today. 

Cattle: Canada and Mexico are two of the beef industry’s top export markets, worth roughly $1 billion a piece. That is big money 

for any industry. In fact, it equates to roughly 1⁄3 of our total beef 

export value. If we lose access to those markets, it will have a profoundly negative impact on all U.S. beef producers. All of our current global market access equates to approximately $350 per fed 

steer and heifer marketed today. If we lose 1⁄3 of that, roughly $115 

will be taken directly out of the pocket of every cattleman in the 

United States. 

But the monetary losses are not all of the problem. The vigorous 

defense of COOL by our government sends an antitrade signal to 

the international community. The WTO keeps telling us that 

COOL violates our trade commitments, but our government keeps 

saying no, it does not. Future trading partners will look at this 

issue closely, and use it before they ink any trade deals with us. 

I am certain we would do the same if we saw similar behavior from 

our trading partners. 

Finally, I wonder why our government wants to hurt an industry 

for a simple marketing program, and that is really what it is. The 

vast majority of the industry does not want it, and consumers don’t 

use it. COOL is about marketing, has nothing to do with food safety. Those who use that argument, it is basically a red herring because they just want to keep on to hold their position. At the end 

of the day, COOL is an experiment that has failed. We agree with 

Secretary Vilsack that Congress must act to fix COOL, but the only 

way to fix it and ensure that there won’t be future WTO cases is 

to repeal it. 

Thank you. 

[The prepared statement of Mr. Smith follows:] 

56 

PREPARED STATEMENT OF MICHAEL T. SMITH, SPECIAL PROJECTS MANAGER, HARRIS

RANCH COMPANY, SELMA, CA 

Mr. Chairman, Ranking Member Costa, thank you for the opportunity to be here 

today to continue the discussion of mandatory, government-run country-of-origin labeling better known as COOL. 

The COOL debate has plagued our industry for almost 2 decades. Proponents of 

COOL have long said that mandatory labeling would cause the U.S. consumer to 

actively seek out and pay more for U.S. beef. Over 6 years of implementation, however, has proven this is not the case. Kansas State University published a study titled ‘‘Mandatory Country-of-Origin Labeling: Consumer Demand Impact’’ in November of 2012. Their study utilized multiple methods to gauge consumer perception 

and use of COOL, and came away with several findings which did not surprise those 

of us in the beef industry. The study discovered that demand for covered meat products has not been impacted by mandatory country-of-origin labeling (MCOOL) implementation. In addition, typical U.S. consumers are unaware of MCOOL and do 

not look for meat origin labeling. 

While proponents of COOL say they have surveys that show Americans want to 

know where their beef comes from, the K-State study actually measured how Americans vote. Americans vote with their pocketbook by purchasing beef, and as stated 

above, the vast majority don’t consider COOL in their purchasing decision. Why 

then would we incur the costs of a program that the consumer is not demanding? 

As a cattle feeder and packer, Harris Ranch has experienced the costs associated 

with implementing COOL. From burdensome record-keeping, to line sorting and 

segregation, and to the actual label itself, we have been paying the costs of COOL 

since it went into effect in October of 2008. All segments of the U.S. beef industry 

have been impacted by COOL. 

Feeders and packers across the country, and of all sizes, are experiencing the 

same issues with compliance costs and discounts. As a result of the costs associated 

with the implementation of COOL, we have seen discounts paid on cattle which 

originate in either Canada or Mexico. Those discounts have ranged from $35 to $60 

per head. These discounts are incurred for no other reason than COOL. The cattle 

can have the same quality characteristics as a similar animal of domestic origin, but 

will be discounted because of COOL. The discounts are not just borne by Canadian 

and Mexican producers. U.S. cattle producers and feeders are incurring these discounts as well. 

In states such as California, Arizona, New Mexico and Texas, cattle producers will 

bring in feeder cattle from Mexico and finish them in the United States. This takes 

place on U.S. ranches and feedlots utilizing U.S. labor and U.S. grown feed. This 

production method is seen in other states and is the primary way many cow/calf 

producers and cattle feeders are feeling the brunt of COOL. Again, these discounts 

are being realized by American beef producers thanks to a program that proponents 

said would help them. 

Given all I’ve stated above, I again have to ask the question ‘‘why do we still have 

COOL?’’ That question is especially relevant when you look at the World Trade Organization (WTO) case filed by Canada and Mexico against our mandatory, government-run COOL program. The WTO has ruled against the U.S. COOL program 

three times, most recently in October of 2014. The U.S. Government, however, has 

appealed this decision. We expect the WTO to rule on the current appeal on, or 

about, May 18th. If Canada and Mexico win their appeal for a fourth time, which 

we believe they will, they will be allowed to retaliate against our industry and many 

other industries across the United States. 

Canada and Mexico have consistently been two of our top five markets for the export of U.S. beef. In 2014, Canada imported over $1 billion in U.S. beef and Mexico 

imported almost $1.2 billion. That is big money for our industry. In fact, it equates 

to approximately 1⁄3 of our total beef export value. If we lose access to those markets, or have tariffs placed on them, it will have a negative impact on U.S. producers. All of our current global market access equates to approximately $350 per 

marketed head. If we lose 1⁄3 of that, roughly $115 per head will be taken out of 

the pocket of every U.S. cattle producer. That is a cost in addition to all we have 

incurred with compliance. 

As I mentioned above, we have been paying the costs of COOL since 2008. Retaliation would only make our losses worse. The monetary losses are not all, though. 

The vigorous defense of COOL by our government does not send a pro-trade signal 

to the international community. The WTO keeps telling us that COOL violates our 

trade commitments, but our government keeps saying it doesn’t, even though the 

very entity regulated does not support the program. Future trading partners will 

look at this closely and use it before they ink any trade deals with us. We would 

57 

do the same if we saw that behavior from any of our trade partners. This anti-trade 

stance is contrary to the very pro-TPA rhetoric we are hearing from this Administration. So, just who are they trying to protect with COOL? 

Why would our own government want to hurt our industry for a simple marketing 

program that the vast majority of the industry does not want and that the consumer 

does not use? COOL is all about marketing and has absolutely nothing to do with 

food safety. Those who use that argument know nothing about the food safety protocols in this country. This is a red herring used by COOL proponents in a desperate 

attempt to hold on to their position. COOL is a farce and its proponents obviously 

have no idea how modem beef production in the United States actually works. They 

have a simple and short-sighted view which is already costing our industry money. 

COOL is a failed experiment. It has added costs to the production of beef and resulted in discounts borne by American ranchers; the U.S. has been found out of compliance with our WTO trade obligations three times, and soon to be a fourth; and 

our two closest trading partners are potentially months away from instituting retaliatory tariffs against multiple industries, damaging our economy and costing jobs. 

All of these negative consequences result from a program that the typical consumer 

does not even look for when buying their steaks or ground beef. 

After the WTO ruled against the U.S. in 2012, USDA took NFU’s advice and revised the COOL regulations. Today, we’re seeing the result: a more burdensome 

COOL program for the meat industry; more steps in the WTO case taking us to the 

brink of retaliation; uncertainty for U.S. exporters in multiple industries; and a 

label even less useful or meaningful to the consumer. This must stop. The Secretary 

of Agriculture has made several public comments over the past few months, most 

recently at the NFU convention, that there is nothing else he can do to bring COOL 

into compliance and that Congress must act. On that point, we agree. We must ensure that we are not sitting here again in 2 years, facing another potential loss at 

the WTO. The solution is for Congress to repeal COOL now. Half-measures or other 

alterations to COOL will only bring more uncertainty and possible WTO challenges. 

That is unacceptable to the meat industry, as well as to the other industries forced 

to look over their shoulders, worried about potential retaliatory tariffs from Canada 

and Mexico. We encourage you to work with Chairman Conaway to repeal COOL 

before retaliation is implemented. 

Mr. Chairman, thanks for the opportunity to be here today. 

The CHAIRMAN. Ms. Bodor. 

STATEMENT OF ALISON BODOR, EXECUTIVE VICE PRESIDENT, 

NATIONAL CONFECTIONERS ASSOCIATION, WASHINGTON, D.C. 

Ms. BODOR. Good morning. I am Alison Bodor, Executive Vice 

President of the National Confectioners Association, and I appreciate this opportunity to testify on behalf of America’s confectionary 

companies that manufacture and market the vast majority of chocolate, gum, candy, and mints sold in the United States. 

NCA also represents the companies that supply those manufacturers, and companies who serve as brokers. More than 2⁄3 of 

NCA’s 290 members are small businesses. Many of the industry’s 

manufacturers are now fourth and fifth generation family-owned 

companies, started by immigrants before the turn of the century. 

The industry supports 70,000 jobs across the United States, and if 

you add in supplier and distribution networks, that number easily 

triples. 

NCA members have long supported free trade. This is despite the 

fact that our companies are disadvantaged in our own domestic 

marketplace by U.S. agriculture subsidies that increase the price of 

sugar, one of our key ingredients, in the U.S. compared to the 

world price that our global competitors enjoy. Confectionary manufacturers are major users of U.S.-grown commodities, including 

sugar, corn sweeteners, dairy products, peanuts, almonds, and 

other nuts. These industries, of course, benefit also from U.S. exports of confections. 

58 

In 2014, U.S. confectioners exported more than $2 billion worth 

of candy, chocolate, gum, and mints, and bulk chocolate products 

around the world. Not surprisingly, Mexico and Canada are our 

most important trading partners. Forty percent of U.S. confectionary exports are to Canada, $900 million worth, while 15 percent are to Mexico. These two markets together total over 50 percent of U.S. confectionary exports. We are deeply concerned that retaliatory duties from both countries will target our industry. 

Let me talk about Canada. Currently, four confectionary-related 

tariff codes are on Canada’s proposed retaliatory duty list. These 

codes capture U.S.-made bulk chocolate preparations, finished chocolate confections, and sugar-free sweeteners. Together, these confectionary products represented $615 million of confectionary exports to Canada last year. U.S. confectioners have worked hard to 

grow the presence of U.S. confections and intermediate products in 

Canada, and our efforts are paying off. Exports of finished chocolate grew by almost $45 million in just the last 2 years, while exports of bulk chocolate grew by almost $12 million. Those years of 

investment will quickly be diminished if the retaliations from Canada are implemented. For all of these products; chocolate, bulk 

chocolate, wafers, biscuits, and sweeteners, there are Canadian and 

global competitors. Many American-made chocolates will disappear 

from Canadian shelves. Manufacturers in Canada that source critical raw materials from U.S.-based suppliers will shift supply 

chains outside of the United States. That loss of business will impact U.S. confectionary companies, their workers, and importantly, 

also their communities. 

The Government of Mexico has not yet declared the products 

upon which they intend to levy duties if WTO grants retaliation, 

but U.S. confectioners are very troubled that our industry will 

again be targeted, as they were several years ago during the U.S.- 

Mexico cross-border trucking dispute. At that time, Mexico implemented a 20 percent duty on confectionary products. That resulted 

in a 50 percent drop in U.S. confectionary exports. 

The longer these disputes are unresolved, the greater the consequences to the U.S. confectionary industry, and the communities 

in which those companies reside. U.S. confectioners urge Congress 

and the affected industries to find a resolution that ensures U.S. 

compliance with international trade obligations, and avoids retaliatory actions against our exports to the north, and possible retaliation for our exports to the south. 

Thank you very much. 

[The prepared statement of Ms. Bodor follows:] 

PREPARED STATEMENT OF ALISON BODOR, EXECUTIVE VICE PRESIDENT, NATIONAL

CONFECTIONERS ASSOCIATION, WASHINGTON, D.C. 

Impact of the Trade Dispute Over Country-of-Origin Labeling on the U.S. 

Chocolate and Confectionery Industry 

I appreciate this opportunity to testify on behalf of America’s confectionery companies before this Subcommittee. NCA has been representing companies that manufacture candy, one of life’s little pleasures, since 1884. Today, NCA represents 290 

companies that manufacture and market the vast majority of chocolate confectionery, sugar confectionery, gum and mints sold in the United States, 260 companies who supply those manufacturers and 135 companies who serve as third-party 

sales agents for manufacturers, known as brokers. 

59 

More than 2⁄3 of NCA’s members are small businesses. Many of the industry’s 

manufacturers are now fourth and fifth generation family-owned companies, started 

by immigrants before the turn of the century. There are confectionery manufacturers in all 50 states, with a particular concentration in Pennsylvania, New York, New 

Jersey, Illinois, Ohio and California. 

According to the U.S. Department of Labor, in 2009 (the latest data available) 

there were about 70,000 Americans directly employed by the confectionery industry. 

When you count the related number of sales and distribution jobs associated with 

the industry, that number triples. Confectionery workers are represented by the 

Bakery, Confectionery, Tobacco, and Grain Millers; United Food and Commercial 

Workers International; and the Teamsters Unions. 

Confectionery manufacturers are major users of U.S.-grown commodities including 

sugar, corn sweeteners, dairy products, peanuts, almonds and other nuts. These industries, of course, benefit also from U.S. exports of confections. 

NCA members have long supported free trade. 

NCA companies have actively engaged in the President’s National Export Initiative. In 2014, U.S. confectioners exported more than $2 billion worth of candy, chocolate, gum, mints and bulk chocolate products around the world. Not surprisingly, 

Mexico and Canada are our most important trading partners. Forty percent of U.S. 

confectionery exports are to Canada ($900 million) while 15 percent (more than $300 

million) are to Mexico. These two markets together total over 50 percent of U.S. confectionery exports. We are deeply concerned that retaliatory duties from both countries will target our industry. 

Let me tell you more about how U.S. confectioners will be impacted if Canada proceeds with retaliatory duties. Currently, four confectionery related tariff codes are 

on Canada’s proposed retaliatory duty list. These codes capture U.S.-made bulk 

chocolate, finished chocolate confections and sugar-free sweeteners. Together, these 

confectionery products represented $615 million of U.S. exports to Canada last year. 

Tariff code 1806.90 covers chocolate and chocolate confectionery. Included 

here are chocolates in varied forms, such as buttons, coins, drops, hearts, animals, 

and other shapes along with assorted boxes of chocolate and hot cocoa mixes. U.S. 

confectioners supply more than 50 percent of Canada’s total imports in this category. Examples of typical chocolate products classified under 1806.90 are pictured 

below. 

Sweet biscuits and waffles/wafers are covered under tariff code 1905.31 

and 1905.32. Forty-two percent of Canada’s total imports of sweet biscuits and 2⁄3

(68 percent) of Canada’s total imports of waffles/wafers are sourced from the U.S. 

Some of NCA’s members manufacture chocolate-covered or chocolate-containing 

sweet biscuits, waffles and wafers. Examples to illustrate such finished products are 

pictured below. 

Example of chocolate-covered sweet 

biscuits (1905.31) 

Examples of chocolate-covered waffles and wafers (1905.32) 

Tariff code 1806.20 covers bulk chocolate preparations. These include chocolate crumb, liquid chocolate and chocolate slurries, all of which are used in the 

manufacture of chocolate and chocolate-containing products. U.S. chocolate makers 

supply more than 75 percent of Canada’s total import demand of bulk chocolate 

preparations. 

Certain sugar substitutes including sorbitol and xylitol are included in 

Tariff Code 2940.00. More than 1⁄4 (28 percent) of Canada’s total imports of sweeteners of 2940.00 are sourced from the U.S. As the sugar-free market continues to 

grow, sugar substitute inputs sourced from the U.S. continue to grow to support 

manufacturing of sugar-free gum and confectionery. 

U.S confectioners have worked hard to grow the presence of U.S. confections and 

intermediates in Canada and our efforts are paying off. Exports of finished chocolate 

grew by almost $45 million in just the last 2 years, while exports of bulk chocolate 


11409025.eps 11409026.eps
60 

grew by almost $12 million. Those years of investment will quickly be diminished 

if the retaliations are implemented. For all of these products—chocolate, bulk chocolate, wafers/biscuits and sweeteners—there are Canadian and global competitors. 

Many American-made chocolate products will disappear from Canadian shelves. 

Manufacturers in Canada that source critical raw materials from U.S.-based suppliers will shift supply chains outside of the United States. We are aware already 

of Canadian companies using the threat of the retaliation to lure manufacturers to 

new and more secure supply sources. The loss of business will impact U.S. confectionery companies and their workers, also their communities. 

The Government of Mexico has not yet declared the products upon which they intend to levy duties if WTO grants retaliation, but U.S. confectioners are very troubled that our industry will again be targeted as they were several years ago during 

the U.S.-Mexico cross-border trucking dispute. 

The longer these disputes are unresolved, the greater the consequences to the 

U.S. confectionery industry. 

U.S. confectioners urge Congress and the affected industries to find a resolution 

that ensures U.S. compliance with international trade obligations and avoids retaliatory actions against our exports to the north, and possible retaliation for our exports to the south. 

The CHAIRMAN. I would like to thank each of the witnesses for 

your testimony today. 

We will now move into a period of questions by our Members. I 

need to note that given the time constraint we are under due to 

the Joint Session of Congress, in fact, we need to be out of this 

hearing room by around 10:20, 10:25. I ask unanimous consent that 

Members limit their questioning to 31⁄2 minutes. Without objection, 

so ordered. 

I now recognize myself for 31⁄2 minutes. 

My question is directed to Mr. Wenk and Ms. Dempsey. As I 

mentioned in my opening statement, when countries impose nontariff trade barriers on U.S. agriculture products, and encourage 

other nations to adopt similarly protectionist policies, we would certainly all expect the United States Government to fight vigorously 

against those policies. I also understand that to criticize other nations for imposing protectionist barriers to our products means that 

we must likewise be critical of our own policies that do the same. 

Now, do both the U.S. Chamber of Commerce and the National 

Association of Manufacturers consider Country-of-Origin Labeling a 

non-tariff trade barrier? 

Ms. DEMPSEY. Yes, the NAM believes that the barrier is, in fact, 

a non-tariff trade barrier. 

The CHAIRMAN. Mr. Wenk? 

Mr. WENK. Yes, we do. 

The CHAIRMAN. Thank you very much. 

I now recognize Mr. Costa for any questions he may have. 

Mr. COSTA. Thank you very much, Mr. Chairman. 

Mr. Smith, you did accounting of the costs that your own company incurred in trying to comply with it. What was the timeline 

in trying to put that together to ensure that you were in compliance? 

Mr. SMITH. The timeline for putting the program together, Mr. 

Costa? 

Mr. COSTA. Yes. 

Mr. SMITH. Okay. When COOL was first implemented, obviously, 

we were fortunate in that USDA met with industry, and sat down 

and came up effectively with a means by which we weren’t going 

to dramatically reduce the speed at which commerce would occur 

61 

in terms of selling live animals to one another. As a company, obviously, you try to plan ahead, you try to expect what some of these 

difficulties are going to be. You put together programs, procedures, 

so that you make certain that livestock are segregated accordingly, 

you identify specific days upon which those cattle will move into 

your processing facility, not only what day but what hours of certain shifts. 

Mr. COSTA. And you run two shifts there at your operation. 

Mr. SMITH. Actually, just one, Congressman Costa. We run two 

shifts in ground beef production, but the actual harvest and processing of the carcasses is just one 8 hour shift. 

Mr. COSTA. But I noted that you export to Asia. Are you currently exporting any product to Mexico? 

Mr. SMITH. We are, sir. 

Mr. COSTA. Or Canada? 

Mr. SMITH. And it amounts to roughly $1.5 million in value as 

far as sales to Mexico. 

Mr. COSTA. So you are concerned about retaliatory effects would 

possibly occur immediately then. 

Mr. SMITH. Very much so, sir. 

Mr. COSTA. Yes. I assume you consider this a non-tariff barrier 

if enacted? 

Mr. SMITH. Yes, we do. 

Mr. COSTA. Mr. LaFaille, you consider it the same? 

Mr. LAFAILLE. Absolutely, Mr. Costa. 

Mr. COSTA. When we talk about the impact to the wine industry, 

that has tried very hard to penetrate foreign markets, with some 

success, what potential fallout do you see in the event that Congress doesn’t act if we get the adverse ruling we are expecting by 

the end of this year? 

Mr. LAFAILLE. Well, we know that retailers will start to look at 

other countries’ wines and—rather than ours, even before retaliatory tariffs will hit. At the same time, once they hit, consumers, 

who are definitely price-sensitive, are going to be looking to less expensive products, and so we know that this is exactly what happened in Mexico, and it took 7 years to recover. 

Mr. COSTA. All right. Have we gotten any clarification with the 

U.S. Office of Trade Representative as to whether or not this is a 

4 to 6 month process, instead of the 60 days that some are anticipating? 

Mr. LAFAILLE. I am not certain of that. 

Mr. COSTA. Anyone else care to opine? 

Mr. JOHNSON. I would only point out that history would indicate 

that almost every WTO deadline that they lay out is not met by 

some long period of time. They generally are very late because they 

are very overworked. 

Mr. COSTA. Okay. 

All right, my time has expired, Mr. Chairman. Thank you. I will 

wait until the next round, if there is one. 

The CHAIRMAN. Thank you, Mr. Costa. 

I now recognize Mr. Emmer. 

Mr. EMMER. Thank you, Mr. Chairman. 

As you know, I come from Minnesota, and when I arrived here 

to Congress, some of the advice I received was focus on an area 

62 

that is not only in your wheelhouse but it is important to your 

state, as opposed to getting involved in everything. Minnesota is 

still home to 19 Fortune 500 companies, and our two biggest private economic drivers are agriculture and manufacturing. Our 

state is all about trade, including trade with Canada and Mexico. 

In fact, Canada is Minnesota’s top export market, and it is our 

number one export market for agriculture and agrifood. 

The questions that I have, and I will try to keep them brief, is 

first, many of you have talked about the effects of retaliation to 

your producers or members, but what would these retaliations look 

like to the average person buying a pound of ground beef at the 

grocery store, or an office chair at Office Depot? Can you give me 

an idea what that will look like to the consumer? 

Ms. DEMPSEY. Let me start. I mean trade is absolutely vital not 

just to produce jobs in industries and agriculture and services and 

certainly manufacturing, but it helps give consumers in the United 

States choice of quality products, choice over price. The loss of new 

opportunities and existing opportunities in Canada and Mexico 

that we see resulting from the retaliatory tariffs that we fully expect Canada and Mexico to impose, and very likely in 2 months, 

it will be a short time, they have waited years on this to resolve 

this dispute, that will result in lost opportunities, less efficiency, 

less innovation both in our manufacturing sector and others. 

Mr. EMMER. It would be great, Mr. Smith, if you could give me 

an idea—— 

Mr. SMITH. I don’t know if I can necessarily give you a dollar figure, Congressman, in terms of what the net impact financially will 

be to the consumer, but I know that there will be lost opportunity 

there in terms of being able to purchase value-added products. 

As a company, this retaliation, and I just want to go on record 

to state that it would be more than just potentially the increased 

tariffs on beef products that we would market, but as a large farming operation as well, it will have negative impacts. I know that 

on their list the Canadians have identified cherries, oranges—— 

Mr. EMMER. Right. 

Mr. SMITH.—tomato paste, three of the commodities that we are 

very big in producing as well. 

Mr. EMMER. And I appreciate that. I just was going back to Mr. 

Weber’s original testimony, and he has a figure in there that shows 

Minnesota could lose depending on $2 to $4 billion in retaliation, 

somewhere between 250 and 500 jobs. Since we have short time, 

the question I want to ask, the last one, to all of you is, in lieu of 

the conflicting data that surrounds the cost and benefits of COOL, 

does anyone see a solution that would be satisfactory to all parties 

involved, and perhaps maybe not you, Mr. Smith, based on your 

testimony, but a solution that would be satisfactory to everyone 

and WTO compliant? 

Mr. JOHNSON. Mr. Chairman, if I could take the first crack at 

that. It gets to part of your previous question too. There is no right 

to retaliate unless there is proven economic damages. The only evidence introduced to the WTO at this point is based on proprietary 

pricing data provided by the CCA in Canada, and it has been overwhelmingly refuted by publicly available data in the Taylor study 

that I referenced. 

63 

[Submitted information in response to Mr. Emmer’s question and 

it is located on p. 71.] 

Mr. EMMER. Thank you, Mr. Chairman. That is not really helpful 

to me. I was looking for a solution as opposed to an argument. 

So I yield back, Mr. Chairman. And thank I the witnesses for 

their time. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. Yoho, 31⁄2 minutes. 

Mr. YOHO. Thank you, Mr. Chairman. I appreciate the opportunity. I appreciate your testimony. 

COOL started in 2002, and it was implemented in 2009. Since 

that time, we have had this disgruntlement, the disruption of the 

market, the lawsuits and all that, and when I look at the responsibility of the USDA, is it the responsibility of the USDA and the 

government to illustrate the origin of the meat that the U.S. consumer eats, like Canada and Mexico, or is it a trade issue? 

Mr. Smith, let me ask you first. 

Mr. SMITH. I am sorry, Congressman, I didn’t understand your 

question. 

Mr. YOHO. Is it the responsibility of the USDA to demand, or require Country-of-Origin Labeling, or should that be negotiated in 

the trade issues like with NAFTA, when NAFTA came out, should 

that have been put in there and not after the fact when NAFTA 

was negotiated? 

Mr. SMITH. Right now, USDA has oversight over those labeling 

requirements. 

Mr. YOHO. I understand that, but should that have been negotiated in NAFTA when it first happened, instead of after the fact? 

Mr. SMITH. Perhaps in hindsight, yes. 

Mr. YOHO. All right. My other question is, the COOL label 

doesn’t make a product safer. 

Mr. SMITH. That is correct. 

Mr. YOHO. It doesn’t add to the traceability of a product. The 

USDA has sole responsibility of saying a product is wholesome, 

healthy and good for the consumer or marketable. And I don’t see 

the benefit of the COOL labeling, and you guys have brought it up 

for the majority of the panel that it has added a burden to the U.S. 

producer, it has put us in trade retaliation. And let us see, probably the best way to go in this is looking at the complete repeal 

of that, and I hope out of this Committee, and with your recommendation, that is the smartest way to go, and have these 

things negotiated in trade agreements. As I said, the labeling 

doesn’t make the product any safer for the consumer. It doesn’t increase the traceability. In addition, it adds $2 billion to the cost of 

meat, which is ultimately paid for by us, the consumer, and it affects the people at the lower income levels higher. 

So with that, we will listen to your recommendations, and I look 

forward to working on that so that we can move beyond this and 

not have retaliation from our trading partners. And coming from 

the State of Florida, I was born in Minnesota like Mr. Emmer, but 

my parents had the good sense to move to Florida. And Canada is 

Florida’s largest trading partner also, and it would be tough for us. 

We ship a lot of citrus up there. And I look forward to working 

64 

through this so that we build those alliances with our trading partners stronger so that we keep agriculture a strong trading tool. 

I am going to yield back, Mr. Chairman. And I appreciate it, and 

congratulations. 

The CHAIRMAN. Thank you very much. 

The gentleman from Washington, Mr. Newhouse. 

Mr. NEWHOUSE. Thank you very much, Mr. Chairman, and you 

are doing a great job this morning. Thank you all for being here 

and helping us understand the implications of this very important 

issue. 

Let me take the brief time I have to ask a couple of questions 

real quickly. First of all to Mr. Weber and Mr. Smith, you have 

talked about the cost of COOL and the implications that it has had 

on our industries. Since its enactment, can you point to anything 

of benefit, increased sales, any kinds of an upside to this at all? I 

am trying to understand if there is a flipside to this as well. 

Mr. SMITH. No, sir, we have seen none. And you would think that 

as a branded beef company, one of the first branded beef companies 

in the U.S., if we saw an economic benefit associated with being 

able to identify products coming from a specific entity, whether it 

be product of the U.S., we would have, on our own fruition, approached the USDA, because companies can do this, and asked to 

make label claims. We saw no benefit in the marketplace. We did 

demographic studies, we asked some of our customers do you think 

the end consumer would like to see this type of information, and 

almost to a man, they have said no. So to answer your question, 

Congressman, we see no benefit whatsoever, no, sir. 

Mr. NEWHOUSE. Mr. Weber, any thoughts? 

Mr. WEBER. Yes, Congressman. I think I would agree with that 

statement. It is very hard to measure any type of economic benefit 

from Country-of-Origin Labeling, much more difficult than it is to 

label the cost of having to comply with Country-of-Origin Labeling. 

The difficulty it presents for packers, processors, producers, clear 

down to the retail level, there is added cost involved and it is hard 

to pinpoint that in any one sector, but from an economic benefit, 

it would be extremely difficult to say that consumers are benefiting 

from Country-of-Origin Labeling. 

Mr. NEWHOUSE. Okay, thank you. Mr. Wenk and Ms. Dempsey, 

can you tell me if the potential retaliation is having any impact on 

our industries already, just the existence of the potential? 

Mr. WENK. Well, thanks, Congressman. This is a dark cloud that 

is forming over U.S. exporters right now, and that is very much 

why this hearing today is very timely. And as I said in my testimony, we believe that the way forward right now is for Congress 

to move forward on legislation to repeal the COOL rule for muscle 

cuts of meat. And just in Washington, sir, if you look at our 

website, www.COOLReform.com, you will see that there are several 

products in your state that could be impacted by retaliatory tariffs; 

apples, cherries, pears, potatoes, video game consoles, to name a 

few. So this is a very urgent topic, sir, and it is having an impact, 

and it is a dark cloud that is forming over our exporters right now. 

Mr. NEWHOUSE. Thank you. 

65 

Ms. DEMPSEY. I agree with Mr. Wenk, and would just add that 

just as in the United States, customers overseas oftentimes plan 

months in advance, and once a decision is made—— 

Mr. NEWHOUSE. Yes, right. 

Ms. DEMPSEY.—to purchase, they are going to make that purchase. And so this looming threat of retaliation, which we believe 

will be very substantial given the disruption in Canadian and 

Mexican trade in this area, will have, and will have not an effect 

just on that one sale, but could, as we saw in the Mexico trucking 

case, it could affect sales to those customers for years to come because once you lose that customer, you are not going to get them 

back very quickly again. 

Mr. NEWHOUSE. Right. Well, thank you very much. 

And, Mr. Chairman, I have gone over. Thank you for your indulgence. 

The CHAIRMAN. Thank you very much. 

I will now recognize the gentlewoman from Missouri, or perhaps 

for the benefit of the other 1⁄2 of the population of that great state, 

perhaps I should say Missouri, Mrs. Hartzler. 

Mrs. HARTZLER. Either one works, but I am proud to be a lifelong 

farmer and glad to be here today in this very, very important issue. 

I appreciate your testimony. 

I wanted to start with Mr. Weber and Mr. Smith. Secretary 

Vilsack recently stated that if we lose the appeal of the WTO, Congress essentially has two options; come up with some sort of generic label, or repeal the current law. So I was just wondering, has 

the Secretary approached either of your organizations to discuss 

possible alternatives to a full repeal of COOL? 

Mr. WEBER. I am not aware that he has approached our organization as far as a solution to COOL. I think, from our position, due 

to the urgency that we have, and I guess I would like to maybe address Congressman Costa’s previous question, it is 60 days by rule, 

and we are staring this in our eyes, this threat of retaliation. The 

Canadians and the Mexicans are both ready to move, so I don’t 

think we have much other option other than repeal of the statute 

that is causing the problem here. 

Mrs. HARTZLER. Mr. Smith? 

Mr. SMITH. I would concur with those remarks. To my knowledge, the Secretary has not reached out to the beef industry to ask 

for their input regarding any potential fix. I would rely back to my 

testimony. This is a failed experiment. In our opinion, it just needs 

to be repealed. We need to get rid of it. 

Mrs. HARTZLER. So if we repeal COOL and the President signs 

the legislation into law, do you believe that would immediately end 

the threat of retaliation? Everybody. 

Ms. DEMPSEY. Yes. So then Canada and Mexico would not be 

WTO authorized to retaliate. 

Mrs. HARTZLER. Right. Good. Okay, so back to Mr. Wenk and Mr. 

Smith. From the outset, many of us had concerns that a Countryof-Origin Labeling requirement would add cost to the processing 

and marketing of meat products, and it seemed that USDA shared 

those concerns, and in the 2009 final rule implementing COOL, 

USDA estimated that the first year implementation cost for growers, producers, processors, wholesalers and retailers would be $2.6 

66 

billion, and this was their original estimate. The rule also stated 

that the estimated economic benefits associated with the rule were 

‘‘likely to be small.’’ So they saw this coming. 

So to what extent have cattlemen and pork producers borne this 

cost? 

Mr. SMITH. If you don’t mind, I could start. I mean as a feeder 

and a packer, I will tell you that most of those costs right now are 

being borne within those two segments of the industry. Now, that 

is not to say that there are not additional costs associated with paperwork that occurs back at the ranch level, but the majority of 

those costs, in my opinion, have been absorbed in those two segments of the industry. And it is primarily just because of the sorting within pens, coolers, separate, as I mentioned, fabrication sets, 

labeling requirements, et cetera. 

Mrs. HARTZLER. Is that passed on to the consumer? Have costs 

been passed on to the consumer as a result of this rule? 

Mr. SMITH. A portion of those have, yes, ma’am. Some of them 

have been sent backwards, back through the production channel, 

and that is the reason that the Mexican Government and the Canadian Government are angry, because that negative economic signal 

is being sent to them in one direction in those direct costs, but then 

the indirect costs, the lack of production efficiencies because some 

of the difficulties we have, and some of the decisions our customers 

have made regarding whether they will carry two separate labels 

in their retail stores, those are indirect costs that the consumer 

bears. 

Mrs. HARTZLER. Clearly, there is no upside to this. It is not good 

for America, it is not good for the producers, the processors, and 

it is not good for the mom that goes to the grocery stores having 

to pay more for products. And so we really do need to repeal it. 

Mr. WEBER. I would pretty much agree with Mr. Smith’s comments on that. If you just picture our industry. We have the processor in the middle that is really caught in the endgame in this 

thing, and they work on a margin, and I guarantee you they are 

going to pass those margins forward, and as much as they can, 

back to us as producers on the farm. And that is why I mentioned 

it is hard to actually know exactly what it is costing because that 

is exactly what happens; it spreads out through the economy. But 

there is no question that there is added cost with segregation of the 

product and distribution of the product. It becomes almost an impossible situation for them, and that is what has been passed down 

to us as producers. And so there are many costs involved. 

Mrs. HARTZLER. Thank you. 

The CHAIRMAN. The gentlewoman’s time has expired. 

We are within our time constraints, so we will move into round 

two. I have a question for you, Mr. Weber. 

The U.S. has imported millions of feeder pigs from Canada. 

These feeder pigs have been essential to help fully utilize pork producing capacity in the United States. For the record has, Mandatory Country-of-Origin Labeling had an effect on the availability of 

those feeder pigs? 

Mr. WEBER. The feeder pigs are available, but the number of pigs 

willing to come into this country has been affected, and that is 

clearly the case that Canada—one of the topics that Canada has. 

67 

I have fellow producers in my state that have been impacted by 

this because they haven’t got a market for the Canadian pigs, and 

that occurred early on. So it is not a matter—to me it isn’t an issue 

of availability. The pigs are available, there are still approximately 

75,000 feeder pigs a week coming into this country, high-quality 

pigs. The issue at hand here is the retaliation that our industry is 

facing. We absolutely have to avoid retaliation. We have come 

through a very difficult marketing period in the pork industry. Obviously, with PED we had some high prices. Those prices are less 

than 1⁄2 of that today. We are negotiating a major free trade agreement and we want to be represented as a country that lives up to 

its trade agreements, and so we just need to avoid this retaliation 

by WTO—or by Canada and Mexico. 

The CHAIRMAN. Thank you, Mr. Weber. 

Mr. Costa. 

Mr. COSTA. Thank you again, Mr. Chairman. 

Both Mr. Smith and Mr. Weber, I believe, testified earlier that 

in the event of the adverse ruling that we have discussed, and retaliatory action is taken by Canada and Mexico, that the solution 

to this issue would be to repeal the law. With the exception of Mr. 

Johnson, do the other witnesses concur with Mr. Smith and Mr. 

Weber? You can nod your head. 

VOICE. Absolutely, sir. 

Mr. COSTA. Yes. There has been some discussion as an alternative, and I would like to get your reaction to it, if those course 

of events take place that we develop a North American label. And 

I would like to get your reaction to a North American label, and 

maybe we can begin with Mr. Johnson since I am certain you don’t 

favor repealing it. 

Mr. JOHNSON. Thank you, Congressman. You are correct, we do 

not favor repealing it. We think actually that the best way to deal 

with this is to get the decision from the WTO—— 

Mr. COSTA. No, I understand that—— 

Mr. JOHNSON.—and then—— 

Mr. COSTA.—but I am talking about in the event of an adverse 

decision—— 

Mr. JOHNSON. Yes. 

Mr. COSTA.—what is your thought on a North American label? 

Mr. JOHNSON. Well, we would initially be inclined to oppose a 

North American label, but—— 

Mr. COSTA. Okay. 

Mr. JOHNSON.—it is very important that you look at the actual 

decision, because we believe that there can be a very narrow fix 

that can be applied. Every WTO decision that has been made, there 

have now been three of them, has been narrower than the one before it. 

Mr. COSTA. Okay. 

Mr. JOHNSON. We have every expectation the same thing would 

happen this time. 

Mr. COSTA. Mr. Smith, would you care—Mr. Weber, or any other 

of the witnesses, to react to a North American label? 

Ms. DEMPSEY. I would just say that it is critical from our perspective and that of the COOL Reform Coalition that we eliminate 

the possibility of retaliation immediately. And so if we put ourVerDate Mar 15 2010 16:15 May 28, 2015 Jkt 041481 PO 00000 Frm 00071 Fmt 6633 Sfmt 6601 P:\DOCS\114-08\93967.TXT BRIAN
68 

selves in a situation of developing yet another legislative mandate 

that is viewed as WTO inconsistent, and until one sees the details 

of such a rule it is very difficult to expect that Canada and Mexico 

are going to wait in terms of the retaliation. First and foremost, 

and as Mr. Wenk testified, our coalition has looked for lots of other 

alternatives along the way to try to promote resolution of this, but 

at this point, time has run out—— 

Mr. COSTA. Mr. Wenk? 

Ms. DEMPSEY.—and so we need to see the—— 

Mr. COSTA. Yes. 

Ms. DEMPSEY.—repeal of this rule, and then if there is work that 

needs to be done with Canada and Mexico to figure out another solution, then so be it. 

Mr. COSTA. Yes. 

Mr. WEBER. I would agree with Ms. Dempsey fully in her comments that it—— 

Mr. COSTA. Mr. Smith, Mr. Wenk, do you care to comment? 

Mr. SMITH. Congressman Costa, I would agree wholeheartedly as 

well, yes. I mean I don’t think we have the luxury to propose another potential fix. We have tried that twice now. It has not 

worked. As I mentioned, the clock is ticking. Let us repeal it. 

Mr. WENK. I completely concur. The reality is that we don’t have 

a lot of time, Congressman, we are not in the driver’s seat right 

now. We are days away from a final WTO ruling, so that is why 

it is urgent that Congress acts. 

Mr. COSTA. All right. Thank you, Mr. Chairman. I yield back the 

balance of my time. 

The CHAIRMAN. I see we are now 10 minutes after 10:00, so we 

have about 10 minutes here. 

Mr. Newhouse, have any follow-up? 

Mr. NEWHOUSE. Thank you, Mr. Chairman. Just one line of questioning perhaps we haven’t explored yet. 

Certainly, we have talked about some of the negative impacts of 

retaliation, but are there other consequences of the U.S. being out 

of compliance with its trade obligations? And being out of compliance with WTO obligations, what does that do to the development 

of other opportunities perhaps in the marketplace internationally? 

Mr. SMITH. I would offer just briefly. I mean that concept to do 

as I say, not as I do won’t fly very well. It will pose astronomical 

challenges moving ahead, trying to negotiate any further trade 

agreement with any other countries. 

Ms. DEMPSEY. I would just say from the manufacturing perspective, we already face a lot of trade barriers overseas on which we 

are trying to get resolution. There is over $12 trillion traded in 

manufactured goods worldwide, and the United States has nine 

percent of that. That world trade in manufactured goods is about 

three times the size of all consumption of manufactured goods in 

the United States. So if we are going to grow our economy, we need 

to do more. And so putting the United States out of its traditional 

leadership role in the world economy to make us a bad actor will 

tell the rest of the world that they can go ahead and impose additional barriers. And in a time that we are negotiating two big trade 

agreements to try to level the playing field, to try to have fair trade 

so we can get better access to the world’s markets, this type of acVerDate Mar 15 2010 16:15 May 28, 2015 Jkt 041481 PO 00000 Frm 00072 Fmt 6633 Sfmt 6601 P:\DOCS\114-08\93967.TXT BRIAN
69 

tion and our continued lack of compliance with WTO rules is really 

costing our leadership. 

Mr. WEBER. I would fully agree with those comments. We have 

to be portrayed as a respectable trading partner in these negotiations. And believe me, we are all aware of it in this room here, that 

market access is extremely difficult, and world trade is extremely 

competitive, and we have to be portrayed as a respectable trading 

partner. 

Mr. WENK. I would just—— 

Ms. BODOR. I would—— 

Mr. WENK.—add to what Ms. Dempsey said. We helped write the 

rules of the World Trade Organization, so we ignore those rules at 

our own peril. And it just doesn’t make sense for us to ask other 

countries to follow the rules and that we don’t have to follow those 

rules. And, there are many instances where we have brought cases 

against other countries for discriminatory practices they have 

brought against us, and most recently India, we brought a case 

against India in the WTO in terms of agriculture products. So if 

we expect other countries to abide by these rules, we need to do 

the same. 

Mr. NEWHOUSE. Yes. 

Ms. BODOR. I would also add from a small business perspective, 

it increases the lack of confidence in putting forth the investment 

that it takes to open up these markets. So companies need to be 

sure that when they make that investment, that it is going to stay 

for the long-term. Now, for the confectionary industry, we are facing the second set of retaliatory duties in 10 years, and that makes 

it difficult for companies to go the next step to make the investment that is necessary if they don’t believe that the marketplace 

will last. 

Mr. NEWHOUSE. Okay. 

Mr. JOHNSON. If I could, I would argue that we also need to defend our position here. In the WTO proceedings, it was pointed out 

that some 70 countries who are members of the WTO have very 

similar Country-of-Origin Labeling rules. The WTO has never 

found against the law; they have found against how it was implemented. And so we ought to be precise about how we come into 

compliance, not simply throw out the law. 

Mr. NEWHOUSE. Yes. I appreciate all your testimonies today. 

And again, thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Mrs. Hartzler. 

Mrs. HARTZLER. Thank you, Mr. Chairman. 

Mr. Smith, I wanted to explore some other implications. We 

talked about economic cost, but in your opinion, do you believe that 

Mandatory Country-of-Origin Labeling has had an effect on consolidation within the beef cattle industry? 

Mr. SMITH. That is a touchy issue, and I will need to tread lightly. I mean intuitively, it would suggest that it does have an impact 

on further consolidation. I mean let us be honest with one another, 

it is the large companies that have the economic wherewithal to 

implement procedures, purchase equipment, to come in compliance 

with some of these additional burdens that are placed on them, and 

smaller companies don’t necessarily have that luxury. There is an 

70 

indirect impact on consolidation as a result of some of these rules, 

yes, ma’am. 

Mrs. HARTZLER. Makes sense. How has Country Origin of Labeling impacted the demand for Canadian cattle, and how could this 

impact the level of retaliation the U.S. will face if we lose the WTO 

appeal? 

Mr. SMITH. Unfortunately, I don’t have a lot of experience with 

Canadian cattle. We don’t purchase Canadian cattle, but the symbolism would be the same and we do purchase quite a few cattle 

of Mexican origin. 

Mrs. HARTZLER. Yes. 

Mr. SMITH. So it will pose some challenges. I mean if those retaliations go into play, it could make it more difficult to be able to 

source the live animals that are necessary to be brought into the 

production system. 

Mrs. HARTZLER. Okay. Ms. Bodor, we share your concerns if the 

U.S. loses its appeal, Canada and Mexico may take retaliatory actions against confectionary exports. So do you have an estimate of 

the economic damage this could cause your industry if we fail to 

repeal Mandatory Country-of-Origin Labeling for meat? 

Ms. BODOR. For confectionary on the tariff codes that Canada 

has already identified, we believe we will lose those exports. At 100 

percent duty, we cannot export those products into Canada. 

As I mentioned earlier, when we faced a 20 percent duty on these 

products in Mexico, we lost 50 percent of our exports. So 100 percent is really unlikely that we would be able to recover. And then 

we would also—because there are competitors who are willing to 

jump in from Europe and from China, from other marketplaces— 

we would be put in the position of having to crawl back and try 

and regain that market share, and that takes a long time. 

Mrs. HARTZLER. Okay. Years. 

Ms. BODOR. Yes. 

Mrs. HARTZLER. Very serious. Thank you very much. 

I yield back, Mr. Chairman. 

The CHAIRMAN. Thank you. I want to thank each of our witnesses for appearing today, and I appreciate your testimony very 

much. 

Just a closing comment from myself. I have observed over a long 

period of time that our trade agreements are incredibly important 

to growing the economy here in the United States, particularly important for agriculture, our poultry and pork industries specifically 

as it relates to my district. And it is also my experience that in all 

these trade negotiations, past, present and future, everybody 

around the world has an axe to grind, no use in giving them another axe. 

And with that, let me adjourn the hearing. Under the rules of 

the Committee, the record of today’s hearing will remain open for 

10 calendar days to receive additional material, and supplementary 

written responses from the witnesses to any question posed by a 

Member. 

This Subcommittee on Livestock and Foreign Agriculture hearing 

is now adjourned. 

[Whereupon, at 10:17 a.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

71 

SUPPLEMENTARY MATERIAL SUBMITTED BY ROGER JOHNSON, PRESIDENT, NATIONAL

FARMERS UNION

Many of my colleagues on the panel testified in favor of repealing the Countryof-Origin Labeling (COOL) law. Canadian Minister of Agriculture and Agri-Food 

Gerry Ritz has called for full repeal of the law, as have several Members of Congress and interest groups. 

Repealing the law would remove origin labels from ground and muscle cuts of 

beef, lamb, and pork. It would also remove origin labels from fish and shellfish, peanuts, fresh and frozen fruits and vegetables, goat meat, chicken, pecans, macadamia 

nuts, and ginseng. Beyond the ground and muscle cuts of beef, lamb, and pork, all 

other covered commodities are beyond the scope of the World Trade Organization 

(WTO) dispute. The WTO dispute only applies to muscle cuts of beef, lamb, and 

pork. Full repeal of the COOL law would remove an important piece of information 

that consumers have time and time again indicated they want to know—the country-of-origin. National Farmers Union would also oppose removing beef, pork, and 

lamb from the scope of the law. These labels have been around since the 1890s in 

one form or another. Consumers have the ability to determine where every piece of 

their automobile originated or where their T-shirt was made. As consumers become 

more and more interested in the food system and where and how their food was produced, it only makes sense to affix an origin label on food. The labels are common 

sense and applied throughout every industry. 

Because the WTO has narrowed the scope of noncompliance of the regulations 

with each subsequent ruling, Congress should wait to see what the WTO Appellate 

Body reports before suggesting any changes to the law. The Appellate Body may 

find the U.S. is compliant or it may identify a very simple fix to the type of label 

or labels that would give Congress direction should any legislative change be required. 

SUBMITTED STATEMENT BY HON. ROD BLUM, A REPRESENTATIVE IN CONGRESS FROM

IOWA

I wish to thank the House Committee on Agriculture, particularly, Chairman 

Conaway and Ranking Member Peterson, as well as Livestock and Foreign Agriculture Subcommittee Chairman Rouzer and Ranking Member Costa for permitting 

me the opportunity to submit these remarks and express my ongoing concerns on 

behalf of my constituents in the First District of Iowa. I appreciate the willingness 

of the Committee to explore legislative solutions for the issues that implementation 

of the mandatory Country-of-Origin Labeling (COOL) presents to agriculture. 

As the Committee is aware, COOL is a product from the 2002 Farm Bill which 

requires labeling of fresh beef, pork, and lamb but exempts processed meats and 

food items. However, this provision has been challenged by Canada under the authority of the World Trade Organization (WTO), which was subsequently appealed 

by the U.S. 

Unfortunately, the WTO is likely to rule against our appeal of their decision that 

implementation of COOL constitutes a trade barrier for our closest trading partners, 

Canada and Mexico. This decision permits our friends and partners to institute retaliatory tariffs on U.S. products. 

I feel this outcome is most unfortunate. The First District of Iowa is home to a 

great number of agricultural producers that are either directly affected by COOL, 

or used as ingredients in the expanded list of products that are threatened with 

these tariffs. Implementation of these measures would have a severe negative impact on producers, their livelihoods, the employees, and directly and indirectly related businesses. 

Additionally, to date, only Canada has made public their intentions regarding the 

WTO decision. Mexico has yet to release a retaliatory tariff list, so this terrible situation might be of even a greater magnitude than the industry anticipates. 

I commend the Committee for beginning the legislative process in order to properly address these concerns before these tariffs begin to negatively affect producers 

in my district and across the country. I remain hopeful that Congress, along with 

consultation from U.S. Secretary of Agriculture Vilsack, can come to an agreement 

on legislation that satisfies the requirements of the WTO and avoid disruptions to 

the economic trade between the U.S., Canada, and Mexico. 

72 

SUBMITTED LETTER BY BRAD FIGEL, VICE PRESIDENT, PUBLIC AFFAIRS, MARS, 

INCORPORATED

March 25, 2015 

Hon. K. MICHAEL CONAWAY, 

Chairman, 

House Committee on Agriculture, 

Washington, D.C. 

RE: Subcommittee on Livestock and Foreign Agriculture’s hearing to examine the 

implications of potential retaliatory measures taken against the United States 

in response to meat labeling requirements 

Dear Chairman Conaway: 

On behalf of Mars, Incorporated (‘‘Mars’’), we appreciate the opportunity to submit 

comments to the House Agriculture Subcommittee on Livestock and Foreign Agriculture’s hearing to examine the implications of potential retaliatory measures 

taken against the United States in response to meat labeling requirements. 

As a U.S.-based company with international operations, it is very important to 

Mars that Congress immediately resolve the issue of the current U.S. country-of-origin labeling (‘‘COOL’’) requirements in dispute in the World Trade Organization 

(‘‘WTO’’), as the United States has less than 60 days to take action before the WTO 

makes its final decision on whether these measures are in violation of international 

trade rules. If this matter is not resolved, we are deeply concerned about the prospect of impending retaliation by Canada and Mexico. Retaliation will have a devastating, broad economic effect on American families and a wide range of companies, 

including ours. 

We are extremely proud that Mars is a family-owned, U.S.-based company that 

has invested in our economy and communities since 1911. As a leading food company, we have more than 26,000 associates in the United States and more than 

75,000 Associates worldwide. Our company includes six business segments: Petcare, 

Chocolate, Wrigley, Food, Drinks, and Mars Symbioscience, and we generate more 

than $33 billion in annual revenue. 

Mars is very concerned about the possible retaliatory actions of Canada and Mexico because we anticipate that they will have a direct economic impact on our business. On its draft retaliation list, Canada included finished products and agricultural commodities and materials relevant to our business. Mexico has not yet announced its retaliation list, which has caused greater uncertainty with respect to 

our cross-border operations. 

To avoid retaliatory actions by Mexico and Canada, Mars has been a constructive 

player and leader in seeking a resolution to resolve this issue. We continue to be 

a highly active member of the COOL Reform Coalition, which has worked since last 

year to ensure that the United States complies with its WTO obligations. In fact, 

the Coalition proposed and advocated for several approaches to resolve this issue. 

Given the United States’ position as a global leader and a major exporter, including of agricultural goods, it is critically important that we remain a good actor in 

complying with our WTO obligations. U.S. food and agricultural producers depend 

on exports, and agricultural exports support over one million U.S. jobs on and off 

the farm. If the United States does not demonstrate its commitment to international 

trade rules by adhering to them, how can we expect other countries, whose markets 

we depend on for our exports, to comply with the rules? For Mars and other companies that support U.S. jobs by manufacturing in and exporting from the United 

States, access to other markets often depends on our trading partners’ compliance 

with WTO rules. 

Further, the United States’ credibility on global trade issues carries particular significance when we are actively negotiating new, far-reaching agreements—the 

Trans-Pacific Partnership and Trans-Atlantic Trade and Investment Partnership 

agreements—and at the same time, seeking to reauthorize Trade Promotion Authority. We cannot afford to send a message that the United States will not abide by 

and implement its international trade obligations. 

The United States also has a responsibility to protect its important trading relationship with Canada and Mexico. Many businesses, including ours, rely on the open 

market that the North American Free Trade Agreement created for U.S. exports. 

We can and should avoid retaliatory tariffs by fully complying with the panel and 

Appellate Body reports through the repeal of the current COOL requirements for 

muscle cuts of meat. Therefore, we support prompt Congressional action that brings 

73 

the United States into compliance with its WTO obligations related to COOL. Once 

again, we thank you for the opportunity to comment. 

Sincerely, 

BRAD FIGEL, 

Vice President, Public Affairs, 

Mars, Incorporated. 

SUBMITTED LETTER BY BEN MOSELY, VICE PRESIDENT, GOVERNMENT AFFAIRS, USA 

RICE FEDERATION

March 25, 2015 

Hon. DAVID ROUZER, 

United States House of Representatives, 

Washington, D.C. 

Dear Congressman Rouzer: 

The USA Rice Federation appreciates the opportunity to submit a written statement regarding today’s Livestock and Foreign Agriculture Subcommittee’s hearing 

on Meat Labeling Requirements. USA Rice is the global advocate for all segments 

of the U.S. rice industry with a mission to promote and protect the interests of producers, millers, merchants and allied businesses. USA Rice is made up of the USA 

Rice Producers’ Group, the USA Rice Millers’ Association, the USA Rice Council and 

the USA Rice Merchants’ Association. 

USA Rice members and our customers in Canada and Mexico—two of the top five 

export markets for U.S. rice—are vitally concerned over possible retaliation against 

exports of U.S. rice if the United States is found, once again, to be out of compliance 

with its international obligations in the World Trade Organization (WTO). USA Rice 

is a strong supporter of WTO compliance and requests that Congress and the Administration take steps necessary to reform the Country-of-Origin Labeling (COOL) 

rule, thereby avoiding massive retaliation threatened against our industry by Canada and Mexico. 

The Country-of-Origin Labeling rule pertains to mandatory labeling on muscle 

cuts of meat, detailing the country in which the animal was born, raised, and 

slaughtered on all meat sold in the United States. Canada and Mexico have consistently opposed this rule, stating that it unfairly discriminates against meat originating or being processed within their borders. After filing a dispute claim with the 

WTO in 2012, and then again in 2013, WTO panels have time and again agreed 

that the COOL rule violates the U.S.’s international trade obligations. 

Canada and Mexico are planning to retaliate against COOL by introducing tariffs 

on a number of goods produced in the United States. Canada has released its retaliation list, and it heavily penalizes U.S. agriculture, including a 100 percent import 

tariff on rice. While Mexico, which is the United States’ number one rice export 

market, has not released a retaliation list, there is every reason to believe that rice 

will make an appearance there as well. Import tariffs on U.S. rice would seriously 

threaten the U.S. dominant market share in these two vital export markets. 

Losing two markets among the top five for U.S. rice would cause serious economic 

harm in the six rice producing states: Arkansas, Louisiana, Texas, Missouri, Mississippi and California. On average, the U.S. rice industry exports $350 million in 

product to Mexico and $177 million to Canada yearly. This accounts for a full quarter of our exports to world markets. With final adjudication due out this spring, 

Canada and Mexico may be allowed to retaliate as early as later this year. The 

longer we remain out of compliance, however, the longer we are threatening real 

commercial harm to U.S. exports. Keeping the COOL rule on the books as it is and 

allowing this retaliation to occur will result in reported damages to U.S. exports of 

an estimated $1 billion to over $2 billion. 

The USA Rice Federation strongly supports coming into compliance with our WTO 

obligations. We do not have a position on the future construction of a COOL regulation, only that such regulation be compliant with our international obligations, and 

not have a negative impact on our and other agricultural industries’ exports. 

We appreciate the opportunity to have our statements entered into the record. 

Please have your staff contact me at [Redacted] or [Redacted] for any additional 

assistance. 

Sincerely, 


11409027.eps
74 

BEN MOSELY, 

Vice President, Government Affairs. 

Æ