Data show COOL’s ‘significant’ impact on cattle exports

U.S. laws on mandatory country-of-origin labelling (COOL) have not only led to a substantial drop in U.S.-bound Canadian cattle exports, but helped widen the price gap between Canadian and U.S. marketings, Canadian research shows.

The Canadian Cattlemen’s Association, in the wake of the November 2011 ruling against COOL by a dispute settlement panel at the World Trade Organization (WTO), says its research shows COOL held far more "substantial influence" than just a requirement for stickers at the meat counter.

The CCA warned it has so far "resisted" going public with any dollar-value assessment of COOL’s impact, as such costs "may well become a point of arbitration" if Washington refuses to bring COOL in line with the WTO panel’s ruling.

Specific data on costs would then help form the basis of any new or higher tariffs the WTO would allow Canada to slap on exports from the U.S., equal to the negative impact of COOL, the CCA said in a newsletter this week.

However, the CCA said, it can show the "change in proportion" of Canadian feeder cattle in U.S. cattle-on-feed placements. 

Overall, the CCA logged a loss of U.S. imports of Canadian feeder cattle of about 480,000 head in the first 80 weeks after the COOL measure came into effect at the end of September 2008.

That works out to an estimated reduction of 6,000 head per week, which the CCA said is "substantial" compared to Canada’s average weekly feeder cattle exports to the U.S. before COOL came in: specifically, 10,494 head per week in 2007 and 8,372 head in 2006.

Looking at the ratio of imports of fed cattle to U.S. slaughter, the CCA’s "econometric estimates" show COOL cut into U.S. imports relative to slaughter by 30 per cent, or about 400,000 head, during the same period.

That works out to an estimated reduction in slaughter cattle exports of 5,000 head per week, the CCA said, compared to pre-COOL average weekly fed cattle exports to the U.S. of 16,333 head in 2007 and 13,534 in 2006.


The CCA has also looked at the fed cattle basis, which measures the difference between Canadian and U.S. fed cattle cash prices, to show the price differential between the two markets following COOL’s implementation.

Analysis of weekly fed cattle prices from 2005 through 2010 and full years through September 2009 found that in both cases, COOL widened the negative price basis for fed cattle by about 30 per cent of the initial basis, or about US$4 per hundredweight.

Based on a typical per-head live weight of about 1,200 pounds, this works out to a price difference of about US$48 per head for Canadian fed cattle, the CCA said.

"For feeder cattle, the strong impact of the COOL measure on U.S. import quantity dominates any potential price impact," the association said.

Moreover, the CCA said, the effect of the basis difference caused by COOL "is felt on every fed animal sold, regardless of whether it is exported or not."

Any quantification of the impact of COOL would have to include total Canadian marketings, not just exports to the U.S., the association said.

COOL requires U.S. retailers to notify their customers, by way of labeling, on the sources of foods such as beef, veal, pork, lamb, goat, fish, fruits, vegetables, peanuts, pecans and macadamia nuts.

The WTO Dispute Settlement Body’s panel ruled in November that COOL — which the U.S. government has touted as a way of educating and informing U.S. consumers — "does not fulfil its legitimate objective of providing consumers with information on origin" and was thus in breach of the WTO’s Agreement on Technical Barriers to Trade (TBT).

The panel also found COOL breaks the TBT Agreement by "according less favourable treatment to imported Canadian cattle and hogs than to like domestic products."

The office of U.S. Trade Representative Ron Kirk said in November it would be "considering all options, including appealing the (DSB) panel’s decision," but hasn’t yet announced such a move.

Related story:

WTO rips U.S. COOL law in win for Canada, Nov. 18, 2011

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