On May 18, the WTO decided for the fourth and final time that America's country of origin labeling (COOL) requirements for beef and pork are a breach of global trade rules and have resulted in economic harm to both Canada and Mexico.  Since then, one question has been, can the U.S. fix the situation in a way that will satisfy its southern and northern neighbors?  Another is, if there isn't a satisfactory fix, will Canada and Mexico retaliate?  And, finally, if it comes to retaliation, how much trade will be affected?

Gerry Ritz is Canada's Minister for Agriculture, and he unequivocally answered two of those questions in a statement he issued on July 30. Yes, he said, the U.S. can avoid retaliation.  Legislation to repeal the offending COOL requirements passed the House on June 10 by a vote of 300 to 131.  It is now pending in the Senate, both in the form of the House bill, H.R. 2393, and also in the form of an amendment to the Highway Bill.   That amendment was authored by the Chairman of the Senate Committee on Agriculture, Nutrition and Forestry, Senator Pat Roberts (R of KS).   If the language in any of those vehicles is passed by the Senate and signed into law by President Obama, Canada (and, we assume, Mexico too) will take the threat of retaliation off the table.

 
But there is a complication.  On July 23, Senator John Hoeven (R-ND), together with the Ranking Member of the Senator Agriculture Committee, Senator Debbie Stabenow (D-MI) and thirteen others introduced a bill with another approach.  This is the "Voluntary Country of Origin Labeling (COOL) and Trade Enhancement Act of 2015," S. 1844.  Like Senator Roberts' amendment, it would repeal the mandatory COOL program.  But it would go farther and institute a new "voluntary" program, which some have compared to Canada's own voluntary labeling program. 
Minister Ritz was blunt in addressing both the proposal in the Hoeven-Stabenow bill and the comparison that has been made between that bill and Canada's labeling policy.  We have reversed the order, but here is what he said on those issues:

On the Bill:  "Should the United States move forward with their [Senators Hoeven and Stabenow] short-sighted proposal, Canada will have no choice but to impose billions of dollars of retaliatory tariffs on United States exports."

On the Comparison: "Senators Hoeven and Stabenow's proposal in no way reflects Canada's voluntary labelling regime - any suggestion of this is blatantly false.  A voluntary regime as they propose does not require legislation."

The damages claimed by Canada and Mexico are large, over $3 billion, and from wine to mattresses, the sweep of the proposed retaliation is broad.  Not surprisingly, the United States estimates the plausible claims at a much more modest $91 million.  It will be up to a WTO arbitration panel to decide what the real number is.  Real being the levels of retaliation that the arbiters will authorize respectively for Canada and for Mexico. 

The Dispute Settlement Body of the WTO has scheduled an arbitration meeting in Geneva for September 15 and 16.  We, of course, do not know what they will decide.  But the amount could be large.  The decision could come soon.  And the timing could be important. Very.

Senator Roberts, the chairman of the Senate Agriculture Committee, also put out a statement on July 30.  In it, he quoted the above passages from Gerry Ritz and added: 

We think Senator Roberts is right about that, but the timing, just when things happen, could make a difference. Where COOL is concerned, both the U.S. and Canada have challenging calendars.

In the United States.  Presumably, Senator Roberts put his COOL amendment on the highway bill because he sees it as must-pass legislation that could move quickly.  We hope that is right.  On the other hand, this has been a summer of very high drama, and some of that will come to a head in September, when Congress returns from its August break.  The nuclear deal with Iran is Item No. 1 in that department, but there are others.  Whether Congress will also be able to manage a quick approval of the highway bill-much less free-standing COOL legislation-is an open question.  

In Canada, the key date is October 19.  That's the day Canadians go to the polls.  Prime Minster Stephen Harper has been in office since 2006.  He won re-election in 2008 and 2011, but there is no particular reason to believe he can do it again.  Indeed, quite the opposite.  Yes, his accomplishment in trade policy alone have been impressive, but we are in an energy slump - that's big for Canada - the Canadian dollar is weak, and nine years is a long time.  If the authorization from the WTO comes in September or even early October, the Harper government is not likely to wait long before announcing retaliation, especially since they have so clearly signaled their intentions on that score.

A Clear Warning from Canada is a link to the July 30 statement from Canada's Agriculture Minister that was the source for today's quote.

The House Votes for Repeal is a link to information on H.R. 2393, the Country of Origin Labeling Amendment Act, which passed the House in June.

On the Hoeven-Stabenow Bill.  This is S. 1844, and the link will take you to the Library of Congress write-up - text, cosponsors, etc. - on this bill.

Retaliation Disparities is an article on the website of the North American Meat Institute, which highlights the disparities between the Canadian and Mexican assessment of the damage caused by U.S. Cool regulations and the assessment put forward by the U.S. Government.   From USTR takes you to a USTR submission on this issue.

From Senator Roberts is a link to his statement of July 30 quote above.