In a word: Retaliation.  On Monday, as expected, the World Trade Organization authorized Canada and Mexico to retaliate against the U.S. meat labeling law known as COOL for country of origin labeling.  Today's quote is from the paragraph authorizing Canada to retaliate.  The full paragraph reads as follows:

The paragraph for Mexico is similar but the number is different.  Mexico is only authorized to retaliate against "USD 277.758 million annually."   Putting the two together, the authorized retaliation in the COOL case comes out roughly $1.01 billion in U.S. dollars.  That figure is considerably less than the $3.2 billion in authorization that Canada and Mexico asked for.  It is, however, still a very big number.  You can do a lot of damage to your trading partner's exports with $1 billion in retaliation, especially if you vary the targets as Canada has threatened to do.
 
So the question is, will America's NAFTA trading partners take action against the current COOL labeling requirements?  And if so, when?

Optimism must be an inherited trait.  You certainly don't get it from operant conditioning.  The optimist is punished with disappointment far more often than he is rewarded.  And yet, when it comes to COOL, or more accurately the threat of retaliation against COOL, we are optimistic. We don't expect to see retaliation.  Ironically, that is the case because the threat of retaliation is taken very seriously by the key Congressional leaders as well as by those whose business are on the line. 

On June 10, the House of Representative approved legislation to repeal the COOL requirements for beef, pork, and chicken by a vote of 300 to 131.  Since then the spotlight has been in the Senate, where the issue of what to do has been more contentious.  With the WTO ruling on Monday, the Senate too now seems ready to act on repeal legislation. 

Senator Pat Roberts of Kansas (R), the chairman of the Senate Committee on Agriculture, Nutrition and Forestry, has been urging repeal for some time.  On Monday, he did so forcefully in a statement that followed the release of the WTO arbitration ruling.  "We must prevent retaliation, and we must do it now before these sanctions take effect." 

Equally significant were the comments of Senator Debbie Stabenow (D-MI), the ranking member of the Committee.  She has long been sympathetic to COOL, and earlier this year offered legislation to continue the program in another form, but this week her emphasis too is on dodging the punitive bullet: "I have always said I would not allow retaliation to take effect.  It is critical that we work together to find a solution before the end of the year," she said.

But what solution?  Here is where things get tricky because the solution to the COOL problem-namely repeal-is to include it in the omnibus spending bill.  The National Milk Producers Federation and the U.S. Dairy Export Council argued for just that approach in their December 3 letter to Congressional leaders.  America's dairy farmers are among many U.S producers who are worried about retaliation, which the two groups characterized as a "significant threat to U.S. dairy exports."  And they explained that it would come "at a particularly harmful time for our industry given the currently depressed global dairy market."

Our understanding is that, indeed, the plan is to include COOL repeal in the omnibus spending bill.  The problem is that, as essential as it may be, the bill is hardly non-controversial.  So, anything could happen.  The goal was to get the omnibus bill done - passed by both houses and signed by the President - by midnight tomorrow and so avoid a government shutdown.  That deadline will be missed, according to press reports, but to avoid a shutdown Congress may pass a very short-term continuing resolution.  We'll see. 

Of course, we don't know how this current budget drama is going to play out.  Nobody does.  Yet, the expectation that Congress will pass an omnibus spending bill before too long seems reasonable.    So too does the hope that it will include a repeal of the COOL requirements sufficient to forestall retaliation from Canada and Mexico.
Will that be the end of the matter?   For a while, yes.  But only for a while.  COOL is only marginally, very marginally, about information for consumers.  More fundamentally it is about tensions between and among ranchers and meat packers, and differences in North America's three legal systems, and (almost) inevitably those tensions will surface again in one trade dispute or another.

That, however, is no reason to get ahead of ourselves.  "Sufficient unto the day is the evil thereof," it is said.  Alas, the same is true for good fortune.  Our hope and expectation is that one day this month - soon we hope - Congress will give us the good fortune of COOL repeal, and the Canadians and Mexicans will put away their retaliation lists ... until the next time.     

Decisions by the Arbitrator is a link to the report of the WTO arbitration panel that was the source for today's quote.
 
From Milk and Dairy takes you to the December 3 letter from the presidents of the National Milk Producers Federation and the U.S. Dairy Export Council to the leadership of the House and Senate. 

Roberts Reacts is the press statement issued on December 7 by Chairman Pat Roberts of the Senate Agriculture Committee.

Pressure Builds is a link to a December 8 Politico report on the COOL issue, including the above quote from Senator Stabenow.

Tucked in the Budget Bill is a McClatchy DC article on the WTO's COOL decision and possibility of COOL repeal as part of the omnibus spending bill.

John Masswohl on COOL is a link to the TTALK Quote for June 16, which highlights a Canadian presentation at last summer's GBD event on COOL.