Canada warns of trade retaliation as U.S. fails to change labelling rules

The Canadian government is fuming over a U.S. agriculture bill and warning of trade retaliation, in the latest twist in a lengthy dispute that just days ago showed signs of resolution.

American lawmakers have failed to make changes to country-of-origin labelling rules that had devastated Canadian meat exports, which have dropped by half to the U.S. since 2008.

• Canadian beef prices could fall as Tyson stops buying
• Gerry Ritz hopes farm bill will change U.S. meat labelling

The Canadian government is fighting the measures on separate fronts and had been hopeful that a sweeping new U.S. farm bill might become the vehicle to do away with the labelling requirements.

Canada threatens retaliation

Those hopes dimmed drastically Monday as lawmakers from both parties, in both houses of Congress, emerged to say that they'd arrived at a deal for a bill that didn't touch the labelling requirements.

We remain steadfast in taking whatever steps may be necessary, including retaliation, to achieve a fair resolution.- Joint statement from Federal Agriculture Minister Gerry Ritz, International Trade Minister Ed Fast

That legislation will still face some resistance as it makes its way through congressional votes to U.S. President Barack Obama's desk. However, the news Monday was undeniably a blow to Canadian efforts.

The federal government, which has previously threatened retaliation over the issue, once again raised the spectre Monday of a trade war.

"By refusing to fix country-of-origin labelling, the U.S. is effectively legislating its own citizens out of work, and harming Canadian and American livestock producers alike by disrupting the highly-integrated North American meat industry supply chain," Federal Agriculture Minister Gerry Ritz and International Trade Minister Ed Fast said in a joint statement.

"Our government continues to stand with our industry, and we remain steadfast in taking whatever steps may be necessary, including retaliation, to achieve a fair resolution."

$1B in losses estimated per year

The battle over meat labelling has pitted Canadian farmers and their meat-processing partners in the U.S. against American farmers who pushed for those rules on foreign imports.

In the mad scramble for congressional allies while the parties negotiated the bill, however, it appears the American farmers won.

Not long ago, Ritz had signalled some optimism on the topic, after the chairman of a U.S. congressional committee had requested that the U.S. Department of Agriculture back off on the labelling rules.

Country-of-origin labelling rules are blamed for complicating the import of meat and livestock into the U.S., driving up the cost of business, and causing about $1 billion a year in losses

The rules require detailed labels about the origins of beef, pork and chicken sold in U.S. stores.

Some U.S. companies have said they can't afford to sort, label and store meat from Canada differently than meat from domestic animals. In October, Tyson Foods Inc., one of the largest buyers of Canadian cattle in the U.S., said it would stop buying from feedlots north of the border because of the higher cost of complying with the regulations.

Ritz has said Ottawa will continue fighting the regulation at the World Trade Organization, and cattlemen on both sides of the border will go on with their own court action.

John Masswohl, a spokesman for the Canadian Cattlemen's Association, was also disheartened Monday.

"They seem unwilling to consider any amendment," he said. "It just seemed that through the negotiations, there was more to it for the COOL proponents than just consumer information; it seemed they were very intent on maintaining the discrimination — that was the fundamental objective they had."

There will be an inevitable lobbyist counter-effort against the bill in the run-up to congressional votes, which could start as early as mid-week.

U.S. meat-packing companies are already vowing a fight. And other pockets of resistance are forming against the legislation — whose contents were described Monday by lawmakers but not actually publicly released.

Masswohl said he's aware of several U.S. groups saying they will oppose passage of the farm bill and will work over the next few days to encourage congressmen and senators to vote against it.

But he said if that doesn't work, Canada would be looking to impose retaliatory tariffs on U.S. exports in the first half of 2015 on things such as beef, pork, cereals, cakes, cookies and fruit.

"The products that are on that list were selected because they're produced in areas that are represented by congressmen and senators who oppose that resolution in the farm bill."

'They are hurting our industry'

In year-end interviews, Ritz had said Canada's pledge to retaliate against a wide range of U.S. products if COOL wasn't scrapped or amended — from orange juice to bread — was no idle threat.

"This is not a game of chicken here. This is a game of reality," Ritz told The Canadian Press. "They are hurting our industry to the tune of $1 billion per year."

In a letter this month to the USDA, the House of Representatives' agriculture committee chairman referred to those Canadian threats.

"On June 7, 2013, Canada issued a list of U.S. products (agricultural and non-agricultural exports to Canada) that would face higher tariffs totalling up to $1,100,000,000. Mexico is expected to issue a similar list of U.S. exports totalling several hundred million dollars," said the note, from Hal Rogers of Kentucky.

"If the complainants do prevail (at the WTO), industry may be forced to change their labels and practices once again and the nation will suffer the economic impact of approximately $2,000,000,000 in retaliation actions affecting agriculture and non-agriculture jobs and industries across the U.S. It is strongly recommended that USDA not force increased costs on industry and consumers and that the department delay implementation and enforcement of the final rule ... until the WTO has completed all decisions related to cases."

The committee has no authority to force the change, but it does control the USDA's budget.