The U.S. stands at a pivotal point in its trading relations with its neighbors to the north and south, and decisions made in Washington in the next month will be key in the future of that relationship.
That’s the situation that Glynn Tonsor, Kansas State University (KSU) ag economist, laid out for cattlemen in a recent webinar co-sponsored by BEEF. The webinar was the first in a series of quarterly webinars that Tonsor will conduct this year with the help of BEEF and other ag publications. The next three webinar sessions are set for 1:30 p.m. CST on May 1, Aug. 7, and Nov. 6 (the first Tuesday of each month).
“For background, in December 2008, Canada initiated a dispute with the World Trade Organization (WTO), suggesting that mandatory country of origin labeling (mCOOL) was not WTO-compliant. This past November, WTO ruled largely in favor of Canada, Mexico and others who filed that complaint,” he says.
The U.S. has until March 23 to either accept the WTO’s findings and change its mCOOL labeling system to be in compliance with WTO, or appeal the ruling.
What the U.S. decides to do could affect trade with both Canada and Mexico for years to come, Tonsor says. The two countries are among the top-four export destinations for U.S. beef, he says, and historically are among the top three.
“Since the BSE event of 2003, we had 2½-3 years where we only traded within North America. I encourage everybody to recognize the importance of Canada and Mexico and the importance they play in the beef industry,” Tonsor told the webinar audience.
If the U.S. chooses to fight the WTO ruling and ultimately loses its appeal, which many in the industry expect would happen, Canada, Mexico and other countries will be allowed to place tariffs on a variety of products the U.S. exports, not just beef.
Take pork, for example. “Mexico could be in the position where they put additional tariffs on U.S. pork exports,” Tonsor says. “That would not necessarily be good because, all else equal, that makes pork more expensive for the U.S. to export to Mexico, and that would adversely hurt beef as well.”
Then there’s the possible effect that the move might have on future trade negotiations, he suggests. “Nothing happens in a silo when it comes to international trade and we need to keep that in mind.”
Economists at KSU and Oklahoma State University are conducting a USDA-funded study to determine consumer knowledge and understanding of mCOOL. “Some studies done before mCOOL was implemented suggested a 2-4% increase in beef demand would be necessary to justify the additional costs of mCOOL,” Tonsor says.
The current study involved a survey of 2,000 consumers and preliminary results show very little awareness of mCOOL by consumers. When asked if grocery stores are currently required by law to label country of origin on fresh products, 30% of respondents answered correctly, 11% answered incorrectly and 59% said they didn’t know.
“Moreover, there is limited use of mCOOL in purchasing decisions; 60% said they never look. I think that’s important to keep in mind when we think of future pathways and the U.S. response to the WTO ruling,” Tonsor says.
In Tonsor’s opinion, Canada, Mexico and other countries involved in the WTO complaint are reasonable in what they expect the U.S. to do to come into compliance with WTO rules. “I encourage the U.S. to recognize that fighting that is probably unwise,” he says.