Canada Readies Tariffs Worth $1 Billion

Retaliation for regulation of imported meat could hurt US wine exports

by Peter Mitham
Canada will impose tariffs on U.S. products including wine unless the U.S. Senate votes to rescind COOL legislation that requires the labeling of imported meat.
Washington, D.C.—U.S. legislation requiring discriminatory labeling of imported meats is anything but cool, according to the World Trade Organization (WTO)—and the decision could chill U.S. wine exports to Canada and Mexico.

On Dec. 7, an arbitrator with the WTO announced that Country of Origin Labeling (COOL) requirements discriminate against meat from Canada to the tune of more than $1 billion annually.

Originally adopted in 2002, the legislation has been the subject of several WTO rulings since 2011, all of which found the U.S. legislation discriminatory, imposing an undue regulatory burden on foreign meat producers and a potential cause of inaccurate labeling for consumers. The most recent decision is final and cannot be appealed.

And so, barring action from Congress, it’s time for payback.

“The WTO arbitrator ruled that Canada can impose retaliatory surtaxes on $1.054 billion (Canadian) of U.S. exports to Canada as a result of the economic harm caused by the U.S. COOL policy, once final WTO authorization is obtained,” a joint statement from Canada’s ministers of agriculture and international trade declared. “If the U.S. Senate does not take immediate action to repeal COOL for beef and pork, Canada will quickly take steps to retaliate.”

While the House of Representatives voted in June to repeal COOL requirements for beef and pork, senators—who have approved a number of other measures in recent days ranging from a symbolic repeal of Obamacare and defunding Planned Parenthood to reopening the federal Export-Import Bank as well as budget, defense and cybersecurity legislation—have yet to do so.

Canada claims that it’s working with “partners” to affect the repeal of COOL requirements for beef and pork (they would remain for lamb, goat, venison, fish and shellfish, fruits and vegetables, ginseng and various nuts), but that’s small comfort to the wine industry.

“We are not resting easy and will keep up a full-court press on targeted senate offices until the bill is passed,” Michael Kaiser, director of public affairs for WineAmerica, told Wines & Vines.

Canada is the single-largest export market for the U.S. wine industry, which ships $500 million worth of product each year with a retail value in excess of $1 billion to Canada and Mexico under the North American Free Trade Agreement.

WineAmerica earlier this year pegged the cost of retaliatory tariffs in the “hundreds of millions of dollars,” doubling the cost of U.S. wine sent to Canada; add in markups determined by Canada’s various provincial liquor boards, and wine valued at $10 on one side of the border could cost consumers on the other a whopping $40 per bottle (see “$10 Wine Would Cost $40-plus under COOL”).

It’s “simply unacceptable,” Bobby Koch, president and CEO of California’s Wine Institute, said in a statement earlier this year. “In Canada, it has taken decades to build the market for U.S. wine, and it could be irreparably harmed in an instant if Congress does not act.”

His stance remained unchanged in a statement issued today, following the latest decision.

“Retaliation by Canada and Mexico would set our wine exports back decades and cost billions of dollars in lost sales over time,” Koch said. “There is only one solution at this point, and that is for Congress to include COOL repeal language in the omnibus funding bill. Without congressional action now to bring the U.S. into WTO compliance, retaliatory tariffs could be in place before Christmas.”

Kaiser said the “B-word”—billion—should get the attention of lawmakers, and he’s confident that they’ll take note, and act to repeal COOL.

“It is the only way to get repeal before the end of the year,” he told Wines & Vines. “We expect tariffs could start as early as the week of (Dec.) 22, but more like January, if it is not repealed. Full repeal is the only solution.”

While reauthorization of the Export Import Bank after its mandate ran out earlier this year is good news for wine exporters, Washington Wine Institute president Marty Club hopes that legislators will likewise act to prevent the imposition of damaging tariffs.

“We’re hopeful that congress will provide some resolution,” he said. We’re somewhat frustrated “that resolution hasn’t happened yet, but we still remain hopeful that as this evolves, that congress will take action to alleviate any imposed harm.”

Posted on 12.11.2015 - 06:30:29 PST
The threatened tariffs are the result of a ruling by an unaccountable foreign tribunal (WTO) to overturn a very popular US regulation, passed by our accountable representatives (Congress), that helps Americans know where the meat we eat is born, raised, and slaughtered. We consumers want to know more, not less, about the food we eat. The basis of this ruling is NAFTA. Congress should not simply give up -- as Wine America and multi-national meat processors want them to do. If this ruling stands we can expect limitations on our right to market Colorado wine as “local". If the current trade agreement, the TPP, is approved by Congress we must expect to see more, much more, of these infringements on our sovereignty. Consumers and producers must resist these limitations. It is yet another example of an increasingly familiar and disturbing struggle between we, the little people, and huge multi-national exploiters — on which Wine America is on the wrong side.
Wink Davis