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US Faces $1 Billion in Punitive Tariffs on Wine, Meat and More

Canada plans trade retaliation if U.S. Senate fails to repeal labeling rules on meat soon
American rules on beef labeling could lead to heavy tariffs on U.S. wines in Canada.
Photo by: Thinkstock/Fuse
American rules on beef labeling could lead to heavy tariffs on U.S. wines in Canada.

Kasey Carpenter
Posted: December 10, 2015

This story was updated on Dec. 11.

U.S. wine industry members are urgently appealing to senators in Washington, D.C., to pass legislation to eliminate a threat to sales in their top export market. But they are running out of time.

If Congress fails to act, Canada will impose more than US$1 billion in punitive tariffs after Dec. 22, on a variety of American products, including wine. U.S. wineries send more than $500 million worth of table wine north of the border annually, according to the Canadian Vintners Association.

But for more than 13 years, the Canadian and Mexican governments have cried foul over American “country of origin labeling” (COOL) rules for certain cuts of meat sold in the U.S. They argue that the laws discriminate against their meat products and violate the North American Free Trade Agreement (NAFTA). The World Trade Organization (WTO) has agreed on multiple occasions, and on Dec. 7, an arbitrator ruled that the Canadian government can impose $1.054 billion in “retaliatory surtaxes.” Canadian officials have said they are looking at penalizing American beef, pork, wine, fruit, corn and other products; they will release a list on Dec. 18.

The only way to avoid the tariffs, the WTO has said, is to repeal COOL regulations. In June, the U.S. House of Representatives voted to do just that, passing H.R. 2393, a bipartisan bill sponsored by U.S. congressmen Mike Conaway of Texas and Jim Costa of California. But the bill has languished in the Senate.

“If the U.S. Senate does not take immediate action to repeal COOL for beef and pork, Canada will quickly take steps to retaliate,” said Canadian trade minister Chrystia Freeland and agriculture minister Lawrence MacAulay, in a statement. “Canada continues to work with our partners in the United States, and in the U.S. Senate, to urge the full repeal of the discriminatory COOL policy for beef and pork.”

Tariffs could be imposed as soon as Dec. 22. While California senators Dianne Feinstein and Barbara Boxer both support the repeal, some senators from pork and beef states do not. The looming deadline has winemakers nervous. “The size of the award, with surtaxes in excess of a billion dollars, has everyone’s attention,” said Michael Kaiser, director of public affairs for WineAmerica, a lobbying group. Kaiser is cautiously optimistic that the bill will pass.

The timing is tricky, however, because the Senate is rather busy right now. The U.S. government runs out of money after Dec. 11, and senators are working to pass an omnibus funding bill, authorizing $1.1 trillion in expenditures, by that date. It’s become a regular ritual for senators to take care of last-minute business by adding provisions like the COOL repeal to the omnibus bill, but that means the provision’s fate depends on the larger budget battle. Congress may pass a stopgap spending measure to give themselves more time to pass an omnibus. (On Dec. 11, the House passed a stopgap funding measure to allow an additional five days for negotiations over an omnibus spending bill. The Senate followed suit later that day.)

“The fact that it will be bundled with the omnibus funding bill to keep the government operational could mean that senators who would not outwardly support the repeal of COOL could still vote it through by way of approving the omnibus. Which is good,” said Kaiser. But “what we are hearing from many senators is that the omnibus may require another week beyond the Dec. 11th deadline.”

“All signs point to COOL being repealed in the omnibus,” said a spokesperson for Sen. Feinstein. “But there are a lot of moving parts, and it could be passed this week or the next.”

That means more trips to Capitol Hill for wine-industry lobbyists. “We’re working it really hard,” said Tom LaFaille, of the Wine Institute. “In light of the WTO ruling, there is no other alternative at this point aside from a repeal of COOL. This law doesn’t work. The reality of the legislative calendar is that this needs to go through as soon as possible. The WTO has ruled, and Canada and Mexico are going to retaliate.”

Charles Chambless
Stow, Ohio, USA —  December 13, 2015 6:32pm ET
It would have been nice to give some specifics on how the COOL rules were unfair to Canada and Mexico.
Kasey A Carpenter
Fort Worth, Texas —  January 4, 2016 3:01pm ET

There is (was) plenty of debate as to just how much COOL hurt ranchers in Canada and Mexico, but the law was found to be in violation of WTO trade practices - which all member nations had agreed to - and therefore the tariffs were awarded to Mexico and Canada based on that finding.

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