Just a few short days ago, I received an email message from the American Meat Institute (AMI). They were planning a teleconference in a few hours. The subject was COOL and, with the very recent decision by the USDA to double down on their ruling in spite of losing their World Trade Organization case, the content of that press conference was predictable. The AMI was going to be against it and most of the North American meat industry trade associations were going to join them in a lawsuit.
The list of Plaintiffs joining the AMI include the American Association of Meat Processors, Canadian Cattlemen’s Association, Canadian Pork Council, National Cattlemen’s Beef Association, National Pork Producers Council, North American Meat Association, and Southwest Meat Association. Note the Canadian presence. Expect Mexico to strongly consider joining the group.
Leading the charge, Mark Dopp, AMI senior vice president of regulatory affairs, said this about the complexity of the USDA ruling during the teleconference: “Shoes might say ‘Made in the USA.’ They do not say ‘Leather from cattle born in Canada, harvested in the USA, tanned in South Korea and processed in the USA’, yet that is the sort of labeling that we are now being forced to apply.”
An angry Dopp said, “Congress mandated country-of-origin labeling for meat and poultry -- not lifetime itinerary labeling. Segregating and tracking animals according to the countries where production steps occurred and detailing that information on a label may be a bureaucrat’s paperwork fantasy, but the labels that result will serve only to confuse consumers, raise the prices they pay, and put some producers and meat and poultry companies out of business in the process. Everyone loses under this rule.”
The meat and livestock organizations, backed by powerful legal counsel, said the USDA rule violates the United States Constitution by “compelling speech in the form of costly and detailed labels on meat products that do not directly advance a government interest.” They also claimed the rule “exceeds the scope of the statutory mandate, because the statute does not permit the kind of detailed and onerous labeling requirements the final rule puts in place, and that the rule is arbitrary and capricious, because it imposes vast burdens on the industry with little to no countervailing benefit.” Because it serves no health requirements, it serves no compelling government interest, either.
Catherine Stetson, attorney for the American Meat Institute and friends, dismissed that last point, saying, “Mere consumer curiosity is not a substantial government interest and it’s easy to see why. There’s no end point.”
Not-so-curiously missing from the list of plaintiffs was R-CALF USA, a Montana-based group of cattlemen who have pushed hard for just such labeling. Their CEO, Bill Bullard, a fiery spokesman for the group’s interests, has been outspoken about the subject, arguing forcefully that consumers are willing to pay more for American beef than they are for beef from Canada or Mexico and the driver behind an expanded label should be informed consumer preference. He says the meat industry is guilty of selling lesser quality foreign meat under the cloak of America’s good beef reputation and that amounts to an undeserved free ride.
John Maday, writing for Cattlenetwork shortly after the AMI Teleconference, reported Roger Johnson, President of the National Farmers Union (NFU), siding with the R-CALF position, said the lawsuit is another in a series of delaying tactics. “Time and again, many organizations that represent or are heavily influenced by meatpackers have dragged their feet when it comes to COOL,” he says. “They prevented COOL from being implemented after the 2002 Farm Bill, tried to block it following the 2008 farm bill, and now are suing to stop the revised COOL rules from taking effect. Such delaying and stalling tactics only serve to deprive their customers of important information about the products they buy.”
I contacted Bullard in his Billings office and asked him to expand on R-CALF’s position. He responded quickly:
Q. Bill, the American Meat Institute and seven other U.S. and Canadian organizations have field suit asking for relief from the recent USDA decision on COOL. R-Calf was joined by the National Farmers Union to stand against the suit? What was your reasoning?
A. This lawsuit demonstrates that the NCBA and meatpackers, who have long opposed COOL, have unlimited resources with which to advance and protect their economic positions to the detriment of U.S. consumers and U.S. cattle producers. These groups have vehemently opposed COOL since its 2002 passage and have fought against it in various forums including within Congress, the Administration, the WTO, and now the courts.
The meatpackers and NCBA continually ignore the fact that U.S. cattle producers, Canadian cattle producers and Mexican cattle producers are global competitors. Only if the meat products produced by these competitors are distinguished in the marketplace can global competition occur. Without COOL, packers can source cheaper foreign cattle and pass it off to unsuspecting consumers as if it were produced under the reputation of the U.S. cattle producers.
Only with COOL can consumers choose to, and actually exercise nationalism, by purchasing products exclusively of U.S. origin. It is obvious that Canada, U.S. meatpackers and NCBA do not want consumers to be able to choose to support U.S. farmers and ranchers by choosing to support meat products that are exclusively of U.S. origin.
Q. During the AMI sponsored press conference announcing the suit, their legal counsel cited several reasons for their suit. A violation of free speech, specifically a decree that would compel speech, was mentioned. They made the point that there was no compelling government interests that would be served. In your opinion, is COOL a violation of the first amendment and is there a compelling government interest?
A. The argument that COOL violates free speech is meritless. The U.S. has long recognized that informing consumers as to the origins of consumer goods is a compelling government interest. That is why the U.S. requires virtually all consumer products that are imported into the U.S. from foreign countries to be labeled as to their origin – from pet food to hand tools to clothing. Even imported beef is required to be labeled as a condition of entry into the United States. The only problem was that U.S. meatpackers and U.S. retailers were not required to maintain the labels if the products were repackaged in the United States. One of the reasons COOL was passed was to prevent meatpackers from hiding the origins of imported meat simply by repackaging it.
Q. Let’s look at another point they made. The segregation of animals would be onerous, prohibitively expensive and hinder trade between the U.S., Canada and Mexico. True?
A. The meatpackers, NCBA, et al., make a sensational and outright fabricated claim that the new COOL rule prohibits packers from processing animals with differing born, raised, and slaughtered configurations during a single production run. This is not true. The May 23 final rule contains no such prohibition. Under the May 23 final rule, packers are free to use the same bar code system they use to track differing branded products during a production run to track differing born, raised and slaughtered configurations for COOL labeling purposes.
The meatpackers, NCBA, et al., erroneously claim the U.S. government has never suggested that the current meat labeling regime is deceitful. Indeed, the U.S. government made this very claim to the WTO stating the use of the USDA inspection label on imported beef was confusing as consumers were led to believe the product was a U.S. product even when it was not and stating that the prevention of consumer confusion was a legitimate objective under WTO rules that allowed practices that prevented deceptive practices.
Q. The USDA hasn’t responded to requests for comment, probably because their legal team needs to review the suit. Do you think they were wrong to revise their rule after the WTO verdict?
A. Unfortunately, the USDA set itself up for this lawsuit. It did so by failing to timely close the unconscionable loophole that allowed meatpackers, since 2009, to mislabel meat exclusively of U.S. origin with a mixed-country label when a meatpacker comingled at least one foreign product during a day’s production. Had the USDA timely closed this loophole in 2009, as R-CALF USA and others had requested, rather than to allow this inexplicable provision to persist for four years during which time the public was provided inaccurate and deceptive labels, the meatpackers, NCBA, et al., would not be able to claim that the comingling loophole was an entitlement program as they now claim in their lawsuit.
Further, USDA set itself up for this lawsuit by choosing the more complicated modification option with which to comply with the WTO ruling. The WTO attacked COOL on the basis that it required more information from upstream suppliers (i.e., cattle producers) than was actually communicated to consumers via the label. Combined with Canada’s and Mexico’s relatively small shares of the U.S. market, the WTO found that this imbalance between information required of producers and information communicated to consumers resulted in the discriminatory treatment of imported livestock.
The U.S., therefore, could have addressed this criticism by either reducing the amount of information required of producers - the simple option - or increasing the amount of information communicated to consumers via a label - the complicated option. USDA chose the latter, more complicated option even though they knew it would increase the cost of COOL.
In comments submitted to USDA prior to the issuance of the May 23 final rule, R-CALF USA urged the USDA to adopt the simple option. We argued that USDA could eliminate all recordkeeping requirements for producers by authorizing meatpackers to initiate origin claims based on whether or not cattle were marked with foreign import markings – those that were would have two countries listed on the label, e.g., “Product of the United States and Canada,” and those that bore no import marking would be presumed to be exclusively of U.S. origin and eligible for the “Product of USA label.”
R-CALF USA pointed out that the 2009 final rule already allowed for this “presumption of domestic origin” methodology, but it authorized its use for cattle producers rather than for meatpackers. Had USDA adopted the simple option, the meatpackers, NCBA, et al., could not now argue that the new rule has increased their costs.
Q. Canada has already threatened retaliation if this version of COOL is allowed to stand and Mexico is considering its reaction. The result could be an agricultural trade war between the three North American countries. Is the imposition of the current rule worth the damage that might be done or is there room for compromise?
A. Canada and Mexico are whining because COOL will bring their undeserved gravy train to a halt. You do not see Canada making any effort to market its beef in the U.S. market under its maple leaf logo or Mexico advertising its beef under its eagle and snake logo. That is because Canada and Mexico decided long ago that they would forgo competition at the retail level and would relegate themselves to be nothing more than commodity suppliers to U.S. meatpackers (as well as to meatpacker-aligned U.S. feedlots). In other words, Canada and Mexico have been able to sell their cattle and beef into the U.S. market regardless of whether there was any consumer demand for their products. We think beef from Mexican and Canadian cattle would command lower prices at the retail level than beef from U.S. cattle, but only with a COOL label would the meatpackers and Canada and Mexico be forced to price imported beef according to actual consumer demand.
Therefore, COOL will not start a trade war. Instead, COOL will start competition in the U.S. retail market for beef produced in the U.S. and beef produced under the various production regimes of the various countries that want to compete against the U.S. farmer and rancher in the U.S. market.
Canada and Mexico are doing very well under this no-competition regime. In 2012, for example, Mexico exported to the U.S. more cattle, beef, beef variety meats and processed beef than the U.S. exported to Mexico, leaving Mexico with a positive trade balance of nearly a half million dollars. Canada enjoys a much larger positive trade balance with the U.S. than does Mexico. Its 2012 trade balance with the U.S. for those same products was nearly three quarters of a billion dollars. In fact, over the past five years (2008-2012) the U.S. has accumulated a trade deficit with Canada and Mexico in those products of more than $5 billion. I do not believe for a minute that either Canada or Mexico will start a trade war with the U.S. and leave that kind of money on the table – over a billion dollars a year.
If beef from Canada and Mexico find profitable niches in the U.S. market, both countries will continue to trade with the U.S. If either country were serious about their trade war threats, they would have long ago initiated a boycott by refusing to export any cattle or beef into the United States in an effort to persuade the U.S. to capitulate to their demands. But, they are making far too much money to cease exports to the U.S. so their antics are nothing more than hollow threats made in an effort to cause USDA to buckle.
Q. Taking it to the bottom line, if the public doesn’t care and no need is served, is COOL necessary?
A. COOL is widely supported by producers and consumers as evidenced by a COOL letter recently sent to USDA and signed by 229 groups.
We are hopeful the courts will recognize that the only reason this lawsuit was filed was to allow meatpackers to continually exploit U.S. consumers by sourcing lower-priced imported cattle and charging consumers full price for the resulting meat as if the meat had been produced by U.S. farmers and ranchers.
We are also hopeful that the USDA will vigorously defend its final COOL rule and that COOL will emerge unscathed from this packer-lobby lawsuit.
The opinions expressed in this column are solely those of Chuck Jolley, a veteran food industry journalist and columnist.