Producers, shippers caught in midst of North American food fight

The World Trade Organization on Monday authorized Canada and Mexico, the biggest markets for exported U.S. goods, to retaliate against the United States' meat-labeling rules.

(Photo: AP)
English 16/12/2015 20:38 Reuters Actualizada 20:39

The North American spat pitting Canada and Mexico against the United States over meat labels has sown confusion among producers and shippers in all three countries, with a trade war potentially just weeks away.

The World Trade Organization on Monday authorized Canada and Mexico, the biggest markets for exported U.S. goods, to retaliate against the United States' meat-labeling rules, setting the annual level at C$1.055 billion for Canada and US$228 million for Mexico.

The United States took a step towards defusing the row on Wednesday when the U.S. Congress approved a spending bill that includes the repeal of federal laws mandating meatpackers identify where animals are raised and slaughtered.

"It's causing a lot of angst and anxiety," said Candace Sider, vice-president of Canadian regulatory affairs for customs brokerage and trade consultant Livingston International.

A trade war may force importers in Canada and Mexico to find alternative suppliers, Sider said, but the biggest unknown element is which products may be affected.

The United States in 2014 shipped goods worth US$312 billion to Canada and US$240 billion to Mexico, according to U.S. Department of Commerce.

The previous Canadian Conservative government listed in 2013 three dozen U.S. product categories that could be subject to a 100 percent surtax, including pork, beef, cherries, appliance parts, chocolate, wine and office furniture.

The new Liberal government has not clarified which products it may target.

The dispute stems from a 2009 U.S. requirement that retail outlets label food with information about its origin. Canada and Mexico argued that country-of-origin labeling, known as COOL, led to fewer of their cattle and pigs being slaughtered in the United States.

"Why our industry? This is (about) beef and pork," said Wayne Morris, a vice-president with Association of Home Appliance Manufacturers, whose members include General Electric Co. "It's a bit unfair."

Oregon winemaker A to Z Wineworks, which sells to both Canada and Mexico, is likely to focus sales next year on off-shore markets a little more than usual, given the uncertainty around Canada, said founder Sam Tannahill.

Canada remains a key market, he said.

Trade retaliation may also inadvertently hurt Canadian importers.

An official at a Canadian company that imports U.S. meat to sell to processors including Cargill Ltd and Maple Leaf Foods, said it would have to find supplies domestically if Canada strikes back. The official was not authorized to comment publicly.

COOL has already added costs throughout North America's beef supply chain, said Cargill Ltd vice-president of corporate affairs Chantelle Donahue.

Mexico may target U.S. apples, dairy, alcohol and personal hygiene products.

"It will have an import cost and obviously the final price of the product will go up," said Arturo Behr, president of the Mexican association of importers and exporters.

The association supports retaliatory measures, despite the impact on importers, because it protects Mexican exports, Behr said.

A trade war could even affect internal supply chains. A company that ships products from the United States to Canada for further manufacturing could face the surtax, Sider said.

"We believe this mandatory labeling law must be repealed before any damaging tariffs are implemented," said Gary Mickelson, spokesman for U.S. beef packer Tyson Foods Inc .

To be sure, in only six of the previous 18 cases in which the WTO has authorized sanctions did countries actually apply them, since most cases were settled first.

If Canada and Mexico slap surtaxes on U.S. products, shoppers in those countries will pay more, said Bruce Cran, president of Consumers' Association of Canada.

"It would be a disaster. We'll be in a trade war, and consumers are always called upon to pay the penalty."