- Canada strongly objected to the proposed changes by the USDA to country of origin labeling rules, saying the changes do not comply with the WTO deadline and increase discrimination against Canadian cattle and hogs. - If the US actions are deemed insufficient by the WTO, Canada and Mexico will have flexibility to impose retaliatory tariffs on US products like beef and pork, which are important exports. - Canada and Mexico are major export markets for US beef and pork, and any retaliatory tariffs could significantly damage those industries. Resolving the situation will take time, with tariffs possibly not being imposed until 2014.

1. Sponsored by
Vol. 11, No. 49 / March 13, 2013
The reaction of Canada’s government to USDA’s proposed
“fix” for mandatory country-of-origin labeling was predictable and MAJOR U S BEEF EXPORT MARKETS
swift. Canadian Agriculture Minister Gerry Ritz stated, among other Carcass Weight, Annual
things, that Canada was “extremely disappointed with the proposed Mil. Pounds
regulatory changes” and that Canada would consider all options, includ- 700
ing retaliatory measures, should the U.S. not meet the May 23, 2013 600
deadline set by the World Trade Organization for U.S. compliance. Avg.
2006/10
Canada does not believe the rule changes proposed on Friday accom- 500
plish that and pointed out that it believes the changes, in fact, increase
400
the discrimination against Canadian cattle and hogs. 2011
Regardless of your opinion of the value or need for origin label- 300
ing, the goal here must be to avoid retaliatory tariffs on U.S. products. 200
Should the U.S. actions be deemed insufficient, Canada and Mexico will 2012
have great latitude in picking the retaliation targets and U.S. beef and 100
pork are logical choices since those products a) are directly involved in
0
the dispute, b) represent large values for U.S. producers and c) are rep- Japan Canada Mexico Korea
resented by two pretty effective lobbies in Washington. There would be
little point in picking on someone who cannot be of help in the policy MAJOR U S PORK EXPORT MARKETS
battles so we think Canada will choose their targets carefully.
Carcass Weight, Annual
And plenty is at stake here! As can be seen at right, Canada
Mil. Pounds
was the largest market for U.S. beef exports last year, taking 467.2 mil- 1600
lion pounds of carcass weight product. That total represented 19% of
all U.S. beef exports and just edged out the 449.6 million pounds 1400
Avg.
(18.3% of the total) sent to Japan. Mexico was our third largest beef 1200 2006/10
market at 351.8 million pounds, carcass weight, (14.3% of the total) but 1000
that number is less than half of the total beef we sent southward in 2008
800 2011
and was down 28% from 2011 largely due to higher U.S. beef prices.
Canada was also our largest beef export market in terms of value last 600
year, taking product worth $1.148 billion which accounted for 21.2% of
400 2012
the total value of U.S. beef exports. Mexico continues to be our largest
customer for beef variety meats, purchasing 80,477 metric tons worth 200
$209 million in 2012. Mexico’s beef variety meat purchase shares are 0
Japan Canada Mexico Other
25% for quantity and 29.8% for value.
Japan is still the largest market for U.S. pork muscle cut ex- the leeway that injured countries have in designating retaliation targets
ports but Mexico is now a close second and Canada ranks fourth, just and the past effectiveness of Mexico’s pork lobby in getting U.S. pork
behind China/Hong Kong. Mexico took 1.163 billion pounds of carcass- included on retaliation lists. The best example of that was the dispute
weight pork in 2012. That is 21.6% of total exports, just 4% short of over Mexican trucks not being allowed to operate in the U.S. when U.S.
Japan’s leading 25.6% share. Canada purchased 587.1 million pounds pork was included in the retaliation list in spite of U.S. pork producers
of carcass weight pork last year, 10.9% of the total. Mexican pork mus- support of Mexico’s position in the dispute. It didn’t matter that we were
cle cut exports accounted for just over 16% of the total value of U.S. helping them and it will not likely matter this time that very little of their
pork exports while shipments to Canada accounted for 15.2% of total product is injured.
value. Mexico is the largest destination for U.S. pork variety meats, An important final point is this: Reconciling this situation is
taking 36% of our total exports and accounting for 29% of the total value going to take awhile and, even if the U.S. rules are found insufficient by
of variety meats. the WTO, it will be at least several months before any tariffs are im-
Any way you cut it, these two markets are critical for U.S. beef posed. In fact, it may well be 2014 before U.S. exporters must deal with
and pork shipments and, in spite of (or perhaps because of) USDA’s them. The specter of tariffs may dampen some business relationships
proposed rule change, are in grave danger. Some readers may wonder in the short run but actual price increases — and resulting quantity de-
why pork to Mexico is an issue since virtually no pork is imported from creases — for U.S. product in these markets are still down the road a
Mexico and thus harmed by the MCOOL programs. The answer lies in ways. Much can happen in the meantime. Let’s hope it does!
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