A reality based independent journal of observation & analysis, serving the Flathead Valley & Montana since 2006. © James Conner.

17 December 2015

Budget bill drains America first, repeals country of origin meat labels

President Obama says he will sign the budget bill cobbled together this week. It contains a win for big oil that may prove an economic plus for Montana, and a repeal of country of origin food labeling laws that’s a big win for Mexico and Canada, but a huge loss for every American.

There’s whoopin’ and hollerin’ in the Oil Patch

Two years after the Arab oil embargo during the 1973 Yom Kippur War, Congress passed, and President Ford signed, a law forbidding the export of crude oil from America; there were a few small exceptions. It was a good idea, and still is, and not much of an issue when the Bakken boom began six years ago. Then, the price of oil declined from $106/barrel June, 2014, to $42/barrel by November, 2015. That’s good for consumers, but bad for the oil patch and states like Montana and North Dakota that depend on oil revenues. Hence, reports the Washington Post, the push for lifting the export ban:

The United States still imports more than 9 million barrels a day, but there has been a surge in shale oil, which is a high-quality oil in demand in Europe and elsewhere, where many refineries cannot handle low-quality crudes. By contrast, U.S. refineries especially along the Gulf coast have been mostly upgraded to handle low-quality crude that can be imported from Canada, Venezuela and Saudi Arabia.

Without being able to export, large portions of the North Dakota shale oil has been shipped by train to older East Coast refineries able to drive harder bargains because the shale oil producers have fewer choices.

Most economists say that lifting the export restrictions would have little impact on U.S. consumers. While high-quality U.S. crude prices will rise slightly, the price of imported low-quality crudes should fall by a similar amount.

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On Wednesday, [White House spokesman Josh] Earnest said the United States already exports 4.3 million barrels a day of refined petroleum products and as a result of waivers issued by the administration, producers currently export about half a million barrels a day of crude and condensates.

The companies most likely to benefit are the big North Dakota producers including Continental Resources, Hess, EOG, Whiting and Statoil. The Obama administration had already made certain export exceptions of some very light crude oil, known as condensate, mostly produced in Texas.

In a nutshell, our petroleum infrastructure dictates an energy policy of importing dirty heavy crude oil, and exporting relatively cleaner high quality light crude oil. So, although we still import nine millions barrels a day, we’ll now starting exporting millions of barrels of our best Bakken crude to Europe. How will we make up the difference? By importing more oil, of course. It makes as much sense as shipping Flathead cherries to, say, Norway, and importing cherries from Chile for Flathead tables.

In exchange for the permanent lifting of the export ban, Democrats secured temporary extensions of the investment tax credit for solar (photovoltaic) energy and the production tax credit for wind. That’s good because we’ll need that energy a lot sooner thanks to the budget bill’s drain American first policy.

I suspect that many Democratic politicians in Montana will find the trade-off acceptable. Those who do should consider restraining their enthusiasm: when the price of gasoline goes up, vote tallies for the incumbent party in the White House go down.

GOP helps Mexico and Canada drive a stake through COOL steak labeling

Whether or not it’s agricultural protectionism, country of origin food labelings (COOL) is indisputably protection for the right of consumers to know where what’s on their plate originated. The budget bill stomps that right into oblivion. Some details follow this summary from the Washington Post:

The spending bill repeals federal laws mandating that meatpackers identify where animals are raised and slaughtered. The problem was a World Trade Organization ruling finalized earlier this year holding that the labels were unfair discrimination against Canada and Mexico, nations that were thus entitled to levy retaliatory tariffs worth upwards of $3 billion. The farm industry blanched at the tariffs, and House Republicans voted overwhelmingly in June to end the labeling mandate, though many Democrats resisted changes, saying they would be bad for consumers.

The history of COOL. County of origin labeling is not a new idea. According to the (Congressional Research Service report, PDF):

Since the 1930s, U.S. tariff law has required almost all imports to carry labels so that the “ultimate purchaser,” usually the retail consumer, can determine their country of origin. However, certain products, including a number of agricultural commodities in their “natural” state, such as meats, fruits, and vegetables, were excluded. (See Appendix A for a description of this and two other food labeling laws covering the display of country of origin on imported products.) For almost as many decades, various farm and consumer groups have pressed Congress to end one or more of these exceptions, arguing that U.S. consumers have a right to know where all of their food comes from and that given a choice they would purchase the domestic version. This would strengthen demand and prices for U.S. farmers and ranchers, it was argued.

Opponents of ending these exceptions to COOL contended that there was little or no real evidence that consumers want such information and that industry compliance costs would far outweigh any potential benefits to producers or consumers. Such opponents, including some farm and food marketing groups, argued that mandatory COOL for meats, produce, or other agricultural commodities was a form of protectionism that would undermine U.S. efforts to reduce foreign barriers to trade in the global economy. COOL supporters countered that it was unfair to exempt agricultural commodities from the labeling requirements that U.S. importers of almost all other products already must meet, and that major U.S. trading partners impose their own COOL requirements for imported meats, produce, and other foods.

Authorizing Legislation. With passage of the 2002 farm bill, retail-level COOL was to become mandatory for fresh fruits and vegetables, beef, pork, lamb, seafood, and peanuts, starting September 30, 2004 (P.L. 107-171, §10816). Continuing controversy over the new requirements within the food and agricultural industry led Congress to postpone full implementation. The FY2004 Omnibus Appropriations Act (P.L. 108-199) postponed COOL—except for seafood—until September 30, 2006; the FY2006 Agriculture Appropriations Act (P.L. 109-97) further postponed it until September 30, 2008.

During deliberations on the 2008 farm bill, the interest groups most affected by COOL reached consensus on various changes intended to ease what they viewed to be some of the more onerous provisions of the 2002 COOL law. Provisions dealing with record-keeping requirements, the factors to be considered for labeling U.S. and non-U.S. origin products, and penalties for noncompliance were modified. These amendments were incorporated into P.L. 110-246, Section 11002. The enacted 2008 farm bill required that COOL take effect on September 30, 2008, and added goat meat, chicken, macadamia nuts, pecans, and ginseng as commodities covered by mandatory COOL. (See Appendix B for a timeline of key COOL developments.)

The final rule became effective on 16 March 2009. But by then, Canada and Mexico already were complaining to the World Trade Organization that America’s COOL was an unreasonable restriction on free trade. Here’s the WTO’s summary of how the case got started:

On 1 December 2008, Canada requested consultations with the United States concerning certain mandatory country of origin labelling (COOL) provisions in the Agricultural Marketing Act of 1946 as amended by the 2008 Farm Bill and as implemented through an Interim Final Rule of 28 July 2008. These include the obligation to inform consumers at the retail level of the country of origin in respect of covered commodities, including beef and pork. The eligibility for a designation of a covered commodity as exclusively having a US origin can only be derived from an animal that was exclusively born, raised and slaughtered in the United States. This would exclude such a designation in respect of beef or pork derived from livestock that is exported to the United States for feed or immediate slaughter.

Canada alleges that the mandatory COOL provisions appear to be inconsistent with the United States’ obligations under the WTO Agreement, including:

Articles III:4, IX:4 and X:3 of the GATT 1994;

Article 2 of the TBT Agreement, or, in the alternative, Articles 2, 5 and 7 of the SPS Agreement; and

Article 2 of the Agreement on Rules of Origin.

On 12 December 2008, Mexico and Nicaragua requested to join the consultations. Subsequently, the United States informed the DSB that it had accepted the request of Mexico to join the consultations.

On 18 May 2015, the WTO circulated a summary of key findings that includes this paragraph:

The Appellate Body also maintained the panel’s conclusions regarding the potential for labelling inaccuracy under the amended COOL measure and the exemptions prescribed by the amended measure. The Appellate Body agreed with the panel that the recordkeeping and verification requirements of the amended COOL measure impose a disproportionate burden on producers and processors of livestock that cannot be explained by the need to provide origin information to consumers, and that the exemptions under the amended COOL measure support a conclusion that the detrimental impact of that measure on imported livestock does not stem exclusively from legitimate regulatory distinctions. In this regard, the panel had noted that between 57.7% and 66.7% of beef and between 83.5% and 84.1% of pork muscle cuts consumed in the US convey no consumer information on origin despite imposing an upstream recordkeeping burden on producers and processors that has a detrimental impact on competitive opportunities for imported livestock.

There’s more, and unless you’re a meatpacker or importer of beeves, after reading it you’ll be more steamed than you already are.

The budget bill will make the meatpackers happy, but more than a few ranchers and farmers, not to mention beef eating Americans, are furious. Yesterday, for example, the National Farmers Union issued a blistering press release:

WASHINGTON (December 16, 2015) – National Farmers Union (NFU) President Roger Johnson said the organization was deeply frustrated and angered by language that would repeal the popular Country-of-Origin Labeling (COOL) law for not only muscle cuts of beef and pork, but extending to trade-compliant ground beef and ground pork.

“Congress had a solution to make COOL compliant with our World Trade Organization (WTO) obligations sitting on their desks for 5 months,” said Johnson. “Instead, they gave in to demands to completely remove most aspects of COOL for meat that provided meaningful information to the public,” he said. “This is the type of legislative hocus pocus that has angered so many Americans,” he said.

The language to repeal most significant components of COOL is contained as a rider in the 2016 Appropriations Act. Johnson noted that the language goes well beyond the WTO dispute, repealing COOL for ground beef and pork – two products that were explicitly found to be trade compliant.

“Clearly this language was produced by long-time COOL opponents who legislated in the dark of the night under the guise of solving an issue, when really their intentions completely undermine the will of American consumers and producers,” said Johnson. “NFU is furious that yet again the dysfunction of Congress has enabled this to happen.”

On the right’s right, The New American thundered:

Now, in the wake of the $1-billion ruling against the United States, the power of a foreign entity to heavily influence U.S. law is apparent, and the concerns many Americans have about the proposed TTP and TTIP treaties is apparent: At what point do the rights and concerns of U.S. citizens ever come first?

After the initial WTO ruling on May 18, which declared the U.S. trade law illegal, the advocacy group Public Citizen issued this statement:

The WTO decision is likely to further fuel opposition to Fast Track authority for controversial “trade” pacts that would expose U.S. consumer and environmental protections to more such challenges.

What lies at the heart of the WTO ruling is national sovereignty. Must U.S. law on both the state and federal level first bow to global authority? Two international trade agreements — the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) — would exacerbate this concern many times over, and in the wake of the WTO ruling these two pacts should come under immense scrutiny.

The New American’s friends and affiliates include the John Birch Society and Liberty News Network.

Wanting to know whether a steak is American or not has a way of bringing together people who at first seem to have nothing in common.