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Cdn. farmers COOL to U.S. protectionism

Dr. Milton Boyd

Struggling American livestock producers - hit hard by the recent economic downturn and the drop in demand for meat in the United States - have spurred recent trade protectionism measures, including country of origin labelling regulations (COOL), that essentially require United States meat processors to segregate live Canadian cattle and hogs from US animals.

Any packages containing Canadian meat must be labelled as such, but this separate labelling has been costly for most U.S. processors who have consequently been unwilling to accept Canadian animals at all.

COOL has resulted in a tightened, protectionist border. Canadian hog exports to the U.S. for market pigs have dropped to 585,000 pigs from January through June. That compares to 1.4 million for the same period a year earlier - about a 60 per cent drop. At $100 per hog market value, this loss is around $81.5 million, or $163 million over a full year (not to mention a 30 per cent drop in feeder pig exports). Also, slaughter-cattle exports are down 20 per cent and feeder-cattle exports 50 per cent.

In May 2009, Canada requested a WTO consultation to object to the U.S. regulations. While the U.S. administration and Democrats in the House and Senate talk free trade, their actions have been the opposite and have restricted trade..

Keeping U.S. and international markets open for Canadian livestock is especially important for the financial survival of Canadian producers. They have been hit hard by high feed-grain prices driven up by U.S. ethanol policy, weak livestock prices, a strong Canadian dollar, "mad-cow disease"-related border closures for cattle, and H1N1-related border closures for pork to some countries.

In the long term, a U.S. market loss for Canadian live animals would require building more meat processing capacity in Canada. More exports of Canadian processed beef and pork would go to Asia, given the rising Asian income and growing market, since it's too expensive to ship live animals to Asia. However, Canada's meat processing plant size is smaller and less cost-competitive than the huge U.S. plants, and so Canada still needs to export live animals to the U.S., mainly in the short-term.

For now, fighting COOL must be the first priority for Canada. Canada also must band together with other countries to convince the Obama administration to drop its outdated and wrong-headed trade restrictions before they get worse. For example, back in 1930, U.S. tariffs were increased on 20,000 products as a means to rescue the U.S. from an economic downturn - the disastrous Smoot- Hawley Tariff Act of 1930. That approach should serve as a reminder of the dangers of protectionism now. Smoot-Hawley backfired and created a world trade war, and was a significant cause of the Great Depression. Trade fell by 65 per cent, and unemployment hit 25 per cent.

U.S. trade restrictions were tried in 1930 and brought the world economy to its knees - and they're still nonsensical today. As baseball great Yogi Berra said, "it sounds like deja vu all over again."

Professor Milton Boyd is an economist at the University of Manitoba and Frontier Centre for Public Policy advsior.

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