[Senate Hearing 114-152]
[From the U.S. Government Publishing Office]
S. Hrg. 114-152
COUNTRY OF ORIGIN LABELING
AND TRADE RETALIATION:
WHAT IS AT STAKE FOR
AMERICA'S FARMERS, RANCHERS,
BUSINESSES, AND CONSUMERS
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
JUNE 25, 2015
__________
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Committee on Agriculture, Nutrition, and Forestry
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COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
PAT ROBERTS, Kansas, Chairman
THAD COCHRAN, Mississippi DEBBIE STABENOW, Michigan
MITCH McCONNELL, Kentucky PATRICK J. LEAHY, Vermont
JOHN BOOZMAN, Arkansas SHERROD BROWN, Ohio
JOHN HOEVEN, North Dakota AMY KLOBUCHAR, Minnesota
DAVID PERDUE, Georgia MICHAEL BENNET, Colorado
JONI ERNST, Iowa KIRSTEN GILLIBRAND, New York
THOM TILLIS, North Carolina JOE DONNELLY, Indiana
BEN SASSE, Nebraska HEIDI HEITKAMP, North Dakota
CHARLES GRASSLEY, Iowa ROBERT P. CASEY, Jr., Pennsylvania
JOHN THUNE, South Dakota
Joel T. Leftwich, Majority Staff Director
Anne C. Hazlett, Majority Chief Counsel
Jessica L. Williams, Chief Clerk
Joseph A. Shultz, Minority Staff Director
Jonathan J. Cordone, Minority Chief Counsel
(ii)
C O N T E N T S
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Page
Hearing(s):
Country of Origin Labeling and Trade Retaliation: What is at
Stake for America's Farmers, Ranchers, Businesses, and
Consumers...................................................... 1
----------
Thursday, June 25, 2015
STATEMENTS PRESENTED BY SENATORS
Roberts, Hon. Pat, U.S. Senator from the State of Kansas,
Chairman, Committee on Agriculture, Nutrition, and Forestry.... 2
Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan... 4
Witnesses
Carpenter, Barry, CEO, North American Meat Institute, Washington,
DC............................................................. 9
Hill, Craig, President, Iowa Farm Bureau Federation on behalf of
American Farm Bureau Federation, Milo, IA...................... 10
McDonnell, Leo, Executive Officer and Director Emeritus for the
United States Cattlemen's Association, Rhame, ND............... 12
Moyer, Jaret, President, Kansas Livestock Association, Emporia,
KS............................................................. 14
Trezise, Jim, President, New York Wine & Grape Foundation,
Canandaigua, NY................................................ 15
Cuddy, Chris, Senior Vice President and President of ADM's Corn
Processing Business Unit, Archer Daniels Midland Company,
Decatur, IL.................................................... 17
----------
APPENDIX
Prepared Statements:
Grassley, Hon. Charles....................................... 40
Leahy, Hon. Patrick J........................................ 41
Carpenter, Barry............................................. 42
Cuddy, Chris................................................. 47
Hill, Craig.................................................. 49
McDonnell, Leo............................................... 53
Moyer, Jaret................................................. 68
Trezise, Jim................................................. 72
Document(s) Submitted for the Record:
Hon. Pat Roberts:
Minister of Agriculture and Agri-Food, Ottowa Canada,
prepared statement......................................... 76
Corn Refiners Association, prepared statement................ 78
National Foreign Trade Council, prepared statement........... 79
Country of Origin Labeling Reform Coalition (COOL) and
various organizations...................................... 81
Mars Inc., prepared statement................................ 87
Government of Mexico, Office of the Secretary, prepared
statement (with translation attachment).................... 88-90
National Association of Manufacturers, prepared statement.... 91
National Pork Producers Council, prepared statement.......... 96
National Corn Growers Association, prepared statement........ 112
Produce Marketing Association, press release................. 113
Produce Marketing Association, prepared statement............ 114
U.S. Chamber of Commerce, prepared statement................. 115
Western Premiers, prepared statement......................... 122
McDonnell, Leo:
Addendum in response to Senator Roberts question on
responding to retaliatory tariff's......................... 19
COUNTRY OF ORIGIN LABELING
AND TRADE RETALIATION:
WHAT IS AT STAKE FOR
AMERICA'S FARMERS, RANCHERS,
BUSINESSES, AND CONSUMERS
----------
Thursday, June 25, 2015
United States Senate,
Committee on Agriculture, Nutrition, and Forestry,
Washington, DC
The committee met, pursuant to notice, at 10:04 a.m., in
room G50, Dirksen Senate Office Building, Hon. Pat Roberts,
Chairman of the committee, presiding.
Present or submitting a statement: Senators Roberts,
Boozman, Hoeven, Ernst, Tillis, Sasse, Grassley, Thune,
Stabenow, Brown, Klobuchar, Bennet, Gillibrand, Donnelly,
Heitkamp, and Casey.
Chairman Roberts. Good morning. I call this meeting of the
Senate Committee on Agriculture, Nutrition, and Forestry to
order.
Before making my statement, I would like to yield to the
distinguished Ranking Member for a very important statement.
Senator Stabenow. Well, thank you, Mr. Chairman. Just in
the interest of all of the terrific Senate women who are here
today, I just want to congratulate everyone who played and the
color commentator last night, Senator Klobuchar, for having the
Congressional women beat the press in the charity game that is
really a terrific opportunity to raise money for breast cancer.
It was labeled, ``Beat the Press,'' and we did. I should not
say ``we.'' I was cheering. It is because I was cheering that
that happened, but----
[Laughter.]
Senator Klobuchar. Right, and the pitcher----
Senator Stabenow. --Senator Ernst--and the pitcher, yes,
Senator Ernst and Senator Gillibrand did a terrific job. So,
Mr. Chairman, it raised a lot of money for a very important
cause. It was a beautiful night. Our team won, so
congratulations.
Chairman Roberts. I am not speechless, I just----
[Laughter.]
Chairman Roberts. This is what happens when the Chairman is
outnumbered----
Senator Stabenow. That is right. That is right.
Chairman Roberts. --with regards to--well, anything I would
say would be not PC, so I will----
Senator Stabenow. That is true.
Chairman Roberts. --I will leave it alone.
Senator Klobuchar. You could say congratulations.
Chairman Roberts. Yes, congratulations.
[Laughter.]
Senator Klobuchar. That would be good. Madam Pitcher, yes.
[Laughter.]
Chairman Roberts. I do not know of any member of Congress
who does not congratulate you on beating the press.
Senator Stabenow. That is right.
Chairman Roberts. With all due respect.
[Laughter.]
STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF
KANSAS, CHAIRMAN, U.S. COMMITTEE ON AGRICULTURE, NUTRITION, AND
FORESTRY
Chairman Roberts. Today, the committee turns its focus once
again to the issue of mandatory country of origin labeling, or
COOL. Now, I have got a bit longer statement today and time
will be extended for the distinguished Ranking Member, as well.
My statement is full of history and details, but if you
take nothing else away, I hope it is this. Facts are stubborn
things, and whether you support COOL or oppose COOL, the fact
is, retaliation is coming and this committee has to fix it.
This committee has a long history with COOL, a history that now
spans three decades. Discussions began in the mid-to late-
1990s.
Then in the 2002 farm bill, legislative language first
appeared. Over the course of the next several years, the
Department of Agriculture attempted to issue regulations
implementing the program. After the Department experienced some
difficulty, Congress continually moved the COOL implementation
deadlines to allow the Department more time.
Now, with the passage of the 2008 farm bill, the Department
of Agriculture received more direction from Congress on how to
implement mandatory COOL, and in the late year of 2008, the
Department proposed an interim rule. However, they later
withdrew that rule due to criticism from proponents that the
regulation was too weak, and it was not until 2009 that the
mandatory COOL program as we know it was born. That is when we
began to see mandatory labels appearing on meat that read,
``Products of the U.S.,'' or ``Product of the U.S. and
Canada,'' for example. But, that is not the end of the debate.
Almost immediately upon implementation of the mandatory
regulations, Canada and Mexico filed suit with the WTO, the
World Trade Organization. They claimed that the COOL
requirements were causing the U.S. beef and pork sectors to
discriminate against Canadian and Mexican origin livestock.
In 2011, the WTO ruled in favor of Canada and Mexico,
finding that the U.S. requirements were in violation of the WTO
commitments by treating the Canadian and Mexican livestock less
favorably than U.S. livestock. To use a baseball analogy, that
was strike one.
Later that year, the U.S. appealed the ruling, but in 2012,
the WTO affirmed that the United States was in violation.
Strike two.
Then the USDA went back to the drawing board to create a
new set of regulations to implement mandatory COOL, and in May
2013, they put forth a recommendation that in the eyes of the
WTO were much worse and much more trade restrictive by
requiring labeling of meat based on where the animal was born
and raised and slaughtered.
Despite the warnings of many in the livestock sector and in
the Congress, the USDA implemented the regulation and Canada
and Mexico again took us to the WTO in 2013. In 2014, the WTO
came back with a decision affirming for the third time the
claims of discrimination brought by Canada and Mexico.
Of course, the U.S. appealed that WTO ruling, but on May 18
of this year, the fourth and final ruling of the WTO
compliance--that the panel, the WTO compliance panel, affirmed
that the U.S. attempts to fix mandatory COOL fell short. Some
would say, strike three.
Let us not forget that also occurring at this time, we were
in the midst of the 2014 farm bill negotiations. Congress did
have the opportunity to fix mandatory COOL in the 2014 farm
bill. However, some stakeholders wanted to wait out the WTO
process. My colleagues, that process has played out. There is
no more time to wait.
I share this history so all can understand that the
Congress, the impacted industries, and the regulators at the
Department of Agriculture have put in endless efforts over the
past three decades to make mandatory COOL viable. However, that
objective has not been reached and has cost the U.S. billions
of dollars.
Looking at my home state alone, a Kansas State University
review of the current mandatory COOL regulations found that
compliance has already cost Kansas $500 million. Despite the
best of intentions of COOL supporters, the USDA estimated that
mandatory COOL has cost the U.S. beef, pork, and chicken
sectors approximately $1.8 billion. Furthermore, there have
been no measurable increases in consumer demand to offset the
losses inflicted on the livestock and the meat sectors.
These costs are in addition to the strain this policy has
put on our relationship with two of our closest trading
partners, Canada and Mexico. That in of itself is cause for
serious concern. We know that the damages Canada and Mexico are
seeking are immense. Over $3.2 billion in sanctions on U.S.
products is possible if we do not repeal mandatory COOL, and
these are not just ag products in the crosshairs. Listen to the
list available in 2013. Products including beef, pork,
cherries, ethanol, wine, orange juice, jewelry, mattresses,
furniture, and parts for heating appliances are just some--
some--of the targets of the Canadian retaliation. Mexico has
yet to finalize their list, but we expect it to be just as
damaging.
The U.S. economy cannot tolerate such economic injury. Now,
the House has moved quickly to prevent retaliation by repealing
mandatory COOL for meat. Now the responsibility falls on us.
The Senate must act prior to the WTO's authorization of
retaliation. The WTO stove is hot and we do not want to touch
it.
One estimate from Iowa State University suggests that $2
billion in retaliation applied to U.S. exports would result in
17,000 lost U.S. jobs, yet we could face significantly higher
retaliation damages of the $3.2 billion from Canada and Mexico,
which would lead to many more lost jobs.
Canada has made repeated statements that they intend to
proceed with retaliation should the U.S. Congress fail to
repeal COOL. Just yesterday, the Canadian Minister of
Agriculture sent a letter to members of this committee stating,
and I quote, ``For Canada, legislative repeal of COOL is the
only approach that will achieve this end.'' Another letter was
sent on Tuesday by the Mexican Secretary of the Economy stating
this, quote, ``Retaliation is imminent and inevitable unless
and until the U.S. takes action to repeal the underlying COOL
statute.''
I ask unanimous consent to include both of these letters in
the record. Without objection, it is so ordered.
[The following information can be found on pages 76 and 88
through 90 in the appendix.]
Chairman Roberts. I want to emphasize--I really want to
emphasize--I understand completely the concerns of some members
of this committee. I have encouraged alternatives to be brought
forth, or especially by our distinguished Ranking Member and
other members of this committee.
But, as Chairman of this committee, I must emphasize to my
colleagues and all of agriculture that retaliation is fast
approaching and the responsibility sits squarely on our
shoulders to avoid it. It is important to realize that
regardless of what farm groups, the Department of Agriculture,
or the USTR says, or regardless of what action Congress may
take, regardless of what any member of this committee may say,
Canada and Mexico--only Canada and Mexico--have the ability to
halt retaliation.
So, this takes me back to the beginning of my statement. It
does not matter if you are pro-COOL, and many are, or anti-
COOL, and many are. You cannot ignore the fact that retaliation
is imminent and we must avoid it. Repeal of mandatory COOL is
the surest way to protect the U.S. economy.
The witnesses we will hear from today represent different
perspectives in the agriculture and food production chain, all
of whom stand to suffer immensely should retaliation go into
effect. I want to thank each witness for providing testimony
before the committee on such an important issue.
As you can imagine, there are a number of folks--quite a
few--who would have liked to have testified today. Simply put,
that was not possible, so as a consequence, I ask for unanimous
consent to include in the record testimony and letters
submitted by the companies, trade associations, and coalitions
listed on the handout included in your materials, all of whom
urge repeal of COOL to avoid retaliation.
[The following information can be found on page 81 in the
appendix.]
Chairman Roberts. I now recognize our distinguished Ranking
Member, Senator Stabenow, for any remarks she would like to
make.
STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE
OF MICHIGAN
Senator Stabenow. Well, thank you very much, Mr. Chairman,
and I appreciate very much your holding this hearing. I agree
with you that we need to act together in a bipartisan way and
appreciate your willingness to work together to be able to move
something quickly, which is, I believe, overwhelmingly what we
need to do together. The question is being able to come
together to determine the right way to do that.
I want to recognize all of the officials and the industry
representatives for testifying today. It is really critical we
hear from everyone involved so we can make sure we are coming
to the right point.
COOL is a landmark law. It empowers consumers to know where
their food comes from. It is supported by America's family
farmers and ranchers who proudly raise the world's safest, most
abundant, most affordable food, and we are proud of them for
doing that.
This partnership is a big reason that COOL has always
enjoyed broad bipartisan support in the Senate. Even so, we are
facing a very significant trade compliance issue that demands
our full attention.
As we know, the World Trade Organization has spoken
decisively regarding COOL. They have spoken about the effects
on the beef and pork trade with Canada and Mexico very
specifically. Simply put, inaction from the Senate is not an
option, not when the threat of retaliation is hanging over
American agriculture and American manufacturing.
We both know--we all know that both sides of this debate,
those who want to repeal COOL, those who want to keep COOL,
have been dug in for a long time on this issue and that
entrenchment has not produced a path forward. Now is the time
to come together to do that. As many of you know, there were
many conversations in the process of the farm bill to try to
come together to do that. We were not successful. Now, we are
here, and now is the moment to do that.
That is why today's hearing is so important, and that is
why we need all of our colleagues involved in this discussion
so that we can find a path forward that is bipartisan and that
we can do quickly.
To help jump-start that process, Mr. Chairman, as you know,
I am offering a discussion draft. I appreciate your comments
regarding that draft as one option that I hope can be the basis
for a bipartisan solution that can move quickly through the
Senate and the House.
This approach includes two very simple components. First,
the removal of beef and pork from the mandatory labeling
provisions deemed noncompliant by the WTO. Second, the
establishment of a completely voluntary ``Product of US'' label
for beef and pork, similar to the voluntary Canadian label. It
is my hope that this simple WTO-consistent approach to
addressing this dispute will help us find a solution that
benefits American consumers and American agriculture, while
also finding a pathway forward between the United States and
our neighbors to the north and south.
Now, as a Senator from Michigan whose state borders
Canada--and we value that relationship, it is a working
relationship every single day, many conversations not only on
this issue, but many issues--I know firsthand the vital
importance of protecting our North American trade
relationships.
So, Mr. Chairman, I look forward to working with you and
members of the committee. I believe there is a way forward that
accomplishes the goal and one that we can do together and one
that can move quickly, because I know that that is what we need
to do. Thank you.
Chairman Roberts. I thank the distinguished Ranking Member
for her comments.
We would like to welcome our panel of witnesses before the
committee this morning. First, I would like to introduce Barry
Carpenter of the North American Meat
Institute from Washington, DC Mr. Barry Carpenter is the
President and CEO of the North American Meat Institute. He has
been in a leadership role in the meat packing industry since
2007, when he became CEO of the National Meat Association, one
of the predecessor organizations to the North American Meat
Institute.
Prior to joining the private sector, Barry retired from an
illustrious 37-year career as a public servant at the United
States Department of Agriculture, where he headed up the
Agriculture Marketing Services. The acronym for that, by the
way, is AMS. He created the United States Beef Export
Verification Program that was critical to reestablishing
American beef export following the first U.S. case of BSE in
2003. Among many other impressive accomplishments while a
government servant, Barry has received numerous governmental
and industry awards, including the Presidential Rank Awards
from President Clinton and President Bush, and is a member of
the Meat Hall of Fame.
Barry was raised on a multifaceted farm in Central Florida
that produced cattle, hogs, corn, peanuts, and melons. Talk
about diversification. He graduated in 1969 from the University
of Florida with a B.S. in animal science, and we look forward
to Barry's testimony and insight.
Our next witness is Craig Hill, who is an Iowa Farm Bureau
President, on behalf of the American Farm Bureau Federation. I
yield to the distinguished Senator from Iowa for her
introduction.
Senator Ernst. Thank you, Mr. Chairman, and thank you,
Ranking Member. I appreciate this time to give a great
introduction to a great Iowan. So, thank you to all of our
witnesses here today, but I would like to take this time and
introduce Mr. Craig Hill.
The World Trade Organization's ruling regarding the country
of origin labeling dispute between the United States, Canada,
and Mexico is an important issue that could have major impact
on the U.S. economy and on Iowa, in particular. Iowa is home to
over 20 million hogs. That is nearly six hogs for every person
residing in Iowa. Our annual pork sales lead the nation,
surpassing the next two states combined.
Additionally, our state boasts almost four million cattle
and calves on feed scattered across the 88,000 farms in the
state, almost all of which are family owned. Consequently, Iowa
is home to a robust meat packaging industry to support all of
this production.
Today, it is my great pleasure to introduce one of the
leaders of our thriving agriculture industry. Mr. Craig Hill is
a grain and livestock farmer from Milo, Iowa, and since 2011
has served as President of the Iowa Farm Bureau Federation. As
President, Craig serves as Chairman of the Board of FBL
Financial Group, Incorporated, and Farm Bureau Life Companies.
Additionally, he serves on the American Farm Bureau Board of
Directors.
Throughout his years with the Farm Bureau, Craig has been
involved in a variety of projects. He was instrumental in the
development of revenue assurance, a revenue-based crop
insurance program for corn and soybean farmers. He served as
the first chairman of the Iowa Ag State Group, which consists
of representatives from all sectors of Iowa's agriculture.
Craig is on the Board of Directors for the Cultivation Corridor
Project, which works to enhance the ag, bioscience, economic
opportunities in Iowa. He is also on the Board of Trustees of
the Council in Agricultural Science and Technology.
In addition to his successes in farm and business circles,
he and his wife, Patti, have two children.
We are excited to have someone with his depth of knowledge
and range of experience in the ag industry here with us today,
and Craig, it is really great to see you again. It is always
good to have you here. I appreciate having an Iowan on the
panel with the type of knowledge and expertise that you do. So,
thank you, Craig, very much for being with us today.
Thank you, Mr. Chairman.
Chairman Roberts. I thank the Senator from Iowa, and we
welcome Mr. Hill.
Our third witness is Leo McDonnell, the Executive Officer
and Director Emeritus for the United States Cattlemen's
Association. The distinguished Senator from North Dakota is
scheduled to introduce this witness and I yield to her at this
time.
Senator Heitkamp. Thank you, Mr. Chairman.
I am assuming, Leo, that is your hat.
Mr. McDonnell. Yes.
[Laughter.]
Senator Heitkamp. I figured so. It fits with the
description. I just want to make a point that you are one of
those guys who are out there in North Dakota making this happen
and continuing to diversify our opportunity in agriculture. We
are number one in the nation in a lot of crops, big crops and
little crops, specialty crops, but we definitely appreciate the
cattlemen in our state, and so it is a great pleasure to
introduce a rancher from North Dakota, Leo McDonnell, to
testify on the importance of country of origin labeling to the
ranchers of my home state, North Dakota.
Leo, along with his wife, Debra, ranch in the southern tip
of the North Dakota Badlands, between Marmath and Rhame, and if
you have not been there, it truly is God's country. Leo and
Debra have four children and ten grandchildren. Leo's
grandparents were natives of another great cattle town, Towner,
North Dakota.
The McDonnell's run a registered Angus herd and have a bull
sale in May in Bowman, North Dakota, along with Angus herds
near McKenzie, North Dakota. Mr. McDonnell owned and operated
Midland Bull Test, the largest genetically tested bull
development and sale in North America, in Columbus, Montana,
and has since turned that operation over to his son, Steve, as
Leo and Debra spend more time developing their program in North
Dakota.
He has been active in community and cattle groups over the
years, probably longer than what he cares to remember,
including as past member of the North Dakota Stockmen's
Association and a member of the Independent Cattlemen's
Association of North Dakota, otherwise known as IBAND. Mr.
McDonnell has also served as Past Chairman of the Montana
Cattle Feeders and sat on the NCA, today NCBA, international
marketing committee in the early 1990s.
Currently, Leo serves as Executive Officer and Director
Emeritus for the U.S. Cattlemen's Association, USCA, and is a
member of the Cattlemen's Beef Board, Director on the American
Angus Association, and most recently stepped down from NCBA CBB
Industry Long-Range Planning Committee, which has been tasked
with setting the direction for CBB spending and various
industry groups policies.
I think Leo knows a few things about ranching, knows a few
things about the cattle business, and knows what is good for
the cattlemen of our country and for the state and for the
region.
Thank you so much for traveling to Washington, DC, Leo. We
appreciate and look forward to your testimony.
Chairman Roberts. I thank the distinguished Senator from
North Dakota. Thank you, Senator Heitkamp.
Our fourth witness is Jaret Moyer, President of the Kansas
Livestock Association, a good friend. Jaret Moyer and his wife,
Shawna, ranch in the Kansas Flint Hills, where they run a
cattle backgrounding operation. Jaret is current President of
the Kansas Livestock Association and serves on the KLA
Executive Committee and its Board of Directors. He also serves
on the National Cattlemen's Beef Association Board of Directors
and is the Past Chairman of the Kansas Beef Council.
In addition to his many leadership positions in the beef
industry, Jaret is also President of the Citizens State Bank
and Trust Company. He is a graduate of Kansas State University,
the home of the ever-optimistic and fighting Wildcats----
[Laughter.]
Chairman Roberts. --with a degree in animal science. Jaret
also completed coursework at the Graduate School of Banking in
Madison, Wisconsin.
I am very glad to welcome a fellow Kansan and a friend and
a fellow Wildcat to our nation's capital.
Our fifth witness was to be introduced by Senator
Gillibrand, but she had to leave, and so I yield to the
distinguished Ranking Member.
Senator Stabenow. Thank you very much, Mr. Chairman, and
Senator Gillibrand apologized. She wanted very much to
introduce Mr. Trezise, but had to leave for another hearing and
hopefully will be able to come back and join us.
Jim Trezise currently serves as the President of the New
York Wine and Grape Foundation, a position he has held since
the Foundation's creation in 1985. In addition to his role as
President, Mr. Trezise is the founder and President of the
International Riesling Foundation, a coalition of top riesling
producers from around the world seeking to promote riesling and
educate consumers.
He serves on the Presidential Council at FIBS, based in
Paris. He is a member of the Executive Committee and Board of
Directors of Wine America, the national organization of
American wineries, as a board member of the National Grape and
Wine Initiative, and as a board member of the Wine Market
Council.
He has received numerous awards and recognitions, most
recently the Grand Award of the Society of Wine Educators in
2014.
In short, he is one of the greatest champions of the New
York wine industry and we welcome you today.
Chairman Roberts. Thank you, Senator Stabenow.
Our next witness is Mr. Christopher Cuddy, who is Senior
Vice President and President of ADM's Corn Processing Business
Unit and an officer of that corporation. In that role, he has
responsibility for all commercial activity operations and
production for the company's global corn business.
Previously, Mr. Cuddy served as President of the Sweeteners
and Starches in ADM's Corn Processing Business Unit. He has
also held a variety of merchandising and management roles prior
to leading the Sweeteners and Starches Group, including time at
an ADM joint venture based in Guadalajara, Mexico, roles in
sales, marketing, and distribution of corn-based sweeteners and
sugar, and North American Sales Manager for ADM Bioproducts. He
began his career with the company as a Senior Commodity Trader
with ADM Grain.
Mr. Cuddy holds a Bachelor's degree in business
administration from Appalachian State University in Boone,
North Carolina. He serves on the boards of the Corn Refiners
Association and Red Star Yeast Company, LLC, an ADM joint
venture. He is also a board member of the Mid-Illinois Chapter
of the American Red Cross.
Mr. Cuddy, welcome, and I look forward to your testimony,
as well.
We will start with the first witness.
[Pause.]
Chairman Roberts. Excuse me, Mr. Barry Carpenter. Mr.
Carpenter.
STATEMENT OF BARRY CARPENTER, CHIEF EXECUTIVE OFFICER, NORTH
AMERICAN MEAT INSTITUTE, WASHINGTON, DC
Mr. Carpenter. Good morning, Chairman Roberts, Ranking
Member Stabenow, and members of the committee. My name is Barry
Carpenter and I am the President and CEO of the North American
Meat Institute.
The Meat Institute members include 374 meat and poultry
food manufacturers ranging from the nation's largest to the
smallest. Collectively, they produce 95 percent of the beef,
pork, lamb, veal products, and 75 percent of the turkey
products in the United States. Among the Institute members, 80
percent are small family-owned businesses employing fewer than
300 people. These companies operate, compete, sometimes
struggle, mostly thrive in one of the toughest, most
competitive, most scrutinized sectors of our economy, meat and
poultry packing and processing.
Make no mistake, the Meat Institute has opposed mandated
country of origin labeling since the beginning. COOL for beef,
pork, and chicken is a non-tariff trade barrier that adds great
cost while providing no benefit. Further, USDA has repeatedly
stated that COOL is not a food safety program and all credible
parties have agreed.
Government-mandated COOL is not WTO compliant. Let me
repeat that. Government-mandatory COOL is not WTO compliant.
This is a settled matter. In four separate decisions, WTO
has ruled against the United States concerning COOL, putting
the United States on the brink of having its most important
trading partners impose $3 billion in annual tariffs on U.S.
products.
Let us be candid. The most vocal proponents of COOL for
livestock have a single objective, to block the importation of
livestock from our neighbors. The law has never been about
distinguishing meat products in the market. It is simply a
protectionist measure intended to exclude Canadian and Mexican
livestock from the U.S. market. It is and always has been a
non-tariff trade barrier. Anyone ignoring this fact is not a
serious participant in this discussion.
COOL must be repealed now to bring the U.S. into compliance
with its trade obligations and put an end to this protectionist
nonsense. The U.S. has run out of opportunities to try to fix
COOL. We should stop talking amongst ourselves to address COOL.
We should be talking with the Canadians and Mexican
governments. To do otherwise is a fool's errand. I can tell
you, the Canadian and Mexican governments are very clear.
Repeal is the only solution.
The House of Representatives recognized the gravity of the
situation and 300 members of that body voted on a bipartisan
basis to repeal COOL for beef, pork, and chicken. It is time to
repeal government-mandated COOL for beef, pork, and chicken
before Canada and Mexico levy a $3 billion annual retaliatory
penalty that will cost jobs across the economy in virtually
every State. We urge the Senate to move quickly and put this
failed experiment behind us once and for all.
Thank you for the opportunity to participate in this
hearing, and I would be pleased to answer questions.
[The prepared statement of Mr. Carpenter can be found on
page 42 in the appendix.]
Chairman Roberts. Mr. Carpenter, I thank you very much. You
made your point and you had two minutes remaining, which is
very unusual for a witness before the Senate.
[Laughter.]
Chairman Roberts. I am not sure what kind of an award we
will give you, but we will think about it.
Our next witness is Mr. Craig Hill, Iowa Farm Bureau
President, on behalf of the American Farm Bureau Federation.
Mr. Hill.
STATEMENT OF CRAIG HILL, PRESIDENT, IOWA FARM BUREAU
FEDERATION, MILO, IOWA, ON BEHALF OF THE AMERICAN FARM BUREAU
FEDERATION
Mr. Hill. Chairman Roberts and Ranking Member
Stabenow, members of the Senate Committee on Agriculture,
it is a great opportunity for me to be here today and to stand
before you today as you take the next steps forward to resolve
this longstanding and contentious trade dispute between the
United States and North American neighbors.
My name is Craig Hill and I am a grain and livestock farmer
from Milo, Iowa. I currently serve as President of the Iowa
Farm Bureau Federation, also a member of the Board of Directors
of the American Farm Bureau, as well as a member of their Trade
Advisory Committee. I am pleased to present Farm Bureau's views
today regarding the hearing on ``Country of Origin Labeling and
Trade Retaliation: What is at State for America's Farmers,
Ranchers, Businesses, and Consumers.''
Farm Bureau policy clearly states, set by our grassroots
members, that we support country of origin labeling for a wide
variety of agricultural products. Our policy states we support
country of origin labeling, COOL, that conforms to the COOL
parameters and meets WTO requirements.
The American Farm Bureau has consistently supported the
efforts of the U.S. Government to resolve the World Trade
Organization, WTO, rulings that found in favor of Canada and
Mexico regarding their challenge of the U.S. beef and pork COOL
programs. With the latest WTO decision that rejected the U.S.
appeal in the COOL case, it is clear. It is clear now that it
is time to act, time to prevent Canada and Mexico from imposing
retaliatory sanctions that will negatively impact U.S.
agriculture and other goods and commodities.
The WTO determination that provisions in the U.S. mandatory
country of origin labeling for beef and pork is illegal under
international trade rules and allows Canada and Mexico to
impose these tariffs against U.S. ag commodities and other
goods until the case is finally resolved between the parties.
The WTO has consistently ruled against both the original USDA
regulations and the revised regulations set forth by the
Department in implementing mandatory COOL in accordance with
farm bill provisions.
To be clear, Farm Bureau supports the repeal of COOL
requirements for beef and for pork which have been found do not
comply with the WTO rules, and we also support the action taken
by the House Ag Committee to repeal COOL for chicken. We
appreciate the support this approach has given and also the
effect of keeping and maintaining our COOL programs in place
for other crops and commodities, including lamb, goat meat, and
et cetera.
The key factor in our position is the fact that WTO's final
ruling opens the gate for retaliation by Canada and Mexico
against the United States. As you are no doubt aware, after
Canada presented its request, the WTO dispute settlement body
on June 17, 2015, for retaliatory tariffs equaling $2.52
billion worth of trade. The U.S. objected to the amount
requested and this objection triggers a 60-day arbitration
process.
Mr. Chairman, 30 percent of Iowa's economy is predicated
upon agriculture. Twenty percent of Iowa's workforce is either
directly related to agriculture or indirectly related to
agriculture. Eighty-thousand jobs in Iowa are export dependent
with a whole array of products.
Senator Ernst mentioned that we had lots of hogs in Iowa.
Well, actually, our sales are $44 million a year of $144
million that are produced nationally. Twenty-five percent of
America's corn is produced in Iowa. Canada is Iowa's number one
export market. I understand number two in the U.S., but number
one for Iowa. Iowa State University, as you mentioned, claims
that 17,000 jobs nationally would be lost if this retaliatory
effort began.
So, to echo your remarks, it is intolerable and we urge the
repeal of COOL. Thank you.
[The prepared statement of Mr. Hill can be found on page 49
in the appendix.]
Chairman Roberts. Well, thank you, Mr. Hill. You also made
a concise statement, very clear, with about a minute to go. So,
we have three minutes to the good. We will put that in the
bank, Senator Stabenow.
Our next witness is Leo McDonnell, the Executive Officer
and Director Emeritus for the United States Cattlemen's
Association. Senator Stabenow and I said it was a close race
between you and Mr. Trezise, but you have the sharpest tie of
all the witnesses.
[Laughter.]
Chairman Roberts. Simply put, we see you coming.
[Laughter.]
Chairman Roberts. Please.
STATEMENT OF LEO MCDONNELL, OWNER/OPERATOR, MCDONNELL ANGUS AND
MIDLAND BULL TESTS, RHAME, NORTH DAKOTA, ON BEHALF OF THE
UNITED STATES CATTLEMEN'S ASSOCIATION
Mr. McDonnell. Thank you, Mr. Chairman, Ranking Member
Stabenow, and members of the committee. I am Leo McDonnell. I
am owner and operator of McDonnell Angus and Midland Bull Tests
based out of North Dakota and Montana and I appreciate the
invitation to be here today on behalf of the United States
Cattlemen's representing cow-calf producers, backgrounders, and
feed lot operators, and also representing the largest segment
of the cattle and beef complex as it has to do with
investments, the largest segment who, consistently with every
poll, supported country of origin labeling.
American cattle producers provide the highest quality
cattle and beef in the world. U.S. producers are recognized
worldwide for having the highest and most rigorous standards
when it comes to how we produce cattle and beef, from our
conservation practices to having the most respected food safety
inspection system and to having the highest quality product.
U.S. beef is considered number one globally, which is why both
producers and consumers are behind the effort to keep COOL and
be able to identify our product.
Efforts to strip this program through a blanket repeal
approach is unwarranted and unprecedented at this point of the
process in arbitration. This issue is personal for me, as it is
for ranching families across the country. My wife and I ranch
in the south western tip of the North Dakota Badlands, just
five hours from where my grandparents called home and
homesteaded in Towner. We run multiple registered herds.
We also run the largest genetic seedstock test station and
bull sale in North America, with sales in Montana, a three-day
sale in Montana and one in North Dakota. We genetically measure
about 2,500 to 3,000 bulls. As I noted before, we are, I think,
the largest seller of breeding bulls in North America. I do not
know that for a fact. It is not the way we measure our
business.
But, we sell bulls into Canada, Mexico, Brazil--we actually
partner with one of the largest ranchers in Brazil--Argentina,
Australia, and New Zealand. We were also involved in very large
shipments of breeding females to Turkey and Russia as they
started up their agriculture industries in recent years and was
involved in the very first shipment of breeding bulls quite a
while back to Uruguay.
I note all that because my family and I have never seen a
problem with being both pro-COOL and pro trade, and I take a
little offense to having people call COOL as a protectionist
act, because nothing is protectionist about it. We do it on 90
percent of the other products we bring into the United States.
COOL was founded, though, as much to address deception in
the marketplace as it was to address something so simple as the
consumers deserving the right to know where their beef products
come from. Since the late 1980s, we have been told by experts
that those in the ranching business need to learn how to
compete in the global market. You tell me how we can compete if
we are not allowed to differentiate our product. That does not
work in a capitalistic society.
In other words, COOL is a program designed to promote
choice and COOL also initiated a historic partnership between
cattle country and consumers, and I would sure hate to lose
that during the Information Age.
The WTO has found some problems with COOL, but do not
forget, one of the problems was that it did not go far enough,
that it excluded some segments of our industry; such as, food
service and wholesale. That was one of the early discoveries.
That it is only perceived, the segregation costs that they
found were discriminatory. They have not provided an economic
analysis and they so admitted it in the last ruling. All other
sectors of the ag industry have origin labels--``avocados from
Mexico.''
You know, we should be stepping forward to meet those
interests from consumers wanting to know where their food comes
from instead of stepping backwards in trying to repeal this law
and going back to deceptive practices.
There is no question, we have hit a roadblock at the WTO,
legitimate or otherwise. The global market is demanding U.S.
beef and this ongoing case threatens the ability of our
producers to seize these opportunities to compete.
These differences have made it tough for us to address this
issue. Unsubstantiated retaliatory tariffs--and I say
unsubstantiated, because the arbitration process we are going
through today, has shown in the past that in other cases where
foreign countries have threatened $3 billion tariffs, and at
the end of the day, such as in the gambling cases, got $25
million. Nonsense.
I want to thank you all for considering looking at
voluntary. We want to be able to keep what we have invested in
so far. We want to have that opportunity if the arbitration
fails. We want to preserve the integrity of the ``U.S. beef''
label and preserve our opportunity to truly compete in a global
market. Thank you.
[The prepared statement of Mr. McDonnell can be found on
page 53 in the appendix.]
Chairman Roberts. Mr. McDonnell, you have a very impressive
background. Senator Heitkamp, when she introduced you, said she
had not seen you for a while, but that is your hat. In Dodge
City, we have an expression, a big hat, no cattle. In your
case, big hat, lots of cattle.
[Laughter.]
Chairman Roberts. We have a lot of bull around this place,
but you seem to have exceeded even our level of production. I
thank you for your statement, sir.
Mr. Moyer.
STATEMENT OF JARET MOYER, PRESIDENT, KANSAS LIVESTOCK
ASSOCIATION, EMPORIA, KANSAS
Mr. Moyer. Mr. Chairman, thank you for the opportunity to
be here today to continue the discussion on COOL. I appreciate
your leadership on this issue. In my opinion, COOL is a failure
and the best solution is full repeal.
I am President of the Kansas Livestock Association, a
5,200-member trade association representing all segments of the
cattle industry. KLA members have long opposed COOL because we
feel it is a cost to us without any benefits. Proponents of
COOL have long said mandatory labeling would increase demand
for U.S. beef. After six years of implementation, it is clear
that is not the case.
Kansas State University published a comprehensive study in
November of 2012. Their study utilized multiple methods to
gauge consumer perception in the use of COOL and came away with
several findings. The study determined demand for beef has not
been positively impacted by COOL. In addition, typical U.S.
consumers are unaware of COOL and do not look for origin
labeling. USDA's own economic analysis provided to you in May
supports these findings.
While proponents of COOL say they have surveys that show
Americans want to know where their beef comes from, the K State
study actually measures how Americans vote, and Americans vote
with their pocketbooks by purchasing beef. As the study found,
they do not consider COOL in their purchasing decision. Why,
then, would we incur the costs of a program that the consumer
is not demanding?
For a Kansas perspective, we sought input from Glynn
Tonsor, Associate Professor of Agricultural Economics at Kansas
State and a primary author of several studies on COOL. In the
April 2015 report to Congress, Dr. Tonsor and his colleagues
identified the industry costs of the COOL rules, totaled $8.5
billion--billion--dollars. The sum of the adverse impacts from
the rules on all segments in Kansas, as, Mr. Chairman, you
mentioned earlier, is $500 million. That is $500 million out of
the pockets of Kansas producers, processors, and consumers for
a program providing no value.
COOL is a failed experiment. The WTO has ruled against the
U.S. four times. The next step is for Canada and Mexico to
retaliate. We continue to hear some pro-COOL groups and members
of Congress suggest that the process is not over and,
therefore, it is too early to act. We disagree.
We have two options, repeal or face retaliation from two of
our largest export customers. Both countries are very clear
about this. The only outstanding question is at what monetary
level Canada and Mexico will be able to retaliate, damaging our
economy and costing jobs.
The Secretary of Agriculture has stated repeatedly there is
nothing else USDA can do to fix this and that Congress must
act. He also reports to you in a letter in May that repeal is a
way to prevent retaliation. On both of these points, we agree.
The solution is for Congress to repeal COOL now. Three-hundred
House members demonstrated in a strong bipartisan vote that the
time has come to stop this madness. We encourage the Senate to
exhibit the courage to do the same.
Mr. Chairman, thank you for this opportunity to be here
today.
[The prepared statement of Mr. Moyer can be found on page
68 in the appendix.]
Chairman Roberts. I appreciate that, and we are 45 seconds
ahead. This is a great panel.
[Laughter.]
Chairman Roberts. Mr. Jim Trezise, President of the New
York Wine and Grape Association. Please proceed.
STATEMENT OF JIM TREZISE, PRESIDENT, NEW YORK WINE AND GRAPE
FOUNDATION, CANANDAIGUA, NEW YORK
Mr. Trezise. Chairman Roberts, Ranking Member Stabenow,
members of the committee, thank you for allowing me to provide
testimony today on behalf of the New York grape and wine
industry about the potential retaliatory tariffs on New York
and other American wines exported to Canada.
My name is Jim Trezise. I am President of the New York Wine
and Grape Foundation, which represents grape growers and
wineries statewide. New York is the third-largest grape and
wine producing state, with 37,000 acres of grapes owned by
1,600 farming families, over 400 wineries in 59 of 62 New York
counties, and an economic impact annually of $4.8 billion for
the state economy.
I also serve on the Board of Directors of Wine America, the
national organization of American wineries, which does such a
great job representing us in Washington in collaboration with
our California colleagues from Wine Institute. There are now
wineries in all 50 states, which means all 100 Senators
represent wineries and wine has become an all-American farm
product and art form. Nationwide, the wine industry is growing
strongly, especially in states like Michigan, Ohio, and
Virginia, as well as New York, providing opportunities and
challenges, as well.
The COOL issue has become one of great importance and
urgency for the wine industry. We did not really have a strong
opinion about this until we were forced into the debate because
of potential retaliatory tariffs on American wines, which would
have a devastating effect. The urgency is that unless this
issue is resolved before the August recess, those tariffs would
take effect in September. Subject to a total appeal, which may
take two years, American wine would be an innocent victim
paying a huge price.
Our New York wine industry has exploded during the past
decade and especially the past five years. In 2010, there were
296 wineries, today, 401, and those 105 new wineries represent
26 percent of all wineries created in the 175 years of our
industry's existence. This is all great news for New York's
economy because it means new investment, businesses, jobs,
tourism, and taxes.
But, the explosive growth also means we must expand our
markets. Wine country tourism continues to grow, and so do the
markets in New York State, but not enough to keep up with the
number of new wineries, as well. So, we have to expand into the
export markets and Canada is our number one export market.
In 2014, the value of wine shipments to Canada originating
in New York State was over $5.5 million. That income is
important now, but will be increasingly so as our industry
continues to grow. The market for all American wine in Canada
has increased 78 percent since 2010, with wine exports totaling
$487 million and translating into retail sales of $1 billion,
representing a 16 percent market share. We are just doing
great.
For many years, we and our colleagues in California,
Oregon, and Washington have benefited from USDA's Market Access
Program to build key export markets, with Canada right at the
top. Our program includes many small wineries throughout the
state. In addition, three large companies are major exporters
and vitally important to New York's 1,600 grape farming
families, since among them they purchase more than 90 percent
of all the grapes grown in New York. In other words, the impact
is statewide and extends from grape farms to wineries both
small and large.
The wine industry worldwide is highly competitive and
extremely price sensitive. The potential tariff increase by the
Canadian government would roughly double the price of American
wines to Canadian consumers overnight, drying up our sales and
opening the door to competitors from throughout the world. Even
if the increased tariffs were later dropped, the shelf space
and restaurant wine listings would be long gone, requiring
years of effort and millions of dollars to regain them. This
would be a huge surplus--I mean, the huge surplus of American
wine which, in turn, would depress grape prices for farm
families as early as this fall.
In closing, let me say how grateful we have been to have
MAP funding to help build export markets for New York and other
American wines. I hope that investment will not be jeopardized
by increased tariffs that would make our fine wines
unaffordable.
We know there are many facets to this issue and appreciate
you weighing them carefully. We are here because we feel a need
to protect our investments, businesses, employees, and
especially our families.
So, on behalf of the New York grape and wine industry and
my colleagues in other states, I respectfully request that our
industry's future in all 50 states be carefully considered as
this process moves forward. Thank you very much.
[The prepared statement of Mr. Trezise can be found on page
72 in the appendix.]
Chairman Roberts. We thank you, Mr. Trezise. You finished
about a minute and 20 left in your statement. Senator Stabenow,
I cannot remember a panel where each and every one finished
well ahead of the time period.
Senator Stabenow. I cannot, either, Mr. Chairman. I think
this is great, and we will just take the time that you have,
extra time for questions.
Chairman Roberts. I think if we quit talking, why, they can
finish----
[Laughter.]
Chairman Roberts. --and we can recognize those who have
persevered and been here.
Mr. Cuddy, you are on deck. No, you are at bat. I am sorry.
Senator Stabenow. That is right.
STATEMENT OF CHRISTOPHER CUDDY, SENIOR VICE PRESIDENT AND
PRESIDENT, CORN PROCESSING BUSINESS UNIT, ARCHER DANIELS
MIDLAND COMPANY, DECATUR, ILLINOIS
Mr. Cuddy. Thank you, Chairman Roberts, and thank you,
Ranking Member Stabenow and all honorable members, for this
opportunity to share ADM's views on the current country of
origin labeling rule.
As you said, Mr. Chairman, my name is Chris Cuddy and I am
the Senior Vice President at ADM and the President of our Corn
Business Unit. Earlier in my career, I was President of the
company's Sweetener and Starch Business, and before that, I ran
an ADM joint venture in Guadalajara, Mexico, where we
manufactured corn syrups.
ADM is one of the world's largest agricultural processors
and food ingredient providers, with more than 33,000 employees
and customers in more than 140 countries. We play a vital role
in feeding the world by buying millions of tons of farmers'
crops each year, including corn, soybeans, wheat, rice, edible
beans, and peanuts, transporting these crops to our 300
processing facilities and transforming them into a wide range
of food ingredients, animal feeds, and other renewable
products.
Here in the United States, we employ 17,000 colleagues in
our various processing plants, grain elevators, transportation
and logistics operations, and export facilities. Last year, we
spent a total of $40 billion with U.S. businesses in all 50
states. That figure includes farmers and businesses of all
sizes.
ADM's ability to generate this kind of economic activity
depends in no small part on our export businesses. Last year,
we exported $18 billion worth in crops and finished products to
markets around the world, including Canada and Mexico.
Companies in those two countries represent a sizeable portion
of our customer base. We provide them with everything from
crops, like corn and rice, to ingredients, like sweeteners, soy
proteins, wheat flours, and bakery mixes.
If these valued neighbors and trading partners follow
through on their threat to retaliate against U.S. products over
the COOL rule, the economic impact across the food production,
agriculture, and manufacturing sectors could come to billions
of dollars. We at ADM have calculated that the cost to our
company alone would exceed $700 million per year. Retaliation
would render our exports, from ethanol to soy proteins to corn
sweeteners, completely uncompetitive.
As a company and as an industry, we have gone down a
similar road before and paid a heavy price. Between 1997 and
2001, Mexico imposed countervailing duties on corn sweeteners
imported from the United States. It has been estimated that
direct cost to our industry came to about $800 million and that
the ripple effect on corn sales amounted to another $400
million in direct losses. In addition, if we account for the
cost of industry capacity that went unused during this period,
the idle time generated another $400 million in indirect
losses. That is $1.6 billion for one industry.
As unfortunate as that dispute was, the current situation
involving COOL will have much more serious economic
consequences if Congress does not act to prevent retaliation.
The impact will be felt by ADM and our employees. It will take
a tremendous toll on American agriculture more generally,
particularly on farmers and their communities.
So, Mr. Chairman, honorable committee members, on behalf of
my colleagues around the world, in the interest of farmers,
businesses, and communities who will suffer tremendous losses
if this matter is not resolved immediately.
I would respectfully ask you to act quickly and decisively
to prevent retaliation by Canada and Mexico. Rescind the COOL
requirement for muscle cuts of meat, respect our country's
obligation as a WTO member; reinforce the United States'
standing as a responsible trade partner, and return us to
business as usual right away.
Thank you for your time, and thank you in advance for
taking action.
[The prepared statement of Mr. Cuddy can be found on page
47 in the appendix.]
Chairman Roberts. Mr. Cuddy, thank you very much for your
comments, and once again, you finished way under time. We will
see if we can do the same thing when we ask questions.
This is for the entire panel. We will just move down from
Mr. Carpenter down to Mr. Cuddy. Canada and Mexico will soon be
authorized by the WTO to retaliate against the United States.
Once that happens, it does not matter if the Congress, the
USTR, and the Department of Agriculture all agree that a
certain labeling approach satisfies the WTO rules, not to
mention members of the Senate. If Canada and Mexico disagree,
they can keep any authorized retaliation in place until we get
a ruling from the WTO. During this time, we expose our farmers,
our ranchers, our businesses and consumers to pay the price.
Are you willing to risk any period of retaliation so we can
test whether another approach to labeling works?
Mr. Carpenter.
Mr. Carpenter. None. Very clearly, we are already incurring
tremendous cost to implement the program and lost market
opportunities. To put on top of that additional tariffs is
totally unacceptable.
Chairman Roberts. Mr. Hill.
Mr. Hill. The short answer is ``unwilling,'' Senator.
American farmers are committed to rules-based fair trade
practices, and there is an issue of good faith here. North
American partners need to be treated fairly. It has not been
brought up a lot today, but these obstacles of trade and
barriers to trade affect all of us and we should be good
trading partners and repeal this mandatory COOL.
Chairman Roberts. Mr. McDonnell.
Mr. McDonnell. If I understand you correct, you are asking,
are we willing to preempt the arbitration process?
Chairman Roberts. The question was, are you willing to risk
any period of retaliation so we can test whether another
approach to labeling works.
Mr. McDonnell. Oh. I do not think that is necessary, to go
that direction, sir. I think we can go through arbitration, see
where we are at, see where those levels of retaliatory tariffs
are at, which so far have never been documented. Even our own
courts here, when AMI and others challenged COOL, said that
they were not able to prove damages. So, I would like to see it
go through the process as we have always done before. When we
get to the end arbitration, if for some reason they get these
``sky are falling'' tariffs, then be ready to make a move to
the voluntary.
[As a preliminary matter, this Committee should
consider the troubling implications of the WTO's
decisions on COOL. Though the WTO acknowledged that
providing consumer information is a legitimate
government objective, it also found that any labeling
regime which alters the conditions of competition to
the detriment of imports violates WTO rules, even if
that detrimental impact results solely from legitimate
regulatory distinctions. As all origin labels
necessarily convey different information about products
of different origins, this case could have much broader
negative impacts beyond our cattle and beef sectors.
On May 29, the U.S. Trade Representative expressed
these concerns before the WTO:
Paradoxically however, it would appear from those
findings that there is no clear way under the covered
agreements for a Member to achieve that legitimate
objective (of consumer information).
When examined as a whole, the Panel and Appellate Body
findings appear to mean that the United States cannot
require U.S. retailers to inform consumers of beef and
pork about where the animals were born, raised, and
slaughtered. This is a conclusion with which the United
States strongly disagrees.
USTR concluded that the Appellate Body had failed to
address these and other ``serious and systemic
concerns'' raised in the dispute. These concerns should
give Congress pause.]
Chairman Roberts. Mr. Moyer.
Mr. Moyer. Senator, as you know, or maybe have heard in the
Flint Hills of Kansas, there is the saying that good fences
make for good neighbors. Now, I do not want to get into other
issues that that may lead to in this town, but part of that
saying is the fact that it is the respect of your neighbors,
and the fence law in Kansas, each one is responsible for their
half of the fence. So, if I do my part, they are willing to do
their part. We have a good fence. We have good neighborly
relations.
I think it is a farce to try to go down this road of trying
to see if they are serious when we know they are serious and
that full repeal would be the best answer, sir.
Chairman Roberts. Mr. Trezise.
Mr. Trezise. Mr. Chairman, no, we would not want to see any
period where the tariffs would be into effect because it would
basically unravel the whole wine market system that we have
worked so hard to develop in Canada. Once it starts going, it
is gone, and our wines would be replaced by wines from
competing regions around the world. So, we would not want to
take that risk.
Chairman Roberts. Mr. Cuddy.
Mr. Cuddy. As you stated earlier, Chairman Roberts, we have
lost four times at the WTO. I think we have gone down the path
correctly, but it is time to respect our obligations as a WTO
member. So, the answer is no.
Chairman Roberts. This question is for Jaret. Jaret, as you
know, Kansas is the third-largest cattle producing state in the
U.S. You certainly emphasized that in your statement. Further,
our state has a wide variety of cattle producers, from cow-calf
producers with a couple dozen cows to some of the largest
feedlots in the country. Being from Dodge City, I certainly
know that. We smell the money.
Do you believe Kansas beef producers have options available
to them when it comes to pursuing ways to differentiate their
high-quality beef in the marketplace? If so, what are some of
those options?
Mr. Moyer. Senator, I really do believe they have those
options, and I think part of letting them fully realize those
options is letting them differentiate their products out in the
marketplace. Like it was said in my testimony, there is a
sector of the consumer population that wants to buy the U.S.
beef. That is their main purchasing reason. But, that is a very
small percentage, and I think we need to allow the producers
out there to supply that at a premium that they can realize
instead of supplying it at a cost that they realize.
Chairman Roberts. I appreciate that. My time is up.
Senator Stabenow.
Senator Stabenow. Well, thank you very much to all of you,
and Mr. Trezise, let me just say that we are very excited about
the Michigan wine industry. We are winning some awards on
rieslings, as well, so we are willing to compete with you in
New York and what you are doing.
Let me first start, Mr. Trezise and Mr. Cuddy, I am
assuming, and I certainly understand this, we have a lot of
food industry, a lot of others in Michigan very concerned about
resolving this, and so I would ask each of you, if we have a
solution that can move quickly, bipartisan support, WTO
compliant, that would include a voluntary label similar to
Canada, would you object to that? Mr. Trezise.
Mr. Trezise. I think the question, Senator, is whether
Canada and Mexico would agree to that and suspend retaliatory
tariffs----
Senator Stabenow. Of course.
Mr. Trezise. --for a time that it would take a look at. We
do not necessarily have a position on the shape of a bill. What
we have a position on is we really must avoid any kind of
retaliation for even one day.
Senator Stabenow. Absolutely. So, yours is about getting
this resolved, and I agree with you. We all know the position,
what is going on with Canada and Mexico. I have been talking to
them in a lot of different conversations over time, and they
are looking at the politics and trying to get the best
position. I understand that. But, I also know what can be done,
if people want to do it.
So, Mr. Cuddy.
Mr. Cuddy. I concur with Mr. Trezise. If it is compliant
with WTO and it keeps Canada and Mexico from retaliating, then
we are open to those options.
Senator Stabenow. Thank you.
I would like to now turn to the folks representing our hard
working ranchers and ask each of you, Mr. Hill, Mr. Moyer, and
Mr. McDonnell--and, by the way, Mr. McDonnell, congratulations.
It is five on one today, and I think you are doing pretty well,
so appreciate your position.
But, I guess I would ask each of you, and Mr. Hill, first
of all, would the producers you represent support a purely
voluntary country of origin label for meat derived from animals
born, raised, and slaughtered in the United States if the label
were consistent with WTO rules? I should underscore that I
understand at some point, each of the rancher organizations
actually have supported voluntary COOL measures, so I am
wondering if you would still support a version of a volunteer
effort. Mr. Hill.
Mr. Hill. I guess those discussions subsequent to full
repeal of mandatory COOL could be held. First, we need to
repeal completely this very egregious--what is determined to be
a very egregious trade violation. After that, I think
commercial interests, suppliers, can avail themselves today of
voluntary labeling that indicates country of origin. We have
got the best ag industry in the world and we have got a great
food safety system. If people are seeking that label and there
is a commercial value to it, I think everyone should be capable
of producing a label that indicates that.
Senator Stabenow. Okay. Mr. McDonnell, you indicated that
you are representing the largest segment of the industry today.
How do you and your organization come to the conclusion that a
voluntary COOL process would be an acceptable path for ranchers
looking to resolve the dispute, again, assuming this is WTO
compliant and, obviously, supported by our partners. But, why
do you think that a voluntary COOL process is acceptable from
your perspective and the ranchers you represent?
Mr. McDonnell. Well, I would like to take it back to early
in my talk where I said one of the reasons--and, by the way, I
helped Senator Johnson write the COOL law when Senator Daschle
was in there, and Senator Enzi, and we would sit around the
table. But, I was in there right at the start, and Barry is
aware of that.
Half the reason we want country of origin labeling is
because prior to the COOL law you could bring in a Canadian-fed
steer, a Canadian cow, a Mexican cow, I could bring in loins
from other countries, and if they were processed, slaughtered,
or even just season them with salt and pepper, then you could
call that U.S. beef. There were no definitions for U.S. beef
except point of transformation.
So, at the very minimum, I would hope that if we could go
to voluntary--and I do not think we need to start a new law and
go through all that process and waste that time and money--
simply change ``mandatory'' to ``voluntary,'' preserve the
integrity of the U.S. beef label, because I do not think
anybody wants to vote for repealing it when that means we are
going back to the old way of deceiving consumers. Simply do
that and address the few WTO concerns that we did not go far
enough in other segments of the industry, such as restaurants.
It is very simple. Everybody walks away a winner. Nobody gets
harmed. How often does that happen in D.C.?
Senator Stabenow. Thank you very much, and----
Mr. McDonnell. Good solution.
Senator Stabenow. Finally, Mr. Moyer, I know your
organization, as well, at various points has supported
voluntary COOL measures, and so I am wondering, within the
confines of, as I described them, is that a solution if we can
get this done quickly, with bipartisan support?
Mr. Moyer. I think, Senator, that is something that we
could not support, and if you hear hesitation in my voice, it
is that I am thinking of a story where I would have to admit on
the Congressional record that my wife was right----
[Laughter.]
Mr. Moyer. --and that comes--I am thinking of a piece of
farm equipment that I a while back purchased at an auction. I
told her it was going to solve a problem, make our life easier.
I ended up putting more parts, more time, more work and ended
up taking it to the salvage yard. She was right. I was wrong. I
think that is where we are at with the COOL issue, that it is
time to go ahead and repeal it, allow industry to realize
premiums and not make industry realize costs.
Senator Stabenow. It is interesting. Do you think we should
challenge Canada for their voluntary label?
Mr. Moyer. That would be up to people much wiser than I in
the trade areas, but I think that a purely voluntary labeling
done by industry to realize premiums is a much better way than
even one brought up through this body.
Senator Stabenow. Okay. Thank you very much.
Chairman Roberts. Senator Ernst.
Senator Ernst. Thank you to the Ranking Member and
Chairman, and I will direct my question to Craig. Thank you
again for being here.
Senator Grassley sends his regrets. He did have to leave
for another meeting.
But, as you know, Craig, farmers in Iowa and all across the
United States are facing low commodity prices, and especially
those producers in Iowa and those around the Midwest that are
now facing the outbreak of avian influenza, which has been very
devastating. In your opinion, how devastating an impact would
these retaliatory measures from Canada and Mexico have? What
would the effect be on an already faltering ag economy?
Mr. Hill. Well, as I mentioned, 80,000 jobs in Iowa are
export dependent. The estimate has been given that 17,000 jobs
in America would be lost, and a considerable amount of those
jobs would be Iowa jobs. So, there has been some studies. An
ISU study has been mentioned. There was also another study that
was published in Feedstuffs that indicated a $1.3 billion
economic impact to Iowa annually. So, that is a very, very
significant impact.
We value our relationship with Canada. They are our number
one trading partner and we just believe it is time, it is time
to give up on this failed concept that has been determined to
be illegal.
Senator Ernst. Thank you, Mr. Hill.
Mr. McDonnell, I know you have stated you do not want to go
this far, you do not want to see this happen. Maybe it is the
sky is falling. But, I do not think the fourth time is a charm
here coming from the WTO, and Canada and Mexico have the go
ahead to retaliate. I think they will retaliate. I do think
that.
You know, you are saying that you want to keep the labeling
in place, but I think we have not seen--there is no evidence
that people are actually using that American labeling when
making their selections. So, do you think that American
shoppers are actually using that label to make their decisions,
or maybe expound a little bit on that statement.
Mr. McDonnell. Okay. Is there any value to COOL, is what
you are asking----
Senator Ernst. Well, are American shoppers actually using
this labeling----
Mr. McDonnell. Sometimes it is pretty dang hard to read the
label. I do not know if you have ever grabbed a package of
meat, but it is in small print in the back. But, again, COOL
was not meant to promote. COOL was implemented to allow us to
be able to differentiate our product. It is up to the industry
to promote.
I sit on the Cattlemen's Beef Board. I also sit on the
Global Growth Committee. We are approving $8 to $9 million
annually, Barry, in export targeted Checkoff funds which are
then matched by another $8, $9 million from the USDA. Our
number one directive to U.S. MEF is to promote U.S. beef in the
global market arena. The only market where we have ever tested
the value of promoting U.S. beef. It was reported to us in
January that U.S. beef brings $3.37 a pound, and the next
closest competitor is Canada at $2.50. We have never been given
that opportunity in the U.S. to promote and market U.S. beef
with our Checkoff. But, where we have been given that
opportunity in the international market, people go after U.S.
beef, and it is not surprising because you are able to
differentiate it and we are able to promote it and we are able
to market it. That is the way capitalism works.
I do not want to go back to the dark ages, and I do not
want the government's money to promote it. But, I do not want
other downstream industry segments using beef from a foreign
country and being able to use our label as U.S. beef, and I do
not think you all do, either.
So, I would like to see it go to voluntary if needed to
preserve the law. Preserve the integrity of the label, which we
did not have before. We will take it from there. I can promise
you, as American ranchers, we will take it from there. But,
give us the opportunity first. Do not take it away.
Senator Ernst. Okay. Thank you very much for your opinion.
Thank you, Craig, again, for being here today. We appreciate it
very much.
Thank you, Mr. Chairman.
Chairman Roberts. Senator Heitkamp.
Senator Heitkamp. Thank you, Mr. Chairman, and I thank Leo.
I mentioned your hat on the table, and I think everybody now
knows you are not a guy who is all hat and no cattle, right? We
are pretty clear about what you do for a living and how you
feel about it.
But, we do have a situation that we are in right now, and I
am sure you are sympathetic to what you heard from the wine
growers and the fact that their business could be, in fact,
affected by some of the things that the WTO could do, some of
the things Canada and Mexico are requesting, and so I would
like to look forward, because we are where we are. What are the
opportunities to meet the challenges that you have, to
accomplish what you hope can be accomplished in the cattle
market, but also recognizing that we need to have some
processes, some step forward?
So, I would say we have had mandatory COOL for several
years. I think the consumers out there have been used to and
look for that ``Product of the United States'' label at the
meat counter, contrary to what a lot of people have said here.
I think that the movement in grocery shopping, if I can put it
that way, has really been to read labels. It has really been to
understand sourcing of food. That is an ongoing concern and an
ongoing issue all across the board in America and we are proud
of what we do in the beef industry in this country.
But, how can we maintain that market and build on it, given
what has happened before the WTO? Do you have any suggestions?
I think you know Senator Stabenow has proposed a discussion
draft which we have been very intimately involved in, my
office. But, I am curious about kind of steps forward as you
see them, not defending the old system, but looking at what
might work to accomplish the purpose.
Mr. McDonnell. Well, and I appreciate that, and I may very
well be the one that brought up voluntary here about two months
ago as we were going through this process. I do hate to see us
cut and run before we finish arbitration, and I will guarantee,
I sympathize with our U.S. neighbors who are being targeted
with these unsubstantiated threats. I remember Tom Brokaw and
his Greatest Generation as he talked about those folks coming
back from the Depression and the World War, working together
for family, for community and country, and it truly was the
Greatest Generation. I hope that I honor them in my share of
concern for our neighbors.
But, I hope they also honor those who went before us, too,
and do not preempt the process we are in today. Certainly, with
these high retaliatory tariffs, we need to address it. But, let
these Canadians and our Mexican friends finally put their chips
on the table and the facts, because so far, it is all
unsubstantiated scare tactics. They cannot prove it in our
courts. They cannot prove it in the WTO, that there has been
any harm.
If they do, and it is something we cannot live with, then
just simply go to voluntary, okay, preserve the integrity of
the label so our friends cannot deceive our consumers. Who
wants to vote for that? Let the American rancher figure out how
to promote it, and I guarantee you, we will. But, preserve that
label and our investment and all the time we have spent on this
to date.
Senator Heitkamp. So, I know you are----
Mr. McDonnell. But, simply going to voluntary. Just change
one word, ``mandatory'' to ``voluntary,'' for cattle and beef.
We are there. How much easier and painless can it be?
Senator Heitkamp. Well, I share your interest in kind of
looking at how we can continue to provide the consumers with a
path forward to recognizing where the source of their food is,
how we can, in fact, continue to the good work that you all are
doing in terms of sourcing your food.
But, we are in a situation here where there is a tremendous
amount of pressure to not wait, a tremendous amount of pressure
to move forward, and I am assuming that you have had a chance--
I understand, and I had this argument with your colleagues in
the industry in my office. You know, sometimes we do not always
get 100 percent of what we want. So, recognizing that, I think
the Chairman and a number of people here are very interested in
moving forward.
Have you had a chance to look at Senator Stabenow's
discussion draft and do you have any comments you can share
with us?
Mr. McDonnell. Well, I appreciate very much your work on
that, and I support it. I mean, I think the voluntary approach
is a very reasonable approach. It takes care of the people that
are scared of the threats, and reasonably, and may have a right
to be scared of them. No, I think it is a good approach. I
would like to see it go a little bit farther in addressing the
WTO concerns that we exempted. Where we failed by exempting
some segments, such as food service and wholesalers. I mean, if
somebody is going to label U.S. beef in the United States of
America, whether it is wholesale or retail, by golly, I think
we can all agree it better be U.S. beef, and I hope we can all
agree on that.
Senator Heitkamp. Thank you----
Mr. McDonnell. So, I think it is a big step and I
congratulate you, and if we can find a way to move forward and
satisfy everyone's concern, how nice would that be in D.C.
Senator Heitkamp. Well, you fill me with pride, Leo. You
have spoken like a true North Dakotan, just straight up. Thank
you so much.
Chairman Roberts. Thank you, Senator Heitkamp.
Senator Tillis.
Senator Tillis. Thank you, Mr. Chair. I am sorry I was
running late. I had to preside.
Gentlemen, I am from North Carolina and I am deeply
concerned with the economic impact that retaliation will have
in my state. About a third, 33 percent of our exports in 2014
were to Canada and Mexico.
I hear the discussion, and actually, Mr. McDonnell, you
made a reference to having maybe Mexico and Canada put the
chips on the table, and I think that is probably an interesting
analogy, because I think all of our chips are on the table and
Canada and Mexico have an ace in the hole. We have no leverage
in this. The risk that we have for not repealing COOL is
significant.
I think your suggestion about voluntary policies, those
sorts of things, may need to be looked at, but if they were
going to happen, they needed to happen long before now because
the clock is ticking, and I feel like we need to provide
certainty.
The thing that concerns me with my producers is we are
talking about, well, we have got a few more weeks. We can work
this out. Producers do not think that way. They have product
that they are thinking about now, and how it is going to end up
in the supply chain based on whether or not they actually have
to endure these retaliatory measures.
I completely agree with what virtually everything you have
said to consider policies going forward to make sure consumers
know they are getting meat produced in the United States. That
is great. But, I do not necessarily think the time is now to do
that. The time is now to provide certainty to the agriculture
industries and a number of other industries that can be
affected if retaliation, which I am completely convinced, after
meeting with people from Mexico and Canada, is going to go into
place.
I also agree that even a day will have a dramatic impact.
We have estimates of almost a half-billion dollar economic
impact in North Carolina alone at a time when we are
negotiating trade agreements and the agriculture industry is
getting excited because they see great potential for growth. I
think it would be very helpful for us to set the stage for
certainty and always look for other opportunities to take care
of our farmers, our cattlemen, our pork producers, and our
poultry producers.
But, I, for one, think we have to start by making the
difficult decision. I understand some of the concerns on the
other side of this issue. Repeal, and then continue to look for
ways to take care of my favorite industry in North Carolina, an
$80 billion industry, two-and-a-half times bigger than the next
closest industry. This is a very important industry for me, and
it is because I know the negative impact that this could have.
I, for one, think we need to repeal COOL and then work on other
policies going forward.
Do many of you agree that we need to understand that even
the discussion of maybe waiting a week or two or a month to see
if we can come up with some compromise has an immediate impact
because of the uncertainty that it creates?
Mr. Moyer. Senator, I definitely agree. Time is of the
essence, and if we can get our fence fixed between our
neighbors now, that is better than next week. I think I
definitely agree with you.
Mr. Trezise. Senator, this is Jim Trezise, and yes, I agree
wholeheartedly as well, and the reason really has to do with,
as someone said, the supply chain. If there looks to be some
more delay in terms of resolving this issue instead of
repealing it, then the importers in Canada are going to stop
making orders for American wines going up there because there
is going to be a lot of uncertainty about whether our wines are
going to continue to sell or not, because if there were the
tariffs, the wine prices would double. So, a $15 wine now would
become $30. The consumer is not going to buy it. The store is
not going to stock it. The importer is not going to buy it, and
so forth. That does not start at the time the tariff is
imposed. That starts when the threat of a tariff is in the air,
which it is now.
Senator Tillis. That is my greatest concern. You have got
buyers making decisions today based on the most likely
probability of the economic environment or the regulatory
environment that exists in August, and that is why I am a real
proponent of going ahead and just doing what we need to, what I
believe many people think that we need to do, to just move
forward.
Any other comments? Mr. McDonnell.
Mr. McDonnell. First of all, I appreciate your
understanding of agriculture and your concern about the
uncertainty that we have. If you are in production agriculture,
which Mr. Hill and I may be the only two at this table whose
primary income is from that, we deal with that every day, sir.
We have got a load of fat cattle we are trying to sell this
week and the market has dropped by about seven dollars a
hundred weight in the last ten days, which is a considerable
drop. We learn to live with that.
I have a concern that if we ever scrap COOL or repeal it,
it is going to be a battle to ever bring it back because it has
left a bad taste in some folks' mouth. It is going to be a
battle to get the description of what U.S. beef should be
again.
I will say again, simply take ``mandatory'' out, put
``voluntary'' in, problem solved and everybody walks away a
winner and we all understand where we are at when we walk away
instead of bringing it back up. But, I do very much appreciate
your concerns.
Senator Tillis. Thank you, Mr. Chair.
Chairman Roberts. Senator Boozman.
Senator Boozman. Thank you, Mr. Chairman, and again, I
apologize to you and Senator Stabenow for being late. We have
another hearing going on where Senator Hoeven and myself, were
actually voting on an appropriations bill.
Mr. Carpenter, both Canada and Mexico have said they would
retaliate unless the United States repeals COOL. You have been
working on the issue for a long time. I guess my question is,
do you think they are bluffing or do you think they are really
serious?
Mr. Carpenter. The indication I get is they definitely are
not bluffing. They have been in this battle for quite a few
years, five or six years at least. They have invested a lot in
it. They have had a lot of economic damage, and they are very
serious.
I think it is--as we move forward, if there is a market
demand for country of origin labeling, the industry will
respond to that. We have historically done that. If you look at
the programs USDA has and other voluntary programs, they have
over 100 programs that do just that. If they get a signal from
the marketplace that says, we need information, they step up
and do it, whether it be grassfed, hormone-free, certified
Angus beef. The system is there. USDA has that power right now.
So, I think we need to take the Canadians and Mexicans
serious. They are going to retaliate, and I think we can
address the marketplace needs that are there through systems
that already exist.
Senator Boozman. So, does mandatory COOL have any food
safety benefits, or is it entirely a marketing program?
Mr. Carpenter. It is not a marketing program and it has no
food safety value. In fact, USDA at least five times in the
regulation for country of origin labeling made it very clear
that it is not a food safety regulation, and also other parties
that have looked at it confirm that.
Senator Boozman. Mr. Hill, in your testimony, you reference
a report by the USDA that studied whether mandatory COOL had
any economic benefits. What were the results of that study? Did
the benefits outweigh the costs?
Mr. Hill. There were very slim marginal benefits and great
cost. Senator, if I could indicate a personal experience I had
as a producer, we on occasion would buy about 1,200 isowean or
feeder pigs every few months, and I recall talking to a buyer
looking at the market to see where I could acquire these pigs.
He said, ``Well, Craig, I have got some Canadian pigs for you,
but they can be bought a little cheaper, $5 to $8 a head
cheaper. Some guys have trouble getting them killed. Would you
want them?'' I asked about the health quality and they said it
was superior. They said everything was great, but recognizing
you are going to have a hard time getting them killed because
of country of origin labeling, the disruption, the segregation,
the discrimination.
So, that was a real event that occurred for me and gave me
that understanding of the economic impact.
Senator Boozman. Thank you.
Mr. Moyer, in your testimony, you mentioned the cost of
complying with the 2009-2013 mandatory COOL rules. What were
the estimated costs of compliance for both of the rules?
Mr. Moyer. The study that I was quoting was from Dr. Tonsor
at K State, where he said that the total cost was $8.5 billion
to the industry.
Senator Boozman. Thank you, Mr. Chairman.
Chairman Roberts. Senator Hoeven.
Senator Hoeven. Thank you, Mr. Chairman. I appreciate you
holding this hearing.
I would like to thank all of you for being here. I would
particularly like to thank Mr. McDonnell from North Dakota for
being here, and also I think it is good to hear from you, being
a producer yourself directly. My family--my grandfather raised
Hereford cattle, registered Hereford. I am guessing yours are
black cattle, probably Angus, nowadays. But, we have got a lot
of great cow-calf operators in our state and it is great to
have you here and to hear from and from our other witnesses, as
well.
My question is that given that there are producers and
organizations that favor COOL, is there some form of a
voluntary COOL program that would both meet the requirements of
the WTO and Canada and Mexico and still, on a voluntary basis,
allow those to participate that want to?
So, I am going to start with Mr. McDonnell, being a fellow
North Dakotan, but, essentially, I am going to ask each of you
that same question. Is there a voluntary program that could
work? So, yes, we would repeal mandatory, but you would still
have a voluntary form so that both sides, both the people that
favor COOL can still have an option that they think works, but
we meet the requirements of WTO, and we obviously cannot be in
a position where our producers face tariffs. You know, we
cannot have countervailing duty. That is not acceptable.
So, that is the solution I am asking about, and Mr.
McDonnell, if you would start, I would sure appreciate it.
Mr. McDonnell. Sure, and I appreciate your concerns. Again,
I am going to go back, and I do not think you were in here----
Senator Hoeven. Yes, I apologize. We were in an
appropriations hearing.
Mr. McDonnell. Sure.
Senator Hoeven. They fell at the same time. I wanted to be
here, but--so, I may have missed some of the testimony,
obviously.
Mr. McDonnell. Yes. I understand. You know, I think this
whole thing is much simpler than we are giving it credit for.
But, I think we might all be so entrenched in the different
ways we are going that we are not hearing.
I think a very easy out that lets everybody walk away a
winner on both sides, consumers and producers, and that is
simply take the existing law where it concerns cattle and beef
and change it from ``mandatory'' to ``voluntary,'' because if
you do that, then you still preserve the integrity of the ``A''
label, or the ``U.S. beef'' label, which says it has to be
born, raised, and slaughtered, which, again, is half the reason
we started COOL, because we had people importing product into
the U.S., throwing our name on it if they processed it, salted
it, or cut it up, or slaughtered it, they could call it U.S.
beef prior to COOL. Did you all know that? Yeah.
So, just preserve the integrity. That is half the reason we
want it. Make it voluntary if needed. We will go market it. We
have proven the value of U.S. beef in the international market
when we have invested money into it, and that is where KSU
missed the boat. They never looked at whether it had ever been
marketed or ever been promoted. They just said there is no
value. Well, of course, there is no value. You can have the
best gadget in the world, but if you do not market it, who is
going to buy it? Preserve that integrity. Make it voluntary.
Preserve the law. It should be WTO compliant, because it is
voluntary. You do not have to repeal it. Let us go market it
ourselves.
Very simple, everybody wins.
Senator Hoeven. Let me ask the other panel members their
thoughts along that line. Mr. Carpenter.
Mr. Carpenter. Yes. First of all, there is a simple answer.
We have to start with the priorities. First, we need to repeal
so we satisfy our concerns about retaliatory tariffs. Get that
out of the system.
USDA has significant ability to develop any type of
marketing program that the marketplace desires. In fact, in my
earlier career at USDA, we actually in the late 1990s put
together a program specifically for born, raised, and
slaughtered U.S. beef products.
The marketplace has not used it--did not use it--because
the demand was not there. It may be there now. But, USDA has
numerous of these voluntary marketing programs. It has the full
authority to do them. They do them for grassfed. They do them
for Angus beef. They do them for over 100 different programs.
So, the program is there. USDA could tomorrow develop a
program and put it out there. They cannot make the consumers
want it, they cannot make them buy it, but they can sure put it
out there, and if the industry wants to get out there and push
it, they can do that. It is pretty simple and it is market-
driven and that is what this is all about.
Senator Hoeven. Mr. Hill.
Mr. Hill. I would concur with Mr. Carpenter. He said
exactly what I would say, but much better, and he is the expert
in this area. The first threshold would be, is it WTO
compliant, and if you can cross that threshold and then look to
USDA and what is permitted, what is available today, I think we
should look at those and have discussions around that. I think
those opportunities are available today through USDA and I do
not see any harm in pursuing that.
Senator Hoeven. Mr. Moyer, you are a producer, too, I
understand.
Mr. Moyer. I am.
Senator Hoeven. You have got a moustache, so that is
another plus.
Mr. Moyer. Okay. I agree.
[Laughter.]
Mr. Moyer. Sir, as a beef producer, I would definitely
agree with Mr. Carpenter in the fact that I do not believe it
is worth the risk of any type of retaliation and the effect
that it will have not just on my industry, the beef industry,
as well as others that have got drug into this.
I do believe, and I agree with Mr. McDonnell, that if you
give the producers the ability to go out and market through
something like what Mr. Carpenter brought up, I think we will
see results. But, then it is producers like myself working with
people up the processing chain from me and trying to work out
premiums and discounts, not just the discount that the industry
is seeing right now.
Senator Hoeven. Mr. Trezise.
Mr. Trezise. Senator, yes, thanks for the question, and I
must say that for us in the wine industry, it is a bit surreal
to be talking about this.
Senator Hoeven. You look like a cattle guy for a guy in the
wine industry.
[Laughter.]
Mr. Trezise. I am the wine guy.
Senator Hoeven. I do not know----
Mr. Trezise. Wine and beef. But, it is surreal because wine
has been COOL before there was COOL. I mean, every bottle of
wine that you buy in the United States or around the world has
a country of origin on it.
In fact, the vast majority of them also have a region of
origin--Napa Valley, California, Finger Lakes, New York,
Barossa Valley, Australia, Champagne, France, and so forth--
because we are very, very proud of where we grow the grapes or
make the wine from.
So, we obviously do not have an issue with the idea of
letting consumers know where our product comes from, for sure.
We are not certainly going to demand that other products have
the same type of system.
But, it is very interesting, and I do agree with Mr.
Carpenter, as well. I think the first order of business must be
repeal, just so we can make sure that we are not going to get
retaliated against.
If the industry and the Congress and our trading partners
want to work on some other voluntary solution or something,
then I do not know that we would even be involved with that.
But, I think repeal is number one.
Senator Hoeven. Mr. Cuddy.
Mr. Cuddy. Thank you for the question. This is all great
dialogue about what we could do next. The problem is, it is too
late. We have been found in violation four different times by
WTO. We do not have time to act on a new policy. We must repeal
COOL today or we risk billions of dollars worth of retaliation.
As I mentioned in my testimony, for ADM, $700 million annually.
I think, going forward, any bipartisan right-to-know policy
would be fantastic. But today, the number one goal is to
prevent retaliation from Canada and Mexico.
Senator Hoeven. Mr. Chairman----
Mr. Cuddy. We have to do that by rescinding COOL.
Senator Hoeven. Excuse me. Thanks, Mr. Cuddy.
Mr. Chairman, thanks for your indulgence on the time. I
appreciate it very much, sir.
Chairman Roberts. Well, in previous testimony by the
witnesses, they finished five minutes under time, so it is
their bank that you were using, which I appreciate.
Senator Hoeven. I would like to thank all the witnesses.
[Laughter.]
Chairman Roberts. I am not calling you a bank robber, now.
Do not say that.
[Laughter.]
Chairman Roberts. Senator Klobuchar.
Senator Klobuchar. Thank you very much, Mr. Chairman. Thank
you to the witnesses. I am sorry, I had a Commerce Committee
markup, so I just came back. I was here at the beginning.
I am someone that supported country of origin labeling. I
think it is good for consumers and it has been helpful to some
of our producers. I also have companies on the other side of
this and we have tried to work this out, and I also understand
the danger of the retaliation.
But, the one thing I did want to talk about as I look at a
common sense solution here is just the fact that Canada, the
country of Canada, has voluntary labeling. So, in reality, do
you think that Canada and Mexico would actually object if we
put in place--and I understand your concern, Mr. Cuddy, that
there would not be time or--but, let us just say that Congress
got its act together and put in place voluntary labeling. Do
you think that they could actually object to it when they have
it themselves? If you could all answer that--and say that it
was retaliation if their own country has it.
Mr. Carpenter.
Mr. Carpenter. Thank you. Canada and Mexico both made it
very clear that we need to repeal. If you do not take it out of
the statute, I do not believe they are going to consider it has
been repealed. Regarding voluntary----
Senator Klobuchar. No, no. I was not saying not to take it
out of the statute. I was saying, if you change the statute and
then you also put in its place the voluntary labeling, do you
think they would really object to that when they have that
policy themselves?
Mr. Carpenter. I think their policy is not the same as
having it as a part of our statute, which otherwise is
mandatory. The simplest resolution is to repeal it from there
and then develop a voluntary program, but to try to put
something quasi-voluntary into what is perceived and in real
from the Canadian's perspective a mandatory program, I think,
puts us at great risk.
Senator Klobuchar. So, putting in place the same policy
that Canada has, you think they would actually object to that?
Mr. Carpenter. The same policy they have, probably not.
Senator Klobuchar. Okay. Mr. Hill.
Mr. Hill. Senator, I am just not familiar with the Canadian
policy. I really cannot speak to it.
Senator Klobuchar. Okay. Thank you.
Mr. McDonnell.
Mr. McDonnell. I am not, either. I am presuming maybe
Canada uses the old Codex kind of rules, where if it is
transformed in any way, it becomes a product of Canada. So, if
we have Montana calves up there and they are slaughtered up
there, they can make it a product of Canada--I mean, that is
what we used to have in the U.S. That is what we do not want to
go back to.
Senator Klobuchar. Well, I think all they have is voluntary
labeling----
Mr. McDonnell. Yeah, but----
Senator Klobuchar. --and you are right, we can look at the
details of it.
Mr. McDonnell. Right.
Senator Klobuchar. But, they have a voluntary label system
as opposed to the mandatory, where if retail wants to have in
their stores labels that say, ``Made in America''--this would
be our label--they can do it. I mean, that is all it is. It
does not--it is not required.
Mr. McDonnell. Right. But, I think that brings up the
problem of going back to a rulemaking for a voluntary system,
such as Barry suggested. I mean, you all know what Black Angus
cattle are? So, you all know what Angus beef is. Under USDA and
this voluntary kind of program and the PVPs that go with it,
they only have to be 51 percent black hided. It does not even
have to be Angus. If you make us go through that system of
USDA, the opponents to COOL will beat us to death to get rid of
born, raised, and slaughtered, and go to the system of
voluntary that they are using in Canada and that we had prior
to COOL. We will lose the integrity of the U.S. beef label.
I say, just change the wording in the statute. Once it is
no longer mandatory, I do not even think it is a WTO concern,
or they can make it a concern. Thank you.
Senator Klobuchar. Mr. Moyer.
Mr. Moyer. Senator, I just do not believe it is worth the
risk. You know, as mentioned earlier, we have already been
found uncompliant, not just once, but four different times by
the WTO.
I think we really have to go above and beyond what might
just be acceptable to those countries, and I really do not want
you to risk dollars that I have got invested, that Mr.
McDonnell has invested, that the grape growers in New York have
invested in their products and the price impacts these
retaliation efforts will have.
Yes, it may be a case that we could just get by and make
them happy, but boy, I just hate to take that risk, because
where we have already been caught in the wrong four different
times, I think we have to go and----
Senator Klobuchar. It just seems really odd that they would
object to something they have themselves, but----
Mr. Moyer. Well, I----
Senator Klobuchar. That our country would have to have--
that we could not do what they are doing----
Mr. Moyer. I would----
Senator Klobuchar. --that will not really sell with our
citizens, I do not think.
Mr. Moyer. I would be cautious of trying to out-guess what
another government can do. I have a hard time guessing what my
own will do sometimes.
[Laughter.]
Mr. Moyer. Thank you.
Senator Klobuchar. Yes.
Mr. Trezise. Yes. I basically agree with Mr. Moyer, and I
do not know what they would be thinking of, but to me, the
first order of business is repeal, and then perhaps to explore
something like that.
Senator Klobuchar. Okay.
Mr. Cuddy. The risk of retaliation is just too great at
this point, and the WTO has given Canada and Mexico permission
to retaliate. It would be a complete disruption of our food
supply chain for--across all sectors, frankly. So, the number
one goal has to be to repeal this law, and then if we want to
work on something after the fact, I think that is perfectly
well and good.
Senator Klobuchar. Okay. Thank you for all your answers.
Chairman Roberts. Let me point out, before I recognize--
well, look who is here, Senator Casey. Senator Casey, I
apologize for this, but I want to put this in the record at
this point.
With regards to replicating the Canadian COOL system, there
are several important distinctions to keep in mind regarding
that system. The only mandatory labeling in Canada is for the
meat that is imported from a foreign country in consumer-ready
packaging. All other labeling of meat is voluntary. It allows
feeder cattle that have been in Canada for at least 60 days
prior to slaughter to be labeled as ``Product of Canada.'' Here
is the key. It does not require labeling indicating where the
animal is born, raised, and slaughtered, thus, there is no
segregation requirement.
Senator Casey.
Senator Casey. Mr. Chairman, thank you very much. Knowing
that I am the last to question here, or potentially so, I will
make sure I stay within the time.
This is a tough issue, and I know there is a great deal of
difference here and Mr. McDonnell has a tough job today. I am
in the camp of supporting what our Ranking Member, Senator
Stabenow, is trying to do with what I would call, and I think
what--and, in fact, I know what Mr. McDonnell called in his
testimony a common sense compromise. We have heard that before.
But, wow, do we need more of those around here on a lot of
issues.
I am sorry I was in and out of here. We had a Finance
Committee hearing today on another big problem, transportation,
in particular in my state, a real problem, just repairing
bridges, so repairing and replacing bridges. So, we need common
sense compromises all over this town.
But, Mr. McDonnell, I wanted to highlight something you
said in your testimony. I am quoting, because I think it is a
good, or an important point to make. You said, and I am
quoting, ``U.S. cattle producers want the integrity behind the
`A' label to remain intact. In no circumstance should a product
not born, raised, and harvested in the U.S. be granted a,''
quote, ``U.S. label, `1A''' unquote. ``Through a voluntary
program, we ask that this label be maintained and not
commingled with other products originating in Canada or
Mexico,'' unquote.
That makes a lot of sense to me, and I would hope that we
could get as close as possible, maybe not today, but in the
near term, to that standard.
You also said, and it is both by way of your testimony, but
I think you said this just in your summation of your
testimony--you were not reading, I do not think, at this point,
but I wanted to go back to it. You talked about the challenge
of, quote, ``differentiating your product.'' Can you talk about
that, because I thought that was an important point that needed
to be highlighted.
Mr. McDonnell. You are talking about the early challenges
prior to COOL of differentiating our product, right. At that
time, they had a system much like we see up in Canada, where it
was point of transformation.
If the animal was processed in the United States or beef
was imported and cut up, ground, or salted, anything, it became
a product of the U.S. It is especially troubling with cattle
because nobody eats cows.
You eat beef, everybody knows the end product is beef, and
to let such deceptions go on in the marketplace, especially in
the period we are in today, where consumers want to know where
their food comes from, we are talking about taking a step
backwards, ladies and gentlemen; I just do not think repeal is
acceptable, and I know I have gone past your question.
My apologies.
Senator Casey. I appreciate that.
I also wanted to ask about the issue of cattle exporting
countries like Canada, both Canada and Mexico, have actually
experienced a period of record high profits, consistent profit
margins and stabilization of their herd sizes following the
implementation of COOL. So, I would ask you, can you elaborate
on why you think this increase in profit margins may have
occurred?
Mr. McDonnell. Well, I do not know if I can tell you why it
has occurred, but I would like to include in this a response to
Mr. Cuddy saying the WTO had granted retaliatory tariffs to
Canada and Mexico. They certainly have not done that. We are in
arbitration. What the arbitration process now has said is you
boys now have to prove your scare tactics and put this on the
table before we can even look at what level of retaliatory
tariffs you are going to have.
Part of that, to me, includes what you have asked, Senator
Casey. It is, how has it hurt Canada? It has not hurt their
price, because their price has more than doubled since the
country of origin labeling went in place. The value of their
cattle imports into the U.S. has more than doubled since
country of origin labeling went in place. Today, where both of
those herds were in severe contraction in the early 2000s, in
2009, when COOL went in place, the contraction slowed down. In
fact, today and in recent years, we take a higher percent of
their cattle and beef production, based on their cow herd, a
higher percent than we have ever taken before.
Now, is that harmful? How did it damage them? The fact is
that prices doubled and we are taking a higher percent of their
product. Now, I would love for somebody to do that for me.
Thank you for the question.
Senator Casey. I am out of time. Thank you very much,
though. I thank the panel. Even where we disagree, we are
grateful you are here. Thank you.
Chairman Roberts. Senator Stabenow.
Senator Stabenow. Well, thank you, Mr. Chairman. I do not
have questions at this point. I know as we wrap up, I just want
to thank you for this hearing and indicate that I think for
everyone listening, you see there is a difference of opinion
and we have got to come to the middle so we can act. I would
suggest that everyone who does not have a dog in this fight, or
maybe I should say a steer or a pig, that if you are not in the
steer business, the hog business, if you are not directly
involved in this but you face retaliation, I would urge you to
come down on the side of urging us to work together to find a
bipartisan solution so that we can get this done quickly.
I would also just put forward that I understand why our
Canadian and Mexican partners are saying what they are now. I
have had multiple conversations and different conversations
over the last couple of years. I get it. We all get it. It is
great negotiating. But, we also understand what we can do and
should do together to get things done to move forward in a way
that both recognizes what Mr. McDonnell is talking about in
terms of standing up for our own ranchers, our own farmers and
ranchers and consumers, but also meeting the needs of the
industry more broadly.
Mr. Chairman, I look forward to working with you, because I
believe we can do this. We need to do it quickly. I honestly
believe if we cannot come to an agreement, it will not be done
quickly. I would urge everyone to work with us in terms of
finding a common sense solution. Mr. Chairman, you and I do
that on a regular basis and I look very much forward to working
with you to be able to get this done. Thanks.
Chairman Roberts. I thank the distinguished Ranking Member.
It would not be a real conclusion to the hearing without a
PowerPoint. Once, when I was chairman of another committee, I
outlawed PowerPoints, which is the best thing----
Senator Stabenow. You have a PowerPoint? Oh, my gosh, you
have----
Chairman Roberts. No. Well, it is sort of a PowerPoint. It
is just a poster being held up here by one of my brilliant
staff members. Why do we not just put it right there. That is
what we are talking about.
Now, I hate to use the allegory or the example of my wife,
because it is going to get me in a lot of trouble, but here is
some Smithfield St. Louis style pork spareribs. When she goes
into the grocery store, she first looks at the product. Well,
that is the product. The next thing she looks at is right here,
at the price, and that is what probably every consumer does,
whether it is my wife or me. Well, to tell the truth, I look at
the product and I do not really care about the price. If I want
it, I am going to get it.
But, having said that, what all this is about--if I can
find it--here is the mandatory COOL label the WTO has deemed
noncompliant, right here. Very hard to read. But right up here,
what most consumers will say is a current voluntary program by
the industry themselves, by the people who have provided, in
this case, the Smithfield rib product. It says right here,
``Keep frozen. Product of the United States. USDA processed
verified.'' That is what they look at. Then they have, really,
a lot of confidence with regards to this product, and this is
why we are selling a lot of meat.
This one has cost us, according to the studies by Kansas
State University and others and as testified by Jaret, about $8
billion. That is a lot of money. Consequently, I wanted to
point that out. We already have voluntary labels applied by
companies, should COOL be repealed, similar labels indicating
the origin of U.S. raised pork and beef could be still
available. We have another one that says, ``Rancher Reserve.''
I do not know if that is effective or not.
Senator Stabenow. Mr. Chairman, I would just note that
Smithfield is now a Chinese company, so----
[Laughter.]
Senator Stabenow. Excuse me.
Chairman Roberts. Well, I wanted to show this for Mr.
McDonnell.
Senator Stabenow. Yes.
Chairman Roberts. I think his tie is getting a little tight
here. At any rate, this is Rancher's Reserve tender beef, 100
percent U.S. beef. So, you can have a voluntary label. On this
particular product, you have to look up here and it is about
eight-point, I think, or 12-point--I am an old newspaper guy--
``Product of USA.''
With all due respect, I do not think many consumers can
actually see that, but they see this and it is already a
voluntary label. This cost us $8 billion.
I will go again to my original statement--end of the
PowerPoint--just yesterday, the Canadian Minister of
Agriculture sent a letter to every member of this committee,
and this is what the Canadian Minister of Agriculture said. For
Canada, legislative repeal of COOL is the only approach that
will achieve this end.
Another letter sent by the Mexican Secretary of the
Economy, retaliation is imminent and inevitable unless and
until the U.S. takes action to repeal the underlying COOL
statute.
Now, I know that the distinguished Ranking Member and
myself and other members are going to be meeting, trying to get
to a conclusion, but at the same time, Canada and Mexico are
making this statement, and it is imminent. There is no way that
I can see the WTO is going to reverse their decision, all of a
sudden, okay, U.S., you can go ahead and do this. This is the
fourth time. Three strikes, you are out. The fourth time, we
hit the battle. We do not need to be hit.
So, as Chairman of the committee, I have to emphasize again
to my colleagues and all of agriculture that retaliation is
fast approaching. It is imminent. The responsibility sits
squarely on our shoulders to avoid this kind of a problem.
Mr. Cuddy has already pointed out it is costing him $800
million. Things are already taking place with regards to many
things that the witnesses have stated.
So, this takes me back to the beginning of my statement. It
does not matter if you are pro-COOL or anti-COOL. You cannot
ignore the fact that retaliation is imminent and we must avoid
it, and repealing the mandatory COOL is the surest protection
to the U.S. economy.
Senator Sasse, I welcome you back to the committee. I know
you have been busy with other committees, as well. Your
statement and any question that you may want to ask is welcome
at this time. Thank you, sir.
Senator Sasse. Mr. Chairman, I just thank you for holding
this important hearing and your staff for the very useful
materials and putting it together. I will not detain our
witnesses any longer. Many of us have been double-booked at a
hearing on the cybersecurity attacks that have been ongoing
over recent months. But, just thank you to you for scheduling
this hearing, and to the witnesses for your insights.
Chairman Roberts. Do you have any updates on OPM and the
cyberattacks?
Senator Sasse. I want to make jokes about your cell phone
ringer, but that would not be appropriate at this time.
[Laughter.]
Senator Sasse. The clarity of what would come from your--I
am trying to come up with the name of the tune, the cartoon
that----
Chairman Roberts. Just let it go.
Senator Sasse. ``Frozen.'' Thank you.
Chairman Roberts. Just let it go.
[Laughter.]
Senator Sasse. It would be more insightful----
Chairman Roberts. Let it go.
Senator Sasse. --than much of what we are hearing about the
reality and magnitude of the OPM breaches.
Chairman Roberts. Well, maybe the other ring tone would be
appropriate. It is by Johnny Cash that says, ``I Walk the
Line.'' Every one of these witnesses have to do that.
To my fellow members, we would ask that any additional
questions you may have for the record be submitted to the
Committee Clerk five business days from today, or by 5:00 p.m.
next Tuesday, June 30.
This concludes our hearing. Thank you so much for the
witnesses.
The committee stands adjourned.
[Whereupon, at 12:07 p.m., the committee was adjourned.]
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