'Tariff Cliff' Puts Jobs at Risk

'Tariff Cliff' Puts Jobs at Risk

In late 2012, Americans stood on a fiscal cliff, staring into the abyss. This year, the United States faces a tariff cliff, thanks to a six-year-old trade dispute over its Country of Origin Labeling (COOL) rule for meat. As its name implies, the rule requires retailers to note the country of origin of the meat they sell.

The World Trade Organization (WTO) has found the rule to be in violation of the U.S.'s trade obligations, and on December 7, it will give Canada and Mexico the green light to slap steep tariffs on American products as punishment. Up to $3 billion in exports could be approved as fair game for retaliation, and Canada and Mexico will reportedly impose tariffs on these goods beginning December 18.

To avert this scenario — which could cost tens of thousands of American jobs — Congress must repeal the COOL rule for meat. Two rival proposals to do so have been introduced in Congress.

The first proposal, advanced by Senate Agriculture Committee chairman Pat Roberts (R., Kan.), would bring the dispute to a definitive end by repealing the offensive portion of the law, terminating the possibility of WTO-authorized retaliation by Canada and Mexico. Roberts's proposal is identical to a repeal bill approved by the House in June with 300 votes in support.

The second proposal, authored by Sen. Debbie Stabenow (D., Mich.), would also repeal the COOL rule for meat. However, the bill introduces a successor program. While promoted as a voluntary labeling system, the program would continue to require the segregation of livestock based on where they are born, raised, and slaughtered.

Canada and Mexico have firmly rejected the Stabenow bill. Critically, because they have already won the dispute before the WTO, Canada and Mexico have the “whip hand” and are fully empowered to proceed with retaliation if Congress approves the Stabenow bill. The United States could request a compliance panel at the WTO, but it may take years for such a panel to produce a ruling, which most analysts believe the United States would lose yet again.

In the meantime, American workers, farmers, and ranchers would suffer the painful effects of trade retaliation. The U.S. business and agriculture communities regard this as intolerable even in the short term. The COOL Reform Coalition — which represents the nation's business and agriculture groups and is co-chaired by the U.S. Chamber of Commerce (where I am the senior vice president for international policy) and the National Association of Manufacturers — has created an interactive mapshowing the potential impact of retaliation for each state.

In all likelihood, sourcing managers planning future purchases are already considering vendors in other jurisdictions in response to the threat of higher tariff costs. Once this happens, it could take years for American farmers, ranchers, and companies to recover lost market share.

When our elected leaders faced the fiscal cliff in late 2012, they took action, and the crisis was averted. By the same token, the Chamber hopes the Senate will take up and approve Senator Roberts's proposal — and spare American workers, farmers, and ranchers the pain of a fall off this year's tariff cliff.

John Murphy is senior vice president for international policy at the U.S. Chamber of Commerce.

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