Steep Tariffs to Come in December

This Christmas, American exporters could be getting something a lot worse than coal in their stockings: a series of steep new tariffs on goods sold in Canada and Mexico. Following a ruling by the World Trade Organization (WTO) that the United States’ "country of origin labeling" (COOL) laws unfairly discriminate against our neighbor nations, Canada and Mexico have been authorized to impose new tariffs totaling up to $3 billion on U.S. exports, starting on December 18th of this year.

Since the passage of the North American Free Trade Agreement (NAFTA) in 1994, Mexico and Canada have been extremely important trading partners with the United States. Today, the U.S. trades more heavily with those two countries than it does with the major economies of South Korea, Russia, Brazil, India, and China combined. The imposition of new tariffs threatens to undermine the immense gains we have made in free trade, harming American exporters as well as consumers in other countries.

The point of contention, COOL laws, require that meat packers label products based on where the animals were born, raised,and slaughtered, so that consumers know what country their meat comes from. This is one of those regulations that, on the surface, sounds like common sense. Consumers like to know what their eating, so why not tell them where their meat comes from? But as is the case with most regulations, there are unintended consequences. Canada and Mexico are upset about the laws, not because American consumers refuse to purchase their meat when they no where it comes from – it turns out there’s no evidence for that – but because the labeling process is more costly than you might think, and that puts their products at a competitive disadvantage. It is actually quite costly for meat packers to track every animal’s country of origin, and a report from the Department of Agriculture found that these costs outweigh the benefits of the labels.

Regardless of what you think about COOL laws, the retaliation from major trading partners is a reality that is going to hit U.S. workers hard if they are not repealed within the next month. The House of Representatives already voted to repeal the laws earlier this year, and the Senate has proposed doing the same thing, albeit without success so far.

The immense benefits of free trade have been well-established, and NAFTA, for all its faults, was an important step in improving economic conditions and standards of living across the continent of North America. It would be a real shame to see Congress surrender those benefits over something as minor as labeling standards, and send a signal that the U.S. is willing to harm its own producers rather than work with its neighbors to ensure that free trade is protected.