[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 __________ Printed for the use of the Committee on Agriculture, Nutrition, and Forestry [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Available via the World Wide Web: http://www.fdsys.gov/ __________ U.S. GOVERNMENT PUBLISHING OFFICE 96-180 PDF WASHINGTON : 2016 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Publishing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 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 ---------- 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.] ======================================================================= A P P E N D I X JUNE 25, 2015 ======================================================================= [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] ======================================================================= DOCUMENTS SUBMITTED FOR THE RECORD JUNE 25, 2015 ======================================================================= [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [all]