Former Agency Head Says He Wanted to Pursue Claims of COOL Discrimination
Chris Clayton DTN Ag Policy Editor
Fri Feb 13, 2015 02:09 PM CST
OMAHA (DTN) — The former top enforcer of USDA’s livestock marketing rules wanted to investigate whether U.S. meatpackers were illegally discriminating against Canadian and Mexican livestock because of country-of-origin labeling six years ago, but advisers to the agriculture secretary told Dudley Butler not to pursue such a case.
Butler, an attorney in Mississippi, was administrator of the Grain Inspection, Packers and Stockyards Administration from 2009 to early 2012. He left the department after controversial rules he had drafted at GIPSA regarding livestock marketing agreements were scrapped at USDA.
In a phone interview with DTN, Butler said he and others were aware of allegations that packers were discounting Canadian and Mexican cattle. He and others at GIPSA discussed it. Butler informed advisers to Agriculture Secretary Tom Vilsack that he wanted to pursue the matter.
"I basically told them I wanted to move forward on a case, an enforcement action at GIPSA, to see if all of this was true and if it was true it had to be justified in some kind of way under Section 202 B of the Packers and Stockyards Act,"
That section, 202 B of the Packers and Stockyards Act, deals with "undue or unreasonable disadvantages or prejudices," Butler said. "We felt like it was a violation of the Packers and Stockyards Act for them to do that without any justification."
Since he left USDA, Butler has worked with groups such as the Organization for Competitive Markets and the Ranchers-Cattlemen’s Action Legal Fund to defend country-of-origin labeling in federal court. Butler also has tried to demand USDA reform the beef checkoff to block policy organizations from receiving checkoff dollars.
Country-of-origin labeling has turned into a high-stakes trade dispute among the U.S., Canada and Mexico. The World Trade Organization has twice told the U.S. that country-of-origin labels are legal, but the way USDA implements the law leads to discriminatory segregation and pricing practices against Canadian and Mexican cattle. On Monday and Tuesday, the WTO appellate division in Geneva, Switzerland, will hear oral arguments on the U.S. appeal with a decision expected sometime later in the spring.
A spokesman for USDA said the department did not have any comment on Butler’s conservations about COOL while he was at GIPSA. The department also pointed to Vilsack’s repeated comments about the status of COOL. Vilsack has said his department is "between a rock and hard place" on labeling. Earlier this week, he told the House Agriculture Committee that if the earlier WTO ruling stands, then Congress is either going to have to rescind the rule or modify it to create some kind of generic North American label. A more generic label might avoid discriminating against Mexican or Canadian livestock.
Butler said he argued an investigation by GIPSA would have helped in any WTO case "because we were going to figure out what was true and what was not true."
Butler said he felt like it was GIPSA’s job to investigate what was happening in the marketplace that would lead to such discounts and whether the packer pricing for Canadian and Mexican cattle was justified. Instead, Butler said he was ordered not to move forward with an investigation.
"We discussed it and they had concerns about it interfering with COOL and the WTO, and I told them I didn’t think it would have any detrimental effect," he said. "In fact, it might have a positive effect if you could find what was going on."
Butler also drafted controversial livestock marketing rules following the 2008 farm bill that were defeated because industry opposition prompted Congress to block funding to implement the language. USDA eventually ended up drafting rules that were far less sweeping. Still, Butler notes that two provisions in his now-defunct rule also would have required packers to maintain reports to justify why they were discounting livestock. Unfair practices also would have addressed discriminatory discounts.
Butler largely questions the long-standing argument by packers that there are higher costs for segregating Canadian and Mexican cattle at packing plants to meet country-of-origin labeling requirements. Those animals are tagged at the border identifying their country, he noted. Also, packers sort cattle for a variety of reasons, such as ownership, weight, age, branded program and source verification.
"They can follow that meat right through the plant with no problem whatsoever," Butler said.
After Butler was confirmed in 2009, National Farmers Union wrote him a letter asking GIPSA to enforce Packers and Stockyard Act rules. In an email to DTN, National Farmers Union stated the group did not make any specific request for an investigation regarding COOL at that time. NFU released a study last month stating there was actually less price discrimination on Canadian and Mexican cattle than before COOL took effect. The study uses mandatory price reporting data to show the basis between domestic and imported cattle has actually narrowed since COOL first went into effect in late 2008.
The North American Meat Institute was one of several organizations that unsuccessfully sued USDA to block the latest rule on country-of-origin labels to go into effect. In their original complaint, the groups noted USDA estimated COOL compliance costs were roughly $192 million. Staff for NAMI pointed to studies in 2003 and 2010 showing high segregation costs for labeling. The group also noted the WTO wrote extensively in its opinion last fall about the various ways segregation costs because of country-of-origin labels.
"If someone’s implying there isn’t any costs to segregation, that’s nonsense," said Mark Dopp, senior vice president and general counsel for NAMI.
A Canadian Cattlemen’s Association study in 2012 on COOL’s effects showed a $639 million per year market impact for Canadian cattle producers and a $500 million impact for pork producers. (The dollar figures are in U.S., but the exchange rate in 2012 was nearly par.)
Butler argues GIPSA should have been looking into whether packers unfairly docked livestock from Canada and Mexico or if there was legitimate justification for pricing differences for those livestock. "If they are discriminating, that’s what it’s about, or if they are not discriminating. We may have found the other way."
The bottom line, Butler said, is that a GIPSA investigation could have eliminated the need for multiple, years-long battles in the World Trade Organization to defend the rule.
Butler said he never directly asked Agriculture Secretary Tom Vilsack permission to conduct an investigation. Instead, Butler had two meetings discussing a possible investigation over COOL with two of Vilsack’s advisers. Butler said he was told at the second meeting not to pursue a case. He said he simply inferred the matter had been taken to a higher-level staff meeting in which the matter was brought to the secretary’s attention.
An investigation would have clarified whether the price discounts were a wrongful practice by the packers or whether there was justification for paying less for those animals. The marketplace would have learned what was going on, including whether there was an anti-trust violation."
"It wouldn’t have eliminated all this argument about COOL. That has nothing to do with discriminating against Canadian cattle or Mexican cattle," Butler said. "They are discriminated against because they (packers) have got the power to do it."
Butler added, "You would have eliminated all of this talk about being between a rock and a hard place if they had just let us do our job."