The U.S. Senate may introduce legislation by midnight Monday night to repeal its controversial meat labelling law that Canada has vigorously complained about — possibly averting a trade war.

Or it may not.

In any event, Canada is poised to retaliate after winning a major ruling from the World Trade Organization last week that clears the way for more than $1-billion in punitive tariffs to be imposed on the U.S.

And that could mean a rotating set of steep tariffs on a wide range of American goods flowing into Canada.

"Products for retaliation could include agricultural products, such as cattle, pork, apples, rice, maple syrup and wine, as well as non-agricultural products, such as jewelry, office chairs, wooden furniture and mattresses," said John Babcock, a trade department spokesman.

Omnibus bill is key

What happens next hinges on a complex omnibus spending bill to be tabled in Congress by the end of Monday.

Several so-called policy riders will be tacked onto the bill, but there's no guarantee that one of them will be for the repeal of the controversial rules of origin law that calls for packaged meats to bear a label indicating what country it is from.

The WTO has repeatedly ruled that the law, known by the acronym COOL, gives U.S. products an unfair advantage over their Canadian and Mexican competitors. Last week, the WTO awarded the two countries the right to impose $1 billion in punitive tariffs to counter the U.S. trade violations.

The lower half of Congress, the House of Representatives, has repealed COOL, but there is still opposition in the Senate, where some Democrats face pressure from beef and pork farmers in their constituencies to fight for the protection from their Canadian competitors.

Some influential Republicans, including the Senate's agriculture committee chair, are pushing hard for COOL's repeal. But as the horse-trading and backroom bargaining on the fine print of the omnibus bill continued towards Monday's midnight deadline, there was simply no guarantee that the text would contain the rider calling for COOL's revocation.

Canada threatens retaliation

"We are pursuing authorization at the WTO and if the U.S. Senate does not repeal COOL, Canada will take steps to retaliate once the authorization is approved," said Babcock.

John Masswohl, of the Canadian Cattleman's Association, was pushing hard for repeal in Washington last week, but on Monday he wasn't placing any bets.

"We heard every rumour there was to hear. We heard the COOL rider is in, we heard it's out. We heard that it was in, it was out, and then back in," said Masswohl.

The rider is one of many pawns in the legislative game being played around the passage of the massive spending bill.

"We heard some saying they thought it would survive the first round of cuts, but then when politicians whose pet project gets killed start getting mean and vindictive, then it's fair game on anything," said Masswohl.

Regardless of what happens in Congress, Masswohl and others are expecting Canada to move full steam ahead with a Friday meeting of the WTO where it and Mexico will receive the final authority to impose the punitive tariffs.

Targets picked

Ron Davidson, of the Canadian Meat Council, said the government has compiled a list of target products by focusing on states where COOL is supported.

"They were looking at geographic areas where this would have some impact," said Davidson. "It included trying to enforce the importance of this for people who were opposing repeal of the law."

There were hints Monday that the pressure was beginning to crack one of COOL's biggest Democratic supporters, Sen. Debbie Stabenow of Michigan. The American website, Agri-Pulse, quoted her as saying there "will certainly be repeal of the part that's affected by WTO, and it may be more."

Saskatchewan Agriculture Minister Lyle Stewart said Monday there's no guarantee COOL will be repealed so he's pushing Ottawa to continue moving towards punitive measures.

"If pretty much full repeal of COOL is not part of this omnibus bill, it will be the last opportunity to change COOL. We will support retaliation," said Stewart.

"I hope it doesn't ever escalate into a full-blown trade war, but it's not a pleasant place to be with our largest trading partner."