Updated, June 29 – The U.S. government plans to comply with a new world trade ruling against its country-of-origin labelling (COOL) law, which since 2008 has added hassles for would-be importers of Canadian meat and livestock.
The Appellate Body of the World Trade Organization (WTO) on Friday upheld a November 2011 ruling on COOL from a panel of the WTO’s Dispute Settlement Body (DSB) on challenges Canada and Mexico filed against the U.S. label law.
“This is the result that we have been seeking,” said Martin Unrau, president of the Canadian Cattlemen’s Association (CCA), in a release Friday.
“Going forward, the CCA will be working with its U.S. counterparts to develop a solution that eliminates the discrimination of Canadian cattle in the U.S. market.”
Greald Keddy, Canada’s parliamentary secretary for international trade, said in a news conference south of Saskatoon Friday that Ottawa will ask the U.S. to “respect its international trade obligations and comply with the outcome of the WTO findings.”
U.S. Trade Representative Ron Kirk, in a separate release, said the next step in the dispute settlement process is for the DSB to adopt the Appellate Body’s recommendations and rulings.
The U.S., he said, “will then have a reasonable period of time to comply.” The Appellate Body’s decision in this matter is not subject to further appeal.
The DSB’s ruling — against which the U.S. government had filed its appeal in March — found COOL has violated parts of the WTO’s Agreement on Technical Barriers to Trade (TBT), breached Washington’s WTO obligations and “does not fulfil its legitimate objective” of consumer education.
The Appellate Body has upheld the DSB’s finding that COOL “has a detrimental impact on imported livestock.”
COOL’s record-keeping and verification requirements “create an incentive for processors to use exclusively domestic livestock, and a disincentive against using like imported livestock,” the Appellate Body said.
The Appellate Body went further, however, and ruled COOL “lacks even-handedness” by imposing “a disproportionate burden on upstream producers and processors of livestock, as compared to the information conveyed to consumers through the mandatory labelling requirements for meat sold at the retail level.”
COOL requires that a “large amount of information must be tracked and transmitted by upstream producers for purposes of providing consumers with information on origin,” the Appellate Body noted, but found that “only a small amount of this information is actually communicated to consumers in an understandable or accurate manner.”
On top of that, the Appellate Body ruled, “a considerable proportion of meat sold in the United States is not subject to the COOL measure’s labelling requirements at all.”
COOL’s impact on imported livestock thus “cannot be said to stem exclusively from a legitimate regulatory distinction” and instead amounts to discrimination against Canadian products, violating the TBT agreement.
The Canadian government noted Friday that COOL’s impact in 2008 was “immediately negative” on Canada’s livestock sector.
Between 2008 and 2009, exports to the U.S. of Canadian feeder cattle declined 49 per cent; exports of slaughter hogs fell 58 per cent.
COOL, the government said, “led to the disintegration of the North American supply chain, created unpredictability in the market and imposed additional costs on producers on both sides of the border.”
“After all this time and after so much damage to our interests, (Friday’s ruling) is such sweet music to our ears,” Jean Guy Vincent, president of the Canadian Pork Council, at the federal government’s news conference at Dundurn, Sask.
“The Appellate Body’s decision signals the need for change and should expedite favourable negotiations and a return to normalcy.”
On the other hand, U.S. Ambassador Kirk said the Appellate Body’s ruling “affirmed the United States’ right to adopt labeling requirements that provide information to American consumers about the meat they buy.”
“We are also pleased that the Appellate Body overturned the initial finding that COOL is more trade-restrictive than necessary to provide consumers with valuable information on the food they buy,” Kirk said in a release.
“In doing so, the Appellate Body agreed with the U.S. and declined to accept any of the alternatives that Canada and Mexico claimed we should have used instead.”
One major U.S. producer group, the National Cattlemen’s Beef Association, takes a different interpretation. The WTO “has been extremely clear that mandatory COOL is a clear WTO violation,” NCBA vice-president Bob McCan said in a release.
“Instead of working diligently to bring the U.S. into WTO compliance, we wasted three months and taxpayer dollars on an appeal process,” he said.
The appeal “did nothing more than jeopardize our strong trade relationship with Canada and Mexico, the two largest importers of U.S. beef,” he said, but added the NCBA “worked with Canada and Mexico to prevent any retaliatory action that could have occurred.”
COOL was conceived in Washington’s 2002 Farm Bill and launched in September 2008. It orders U.S. retailers to notify their customers, by way of labeling, on the sources of foods such as beef, veal, pork, lamb, goat, fish, fruits, vegetables, peanuts, pecans and macadamia nuts.
Until late 2008, it appeared the early interpretation of the COOL rule, near the end of the administration of then-president George W. Bush, wouldn’t seriously hinder imports from Canada.
Canada went so far as to put its December 2008 WTO challenge of COOL on hold — until U.S. President Barack Obama’s agriculture secretary Tom Vilsack wrote to U.S. processors in February 2009.
In an open letter, Vilsack had urged processors to apply stricter and broader labelling practices, or else he would review the COOL law’s language with an eye on tightening restrictions even further.
The DSB ruled in 2011 that Vilsack’s letter “constitues unreasonable administration of the COOL measure.”
Canada in April had filed a counter-appeal of the DSB’s ruling on COOL, challenging the DSB’s suggestion that COOL had a “legitimate objective” in the first place.
Canada’s appeal also sought “certain rulings” from the Appellate Body on the Vilsack letter, the Appellate Body noted.
However, the Appellate Body said Friday, Canada pulled that particular request after the U.S. government said “this measure had been withdrawn.”