Revised U.S. COOL law still breaks trade rules, WTO panel finds

A World Trade Organization compliance panel has ruled the U.S. government offside in its latest attempt at a trade-compliant country-of-origin labelling (COOL) law on meat.

Following a long-awaited public release Monday, the ruling may give Canada and Mexico the ammunition to demand COOL be scrapped, on pain of retaliatory tariffs against a range of U.S.-made ag commodities and other goods.

“The WTO has confirmed once again what we have known all along: that the United States’ mandatory COOL requirement for beef and pork is a blatant breach of its international obligations as a member of the WTO,” Canada’s Trade Minister Ed Fast and Agriculture Gerry Ritz said Monday in a joint release with their Mexican counterparts Ildefonso Guajardo Villarreal and Enrique Martinez y Martinez.

The compliance panel found where the COOL law “accords imported Canadian livestock treatment less favourable than that accorded to like domestic livestock,” the revised COOL law “increases the original COOL measure’s detrimental impact on the competitive opportunities of imported Canadian livestock.”

“In light of today’s ruling, Canada calls upon the U.S. to enact legislative change to eliminate COOL’s discriminatory treatment against Canadian hogs and cattle,” Fast and Ritz said Monday.

“Canada will be watching this situation closely to ensure U.S. compliance in accordance with the WTO’s clear ruling. We will continue to fully assert our rights to achieve a fair resolution to our concern, including seeking authorization to implement retaliatory measures on U.S. agricultural and non-agricultural products if and as necessary.”

Canada last summer rolled out a shortlist of its proposed retaliatory tariffs, including the most obvious targets — U.S. live cattle and hogs and fresh and frozen beef and pork products — along with U.S. cereal, bread, pasta, frozen potatoes, frozen orange juice, wine, cheese, cocoa, apples, cherries, fowl, maple syrup, ketchup, sugars, glucose and fructose and some other food- and non-food-related wares.

The impact of COOL on the Canadian cattle and hog sectors was estimated in 2012 to be about $1.1 billion per year, but Canadian livestock groups note that impact has increased since the U.S. amended COOL last year.

For now, the WTO compliance panel recommends that the WTO Dispute Settlement Body (DSB) request the U.S. to bring the inconsistent measure “into conformity with its obligations.”

The next step in the WTO process would be adoption of the compliance panel’s report at a DSB meeting, according to the Canadian Cattlemen’s Association in a separate release Monday.

Adoption of the report — subject to delay by a U.S. appeal — would trigger Canada’s rights to compensation or retaliation, the CCA said. If the U.S. files an appeal and Canada once again wins, Canada would be authorized to slap retaliatory tariffs on U.S. exports.

Also, the Canadian Pork Council noted Monday that the WTO compliance panel’s report further restricts the U.S. government’s options to delay the process. The panel ruled the revisions to COOL are in breach not only of Article 2.1 of the WTO Agreement on Technical Barriers to Trade (TBT), but also of Article III:4 of the General Agreement on Tariffs and Trade (GATT), which allows Canada to invoke “national treatment rights” that guarantee “equivalent competitive opportunities” for Canadian goods.

The panel report also granted “conditional affirmative findings” on Canada’s claims under Article XXIII:(b) of GATT — a ruling the CPC said “will support Canada’s position in the event the basic findings are overturned on appeal.”

“It is as if the panel, after seeing how the U.S. ignored the (WTO’s) previous findings, wanted to anticipate and cut off further attempts to game the system in the guise of ‘corrective’ measures,” the council said.

“Justice delayed is justice denied, and stalling and totally inadequate responses have already delayed enough,” CPC chairman Jean-Guy Vincent said. “Further appeals, which only delay the inevitable, negate the WTO requirement to conduct disputes in good faith.”

What the ruling said

The compliance panel was convened last year to rule on whether the U.S. final COOL law meets the U.S. government’s WTO obligations, in the wake of previous rulings by the WTO DSB and Appellate Body against the earlier version of the COOL rule.

Passed by the U.S. government in 2008 and implemented in 2009, COOL legislation requires country-of-origin labelling for beef, pork, lamb, chicken and goat meat, and certain perishable commodities sold at retail outlets in the U.S.

The U.S. Department of Agriculture’s revisions in 2013, in the wake of the Appellate Body ruling, tightened COOL’s labeling provisions for muscle cuts of meat. COOL now requires covered products’ labels to include even more specific information about where each production step (birth, raising, slaughter) took place.

The compliance panel found the revised COOL rule, compared with the original COOL measure, “entails an increased recordkeeping burden in practice for U.S.-slaughtered livestock and the resulting muscle cuts of meat.”

The revision, the panel ruled, thus also “creates an increased incentive in favour of processing exclusively domestic livestock and an increased disincentive against handling imported livestock.”

Granted, the panel said, the new COOL rule “directly responds to certain deficiencies” in the original labelling scheme, in terms of its value to U.S. consumers — but the revised labels “introduce the potential for informational inaccuracy in respect of where animals are ‘raised.'”

The terms “birth” and “slaughter” are “relatively straightforward and temporally discrete,” the panel said, but “the definition of ‘raised’ as the entire intervening period between them is potentially problematic in the context of certain requirements of the amended COOL labels.”

Further, the panel said, the “detrimental impact” that the revised COOL measure causes for Canadian and Mexican imports doesn’t stem exclusively from the “legitimate regulatory distinctions” needed for the label scheme to work in U.S. consumers’ favour.

On whether there was an identified need among U.S. consumers for such a labelling scheme, the panel noted studies and polls show U.S. consumers “are interested both in country-of-origin information in general and in country-of-origin information according to point-of-production.”

While the panel found consumers show “some willingness” to pay for “general” country-of-origin information, it also found consumers “are not ready to bear all the costs of the amended COOL measure” and saw no “probative evidence” showing consumer willingness to pay for country-of-origin information according to point-of-production.

The panel also rejected the notion that Canada’s or Mexico’s “market access expectations” stemming from previous trade agreements should have taken into account the possibility that they could lose some access under a label law. “We do not find compelling evidence that the amended COOL measure could have been reasonably anticipated before its adoption.”

Granted, “there was a past government policy of labelling imported meat with its country of origin (but) we do not consider this to demonstrate a reasonable anticipation of the key features and requirements of the amended COOL measure,” the panel said.

Rather, the panel said, COOL and the revised COOL law show a particularly “significant departure from pre-existing labelling rules and practices as they concern the products at issue.”

And while other countries in recent years have rolled out such label laws, that fact “does not evidence the kind of ‘trend’ that could give rise to a ‘climate’ in which the amended COOL measure could reasonably have been anticipated.” — AGCanada.com Network