WTO panel finds against amended US COOL

by Erica Shaffer
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KANSAS CITY, Mo. – For the third time, a World Trade Organization (WTO) compliance panel has ruled against the United States’ country of origin labeling measure. In the wake of that decision, Canadian Agriculture Minister Gerry Ritz made clear the third time had better be the charm that pushes US officials to abolish the controversial measure for good.

In an opinion issued Oct. 20, the WTO compliance panel said Canadian and Mexican livestock would receive less favorable treatment than that given to US livestock under the amended COOL measure.

“In particular, the compliance panel concluded that the amended COOL measure increases the original COOL measure’s detrimental impact on the competitive opportunities of imported livestock in the US market, because it necessitates increased segregation of meat and livestock according to origin; entails a higher recordkeeping burden; and increases the original COOL measure's incentive to choose domestic over imported livestock,” the panel wrote. “Further, the compliance panel found that the detrimental impact caused by the amended COOL measure does not stem exclusively from legitimate regulatory distinctions.”

The panel also found that the amended COOL rule worsened the detrimental economic impact on Canada and Mexico, and that the amended COOL measure’s labeling and recordkeeping protocols “could not be explained by the need to convey to consumers information regarding the countries where livestock were born, raised, and slaughtered.”

During a press conference in Saskatoon, Saskatchewan, Minister Ritz said the ruling vindicated Canada and Mexico’s claims of discrimination and opened the door for both countries to implement retaliatory tariffs. The COOL controversy has especially galvanized Canadian livestock stakeholders, who said COOL has cost their industries billions of dollars annually – an estimate that doesn’t include the personal hardships faced by individual Canadian livestock producers.

“The WTO is clear about the mechanisms available if a country does not abide by their obligations, and the Canadian government along with the livestock industry has been clear in our resolve to see this fixed using any and all means at our disposal,” Ritz said. “As you know, our government has drawn up a list of retaliatory measures intended to compensate for the damages caused by COOL.”

“Our government has been clear that we will target everything from California wine to Minnesota mattresses, not to mention the over-$2 billion in import sales to Canada,” Ritz added.

Meat industry reacts

A broad coalition of groups representing food and agriculture interests mounted opposition to the amended COOL measure. The coalition, which included stakeholders in the US, Canada and Mexico, tried unsuccessfully to block implementation of COOL through the federal courts.

“The WTO decision upholding Canada’s and Mexico’s challenge to the US COOL rule comes as no surprise,” the American Meat Institute (AMI) said in a statement. “USDA’s mandatory COOL rule is not only onerous and burdensome on livestock producers and meat packers and processors, it does not bring the US into compliance with its WTO obligations. By being out of compliance, the US is subject to retaliation from Canada and Mexico that could cost the US economy billions of dollars.”

Howard Hill, president of the National Pork Producers Council, said the US can't afford to have products restricted through trade.

“The United States must avoid retaliation from Canada and Mexico,” said Hill, a veterinarian and pork producer from Cambridge, Iowa. “Retaliatory tariffs on pork would be financially devastating to US pork producers.”

Bob McCan, president of the National Cattlemen's Beef Association, said there is no regulatory fix to bring COOL into WTO compliance.

“Our producers have already suffered discounts and faced the closure of a number of feedlots and packing plants due to the effects of this short-sighted regulation,” McCan said in a statement. “COOL is a failed program that will soon cost not only the beef industry, but the entire US economy, with no corresponding benefit to consumers or producers.”

The next move

Ritz said he believes the US government will appeal the WTO panel’s ruling, despite the COOL controversy landing in the middle of mid-term elections in the US. The US has 30 days to appeal the decision. Meanwhile, Ritz said Canada will be using that time to reinforce the point that each product on its list of potential targets represents a state-level economy that could be hurt by retaliatory tariffs. Canada is prepared to impose sanctions of up to $980 million a year. A potential list of products was posted on a Canadian government website.

In its statement, the AMI urged USDA and the US Trade Representative’s office not to appeal the panel’s ruling, implying that a better choice would be mending fences with Canada and Mexico.

“While the US has the option to appeal the ruling, we encourage USTR and USDA to instead work together with the industry and Congress to amend the COOL statute so that it complies with our international obligations and brings stability to the market,” AMI said. “Such a change would help restore strong relationships with some of our largest and most important trading partners.”
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