US Repeals Country-of-Origin Labelling, Avoiding Retaliation

14 January 2016

The US’ country-of-origin labelling (COOL) scheme for pork and beef was repealed by Congress late last month, averting hefty countermeasures that Canada and Mexico were preparing to impose following a prolonged WTO dispute.

“The omnibus bill repealed the country of origin labelling (COOL) requirements for muscle cuts of beef and pork, and ground beef and pork. Effective immediately, [the US Department of Agriculture] is not enforcing the COOL requirements for muscle cut and ground beef and pork outlined in the January 2009 and May 2013 final rules,” explained US Agriculture Secretary Tom Vilsack following the repeal.

The repeal was included in language for a multi-trillion dollar spending bill passed by the US legislature on 18 December and signed into law by President Barack Obama. While it removes COOL for pork and beef, it does allow the labelling to continue for lamb and chicken.

Long-running dispute

The WTO dispute between the US, Canada, and Mexico over the COOL regime dates back to 2008, when Ottawa and Mexico City filed their respective challenges (DS384, DS386) at the global trade body.

The measures at issue in the case were labelling requirements applicable to imported livestock and meat, which required retailers to inform consumers of the origin of those products, including beef and pork. In turn, meat suppliers were required to provide retailers with the necessary information, with origin being determined under a complex formula regarding where the animals were born, raised, and slaughtered.

The original dispute proceedings had found at both the panel and Appellate Body stages that the US COOL scheme was in violation of global trade rules, specifically the Technical Barriers to Trade (TBT) Agreement’s Article 2.1. In other words, the US policy was found to be giving less favourable treatment to meat and livestock products from Canada and Mexico relative to the US equivalent. (See Bridges Weekly, 23 November 2011 and 4 July 2012)

Washington later revised the policy in an effort to bring it into compliance with trade rules, with Ottawa and Mexico City challenging whether the changes were indeed sufficient to address the problems found by the global trade arbiter. A compliance panel and the Appellate Body ultimately found that the changes were not enough to resolve the WTO-inconsistent elements. (See Bridges Weekly, 23 October 2014 and 21 May 2015)

Arbitration levels lower than requested

An arbitrator later deemed on 7 December that Canada has effectively lost benefits worth C$1.054 billion (US$740 million at today’s exchange rate) annually as a result of COOL, with Mexico having suffered losses amounting to US$227.758 million annually. In both cases, in line with global trade rules, the arbitrator had granted those two countries with permission to ask for WTO-authorised retaliation up to those respective amounts.

The level of countermeasures approved by the arbitrator were lower than what the two complainants had earlier requested. Canada had pushed for over C$3 billion annually in authorised retaliation, while Mexico had called for US$713.4 million, with both countries citing losses from both export revenue and domestic price suppression.

During the arbitration process, the US had challenged the inclusion of domestic price suppression losses in the level of countermeasures, which the arbitrator ultimately agreed with, then focusing the remainder of its analysis on potential countermeasures on the “claimed level of export revenue losses caused by the COOL measures.”

The arbitrator’s report subsequently explained the differences and rationale in the econometric approaches advocated by the parties in determining the level of “nullification or impairment of benefits,” as well as what approach the arbitrator found to be appropriate in making its final determination of export revenue losses and level of countermeasures.

The WTO’s Dispute Settlement Body (DSB) granted authorisation to both Canada and Mexico on 21 December for retaliation at the levels found by the arbitrator, following those countries’ respective requests.

Canada, Mexico welcome news

In a joint statement, Mexican Economy Secretary Ildefonso Guajardo Villareal, Canadian Trade Minister Chrystia Freeland, and Canadian Agriculture and Agri-food Minister Lawrence MacAuley welcomed the news.

“The re-establishment of open access to the US market for bovine and pork products from Canada and bovine products from Mexico will benefit our producers and our economies,” they said, according to a 19 December statement released by the Mexican government.

A separate statement on 21 December by the two Canadian officials noted that Ottawa plans to monitor the repeal’s implementation “to ensure discrimination against Canadian cattle and hog exports is removed expeditiously in the US market,” expressing hope that there will be no need for future retaliation.

US lawmakers, stakeholders react

Key US lawmakers, such as Kansas Senator Pat Roberts, a Republican who chairs that chamber’s Agriculture Committee, also welcomed the result, noting the penalties US exporters would have suffered from retaliation.

“From the ranchers in Kansas to the jewelry makers on the East Coast, every state had something to lose from keeping mandatory COOL intact,” said Roberts.

Whether Washington will later pursue a voluntary meat labelling regime is not yet clear, though has been raised in earlier discussions of alternative ways to meet the objective of providing consumers with origin information while attempting not to run afoul of trade rules as the mandatory scheme had.

Across the US, the response by different groups have been mixed, with consumer groups and some meat producer organisations, particular those in direct competition with Canada and Mexico, lambasting the move.

“Clearly this language was produced by long-time COOL opponents who legislated in the dark of the night under the guise of solving an issue, when really their intentions completely undermine the will of American consumers and producers,” said National Farmers Union (NFU) President Roger Johnson, advocating for a voluntary COOL programme.

However, some other farm groups noted that the retaliation could have been extremely harmful to their sectors had it not been prevented.

“Repealing the six-year-old Country-of-Origin Labelling program for beef and pork prevents the loss of millions of dollars of US dairy exports that would have resulted from the World Trade Organization ruling,” said Jim Mulhern, President and CEO of the US-based National Milk Producers Federation.

ICTSD reporting; “New rules on how meat is labeled: What you should know,” CHICAGO TRIBUNE, 4 January 2016; “Meat-labeling changes: Northwest producers and purveyors respond,” SEATTLE TIMES, 4 January 2016; “US repeals meat labeling law after trade rulings against it,” ASSOCIATED PRESS, 3 January 2016.

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