WTO Rules Against US over Country of Origin Labelling

GLOBAL - The World Trade Organization has thrown out the US appeal against its ruling over mandatory country of origin labelling.
calendar icon 19 May 2015
clock icon 8 minute read

The long-running dispute concerned the extra burden of record keeping imposed on exporters of meat and livestock to the US, which Canada and Mexico, who were leading the fight against the regulation, said gave the US an unfair advantage in the market.

The WTO had already ruled that the US was placing too much of a burden on exporting countries but the US has argued that changes it had made to the rules had made them fairer.

However, this week the Appellate Body of the WTO rejected the US arguments against the panel's findings under Article 2.1 of the TBT Agreement.

The Appellate Body maintained the panel's conclusions that the amended COOL measure increases the record-keeping burden for imported livestock entailed by the original COOL measure.

The Appellate Body rejected US arguments that the panel's conclusions were based on “incorrect hypothetical” scenarios that were not based on actual, or the most common, trade situations.

The Appellate Body also maintained the panel's conclusions regarding the potential for labelling inaccuracy under the amended COOL measure and the exemptions prescribed by the amended measure.

The Appellate Body agreed with the panel that the recordkeeping and verification requirements of the amended COOL measure impose a disproportionate burden on producers and processors of livestock that cannot be explained by the need to provide origin information to consumers, and that the exemptions under the amended COOL measure support a conclusion that the detrimental impact of that measure on imported livestock does not stem exclusively from legitimate regulatory distinctions.

In this regard, the panel said that between 57.7 per cent and 66.7 per cent of beef and between 83.5 per cent and 84.1 per cent of pork muscle cuts consumed in the US convey no consumer information on origin despite imposing an upstream recordkeeping burden on producers and processors that has a detrimental impact on competitive opportunities for imported livestock.

In regards to Article 2.2 of the TBT Agreement, the Appellate Body agreed with the Panel that an alternative measure providing less or less accurate information, but having significantly wider product coverage, could qualify as making a degree of contribution “equivalent” to that of the amended COOL measure.

However, the Appellate Body also agreed with Canada and Mexico that the panel made several errors in concluding that the two countries failed to make a prima facie case that the amended COOL measure is more trade restrictive than necessary.

The panel incorrectly excluded two types of COOL labels from consideration when reaching its conclusion that the amended COOL measure makes a “considerable but necessarily partial” contribution to its objective of providing consumer information on origin.

The panel also erred in concluding it was unable to ascertain the gravity of the consequences of non-fulfilment of the amended COOL measure's objective; while making such an assessment is difficult, this should not relieve a panel from its duty to assess this factor, the Appellate Body said.

As a result, the Appellate Body reversed the panel's conclusion that Canada and Mexico failed to make a prima facie case that the amended COOL measure violated Article 2.2 of the TBT Agreement.

However, the Appellate Body made no finding as to whether the amended COOL measure is inconsistent with Article 2.2.

Finally, the Appellate Body upheld the panel's analysis under Article III:4 of GATT 1994.

Ed Fast, the Canadian Minister of International Trade, and Gerry Ritz, Minister of Agriculture and Agri-Food, jointly with Ildefonso Guajardo Villarreal, Mexico’s Secretary of Economy, and Enrique Martínez y Martínez, Mexico’s Secretary of Agriculture, Livestock, Rural Development, Fisheries and Food, said in a statement: “Once again, the WTO has confirmed Canada and Mexico’s long-standing position that the United States’ mandatory COOL requirements for beef and pork are blatantly protectionist and are a violation of the United States’ international trade obligations.

“The amended COOL measure, which causes Canadian and Mexican livestock and meat to be segregated from those of US origin, is damaging to North America’s supply chain and is harmful to producers and processors in all three countries.

“In light of the WTO’s final decision, and due to the fact that this discriminatory measure remains in place, our governments will be seeking authorisation from the WTO to take retaliatory measures against US exports.

“We call on the United States to repeal COOL legislation and comply with its international obligations.

“The Canadian and Mexican governments will continue to work closely to resolve this important trade issue with the United States in order to protect our farmers and ranchers and maintain jobs and economic prosperity throughout North America.”

said Canadian Cattlemen’s Association President Dave Solverson said: “Today is an incredibly important and historic day for Canada’s cattle industry.

“With a final ruling from the WTO affirming the Canadian beef industry’s right to fair market access firmly in hand, the CCA urges the US Congress to finally repeal COOL on red meat.” he said.

He said the CCA had spent C$3.25 million fighting COOL since 2007 but Mr Solverson added that the cost to fight COOL was minor in comparison to the cost COOL has inflicted in the overall industry.

“On behalf of the people who operate Canada’s 68,500 beef farms, I thank the Government of Canada for standing firm against the unfair discrimination of US COOL and ensuring that the US meets its international trade obligations,” he said.

In 2013, the Government of Canada announced a list of commodities being targeted for potential retaliation in the amount of C$1.1 billion.

That figure was based on the annual impairment suffered to that point under the 2009 final COOL rule. The amount has grown significantly following the 23 May 2013 COOL amendment

The amount of US exports that Canada will be seeking WTO authorisation to apply retaliatory tariffs upon is expected to be made known shortly.

US National Farmers Union President Roger Johnson said while the Appellate Body of the World Trade Organization (WTO) has issued its decision today, there was still ample opportunity for the administration, Mexico and Canada to negotiate an acceptable path forward.

“As we have seen in other disputes, once decisions are handed down, WTO members often work together to find a solution that will work for them,” said MrJohnson.

“In this case, such a solution must involve continuation of a meaningful country-of-origin labelling requirement.”

He added: “While those who have opposed giving consumers more information on where their meat products are from have focused on potential retaliation, retaliation is relevant only if the parties cannot reach an agreement on how to move forward and then only after an arbitration process.

“And the amount of any retaliation is by definition speculative at best and aimed to raise alarm where none is warranted. Indeed, looking at the recent report from Dr. Robert Taylor at Auburn University, there is significant evidence indicating that any harm to our trading partners has in fact been negligible at most,” he said.

“Congress may well have a role to play once the administration has worked with our trading partners following today’s decision if a statutory modification is deemed warranted by the administration, but the time for action is not now,” said Mr Johnson.

“Those who find value in greater information to consumers on where their food products are from want to see the administration work with Canada and Mexico for a resolution that maximises the information to consumers in all three countries, not see a retreat from information that helps consumers make informed purchasing decisions.”

Congressman Rick Crawford said: “Country of Origin Labelling not only drives up compliance costs for our domestic producers, but the WTO’s ruling against the rule will now allow for billions of dollars in retaliatory tariffs against US exports.

“In order to prevent the further harm this costly rule will inflict on the US economy, today I am introducing legislation – along with a bipartisan group of colleagues – that repeals COOL requirements for meat once and for all.”

However, the North American Meat Institute has welcomed the WTO Appellate Body ruling.

North American Meat Institute President and CEO Barry Carpenter said: “If there ever was any question that that mandatory country-of-origin labelling is a trade barrier that violates our international agreements, the World Trade Organization’s (WTO) ruling against the United States today should lay those doubts to rest.

“The WTO has spoken not once, not twice, not three times, but four times in panel and appellate body decisions. All four rulings found against the US.

“Now, after years of grappling with this costly and onerous rule – a rule that USDA’s own economic analysis says is a burden on livestock producers, meat packers and processors with no consumer benefit – it is clear that repealing the statute is the best step forward.

“Repeal is particularly warranted given new data released earlier this month by the International Food Information Council (IFIC) Foundation, which shows country-of-origin information maintained its ninth place spot on the list of 11 pieces of labelling information that consumers use when choosing a food product.

“Perhaps more importantly, the percentage of consumers saying they use COOL labels has declined markedly from 29 percent in 2013, to 26 percent in 2014 to 15 percent in 2015. By contrast, half of consumers look for expiration dates and the nutrition facts panel.

“Any action other than repeal invites retaliation from Canada and Mexico that could cost the US economy billions of dollars.

"We look forward to working with Congress to repeal COOL once and for all, so that the United States can comply with its trade obligations, avoid unnecessary retaliation against our products and restore our strong relationships with important trading partners.”

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