WTO sides with Canada, Mexico over COOL

Jun 3, 2011

In a possible impending win for retailers, foreign trade partners, and some livestock industry interests, the World Trade Organization (WTO) indicated Friday, May 20, in a preliminary ruling that it is backing Canada and Mexico in their complaint over U.S. COOL, or Country of Origin Labeling.

The exact content of the preliminary ruling, which is confidential, has only been revealed to U.S., Canada and Mexico trade representatives.

COOL, which for years was the subject of fierce debate within the cattle industry, requires that certain food staples including beef, pork, and chicken sold by retailers bear a label indicating where the product was produced. Only product that is born, raised and processed in the U.S. can carry a U.S. label.

COOL became law in 2008 with passage of the Food, Conservation, and Energy Act.

In 2009, Canada and Mexico filed suit with the WTO protesting the rule on the grounds that it damaged North American trade by violating the Technical Barriers to Trade Agreement, which is meant to ensure that regulations and standards do not create unnecessary obstacles to trade.

National Cattlemens Beef Association President Bill Donald hailed the development as beneficial for the industry. COOL, he asserted, has offered few benefits but has substantial drawbacks.

"This ruling is unfortunate for the U.S. government, but the consequences of a poor decision have been revealed," Donald said in a written statement. "We fully support WTOs preliminary ruling. It is also very important to note that this ruling is very much preliminary and all of the details are not yet known."

In an interview, Donald explained that many U.S. producers had hoped COOL would add value to their product by distinguishing beef that was born and raised in the U.S. from foreign-raised beef. Yet because U.S. beef represents approximately 90 percent of all beef sold under COOL regulations, Donald argued that the rule only served to discount the remaining 10 percentlargely imports from Mexico and Canadawithout benefitting domestic producers.

"That put a strain on that trading relationship, and it didnt really enhance the [U.S.] producers bottom line," Donald explained.

The American Meat Institute (AMI) also reaffirmed its opposition to COOL in a press release issued May 31. In the statement, Mark Dopp, AMI senior vice president of regulatory affairs and general counsel, noted that AMI has long held that COOL potentially violates existing trade agreements.

"It is worth noting that when mandatory country of origin labeling was under congressional consideration, AMI expressed strong concern that such a law would violate our international trade obligations and would likely be challenged by Canada and Mexico at the WTO," Dopp said.

Endorsement of the WTOs preliminary decision, however, was not universally shared across the industry. Producer representative group Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF) strongly objected to the decision in a written statement, saying that COOL empowered consumers to choose by giving them vital information about products.

"The COOL law is widely supported by farmers, ranchers and consumers as an important consumers right-to-know law," R-CALF U.S. COOL Committee Chair Mike Schultz wrote. "COOL enables consumers to exercise choice in the marketplace by giving shoppers the information they need to choose from which country they want their food produced.

"U.S. cattle farmers and ranchers support COOL because we want consumers to be able to support our U.S. cattle industry by differentiating and selecting U.S.-grown beef from the growing volumes of imported beef sourced from over a dozen foreign countries," Shultz concluded.

R-CALF also suggested that the WTOs ruling was a threat to U.S. sovereignty.

Parties familiar with the situation have been speculating that a ruling in favor of Canada and Mexico, which is widely anticipated, could trigger a trend of similar rulings against other low-impact regulations across the globe that do not explicitly limit imports, but favor domestically-produced goods in indirect ways.

WTOs final ruling on the case is scheduled for release in September. Following the ruling, the U.S. will have two months to choose whether it will appeal the decision. Andy Rieber, WLJ Correspondent