WTO confirms country of origin labeling rule

Jul 6, 2012

American consumers may still see country origin labels on their groceries, but the U.S. will have to change the way it implements and enforces its country of origin labeling (COOL) law, according to the recent ruling from the World Trade Organization (WTO).

Despite an appeal, WTO upheld an earlier finding that mandatory country of origin labeling violates U.S. WTO obligations.

The U.S. Trade Representative’s (USTR) office released a statement that “affirmed the United States’ right to adopt labeling requirements that provide information to American consumers about the meat they buy,” said USTR Ambassador Ron Kirk. “The Appellate Body’s ruling confirms that families can still receive information on the origin of their meat and other food products when they shop for groceries.

The Obama administration remains committed to ensuring that information on the origin of all food products covered by COOL is available to American families so they can make informed purchasing decisions.”

But WTO did concur that the current COOL regulations create an unfair competitive environment for imported Canadian and Mexican cattle and hogs.

The report states, “the Appellate Body found that the COOL measure lacks even-handedness because its recordkeeping and verification requirements impose a disproportionate burden on upstream producers and processors of livestock as compared to the information conveyed to consumers through the mandatory labeling requirements for meat sold at the retail level. That is, although a large amount of information must be tracked and transmitted by upstream producers for purposes of providing consumers with information on origin, only a small amount of this information is actually communicated to consumers in an understandable or accurate manner, including because a considerable proportion of meat sold in the United States is not subject to the COOL measure’s labeling requirements at all.”

The Appellate Body also reversed the Dispute Settlement Panel (DSP) finding that “it does not fulfill its legitimate objective of providing consumers with information on origin” but was unable to complete the legal analysis and determine whether the COOL measure is more trade restrictive than necessary to meet its objective. DPS will adopt the Appellate Body report at its next meeting on July 23, at which time the U.S. must begin efforts to comply.

“I hope this second ruling will finally motivate Congress and the Obama administration to take action to fix the law,” said Texas Cattle Feeders Association Chairman Jim Peters. “COOL hasn’t done what its proponents promised. In fact, it’s done the complete opposite, adding unnecessary costs throughout the production chain without a return on investment. Mandatory COOL already has cost American, Mexican and Canadian cattle producers millions, confused consumers and threatened our relations with the two largest importers of U.S. beef. I hate to think what it will cost if Mexico and Canada are allowed to take retaliatory measures.”

USTR, who originally filed the appeal, said that they are working with USDA to come up with a new plan.

“The next step in the process is for the WTO dispute settlement body to adopt its recommendations and rulings,” the USTR office stated. “The United States will then have a reasonable period of time to comply.”

Canadian and Mexican livestock producers believe the original rule discriminates against imported livestock because packers have to segregate their cattle or pork, increasing the chance that some packers might not buy the imported livestock. Some buyers of Canadian or Mexican livestock have used the law as an argument to offer lower prices for imported livestock.

Canadian Cattlemen’s Association (CCA) President Martin Unrau, along with other Canadian industry representatives, were in Dundurn, Saskatchewan, when the announcement was made.

“Going forward, the CCA will be working with its U.S. counterparts to develop a solution that eliminates the discrimination of Canadian cattle in the U.S. market,” said Unrau. According to reports, at a cost of $25 to $40 per head, the current impact of COOL to Canadian producers is approximately $150 million per year.

According to Dow Jones, Canada’s Agriculture Minister Gerry Ritz responded to the news about the decision as “a clear recognition of the integrated nature of the North American supply chain.” He called the ruling a “key victory” for Canadian and U.S. producers.

“We fully expect that the United States will respect this decision and act quickly for the good of industries in Canada and the U.S.,” he said, according to Dow Jones. “With the economy as fragile as it is, this is no time to thicken the border between the world’s largest trading partners.”

Some U.S. agriculture groups declared the WTO ruling as a “split decision” that suggested no changes were needed to the U.S. law, while others claimed the ruling indicates USDA will have to rewrite COOL to eliminate discrimination against imported livestock.

“The ruling was a split decision,” said Roger Johnson, president of the National Farmers Union (NFU), one of COOL’s biggest backers. “It stated that imported animals are being discounted due to the segregation requirements and additional record keeping that is required to comply with the law. The good news is this can be changed through the regulatory process and there is no need to change the law that informs consumers from where their food comes. A statutory change is unnecessary and NFU will not support any such modification.”

Mike Deering, a spokesman for the National Cattlemen’s Beef Association, said USDA will have to go back and change the COOL rule or the Obama administration risks possible retaliatory tariffs on U.S. products.

“There is no way they (USDA) can proceed with this the way it is,” Deering said. “They need to go back to the drawing board and rewrite the rule.”

The National Pork Producers Council (NPPC) also called on the Obama administration to harmonize the North American hog market by changing the COOL rule. NPPC has been an opponent of COOL.

Jon Wooster, president of the U.S. Cattlemen’s Association, said much of the rule is good news for cattle producers because WTO reaffirmed the right of the U.S. to require country-oforigin labeling for meat.

Other advocates of the law were much more condemning in their response.

Food & Water Watch stated the ruling “is an assault on American democracy and undermines the ability of Congress to give consumers basic information about the source of the food in their kitchens.”

Sen. Jon Tester, D-MT, also issued a statement critical of the WTO decision. “This irresponsible ruling allows big meat companies to undercut Montana producers with cheap, foreign beef,” Tester said. “And it denies consumers the right to know where their meat comes from. That’s not fair trade, it’s a slap in the face to Montana ranchers and consumers.”

Tester reaffirmed his support for COOL in March, declaring USTR’s appeal of the WTO’s original ruling “a responsible decision on behalf of American producers.”

The American Meat Institute (AMI) said the ruling had now been handed down twice.

“The WTO has spoken not once but twice: mandatory country-of-origin labeling violates our WTO obligations. While the law’s proponents continue to defend it and to challenge the WTO perspective, it’s time to ‘get over it,’” AMI said in a statement. Trade has been an essential part of the U.S. livestock and meat industry’s success and AMI said our nation needs to lead the trade arena by example.

Despite the WTO ruling, the law still stands and meat packers and processors will continue to comply with it as long as it is in place, AMI said, but added that it is essential that Congress act to change the law to meet the WTO obligations.

In November 2011, WTO ruled in favor of Canada and Mexico in a complaint against the U.S. mandatory COOL law, which took effect in 2008. Following the law’s implementation, U.S. imports of Canadian cattle and hogs and Mexican cattle declined substantially. The complainants had argued that the COOL law is inconsistent with the U.S.’ obligations under several articles of the WTO agreement.

In its November ruling, the panel noted that the U.S. law violated WTO rules on several fronts and wrote specifically that “The COOL measure, particularly in regard to the muscle cut meat labels, violates Article 2.1 because it affords imported livestock treatment less favorable than that accorded to like domestic livestock.” — Traci Eatherton, WLJ Editor