The Canadian and Mexican WTO case against the U.S. Country of Origin Labeling (COOL) requirements for beef and pork is starting to move. Canada first asked for WTO consultations with the U.S. on December 1, 2008, after the Interim Final Rule was published on July 28, 2008 and took effect September 30, 2008. The Final Rule was implemented on March 16, 2009. On November 19, 2009 the Dispute Settlement Body (DSB) of the WTO established a panel to examine the dispute. The outcome of the DSB panel will be closely watched because labeling programs are becoming more common and disputes will continue to increase.

On December 4, 2009 the U.S. Trade Representative (USTR) published in the Federal Register a notice about the WTO establishing the dispute panel and set a January 8, 2010 deadline for comments from the public about issues in the dispute. Two comments were received, one by the American Meat Institute (AMI), a trade association of meat packers and processors, opposed to the final rule and one by the U.S. Cattlemen’s Association (USCA) and the National Farmers Union (NFU) in favor of the final rule. The two sets of comments provide a good overview of opinions on COOL and U.S. commitments under WTO agreements.

The AMI comments are similar to points made by the Canadian and Mexican governments and others opposed to COOL. AMI believes that the final rule does not honor U.S. commitments under both the WTO and NAFTA and undermines the creditability of the U.S. in holding other countries to their commitments. They believe that COOL is not consistent with GATT Article III that requires imported products be treated the same as domestic products. This provision was used by the U.S. to open the Korea distribution and retail market to more U.S. meat. The U.S. program is also not consistent with the WTO Agreement on Technical Barriers to Trade (TBT) that requires the use of international standards for labeling of food products. AMI believes it violates the TBT agreement because it has minimal non-trade objectives as defined in the agreement. AMI states, “The net effect of COOL has been to reduce U.S. market access for foreign livestock producers.”

According to AMI, COOL is not consistent with GATT Article IX related to reducing the value of imported products because it “discourages American companies from importing foreign livestock and meat products because of the cost of tracking country of origin information.” COOL is not consistent with GATT Article X because it cannot be administered in a uniform and impartial manner. A problem also exists under Article 13 related to nullifying or impairing a benefit provided under the WTO.

The U.S. Cattlemen’s Association and National Farmers Union believe it is incorrect to assume that additional labeling requirements are automatically inconsistent with WTO obligations. Labels that provide additional consumer information about origin have a legitimate purpose and are not governed by rules of origin requirements. Programs in Canada, Australia, New Zealand and the EU are cited as examples of country-of-origin labeling requirements for consumer information. COOL simply provides that the origin marking required by U.S. Customs to be retained at retail.

USCA and NFU state that meat products from Canada and Mexico are not required to provide more information than products from the U.S. For example only beef slaughtered in the U.S. and born or raised in another country is required to have additional information. The same is true for comparing live cattle from the three countries, even though technically COOL applies to beef, not live cattle. COOL “merely requires that information about the cattle be included in the beef label, and this requirement applies equally whether the beef is derived from domestic or imported cattle.” They see issues raised about segregated processing lines as a function of relative market share that existed before COOL, not caused by COOL.

This WTO case is mostly centered on nuances about what words in agreements mean and how those words have been interpreted in other WTO and GATT cases. The groups did not present new economic analysis about the cost of compliance or the economic impacts for U.S., Canadian or Mexican producers and consumers.

According to trade data from the Economic Research Service of USDA, feeder cattle imports from Mexico for the first 11 months of 2009 were 334,000, almost the same as the 2008 total of 337,000 when COOL had little impact on the market. The 2008 and 2009 numbers are 35 percent below the average for 2005-2007. Mexico’s calf crop has declined 7 percent over the last four years. Feeder cattle imports from Canada were 66,000 head for 11 months of 2009, less than half the 2008 total of 171,000, and down from 113,000 head in 2007. Canada’s calf crop is also down 7 percent in four years. Slaughter cattle imports from Canada were 693,000 head for the first 11 months of 2009, down from an average of 873,000 in 2007 and 2008. Beef imports from Canada were 747 million pounds in the first 11 months of 2009, compared to an average of 825 million pounds for 2006-2008.

Feeder pig imports from Canada during the first 11 months of 2009 were 4.8 million head compared to 7.0 million head for all of 2008, 6.7 million head in 2007 and 6.0 million or less in 2004-2006. Financial losses have led to a 12 percent decline in pigs produced annually in Canada over the last four years. Imports of slaughter hogs in the first 11 months of 2009 were 996,000 head, less than half the 2.2 million head imported in all of 2008 and a third of the 3.2 million head in 2007. Pork imports from Canada were 615 million pounds in the first 11 months of 2009 compared to 644 million pounds in all of 2008 and 765 million pounds in 2007.

The WTO panel’s conclusions in the case should provide clear direction on labels for imported products so political leaders in all member countries who create programs like COOL will have a better understanding of what must be done to honor commitment under WTO agreements. The panel’s final ruling may be more about splitting legal hairs than creating a more open trading system. If clarity is not achieved by the panel, WTO negotiations will likely be needed to develop language that can be understood. Labeling, country-of-origin and other types, is too important to be left to legal interpretations.