On November 18 the World Trade Organization (WTO) released the details of dispute settlement findings against the U.S. on country-of-origin-labeling (GUAI) of meat. Separate cases were brought by Canada and Mexico, and the U.S. asked that a single document be released with two Panel Reports, one for each case. Els EUA. has 60 days to appeal the decision, which it will likely do, or “a reasonable period of timeto come into compliance or face punitive tariffs on exports from the U.S. to Canada and Mexico equal to the benefits of the lost trade.

 

The current COOL regulations took effect on September 30, 2008. Canada asked for consultations with the U.S. pursuant to Articles 1 i 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) under the WTO on December 1, 2008, followed by Mexico on December 17. Supplemental consultations with the U.S. were requested in May of 2009, which resulted in no change of positions. In October of 2009, Canada and Mexico asked that a dispute resolution panel be formed under the Dispute Settlement Body. A single three member Dispute Resolution panel was formed in November of 2009 and members of the panel where chosen in May of 2010. A preliminary report was released to the three countries in May of this year with the final report in July.

The panel found that the COOL regulations reduced the demand for muscle meats from Canada and Mexico in the U.S. market due to the cost of segregating supplies from the two countries. Costs for ground meat did not have an impact because the retail label is allowed to list all sources of meat that may have been used in the last 60 days. The panel also found that COOL did not provide sufficient information for consumers to readily identify the sources of non-U.S. muscle meat.

The ruling did not say the U.S. could not have country-of-origin labeling for meat. As the U.S. Trade Representative’s Office said in a press release after the ruling was announced, “We are pleased that the panel affirmed the right of the United States to require country-of-origin-labeling for meat products. Although the panel disagreed with the specifics of how the United States designed those requirements, we remain committed to providing consumers with accurate and relevant information with respect to the origin of meat products that they buy at the retail level. In that regard we are considering all options, including appealing the panel’s decision.

The Canadian and Mexican cases focused on Article 2.1 of the Technical Barriers to Trade (TNT) Agreement which states, “Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country." The cost of segregating leads to higher costs for imports in the U.S. market and unequal treatment for imported muscle cuts.

Mentre que els Estats Units. has the right to have county-of-origin labeling, an issue was raised under Article 2.2 of the TBT Agreement if the U.S. COOL as implemented actually accomplished that goal or was just a protectionist measure to keep out other meat supplies. Article 2.2 states, in part, “For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create.The panel concluded, "…the COOL measure does not fulfil the objective of providing consumer information on origin, particularly with respect to meat products, within the meaning of Article 2.2.

As noted above, U.S. Trade Representative Ron Kirk is likely to appeal the ruling. That is the usual course of action for any country when a WTO panel has ruled against regulations based on a law passed by the country’s legislative body, unless there is already a political consensus to not appeal. While appeal is likely, there is no apparent reason to expect a different outcome. The appeal is part of the process, not an outcome in itself.

The central issue is that the WTO panel confirmed that under WTO agreements the U.S. has the right to have country-of-origin-labeling as long as it does not disadvantage imported products compared to domestic products and provides meaningful information to consumers. Whether or not the present COOL program is worth the cost is not an issue of concern to the WTO. That is a political decision for the U.S. political process to decide. A reasonable assumption is that there continues to be political support in the U.S. for some type of mandatory countryof-origin-labeling of meat.

Els EUA. is not alone. A Bloomberg wire story from November 18 noted, “Today’s ruling may affect as many as 70 other WTO members, including the European Union, that also have mandatory labeling requirements.If the WTO had an effective platform for negotiation, instead of the dead Doha Round of trade policy talks, country-of-origin-labeling for meat, fruit and vegetables would be a candidate for discussion. As countries continue to become more affluent, concerns naturally shift beyond basic food quantity issues. While there are certainly some unique issues among the U.S., Canada and Mexico, we share issues with most other trading countries and could learn from them.

The only unacceptable option for the U.S. government is to do nothing. Els EUA. has voluntarily joined the WTO and has agreed to follow the rules set by the organization as we expect other members to also abide by the rules. If a WTO ruling is so onerous that complying is not an option, the USTR Kirk should seek all other remedies before accepting the imposition of higher tariffs on U.S. exports as the result of U.S. policies.

The need to seek a solution is doubly true since the issues are with Canada and Mexico, our partners under NAFTA. Producers and consumers in all three countries have benefited from the economic integration of the three countries under NAFTA. To begin to undo that integration over country-of-origin-labeling will leave producers and consumers in all three countries worse off.

Ross Korves és Analista de Política Econòmica amb la veritat sobre el comerç i la tecnologia