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$1 Billion in Trade Sanctions Authorized in Meat Origin Labeling Dispute

Tuesday, December 08, 2015
Sandler, Travis & Rosenberg Trade Report

The World Trade Organization has authorized a total of more than $1 billion in retaliatory sanctions against the U.S. in a dispute over mandatory country of origin labeling requirements for meat products. The sanctions, which are about a third what complainants Canada and Mexico had sought but significantly higher than what the U.S. had argued for, are expected to take the form of higher import tariffs on U.S. goods and could be imposed within a matter of months. This timeframe could increase pressure on Congress to repeal the COOL law.

The 2008 Farm Bill imposed mandatory COOL requirements for muscle cuts of beef (including veal), lamb, chicken, goat and pork as well as ground beef, lamb, chicken, goat and pork and various other products. The WTO ruled that the U.S. Department of Agriculture’s regulations implementing these requirements were inconsistent with U.S. obligations under the WTO Agreement on Technical Barriers to Trade to accord imported products treatment no less favorable than that accorded to domestic products.

The USDA responded by revising its regulations to require origin designations for muscle cut covered commodities derived from animals slaughtered in the U.S. to specify the country in which the production steps of birth, raising and slaughter of the animal from which the meat is derived took place. The revised regulations also eliminated the allowance for commingling of muscle cut covered commodities of different origins. The WTO Appellate Body subsequently found that the amended COOL regulations also violate WTO rules because they accord imported Canadian and Mexican livestock treatment less favorable than that accorded to like domestic livestock.

A WTO arbitration panel has now authorized Canada and Mexico to respond by suspending $780.7 million and $227.8 million, respectively, worth of concessions to the U.S. Canada’s request had been for about $2.5 billion while Mexico’s was $713 million. Canada has previously indicated that the U.S. products it will likely target for higher tariffs include beef, pork, wine, cherries, mattresses and office furniture, possibly with other goods as well. Mexico has said it could target products such as fruits and vegetables, juices, meat, dairy products, machinery, furniture and home appliances, among others. Neither country has yet indicated what specific products may be subject to higher tariffs now that the arbitration decision is final.

The House of Representatives passed a bill in June to repeal mandatory COOL requirements for beef, pork and chicken but similar legislation has stalled in the Senate. Canadian government officials said Monday that if the Senate “does not take immediate action to repeal COOL for beef and pork, Canada will quickly take steps to retaliate.” Senate Agriculture Committee Chairman Pat Roberts, R-Kan., said that “this is no longer a warning” and that “now more than ever, we need to repeal COOL.” The Ranchers-Cattlemen Action Legal Fund, however, said that Congress “should take no action to repeal COOL or weaken it” and that instead the U.S. should “negotiate a diplomatic solution.”

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