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Trade Sanctions Threat Could Lead to Repeal of Meat Origin Labeling Law

Thursday, May 21, 2015
Sandler, Travis & Rosenberg Trade Report

The World Trade Organization’s Appellate Body upheld this week a ruling that U.S. mandatory country of origin labeling requirements for meat products continue to violate WTO rules by discriminating against livestock imports from Canada and Mexico. Those countries said they will now pursue billions of dollars’ worth of retaliatory measures against U.S. exports, but House and Senate leaders said they hope to act soon to prevent such an outcome.

The 2008 Farm Bill revised the previous mandatory COOL requirements to provide that for a commodity to be labeled as a product of the U.S. all production activities associated with the commodity have to occur on U.S. soil or in U.S. waters. For products produced in the integrated North American marketplace, the label must indicate every country in which a stage of production has taken place. The 2008 Farm Bill also imposed mandatory COOL requirements for muscle cuts of beef (including veal), lamb, chicken, goat and pork; ground beef, lamb, chicken, goat and pork; wild and farm-raised fish and shellfish; perishable agricultural commodities; macadamia nuts; pecans; ginseng; and peanuts.

The WTO subsequently 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 Appellate Body affirmed this week 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. However, the decision also upheld the lower panel’s decision that the amended COOL rules are no more trade restrictive than necessary.

Canada and Mexico responded by announcing that they will request WTO authorization to impose retaliatory sanctions (expected to be in the form of higher tariffs) against U.S. agricultural and non-agricultural products, which could be granted within a few months. Canada issued a list of U.S. goods that could be subject to retaliation in June 2013, and Mexico’s Economy Ministry has said it could target products such as fruits and vegetables, juices, meat, dairy products, machinery, furniture and home appliances, among others.

In the meantime, House Agriculture Committee Chairman Mike Conaway, R-Texas, and Senate Agriculture Committee Chairman Pat Roberts, R-Kan., said they will work to avoid trade sanctions, possibly by repealing the COOL law. “It is more important now than ever to act quickly to avoid a protracted trade war with our two largest trade partners,” said Conaway, who sponsored a bill repealing mandatory COOL for beef, pork and chicken that was approved by the committee May 20 and could be considered on the House floor in early June. No such bill has yet been introduced in the Senate, where Roberts said he “will consider any solution [including repeal] … that will allow the United States to be WTO-compliant and avoid retaliation from Canada and Mexico.” However, repeal efforts could face opposition from those who say the labeling rules benefit consumers and that a solution could still be worked out at the WTO.

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