WTO: COOL discriminates against imports

After releasing a ruling in favor of Mexico and Canada’s complaints concerning U.S. country of origin labeling (COOL) on Nov. 18, the World Trade Organization (WTO) is waiting for the report to be either appealed to the WTO Appellate Body or adopted by the organizations Dispute Settlement Body.
    The 230-page report was released Nov. 18 and cites the U.S. as being in violation of several international trade agreements by discriminating against foreign beef products.
    Complaints were filed separately by Mexico and Canada in 2008, claiming that COOL violated both the General Agreements on Tariff and Trade of 1994 (GATT) and the Technical Barriers to Trade (TBT) agreement, citing nearly identical claims.
    A WTO dispute panel was created in May 2010 to address the complaints regarding both the COOL measure and U.S. Secretary of Agriculture Tom Vilsack’s letter regarding the implementation of the measure.
    The panel ruled on the complaints separately, determining that COOL violates Articles 2.1 and 2.2 of the TBT, writing, “the COOL measure is a ‘technical regulation’ within the meaning of Annex 1.1 to the TBT Agreement, and the COOL measure, in particular 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.”
    The report acknowledged the rights of the U.S. to require country of origin labeling, noting, “The Panel also found that the COOL measure does not fulfill its legitimate objective of providing consumers with information on origin, and therefore violates Article 2.2 of the TBT Agreement.”
    Additionally, the panel felt that Secretary Vilsack’s letter, which provided suggestions for voluntary action, went beyond obligations under COOL and violated provisions in the GATT.
    “The ruling did not say that COOL is a violation of trade agreements per say,” says Wyoming Stock Growers Association Executive Vice President Jim Magagna. “On the surface, the COOL rule may not be discriminatory, but in applying the rule, it results in the imported products being treated less favorably.”
    In its implementation, COOL is very complex.
    Magagna explains, “A processor has to be able to identify the source of the meat. If it is strictly U.S. meat, then they put a label that says ‘born, raised and processed in the U.S.’ They also have the choice of three other labels for muscle cuts. It’s also different for ground beef.”
    “If they process both U.S. beef and imported beef if the same day, they can put a label that says it is of mixed origin, but if it is processed on different days, they can’t commingle the meat,” says Magagna.  “I think it is the complexity of COOL that caused the problem. There is at least some evidence that processors have said it is too costly and either won’t process or limits processing of imported beef. That is where the discrimination is seen.”
    As cattlemen’s groups across the nation weigh in on the decision, National Cattlemen’s Beef Association (NCBA) takes the stance that the U.S. should not appeal, but rather bring the implementation of the COOL rule up to meet the standards of the WTO.
    “NCBA strongly advises the United States not to appeal this ruling. Instead, we urge U.S. Trade Representative Ron Kirk to work with NCBA and other pro-trade organizations to apply pressure on Congress to bring the United States into WTO compliance across the board. We must act quickly before U.S. farmers and ranchers once again face unnecessary and unfortunate retaliatory tariffs on their product,” comments NCBA’s Vice President for Government Affairs Colin Woodall. “U.S. livestock producers have yet to see any financial benefit from COOL provisions.”
    Magagna agrees, saying, “I have to honestly say that I have not seen a direct benefit to producers in monetary terms.”
    Magagna continues, “On the other hand, we are proud of our beef product, and we have every right to identify it to consumers and to encourage consumers to choose our U.S. beef.”
    “At this time, this a huge disappointment to cattle producers to have COOL overruled,” says Magagna. “I think the COOL rule has the potential for benefit.”
    Magagna explains that, while benefit may not be seen on a day to day basis, in the event of food security scare or disease outbreak in another country, the ability to retain consumer confidence in U.S. beef products would be very important.
    “It is very important for consumers to distinguish U.S. beef,” says Magagna. “I view it first and foremost as a benefit to consumers in their right to know. Virtually everything else we buy, we know where it comes from. The right to know where your meat comes from is important.”
    “I have not seen evidence to support that people have been more interested in buying or paying more for U.S. beef as a result of COOL,” adds Magagna, “but by giving the information to consumers, they can make the intelligent and informed choice.”
    Within 60 days of the issuance of the report, it will become the Dispute Settlement Body’s ruling or recommendation, unless the consensus rejects it. Either side can appeal the report.
    “I think the U.S. had three options. Either do nothing, appeal or propose some modifications of the rule that the USDA feels would address the concerns of the WTO panel,” says Magagna. “I’m sure the USDA will analyze the decision carefully in deciding what to do next.”
    For more information on the WTO decision, including their report, search DS384 or DS386 at wto.org. Saige Albert is editor of the Wyoming Livestock Roundup and can be reached at saige@wylr.net.