22 October 2014

6 minute read

In its latest ruling on the case brought by Mexico and Canada and backed by other meat exporters, the WTO said the new measures were more detrimental to competitive opportunities for livestock imports.

The ruling by the WTO has been backed by the meat industry in the US, who said that “USDA’s mandatory COOL rule is not only onerous and burdensome on livestock producers and meat packers and processors, it does not bring the US into compliance with its WTO obligations".

However, the US farmers said that there was strong consumer support for the USDA's COOL regulations.

National Farmers Union (NFU) President Roger Johnson said: "This recent ruling will likely take many months to resolve, since it will undoubtedly be appealed, and the WTO process is slow moving. Just as NFU has played an active role in legally defending this rule in U.S. courts – and has so far won every legal ruling in court – NFU will also work with USDA and U.S. Trade Representative to see that our WTO rights are protected and that we will comply with any final WTO decisions."

The WTO ruling this week said that the dispute concerns whether the measure taken by the United States in 2013 complies with the DSB recommendations and rulings in the original US – COOL dispute.

Canada and Mexico challenged the treatment given to imported Canadian cattle and hogs, and imported Mexican cattle, under the United States' amended country of origin labelling rules for beef and pork.

This “amended COOL measure” consists of:

• the “COOL statute” (7 U.S.C. § 1638), which remains unchanged from the original dispute; and
• the “2013 Final Rule” (78 Fed. Reg. 31367) amending certain provisions of the 2009 Final Rule (74 Fed. Reg. 2658) following the original dispute.

The compliance panel found that the amended COOL measure violates Article 2.1 of the TBT Agreement because it accords to Canadian and Mexican livestock less favourable treatment than that accorded to like US livestock.

In particular, the compliance panel concluded that the amended COOL measure increases the original COOL measure's detrimental impact on the competitive opportunities of imported livestock in the US market, because it:

• necessitates increased segregation of meat and livestock according to origin
• entails a higher record-keeping burden and
• increases the original COOL measure's incentive to choose domestic over imported livestock.

Further, the compliance panel found that the detrimental impact caused by the amended COOL measure does not stem exclusively from legitimate regulatory distinctions.

In this regard, the compliance panel followed the approach of the Appellate Body in the original dispute by taking into account the amended COOL measure's increased record-keeping burden, new potential for label inaccuracy, and continued exemption of a large proportion of relevant products.

These considerations confirmed that, as with the original COOL measure, the detrimental impact caused by the amended COOL measure's labelling and record-keeping rules could not be explained by the need to convey to consumers information regarding the countries where livestock were born, raised and slaughtered.

The compliance panel determined that the complainants had not made a prima facie case that the amended COOL measure is more trade restrictive than necessary within the meaning of Article 2.2 of the TBT Agreement. In reaching this conclusion, the compliance panel found that the amended COOL measure makes a considerable but, given the exemptions from coverage, necessarily partial contribution to its objective of providing consumer information on origin.

The compliance panel further found that the amended COOL measure had increased the “considerable degree of trade-restrictiveness” found in the original dispute.

The compliance panel also assessed the risks non-fulfilment of the objective would create in terms of consumer interest in, and willingness to pay for, different types of country of origin information.

Additionally, the compliance panel reviewed four alternative measures proposed by the complainants and concluded that either they would not make an equivalent contribution to the relevant objective as the amended COOL measure would, or they were not adequately identified so as to enable meaningful comparison with the amended COOL measure. As a result, the compliance panel was not able to conclude that the amended COOL measure is more trade restrictive than necessary in the light of the proposed alternative measures.

The compliance panel found that the amended COOL measure violates Article III:4 of the GATT 1994 based on its finding that the amended COOL measure increases the original COOL measure's detrimental impact on the competitive opportunities of imported livestock in comparison with like US products. In this regard, the compliance panel relied on the same considerations that informed its finding of detrimental impact under Article 2.1 of the TBT Agreement. However, consistent with Appellate Body jurisprudence, it was not necessary in order to find a violation under Article III:4 of the GATT 1994 for the compliance panel to determine whether the detrimental impact stemmed exclusively from legitimate regulatory distinctions.

Given the above findings of violation, the compliance panel exercised judicial economy with regard to the complainants' non-violation claims under Article XXIII:1(b) of the GATT 1994.

US Meat Industry

In a joint statement, the American Meat Institute (AMI) and North American Meat Association (NAMA) said: “The WTO decision upholding Canada’s and Mexico’s challenge to the US COOL rule comes as no surprise. USDA’s mandatory COOL rule is not only onerous and burdensome on livestock producers and meat packers and processors, it does not bring the US into compliance with its WTO obligations. By being out of compliance, the US is subject to retaliation from Canada and Mexico that could cost the US economy billions of dollars.

"While the US has the option to appeal the ruling, we encourage USTR and USDA to instead work together with the industry and Congress to amend the COOL statute so that it complies with our international obligations and brings stability to the market. Such a change would help restore strong relationships with some of our largest and most important trading partners.”

US National Farmers Union

The US National Farmers' Union president, Roger Johnson said: "American consumers want to know where their food comes from, and America’s family farmers and ranchers are proud to provide that information.

“Nothing about today’s ruling changes that rudimentary fact.”

“Under the guidance of USDA, any changes to COOL to ensure full compliance with today’s decision should be able to be made administratively, while maintaining the integrity of COOL labels,” said Johnson.

The US NFU said that a May 2013 public opinion poll found that more than 90 per cent of consumers support COOL, and feelings for the labelling law are equally strong in rural America.

“We are confident that given that level of support, Congress will reject all heavy-handed attempts to make legislative changes to this important labelling law,” said Mr Johnson.

"Now is not the time to change the law. It is the time to see the WTO process through to an ultimate conclusion."

TheCattleSite News Desk