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Getting Ready Now to Lose Your COOL

Posted May 12, 2015

The law firm McCarthy Tetrault LLP is reminding Canadian manufacturers and importers in the “food and beverage space” that a decision from the World Trade Organization (WTO) on the long-running and often heated cross-border trade dispute over the U.S. country-of-origin labelling (COOL) regulations is expected to be forthcoming in the near future*.

Should the appellate body of the WTO again determine that the controversial COOL regulations (as already amended following a previous U.S. loss before the appeal panel, changes that many contend actually made things worse by imposing even more onerous requirements on the industry) and if the U.S. then fails to satsifactorily amend its regulations in accordance with the decision, Canada will be entitled under WTO rules to retaliate with import tariffs on a range of U.S. goods.

The Harper government has repeated threatened over the past two years that it will not hesitate to take this corrective action if necessary; most recently last October when Agriculture Minister Gerry Ritz said, “We don't want to go the retaliatory route, but we certainly will should it be forced upon us.” The minister later added, “Our government encourages American legislators to listen to the WTO panel, do what's right for our economies, and end this discriminatory process once and for all.”    

The proposed retaliatory list contains a wide array of products on which tariffs could be levied to the tune of about $1 billion, an amount the government roughly estimates COOL has been costing the Canadian livestock industry. The list targets many businesses including, but not limited to, the U.S. food and beverage sector. As Ritz put it, Canada plans to issue tariffs on anything “from California wine to Minnesota mattresses.”

McCarthy Tetrault suggests that before implementation of the retaliation scheme, Canadian companies whose imports might be affected should consider preparing now to “reach out to advise the Canadian government of the impact of the proposed tariffs on their business and present alternatives.”

Of course, it should be remembered that the products specified on the government’s list were quite intentionally targeted to deliberately cause the most direct and publicly visible impact so as to incentivize U.S. exporters to pressure lawmakers into taking congressional action that would force the Obama administration’s U.S. Department of Agriculture to scrap the COOL regulations altogether, or at least neuter them to the point of having little practical effect. As such, the Canadian government would most likely be disinclined to ameliorate its stance on retaliation by dropping targeted products from the list, as doing so would obviously undermine the object of the exercise. Still, one never knows – squeaky wheels and all that…   

*The Appellate Body Report is due to be circulated to WTO Members on May 18, 2015.