Trade Compliance

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Pressure Mounts for COOL Repeal Following Latest WTO Ruling

Posted December 08, 2015

Calls for the United States to repeal its highly contentious country-of-origin labelling rules for meat have assumed a greater sense of urgency following publication Monday of the World Trade Organization’s ruling that allows Canada and Mexico to proceed with efforts to impose retaliatory tariffs of up to US$782 million and US$228 million respectively on imported American products.

Despite being considerably less than the amount of compensation the former government had been seeking in economic damages, the WTO’s decision was nonetheless welcomed by Canada’s beef and pork sectors. A joint press release by the Canadian Cattlemen’s Association, the Canadian Pork Council, the National Feeders’ Association and Canadian Meat Council noted that since COOL was implemented in 2008, “cumulative losses for the Canadian beef and pork sectors have been staggering” and called on the U.S. to repeal its mandatory labelling requirements.

“Our patience is exhausted. There is no further negotiation to be done and no compromise is acceptable. Canadian livestock producers and meat processors expect the U.S. to do nothing less than repeal COOL or face the immediate imposition of retaliatory tariffs on U.S. goods to the same extent as the damage we have endured,” the groups flatly demanded.

The new Trudeau government in the person of International Trade Minister Chrystia Freeland and Agriculture Minister Lawrence MacAulay also urged the U.S. lawmakers to completely scrap the “discriminatory” policy. “If the U.S. Senate does not take immediate action to repeal COOL for beef and pork, Canada will quickly take steps to retaliate,” the two affirmed in a joint statement.

Following the final WTO compliance decision in May ending the eight-year legal battle by the Canadian and Mexican governments challenging the COOL regulations for violating the U.S.’s international trade obligations, Canada had initially claimed annual export revenue losses totaling CA$2 billion and further losses from domestic price suppression of CA$1 billion. The Obama administration however dismissed these estimates as being wildly inflated, countering instead that according to its own “equilibrium displacement model” Canada should only be compensated a paltry US$43.2 million.

Although the WTO rejected certain methodologies used by Canada to calculate export revenue losses through reduced prices and sales volumes, and excluded losses claimed in Canada’s domestic livestock markets as an indirect result of the COOL rules, the arbitrator also refused to accept the alternative economic model proposed by the U.S. because it failed to properly account for the discriminatory effects of the labelling law that the trade body had previously found to exist, resulting in estimates of damage that were considered far too low.

Under international trade rules, there is no provision for appeal of the ruling, which enables Canada and Mexico to now seek authorization from the WTO Dispute Settlement Body to levy new import duties on a wide range of U.S. exports in an amount equal to the compensation levels determined by the arbitration panel.

In light of the looming threat of retaliatory tariffs, pressure is now mounting on the Obama administration and Congress to find a solution to the vexatious meat labelling problem before the end of the year. A statement issued by the COOL Reform Coalition, an advocacy group comprised of more than 140 different trade associations and companies representing U.S. food, agriculture and manufacturing industries said it “strongly urges Congress to repeal immediately the noncompliant provisions of law and to honor our international trade obligations.”

Sounding an alarmist note, the coalition warns that retaliation would pose “a very real threat to our economy and thousands of American jobs” and that if the legislation isn’t repealed, “companies that export to our two largest trading partners are in jeopardy of losing significant market share that will be difficult to regain.”

By contrast, proponents of COOL, such as the activist watchdog group Public Citizen said the WTO ruling highlights the dangers of allegedly pernicious trade deals like the Trans-Pacific Partnership in terms of their ability to undermine “public interest policies” such as the “popular” country-of-origin meat labels. “We hope that President Obama stands by his claim that ‘no trade agreement is going to force us to change our laws,’ but in fact rolling back U.S. consumer and environmental safeguards has been exactly what past presidents have done after previous retrograde trade pact rulings,” said the organization’s director Lori Wallach.