Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

WTO Arbitration Panel to Determine Impact of COOL

Posted September 01, 2015


Writing in today’s Financial Post, international trade lawyer Lawrence L. Herman laments the “weaknesses” in the World Trade Organization (WTO) dispute settlement system, which he claims are abundantly illustrated in the protracted wrangling between Canada and the United States over mandatory country of origin labelling (COOL) requirements that is now entering its eighth year. 

The lengthy trade dispute, Herman says, calls into question the utility of the WTO’s resolution mechanism. Notwithstanding the debatable validity of this assertion, after recapping the “history of delay, frustration and prevarication” involved, he fails to provide any reasonable alternative to the current arrangement or suggest what specific improvements could possibly be made to avoid alleged shortcomings in an inherently frustrating process that some might well contend are actually a feature rather than a bug.

Herman also seems to strongly imply that the U.S. administration’s actions in the matter constitute nothing but an attempt to “prevaricate, delay or dissemble” when it comes to meeting its WTO obligations. This harsh opinion gives short shrift to any legitimacy of the arguments made by COOL’s proponents who maintain that the ultimate purchaser has a right to know where their food is sourced and claim there is evidence of “overwhelming consumer support” for such labelling (although this has been questioned by some researchers). Farm groups note that numerous other countries have similar measures: the European Union imposes country-of- origin labeling regulations for fruits, vegetables, fish, shellfish and beef; and Japan requires it for all foods covered by the U.S. law.

The Harper government vehemently claims that the COOL regulations have needlessly caused billions of dollars of damage to the Canadian livestock industry and after scoring another legal victory at the WTO last year, has since repeatedly threatened to impose retaliatory tariffs in the same amount on U.S. exports if it does not scrap the labelling regime. However, a report from Auburn University published earlier this year indicates that COOL has not severely impacted the livestock trade and that any economic harm to Canada and Mexico has been negligible at most.

At the beginning of last month, the U.S. Trade Representative filed a legal brief disputing the level of retaliation sought by Canada and Mexico, calling it a “dramatic overestimation of damages”. The U.S. requested that the WTO Arbitrator reject the amounts proposed by Canada and Mexico, and instead set the totals at no more than $43.2 million and $47.6 million, respectively – a small fraction of the “absurdly high” $3 billion in threatened tariff retaliation that it dismissed as “fundamentally flawed,” “inaccurately estimated” and “unsupportable”.  

The WTO’s Dispute Settlement Body will be considering the matter at upcoming meetings scheduled for September 15-16 in Geneva, Switzerland that will be open to the public.