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Tuesday, September 24, 2013

Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling

Remy Jurenas
Specialist in Agricultural Policy

Joel L. Greene
Analyst in Agricultural Policy

Most retail food stores are now required to inform consumers about the country of origin of fresh fruits and vegetables, fish, shellfish, peanuts, pecans, macadamia nuts, ginseng, and ground and muscle cuts of beef, pork, lamb, chicken, and goat. The rules are required by the 2002 farm bill (P.L. 107-171) as amended by the 2008 farm bill (P.L. 110-246). Other U.S. laws have required such labeling, but only for imported food products already pre-packaged for consumers. The final rule to implement country-of-origin labeling (COOL) took effect on March 16, 2009.

Both the authorization and implementation of COOL by the U.S. Department of Agriculture (USDA) have been controversial, particularly for the labeling rules for meat and meat products. A number of livestock and food industry groups continue to oppose COOL as costly and unnecessary. They and the main livestock exporters to the United States—Canada and Mexico— view the requirement as trade-distorting. Others, including some cattle and consumer groups, maintain that Americans want and deserve to know the origin of their foods.

Less than one year after the COOL rules took effect, Canada and Mexico challenged them in the World Trade Organization (WTO), arguing that COOL has a trade-distorting impact by reducing the value and number of cattle and hogs shipped to the U.S. market, thus violating WTO trade commitments agreed to by the United States. In November 2011, the WTO dispute settlement (DS) panel found that (1) COOL treats imported livestock less favorably than like U.S. livestock (particularly in the labeling of beef and pork muscle cuts), and (2) COOL does not meet its objective to provide complete information to consumers on the origin of meat products.

In March 2012, the United States appealed the WTO ruling. In June 2012 the WTO’s Appellate Body (AB) upheld the DS panel’s finding that the COOL measure treats imported Canadian cattle and hogs, and imported Mexican cattle, less favorably than like domestic livestock. But the AB reversed the finding that COOL does not fulfill its legitimate objective to provide consumers with information on origin. The Obama Administration welcomed the AB’s affirmation of the U.S. right to adopt labeling requirements to inform consumers on the origin of the meat they purchase. Participants in the U.S. livestock sector had mixed reactions, reflecting the heated debate on COOL that has occurred over the last decade.

The WTO’s Dispute Settlement Body (DSB) adopted the AB and DS panel reports in July 2012. A WTO arbitrator set a deadline of May 23, 2013, for the United States to comply with the WTO findings. In order to comply, USDA issued a final rule requiring that labels show where each production step (i.e., born, raised, slaughtered) occurs and prohibits commingling of muscle cut meat from different origins.

COOL’s supporters have applauded the final rule for providing consumers with specific and more useful information on origin. Domestic opponents decried the rule, arguing that it is more discriminatory than the previous rule and imposes additional recordkeeping burdens on processors and retailers, and in turn, additional costs on consumers. In July 2013, COOL opponents filed suit to stop USDA from implementing the final COOL rule. However, in September, the court decided against granting a preliminary injunction against the rule.

Canada and Mexico have expressed disappointment with the final rule, and argue that it does not bring the United States into compliance with its WTO obligations. In August 2013, Canada and Mexico requested the establishment of a compliance panel to determine if the final COOL rule complies with WTO findings. Once the compliance panel is formed, a panel report could be released within 90 days. The compliance report could be appealed. Depending on the outcome of
the compliance ruling(s), procedural timelines, and whether or not the case progresses to the retaliation phase and arbitration, the WTO COOL case may not be concluded before 2015.

Date of Report: September 16, 2013
Number of Pages: 50
Order Number: RS22955
Price: $29.95

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