COOL ruling finally out - What are the next steps?

On October 20 The World Trade Organization (WTO) again ruled in favour of Canada and Mexico regarding the United States country of origin labelling (COOL) requirements. The ruling indicates that mandatory labels on meat packages identifying where the animal was born, raised and slaughtered were unfair. This reinforces a previous ruling from 2012.

As a result, the WTO has given the U.S. 60 days to comply with its international trade requirements. It seems unlikely that the U.S. will abandon COOL as there is no consensus within the U.S. government or the livestock sector regarding the policy.

Prior to the WTO decision, 112 members of the U.S. Congress shared a letter with Agriculture Secretary Tom Vilsack urging him to rescind laws pertaining to COOL so the matter could be closed. Conversely, 32 U.S. senators shared a letter indicating that the U.S. should reject efforts to weaken COOL rules.

As a result, it’s expected the U.S. will exercise their option to appeal the decision. In that case, Canada and Mexico will be authorized to impose tariffs on U.S. goods in retaliation, which could amount to US$2 billion according to the U.S. trade estimates, and could be implemented as early as next summer.

Industry estimates reveal that COOL legislation has cost the Canadian cattle and hog sectors more than $3 billion and $2 billion, respectively, since 2008.

There are limited options to move the matter forward:

1.       The status quo. The U.S. will appeal the WTO decision and the legal battle will drag out. Even if the U.S. ultimately loses its appeal, it could choose to accept Canada and Mexico’s tariffs. There are precedents in which WTO members lost their case, but chose to ignore the ruling and faced retaliation – the Canada/European Union hormone-fed beef is one such case, which was only resolved many years after the initial WTO ruling.

2.       The U.S. government could ease the requirements of U.S. substantial differentiation. U.S. packers could use a label stating “product of the U.S., Canada, and Mexico”. This would put the U.S. in compliance with WTO rules that Canadian and Mexican livestock are treated equally to products from the U.S.

3.       COOL legislation could be removed and the sector could work out a voluntary labelling system. This is unlikely to occur as proponents of COOL understand that the onerous costs of segregating the meat supply chain are not likely to be supported without relevant legislation making it mandatory.

Regardless of which option the U.S. decides to pursue the bottom line is that it doesn’t appear the COOL saga will be over anytime soon. COOL rules not only work against the best interests of the Canadian livestock industry but the U.S. livestock industry as well.