WTO COOL Panel Finally Underway – for Sep. 9, 2010

Eight years after first appearing in legislation and over a year after becoming law, the U. S. country-of- origin labelling (COOL) rule will undergo a legal challenge at the World Trade Organization.

A WTO panel this month in Geneva will hear arguments from Canada and Mexico that COOL violates international trade rules. Hearings are scheduled for Sept. 14-16.

The stakes are high for Canada, whose cattle and swine exports to the U. S. have been devastated since COOL came into force.

Canadian officials feel they have a strong case but refuse to declare victory prematurely.

“We do feel we have a strong case and we’ve definitely tried to make the case as strong as we can build it,” said John Masswohl, international relations director for the Canadian Cattlemen’s Association.

“We’re going over there with our A game. But you just never know what a panel is going to decide.”

The final COOL rule has been a major trade irritant between Canada and the U. S. since officially taking effect March 16, 2009. Its provisions first appeared in the U. S. Farm Bill of 2002.

The U. S. is this country’s largest export market for cattle and hogs and COOL is directly responsible for a collapse in that trade, according to a written submission by Canada to the WTO.

The submission notes that in 2007, prior to COOL, Canadian cattle exports totalled about 1.4 million head and hog exports were roughly 10 million head. In 2009, the first full year after COOL went into effect, cattle exports declined to 1.1 million head and hog exports fell to 6.4 million head, representing reductions of 23 and 36 per cent respectively.

The sole reason for the decline in export numbers is COOL, says the submission.

It argues COOL implicitly discriminates against Canadian cattle and hogs by adding extra segregation costs. As a result, many U. S. feeding operations and slaughterhouses either refuse Canadian cattle and hogs or severely discount them, thus reducing demand for Canadian animals compared to American ones.

KEY EVIDENCE

“The COOL measure has… reduced demand for Canadian cattle and hogs in the U. S. market by discouraging U. S. feeding operations and slaughterhouses from buying Canadian-origin cattle and hogs and U. S. retailers from selling beef and pork derived from Canadian animals,” states the submission.

“The end result has been a significant decline in exports of Canadian cattle and hogs to the United States and a reduction in prices being offered by U. S. purchasers for certain Canadian livestock.”

The drop in exports volumes will be key evidence in Canada’s case, said Martin Rice, Canadian Pork Council executive director.

“The numbers really are quite stunning as to the change in Canada’s exports after COOL became mandatory. That would be very difficult for anybody to overlook or ignore in coming to a judgment on this,” said Rice.

Masswohl said the U. S. will argue it is only providing information to consumers about the origin of food products, just as every other nation does, and that the loss of exports is due to other factors, such as a stronger Canadian dollar.

But Canada will respond that COOL is really trade protectionism masquerading as consumer information, said Masswohl.

Canada argues COOL violates international trade law in two ways: unfavourable treatment and substantial transformation.

The WTO’s agreement on technical barriers to trade (TBT) says countries cannot treat imports less favourably than “like” domestic products. In other words, Canadian and U. S. cattle and hogs are the same but COOL forces them to be treated differently.

Also, importing live animals and processing them into meat transforms them into a different product. That means the U. S. cannot label the meat “Product of Canada” because it has been substantially transformed into a U. S. good, Canada argues.

Masswohl said the U. S. written response to Canada’s submission is curious because it doesn’t directly challenge Canada’s statements; it just passes over them.

That could be taken as a tacit admission of guilt, he said.

“That’s certainly what we would say. If we present evidence that they don’t even discuss… they obviously must agree with what we’ve presented.”

The case has a long way to go before a final resolution. Further oral arguments will take place in December. A written panel ruling could come in July 2011. Whichever side loses will almost certainly appeal, possibly pushing a final outcome into 2012. [email protected]

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