April 2, 2012
US pleads ruling on country's beef, pork labelling
In an appeal that reiterated the arguments that failed to convince the initial panel adjudicating the challenge from Canada and Mexico, the US late last week attacked the two key findings of an adverse WTO panel ruling on the country of origin labelling (COOL) system for beef and pork.
The first key finding of the panel was that the COOL measure violated Article 2.1 of Agreement on Technical Barriers to Trade (TBT) because it discriminated against imports from Mexico and Canada by imposing higher costs on the use and sale of imported livestock by US processors.
That led to a dip in prices for livestock from those countries, they charged in the panel proceeding. Article 2.1 requires WTO members to treat the products of other countries no less favourably than their own
The second key finding was that the COOL measure failed to fulfil what the panel said was its legitimate objective of providing more information to consumers because the labels used were too confusing. The panel ruled that COOL therefore violated Article 2.2 of the TBT agreement, which says that members should ensure that technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective.
Regarding TBT Article 2.1, the US again argues in its legal brief that the COOL measure did not alter the "conditions of competition" to the detriment of Mexican and Canadian cattle and hog ranchers, and therefore did not violate Article 2.1.
While acknowledging that COOL entails compliance costs, the US argued that the WTO panel "overlooks the fact that any country of origin labelling regime will necessarily introduce compliance costs, and WTO Members are not in a position to control the response of private market actors to these costs."
In other words, the US argued that the COOL measure in and of itself did not increase costs for Mexican and Canadian livestock, even if market forces led to that outcome. Therefore, the COOL measure cannot be faulted for being discriminatory, according to the US.
On Article 2.2, the US contended that COOL does not violate its obligations. It also took on the panel's legal analysis, which it identifies as setting up a two-step test to determine whether the COOL measures are consistent with Article 2.2.
Under this test, the panel asked (1) whether the COOL measure fulfils the objective; and, if so, (2) whether the COOL measure is more trade-restrictive than necessary because there are alternative measures that are less trade-restrictive than the COOL measure, but which equally fulfil the objectives.
The panel ultimately concluded that COOL did not fulfil the identified objective "because it fails to convey meaningful origin information to consumers." Based on this, the panel said that it was not necessary to proceed with the next test in evaluating COOL.
The US argued that the panel was wrong in its approach and should have focused its inquiry solely on the question of whether the measure is more trade-restrictive than necessary. "Article 2.2 does not, as this Panel appears to believe, charge the WTO with making intrusive and far-ranging judgments as to whether a Member's measure is effective public policy," the US writes in its brief.
The appeal filing came on the March 23 deadline and put to rest anxiety among US ranchers represented by groups like R-CALF and the US Cattlemen's Association, as well as consumer groups who had pushed for the Obama administration to fight the ruling.
The Office of the US Trade Representative had faced conflicting pressures from the National Cattlemen's Beef Association (NCBA) to refrain from appealing and until last week gave no public indication of its intent to appeal.
In a statement reacting to the US appeal, Canadian Agriculture Minister Gerry Ritz said his government "fully expected" the appeal but is "confident that the Appellate Body will uphold the Panel decision so trade can move more freely, benefiting producers and processors on both sides of the border."
Ritz also said that Canada would continue to work on the American side with the NCBA and the National Pork Producers Council. The NCBA had strong words for the administration's decision, calling the appeal disappointing and a waste of government resources.
Mexico also said that it would defend the panel decision as the case enters a new stage, and a source in Mexico City said that the country also planned to file a cross-appeal in hopes of securing a stronger victory over the US
"We are very disappointed in this decision," NCBA Vice President Bob McCann said in a March 23 statement. "Instead of working diligently to bring the US into WTO compliance, our government has opted to engage in an appeal process, which jeopardises our strong trade relationship with Canada and Mexico, the two largest importers of US beef."
But the US move to appeal was welcomed immediately by Public Citizen, a non-profit consumer advocacy group, along with Food & Water Watch and the US Cattlemen's Association.
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