Tuesday, December 8, 2015

WTO Arbitrator Rules against U.S. COOL Law

Written by M. Sean High – Staff Attorney

On December 7, 2015, the U.S. Country of Origin Labeling (COOL) law suffered a significant blow as a World Trade Organization (WTO) arbitrator determined that COOL violated international trade obligations, and awarded Canada and Mexico the right to impose over $1.2 billion in retaliatory tariffs against U.S. exports.

Under COOL, certain food retailers (such as supermarkets and grocery stores) are required to provide the name of the country of origin on the labels on specific food products including “muscle cut and ground meats: beef, veal, pork, lamb, goat, and chicken; wild and farm-raised fish and shellfish; fresh and frozen fruits and vegetables; peanuts, pecans, and macadamia nuts; and ginseng.” 

According to Canada and Mexico, through the enactment of COOL, the U.S. violated Article 2.1 of the Agreement on Technical Barriers and Trade (TBT Agreement) requiring that all signatory members (which include the U.S., Canada, and Mexico) “shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country.” Canada and Mexico contended that by requiring country of origin labeling, the two nations were “accorded less favourable treatment of imported livestock than to like domestic livestock,” and because of this treatment, the U.S. failed to carry-out its TBT Agreement obligations.

During the arbitration proceedings, Canada and Mexico’s asserted that because of COOL, they each experienced “export revenue losses” and “revenue loss as a result of domestic price suppression.” Canada claimed annual revenue losses totaling $1,054,729,000 and Mexico claimed annual revenue losses totaling $227,758,000.  Ultimately, the presiding arbitrator agreed with Canada and Mexico and awarded each nation the ability to impose retaliatory tariffs on the U.S. commensurate with their claimed annual revenue losses.  

Following the WTO arbitral ruling, U.S. House Agriculture Committee Chairman K. Michael Conaway (R-TX) stated, “We have known for some time that the Country of Origin Labeling law violates our international trade obligations.” Significantly, on June 10, 2015, legislation sponsored by Chairman Conaway that would repeal COOL (H.R. 2393), passed the U.S. House of Representatives by a vote of 300-131.  Currently, H.R. 2393 awaits action by the U.S. Senate. 

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