WTO Preliminary Report Strikes Down COOL

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The following article is from Daily Report for Executives:

In a long-awaited action, The World Trade Organization (WTO) this week issued a preliminary ruling that, if adopted, determines that the U.S. country-of-origin (COOL) requirements violate provisions of the WTO’s agreement on Technical Barriers to Trade (TBT).

Furthermore, the panel ruled in its confidential report circulated to the parties involved that U.S. COOL requirements do not fulfill the stated U.S. objective of helping to inform consumers of the origin of meat, thus violating the TBT agreement that technical regulations not be more trade-restrictive than necessary to fulfill a legitimate objective, sources told the Daily Report for Executives.

The original complaint was filed by Canada and Mexico, which claimed the U.S. COOL provision discriminated against their beef and pork, causing the market to treat it less favorably than U.S.-origin beef and pork. The three-member WTO panel agreed, ruling that COOL violates the TBT.

While the ruling is only preliminary, WTO panels rarely alter their interim conclusions in the final ruling, according to the Daily Report. The panel is expected to issue its final ruling by mid-year, with the WTO making the ruling public sometime in September. The U.S. will then have 60 days to decide whether or not to appeal.

In June 2008, the U.S. passed the Food, Conservation and Energy Act, which imposed mandatory COOL for beef and other meats. Canada and Mexico initiated the WTO case in December 2008. In their arguments, Canada and Mexico said they weren’t challenging mandatory COOL as such, but argued that COOL requirements, as applied internally, act as a protectionist barrier and unfairly distort competition between imported and domestic cattle and pork.


One complaint focused on rules reserving the “U.S. Origin” label for animals exclusively born, raised and slaughtered in the U.S., denying that designation to beef or pork derived from livestock exported to the U.S. as feeder animals and subsequently raised there before slaughter, the Daily Report says.

Mexico told the panel this resulted in young cattle exported from Mexico to the U.S. – the overwhelming share of exported cattle – being denied U.S. designation. That’s despite the fact that 70{dfeadfe70caf58f453a47791a362966239aaa64624c42b982d70b175f7e3dda2} of the weight and value of the animal is added within U.S. territory.

“COOL ignores the fact that the Mexican cattle and U.S. are alike in every respect, except the place where they were born,” Mexico charged.

The practical effect of the discrimination has been to increase the handling cost, and lower the prices, of Mexican cattle because of segregation between U.S.-raised Mexican cattle and U.S.-born cattle during processing, Mexico added. In fact, the COOL rules have disrupted the previously integrated U.S.-Mexican market, with U.S. processors restricting the number of plants handling Mexican cattle and restricting the days on which plants will accept Mexican cattle. Meanwhile, U.S. processors have lowered the price of Mexican cattle expressly because of the cost of complying with the COOL measure. Mexico added that some U.S. packing companies and feedlot operators stopped purchasing Mexican cattle entirely because of the COOL rules.

 

Source:  Daily Report for Executives

Posted by Haylie Shipp

 

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