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WTO ruling challenges COOL regulations

The mandatory Country of Origin Labeling (COOL) regulation was initiated for certain U.S. meat products and other foods on March 16, 2009, as part of the 2008 Farm Bill, which was passed by Congress and signed into law. The purpose of the COOL regulation was to provide a required method for consumers to have more label information about the origin of certain food products. Now, a recent ruling by the World Trade Organization (WTO) could challenge the future of the COOL regulation.

The COOL regulations, which were first implemented by the United States Department of Agriculture (USDA) in 2009, required a COOL retail label stating the “country of origin” of beef, veal, pork, lamb, goat, chicken, wild and farm-raised fish and shellfish, fresh and frozen fruits and vegetables, peanuts, pecans, macadamia nuts and ginseng sold by retailers. In the case of the meat products, it only applied to the muscle cuts and ground products, and did not apply to processed products such as hot dogs, lunchmeat, cured products, etc.

In 2013, in response to live animals being transported into the U.S. from Canada and Mexico, USDA amended the COOL regulation for meat products to specify where the animal was born, raised and slaughtered. For example, if a beef animal is born, fed and processed in the U.S., it would be labeled Born, Raised, and Slaughtered in the U.S. However, if that beef animal were born and fed in Canada, but processed in the U.S., it would be labeled Born and Raised in Canada, and Slaughtered in the U.S.

Canada and Mexico filed a complaint with the World Trade Organization (WTO) stating that the COOL regulations in the U.S. have put beef cattle and hogs originating from the two countries at an unfair trade advantage. The complaint indicated that COOL requirements have forced U.S. processors to segregate cattle and hogs from Canada and Mexico separately from U.S. livestock, or to totally reject these cattle and hogs. The complaint states that the U.S. COOL regulations have added considerable expense to the meat processing industry, and have cost livestock producers and the agriculture industries in Canada and Mexico billions of dollars.

The WTO recently ruled in favor of the COOL complaint that was filed by Canada and Mexico. This was the fourth time in the past few years that the WTO has ruled that the COOL regulation is negatively impacting the livestock industries in the two countries. Following the favorable WTO ruling, Canada and Mexico can now petition the WTO to retaliate against the U.S., if there are not acceptable corrections made to COOL. The trade retaliation would likely include the implementation of tariffs on certain agricultural imports from the United States that go into Canada or Mexico.

A trade retaliation of this type could make certain U.S. products less competitive in export markets, compared to similar products from other countries that are exported to Canada or Mexico. Products mentioned for possible tariffs include beef, pork chicken, cheese, bakery goods, apples, rice and quite likely corn and ethanol. It would definitely have a big effect on the U.S. agriculture industry. Canada and Mexico are the largest export markets for U.S. products. In 2014, total U.S. exports to Canada were valued at $312 billion, and total exports to Mexico were valued at $240 billion. Canada and Mexico are Minnesota’s top ag export customers, accounting for 53% of the state’s total agricultural exports. In 2014, Minnesota exported approximately $912 million of total agricultural and food products to Canada alone.

The World Trade Organization was set up many years ago to expand international trade by resolving trade disputes between countries and by lowering existing trade barriers and preventing new barriers. The WTO is basically a world trade “court” or “referee” to make sure that trade policies or regulations implemented by a country do not unfairly have negative impacts on trade of similar products with another country. The WTO hears both sides of trade disputes between countries, and then decides if a trade distortion claim by a country has merit. The WTO is a powerful institution with a staff set up to enforce international trade policy.

The 2014 Farm Bill, which was passed by Congress and signed into law, did not change the COOL requirements from the USDA adjustments that were made in the 2013. The 2014 Farm Bill did require USDA to do an economic analysis of the current COOL regulations. That study, which was released in early May 2015, was conducted by USDA economists and leading economists from major universities. The study concluded that there was no economic benefit to the meat industry, or the U.S. economy as a whole, from the COOL labeling requirements for beef, pork and chicken. The study also concluded that there is considerable consumer interest in the COOL regulations, but very little likelihood of increased consumer demand for meat products as a result of COOL.

In response to the latest WTO ruling, legislation has now been passed by the U.S. House of Representatives that would eliminate the COOL requirements for beef, pork, and chicken muscle and ground products; however, the U.S. Senate has yet to act on the legislation. There is considerable bi-partisan support for this legislation in Congress, especially from states that could be facing significant economic impacts from trade retaliation by Canada and Mexico. Many agricultural and food processing groups have also expressed support for this legislation. On the other hand, some other leaders in Congress, along with several other farm organizations and consumer groups, have called on USDA to try to work with Canada and Mexico to tweak the current COOL requirements to make them acceptable to the WTO, as well as to Canada and Mexico.

The COOL regulation has not caused much discussion in the U.S. retail food industry since its inception in 2009; however, the recent WTO ruling against COOL has now moved the COOL debate back to the front burner. This WTO ruling appears to have the potential to greatly impact future export markets to Canada and Mexico for U.S. livestock, meat, and other agricultural products. Even some former supporters of COOL are now questioning if the U.S. can afford to maintain the existing COOL requirements with Canada and Mexico for meat products. It is now up to the USDA and Congress to either eliminate COOL requirements for U.S. meat products, or to figure out a workable solution to maintain the desired consumer wishes of COOL, without causing considerable economic hardship to the U.S. livestock industry. 

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