The World Trade Organization (WTO) ruled today that Canada and Mexico can slap more than $1 billion in tariffs on U.S. goods in retaliation for meat labeling rules it says discriminate against Mexican and Canadian livestock. 

The U.S. Congress in 2008 during its debate of the Farm Bill made Country-of-Origin Labeling  (COOL) mandatory for beef, pork and lamb products, requiring meat be labeled with the country from where the animal was born/hatched, raised and harvested.  During conference committee negotiations, chicken was incorporated into the legislation voluntarily.

Both Canada and Mexico have complained to the WTO that the COOL rule discriminated against their meat products. Through a series of judgments that have continually gone against the United States, the WTO has agreed that the COOL rule is illegal. The United States has exhausted the appeals process with the WTO, which has granted Canada and Mexico the authority to levy retaliatory tariffs against American-made goods.

The dispute settlement between the United States and Canada reads, “The Arbitrator determined that the level of nullification or impairment of benefits accruing to Canada is CAD 1,054.729 million (approximately USD $780,000). The Arbitrator concluded, therefore, that, in accordance with Article 22.4 of the DSU, Canada may request authorization from the DSB to suspend concessions and related obligations in the goods sector under the GATT 1994 at a level not exceeding CAD 1,054.729 million annually.”

Similarly, the settlement between the U.S. and Mexico reads, “The Arbitrator determined that the level of nullification or impairment of benefits accruing to Mexico is USD 227.758 million. The Arbitrator concluded, therefore, that, in accordance with Article 22.4 of the DSU, Mexico may request authorization from the DSB to suspend concessions and related obligations in the goods sector under the GATT 1994 at a level not exceeding USD 227.758 million annually.”

U.S. meat associations, which have criticized the COOL rule and called for its repeal, spoke out about today’s judgment.

"I am keenly aware that chicken and fowl could be at the top of the list for retaliation by Canada and Mexico, and that this labeling law continues to leave the door open for retaliatory action by other countries, too," said National Chicken Council (NCC) President Mike Brown in response to today's announcement by the WTO.  "NCC supports legislative action that will bring U.S. laws and regulations pertaining to meat and poultry into full compliance with our international trade obligations.  NCC urges Congress to repeal the labeling provision for chicken, beef and pork now."

Brown noted that Canada and Mexico are two of the largest export markets for U.S. poultry products. The U.S. exported $1.23 billion worth of chicken to those two countries last year.

"Losing access to two of our key export markets would be a devastating blow to U.S. chicken farmers and producers," Brown concluded. 

 In a statement, the North American Meat Institute said that the United States was given a “well-deserved” lump of coal from the WTO.

“Mandatory COOL is one of the most costly and cumbersome rules ever imposed on the agricultural sector and today’s announcement sets in motion Canada’s and Mexico’s ability to impose tariffs, a move they will likely complete before Christmas,” said NAMI CEO Barry Carpenter. “Soon, a host of industries, ranging from cherry producers to maple syrup processors to wooden furniture and mattress makers, could pay the penalties for this debacle created by some anti-trade organizations who fought for the law.

“It’s disappointing this matter had to come to this point because we’ve long said that it would invite retaliation from Canada and Mexico, our two best trading partners.  As the Canadian and Mexican governments prepare to impose these tariffs we are reminded of the sage prophet, Pogo, who said, ‘We have met the enemy and he is us.’  The only way to remove this lump of coal in the United States’ Christmas stocking is swift repeal of mandatory COOL.”

Today's ruling cannot be appealed further and is expected to get formal approval by the WTO's dispute settlement body later this month, according to reports.  Without legislation to repeal COOL, retaliation will begin in mid-December.  The U.S. House of Representatives in June voted by a 300-131 margin to repeal the meat labeling provisions, but the Senate has yet to act on the matter.

Source: NAMI, NCC, WTO