COOL Case Finally Underway at WTO

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Canada’s long-delayed trade challenge to the U.S. country-of-origin labelling rule is finally ready to roll.

The World Trade Organization last week named a three-person panel to rule on whether COOL violates international trade law.

Canada and Mexico have launched a joint challenge to COOL, which requires U.S. retailers to label certain foods according to their country of origin.

The two countries allege COOL restricts market access to their livestock and constitutes a technical barrier which violates WTO rules.

“Fundamentally, what it’s going to come down to is that this COOL law, the way it was implemented, has disadvantaged the sale of Canadian cattle and Canadian hogs in the United States,” said John Masswohl, international relations director for the Canadian Cattlemen’s Association.

“The bottom line is, it’s made them worth less.”

The WTO agreed in November to form a panel to hear the case. Naming the panel members begins a long drawn-out process toward a final ruling, possibly by the end of 2010 at the earliest.

The U.S. imposed the labelling requirements in September 2008 on a range of food products, including fresh meat cuts. The interim rule became permanent in March 2009.

CCA estimates the interim rule took $90 off the value of a finished steer shipped to the U.S. for slaughter. U.S. packers packers discount the price paid for Canadian livestock because of the cost

of segregating them from domestic animals. The situation is somewhat better under the final rule because it doesn’t disadvantage fed cattle over Canadian-born feeder cattle, Masswohl said.

But COOL still depresses livestock exports to the U. S. and costs Canadian producers money, he said. Exports of feeder cattle between 2008 (pre-COOL) and 2009 (post-COOL) were down 55 per cent, according to Can-Fax, CCA’s market analysis arm. Slaughter cattle exports were 21 per cent lower.

So far this year, feeder cattle exports are 52 per cent lower than at the same point in 2009. Slaughter cattle exports are up nine per cent. Masswohl said Canada will argue COOL violates the WTO in two main ways.

The first is a technical barrier to trade. Canada will say the U.S. cannot label products as Canadian because of “substantive transformation” – the live animal becomes fresh meat and therefore a product of the country in which the transformation takes place.

Canada is also expected to argue COOL violates the “national treatment” principle. Countries may not treat imported products less favourably than domestic products.

Masswohl said the U.S. will probably say all COOL does is inform consumers about where their food originates. But international trade law trumps consumers’ right to know in this case, he said.

“To be honest, I don’t think they have any legal grounds to stand on. I think we have a strong case. I think they have a weak case.”

The Canadian Pork Council applauded the formation of the panel, saying COOL has seriously damaged hog and weanling exports at a time when producers are already struggling financially.

“Forcing U.S. pork processors to segregate Canadian animals and meat imposes unnecessary costs in an already difficult market with little benefit to the American consumer,” said Jurgen Preugschas, CPC president, in a statement. Federal Agriculture Minister Gerry Ritz said his government also believes Canada has a strong case.

“We know we have the data on our side to prove that there’s been economic harm here in Canada,” said Ritz.

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