The CCA is involved in major trade issues that end up at the World Trade Organization (WTO), such as U.S. mandatory Country of Origin Labelling (COOL) and South Korea, with the latter market access dispute resolved outside of the WTO process in 2012.
On May 18, 2015, in a historic and decisive victory for Canada’s cattle industry, the Appellate Body of the World Trade Organization (WTO) issued a fourth and final ruling confirming that U.S. mandatory Country of Origin Labeling (COOL) discriminates against U.S. imports of Canadian cattle and hogs. The ruling effectively ends the eight-year legal battle initiated by the Canadian Cattlemen’s Association (CCA) in 2007 challenging the U.S. labeling law for violating the U.S.’s international trade obligations.
On May 19, the Government of Canada announced it will move immediately to request authority from the WTO to impose retaliatory tariffs on U.S. exports, as per the WTO process. In a show of support for the Government of Canada’s request to the WTO to authorize retaliation, the CCA stood alongside Agriculture and Agri-Food Canada Minister Gerry Ritz and International Trade Minister Ed Fast in Ottawa as Minister Ritz cited a retaliation figure of between $2.5 and $3 billion.
Nearly two years earlier, the CCA stood next to Minister Ritz in Vancouver when he announced the Government of Canada’s list of commodities being targeted for potential retaliation in the amount of $1.1 billion. That figure was based on the annual impairment suffered to that point under the 2009 final COOL rule. The new, larger amount cited by Minister Ritz on May 19 is due to the additional damage following the May 23, 2013 COOL amendment that actually increased the discrimination.
The U.S. will almost certainly request that an arbitration panel review Canada’s retaliation number. As soon as that arbitration is complete and the arbitrator’s report is issued - likely later this summer - Canada will be in a position to implement retaliatory tariffs on key U.S. exports. The CCA urges the U.S. Congress to repeal COOL on red meat and avoid billions of dollars in retaliation.
The WTO final ruling prompted a swift response from the U.S. House Agriculture Committee. On May 20, the House Agriculture Committee approved legislation that would repeal COOL by a bi-partisan vote of 38 to 6. The CCA is hopeful that the full House will pass the legislation upon return from the Memorial Day holiday. After House passage the legislation would be referred to the U.S. Senate, which has historically been the more difficult chamber for those seeking COOL reform.
The CCA will continue working with the Government of Canada through the arbitration process in Geneva and to encourage the U.S. to adopt a genuine resolution. If the U.S. attempts a further amendment that does not eliminate the segregation of imported livestock, the CCA will strongly urge the Government of Canada to proceed swiftly and exercise Canada’s right to retaliate.
The CCA will continue its efforts in Washington, D.C., to advocate for a resolution that genuinely resolves the problem of COOL by eliminating the need for U.S. livestock buyers to segregate imported animals from U.S. born animals.
The CCA applauds the Government of Canada’s efforts on this file including a strong legal performance in Geneva, diplomatic representations in the U.S. and Mexico and an unwavering commitment to target U.S. exports for retaliatory tariffs should the U.S. fail to repeal COOL.
In September 2013, the World Trade Organization (WTO) granted the Government of Canada’s request to establish a compliance panel. The panel is comprised of the same panelists whose finding that U.S. mandatory Country of Origin Labeling (COOL) discriminates against Canadian live cattle and hogs was affirmed by the WTO Appellate Body in 2012. The Government of Canada requested that the WTO establish a compliance panel in the COOL dispute at the August 30, 2013 meeting of the WTO Dispute Settlement Body (DSB). Written briefings took place through the fall of 2013 and were followed by an oral hearing in Geneva, Switzerland in February 2014.
On October 20, 2014, the WTO Compliance Panel released its report regarding U.S. mandatory COOL, confirming that Canada has won another important and decisive victory at the WTO on COOL. The compliance panel report unequivocally supports Canada’s position that the U.S. amendments to the COOL regulation continue the discrimination against live imports of cattle and hogs into the U.S. marketplace. Indeed, in finding that “. . . the amended COOL measure has increased the original COOL measure’s detrimental impact on the competitive opportunities of imported livestock . . .,” the compliance panel affirmed the CCA’s position that the revised regulation is worse than the original. The compliance process includes the right of either party to appeal the panel’s determination to the appellate body.
A WTO Compliance Panel ruling in Canada’s favour would allow the Government of Canada to seek retaliatory compensation of approximately $1.1 billion on U.S. commodities that could be targeted for retaliation in relation to the COOL dispute. The Government of Canada released the list of commodities being considered for retaliation in June 2013.
The CCA wants the U.S. Congress to immediately repeal the red meat requirements of the COOL legislation or amend the statute to mandate a single label for meat processed in the U.S., thus eliminating the need for U.S. cattle buyers to segregate imported from U.S. born livestock. Until COOL comes into compliance with the WTO, the CCA will continue to insist that the Government of Canada prepare to impose prohibitively high tariffs on key U.S. exports to Canada, including beef.
On June 29, 2012, the WTO Appellate Body confirmed the most important part of the WTO Dispute Panel decision of November 2011 that U.S. Country of Origin Labeling (COOL) legislation discriminates against Canadian livestock in the U.S. market. The Appellate Body’s final decision provided an important victory for Canadian cattle producers.
In December 2012, the WTO arbitrator established a firm deadline for the U.S. to ensure its COOL requirements square with its WTO obligations. The U.S. was given until May 23, 2013 to comply with the Panel and Appellate Body reports adopted by the WTO Dispute Settlement Body confirming that U.S. COOL legislation discriminates against Canadian livestock in the U.S. market.
The regulatory change proposed by the U.S. Department of Agriculture (USDA) on May 23, however, is expected to necessitate additional segregation which will nearly double the impact of COOL from the current $25 to $40 per head. COOL discrimination costs Canadian cattle producers around $640 million per year, losses incurred since COOL was implemented in late 2008.
The CCA urged the Government of Canada to proceed immediately to initiate a WTO compliance panel and request authority to impose retaliatory tariffs on U.S. exports to Canada. A panel could take 9 to 12 months to produce both a ruling and an appeal. However, rather than wait for the authority to implement those retaliatory tariffs, the CCA asked the Government of Canada to publish immediately a list of retaliatory options for public comment. In June 2013, the Government of Canada released a list of U.S. commodities that could be targeted for retaliation in relation to the ongoing COOL dispute. The wide-ranging list of potential items targeted for retaliation will soon be published in the Canada Gazette, marking the formal launch of the next phase of the WTO dispute settlement process over the U.S. amendment to the COOL regulations.
In terms of next steps, Canada is preparing its arguments aimed at explaining to a compliance panel why the U.S. amendment does not comply with the WTO Agreement. This involves both legal arguments regarding how the U.S. rule contravenes the WTO text and providing evidence to demonstrate the economic impact of the discrimination.
The CCA will continue to fight COOL until a resolution that genuinely eliminates the discrimination is achieved.
Upon implementation of the interim final rule (on September 30, 2008), disruption appeared immediately in Canada/U.S. trade. Most U.S. meat packing companies decided to avoid the cost of tracking Canadian cattle and refused to accept them - while the remaining packers still willing to process Canadian cattle discounted prices and limited procession of Canadian livestock to certain days.
The combined impact of the lower prices and the increased cost of transporting livestock greater distances resulted in a loss of about $90 per animal.
Canadian packers lowered their bids in line with the discounts in the U.S. markets, so the next result hit Canadian cattle with significant price reductions, regardless of whether cattle were sold domestically or exported to the U.S.
The CCA and the Canadian Pork Council advocated that the way the COOL regulation is designed discriminates against Canadian livestock.
Mandatory COOL created five ‘origin’ categories for beef sold at retail in the U.S.:
- Beef from cattle born and raised in the U.S. may be labelled as U.S. beef.
- Beef from cattle born in Canada and raised in the U.S. may be labelled as U.S./Canada.
- Beef from cattle imported from Canada to the U.S. for immediate processing must be labelled as Canada/U.S.
- Beef imported to the U.S. from Canada must be labelled as Canadian.
- Ground beef must be labelled with a list of all reasonably possible countries.
Beef sold at food service establishments in the U.S., such as restaurants are not covered by COOL, nor is beef exported from the U.S.
In a typical year, Canada exported approximately 1.2 to 1.5 million head of live cattle and 310,000 tonnes of beef to the U.S. Approximately one-third of the live cattle would be further raised in the U.S. (“B” category) and two-thirds are exported for immediate processing into beef (“C” category).
The website, 'meatcool.info' was initiated by the CCA and developed in partnership with the Canadian Pork Council, Canada Pork International and the trade division of the Beef Information Centre (now called Canada Beef Inc.) to support meat products following the implementation of the final COOL rule.
At that time, the estimated cost of COOL to Canada’s cattle industry appears to be an annual loss of approximately $400 million.
Under the circumstances of the final interim COOL rule, in December 2008 the Canadian government requested formal consultations under the WTO.
Formal consultations are the first step that must be taken before requesting the initiation of a trade dispute settlement panel under either the WTO or the North American Free Trade Agreement (NAFTA). The formal consultation period must last a minimum of 60 days before a request for a dispute settlement panel can be made. The first step of the challenge process, WTO consultations are intended to encourage disputing countries to reach a negotiated resolution.
The Government of Mexico initiated its own WTO consultation process on COOL. Canada is permitted to participate in the Mexico WTO process.
Click here to see more CCA archives on COOL.
On March 10, 2014 Prime Minister Stephen Harper announced that Canada and the Republic of Korea have reached a free trade agreement (FTA). Under the terms of the agreement, the 40 per cent Korean tariff on fresh and frozen beef will be fully eliminated in 15 equal annual steps and the 18 per cent tariff on offals will be fully eliminated in 11 equal annual steps. The text of the final agreement of the Canada-Korea FTA was tabled in the House of Commons by International Trade Minister Ed Fast in June 2014.
The tariff has been the main impediment to accessing the Korean market since Korea lifted its BSE prohibition on Canada in early 2012. For the past few years, Canada’s key beef competitor, the U.S. has enjoyed an increasing tariff advantage flowing from its FTA with South Korea. The Canada-Korea FTA means Canadian beef will be able to once again compete for meaningful access in the Korean market.
The impact of the tariff disadvantage is clear. In 2002, Korea was a $40 million market for Canadian beef and its fourth largest export destination. In 2013, with a growing tariff disadvantage relative to U.S. beef, Canada exported $7.8 million. The Canada-Korea FTA will signal to Korean buyers that they can resume their relationship with Canadian beef and maintain a long-term competitive position.
The CCA congratulates the Government of Canada on achieving a FTA with Korea that will benefit beef cattle producers. Prior to BSE, Korea was Canada’s fourth largest export market, with 14,400 tonnes of Canadian beef valued at nearly $50 million exported to Korea in 2002.
Launch WTO trade challenge
On April 9, 2009, the federal government announced they will take the first steps toward this.