Fighting over meat-labelling rules isn’t ‘COOL’

The latest installment in the ongoing dispute between Canada and the United States concerning the U.S. country-of-origin labelling (or COOL) requirements played out recently with a World Trade Organization (WTO) panel decision to award Canada the right to impose retaliatory trade sanctions in the amount of roughly $780 million against the U.S.

The dispute, ongoing since 2008, has been the focus of four previous WTO rulings that COOL discriminates against Canadian cattle breeders and hog farmers.

COOL requires U.S. retail establishments to put country-of-origin labels on packages of a variety of food products. From Canada’s perspective, the most relevant are those applying to steaks and other cuts of meat for which retailers must identify the country or countries where the animals were born, raised and slaughtered. This effectively means that livestock imported into the U.S. from Canada must be segregated from U.S. animals along the various stages of the industry’s supply chain, particularly the processing stage, which creates inefficiencies and additional costs associated with producing meat products using Canadian livestock. This, in turn, makes it less profitable for processors to use Canadian livestock and reduces U.S. demand for Canadian exports.

Supporters of COOL argue that American consumers deserve to know where their food comes from and, furthermore, that a majority of Americans support country-of-origin labelling. What is less clear is whether Americans understand the potential costs of COOL including the consequences of discouraging the use of lower-cost imported livestock. While Canadian producers suffer decreased sales of their products as a result of reduced demand, the higher costs of using more domestic livestock are passed on to American consumers of meat products in the long-run in the form of higher prices than would be paid in the absence of COOL.

It’s also unclear whether the imposition of mandatory country-of-origin labelling makes consumers feel “safer” about the products they are buying because they know whether the product has foreign content. More to the point, there’s no evidence to support claims that U.S. food products are safer than Canadian food products. In any case, U.S. food safety regulations apply regardless of where food products originate.

Prior to the recent WTO panel decision, it looked as though the U.S. government might actually repeal COOL. Specifically, the House of Representatives in June 2015 voted to repeal COOL for beef, pork and chicken. However, the U.S. Senate has, to date, not supported repeal of the legislation. So now it looks like the Canadian government will apply retaliatory tariffs to a variety of American products exported to Canada. While American producers of those products will bear some of the financial burden in the form of reduced sales in Canada, Canadian consumers of the tariffed products are also likely to bear some of the costs in the form of higher prices and/or reduced availability of the tariffed products.

This long-lasting bilateral trade dispute once again highlights the unsatisfactory nature of the dispute resolution procedures under the WTO and NAFTA. In particular, it underscores the importance to Canada of promoting a much more streamlined and expeditious dispute resolution mechanism with its largest trading partner.

It also illustrates the need for the Canadian government to redouble its efforts to work with U.S. authorities to mitigate the adverse impacts that national product regulations have on bilateral trade.