From: Jon Johnson
To: President Joe Biden
Cc: Global Affairs Canada and Secretaria de Comercio y Fomento Industrial (SECOFI)
Date: September 28, 2021
Re: The Battle over Country of Origin Labelling Makes its Return
The Farm System Reform Act of 2021 introduced by Senators Cory Booker, Elizabeth Warren and Bernie Sanders, if enacted, would reignite the country of origin labelling (COOL) dispute between the US and its CUSMA partners.
Section 301 of the proposed legislation would amend US law by reintroducing mandatory COOL requirements for beef and pork products.
Section 302 would amend the Federal Meat Inspection Act by adding: “The label of a meat or meat food product may bear the phrase ‘Product of U.S.A.,’ or any substantially similar word or phrase, only if the meat or meat food product is exclusively derived from one or more animals exclusively born, raised, and slaughtered in the United States.” [my emphasis]
This is not a new battle. While proponents argue that such rules provide transparency to consumers, others say they are simply another barrier to trade, which imposes unnecessary costs on exporters, who have already met US food safety requirements.
Canada and Mexico have already litigated COOL respecting their exports of cattle and hogs to the US in a WTO proceeding, which they won in 2015.
The dispute arose because Canada and Mexico export live cattle and hogs to the US. The regulations implementing the US COOL requirements prior to the WTO ruling set out four categories of meat:
Category A (meat from animals exclusively born, raised, and slaughtered in the US), Category B (meat from animals not exclusively born, raised, and slaughtered in the US), Category C (meat from animals imported into the US for immediate slaughter) and Category D (meat from animals not born, raised, or slaughtered in the US.)
The fact that meat from animals from Canada and Mexico could not be labelled under Category A meant that these animals had to be segregated from US animals. As a result, Canadian and Mexican animals traded at significant discount to US animals. The WTO Appellate Body confirmed that, because of the need to segregate, Canadian and Mexican animals received less favourable treatment than US animals, contrary to the national treatment requirement in the WTO technical barriers agreement.
Note that the ‘Product of U.S.A’ language in the proposed legislation tracks the wording of Category A.
The Obama administration complied by eliminating the labelling requirements respecting beef and pork.
You recently signed an Executive Order on Promoting Competition in the American Economy that sets a very different tone from the proposed legislation. As its title suggests, the Executive Order is directed at increasing competition in various sectors of the economy, including agriculture. The Packers and Stockyards Act referred in the Executive Order is designed to ensure effective competition in livestock markets. The current US practice with Canadian and Mexican livestock is consistent with these objectives.
The Executive Order advocates defining the conditions under which the labeling of meat products can bear voluntary statements indicating that the product is of United States origin without being specific. Significantly, the Executive Order does not carry forward the July 6 statement by your press secretary (in advance of the order) that meat can only receive a Product of USA label if that livestock is raised in the US.
The COOL requirements found to be WTO-inconsistent caused considerable hardship for Canadian and Mexican cattle and hog producers. Your government should continue to respect the WTO determination. If the Farm System Reform Act of 2021 or comparable legislation shows any chance of being enacted, you should direct your Trade Representative to consult immediately with Global Affairs Canada and SECOFI to work out a labelling solution that does not create similar hardships, which, further, would reinforce the spirit of your pro-competition Executive Order.
Note that the WTO national treatment provisions do not accept previous US COOL requirements, and they have been incorporated into CUSMA. As well, CUSMA also sets out its own national treatment obligation respecting labelling. If enacted without modification, the Farm System Reform Act of 2021or similar legislation would violate the WTO Agreement and CUSMA.
Jon Johnson is a former advisor to the Canadian government during NAFTA negotiations and is a Senior Fellow at the C.D. Howe Institute.
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