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COOL Protectionism Still a Hot Issue

A protectionist meat labeling rule requires complicated labeling of beef, pork and poultry to indicate where the animals were born, raised, and slaughtered. Called country-of-origin labeling or COOL, the U.S. Department of Agriculture labeling scheme means that cattle from Canada moved to the U.S. for slaughtering, for example, will have to be tracked, segregated, and recorded to show that the meat is from cattle “Born in Canada, raised in Canada, and slaughtered in the U.S.” Meat products from animals born, raised, and slaughtered in the U.S. would have labels indicating that. The rule particularly affects major U.S. trading partners, Canada and Mexico, which are part of an increasingly integrated system of meat production for those three countries. But the rule also hits domestic meat processors and retailers with higher costs of a tracking and record-keeping system from birth through raising, then through the meat processing and distribution systems. The original COOL rule was part of the 2008 U.S. farm bill. It mandated that the “Made in America” label could only be used for meat products from animals that had been born, raised, and harvested in the U.S.  However, Canada and Mexico in 2009 brought a complaint to the World Trade Organization that the rule discriminated against those two countries and was a violation of the WTO rule on Technical Barriers to Trade. The WTO ruled in 2012 against the U.S. and determined that the COOL label requirements had a “detrimental impact on imported livestock because its record-keeping and verification requirements create an incentive for processors to use exclusively domestic livestock.” The WTO said the rule had to be rewritten to be compliant. The revised USDA rule first went into effect in May 23, 2013, with the USDA allowing an extension to November 23, 2013. But its requirements for major trade partner Canada has led two Canadian government ministers to call for another WTO review to ascertain whether the revised rule is compliant and to publish a list of possible retaliatory measures against a wide range of imports from the U.S. In a statement accompanying the listing, the two ministers wrote:
Despite consistent rulings by the World Trade Organization, the U.S. government continues its unfair trade practices, which are severely damaging to Canadian industry and jobs. Our government is extremely disappointed that the United States continues to uphold this protectionist policy, which the WTO has ruled to be unfair, and we call on the United States to abide by the WTO ruling. We are preparing to launch the next phase of the WTO dispute settlement process on the new U.S. rule, which we had hoped to avoid by the United States living up to its trade obligations. The Canadian government, with the full support and active engagement of Canadian industry, has fought against this unfair treatment, which is also hurting U.S. industry and consumers.
These country-of-origin rules are an example of trend in international trade: instead of using obvious tariffs to protect industries, countries increasingly turn to non-tariff barriers or disguised protectionism. Under the guise of protecting consumers or the environment, countries mandate safety or labeling requirements that involve cumbersome and costly procedures for certain imported goods -- procedures that usually don’t apply to their domestic industries. CEI has often pointed to these non-tariff barriers in trade. Last year, CEI focused on the COOL regulations and co-published a study on COOL with the Canadian policy group the Fraser Institute. In his preface to the study, CEI’s Fred Smith unveiled the protectionism bent of those rules. He wrote:
As multilateral, regional, and bilateral trade agreements have dramatically reduced tariffs among most trading countries, protectionist interests have become extremely creative at finding less direct ways to protect their domestic industries. Since overt protectionist measures would violate these agreements, and in many cases, violate World Trade Organization (WTO) rules, opponents of trade liberalization have turned to non-tariff barriers to achieve their anti-competitive objectives. Usually, these are disguised as needed rules to advance the public good, ensure consumer safety and welfare, protect the environment, or any combination of these goals. Too often, these new fangled protectionist measures succeed, rolling back the gains of free trade.