A recent World Trade Organization ruling against American country-of-origin labelling should serve up a big ol’ helping of “I-told-you-so” justice for Canadian cattle and hog producers. It should also serve as a reminder of the importance of rules-based trade agreements.
The WTO issued its final ruling June 29 on a decision that was originally released last November, which the United States then appealed.
The final decision made it clear that mandatory country-of-origin labels place foreign competitors at an unfair disadvantage in the U.S. market. The U.S. has 15 months to comply by changing the rules. No further WTO appeals are possible.
The decision should come as no surprise to the Americans. Rumblings from within their own country should have tipped off lawmakers that the regulations were destined to fail.
American packing companies and national beef and pork lobby groups have stated for years that the labelling rules were unfair because of additional costs they thrust onto processors. Packers were forced to ensure that meat from outside the U.S. was handled separately, on different processing lines or on different dates to ensure imported meat was not mixed with American home-grown product. Rather than incur the added costs of complying with the requirements, some packers simply stayed away from buying Canadian product.
Last week’s decision should demonstrate to all Canadian exporters the importance of having structured trading rules, and an institution to hear and enforce complaints.
Yes, it took years to resolve and it was costly, but the expense would have been far greater if there were no means of challenging the U.S. law. The Canadian Pork Council, for example, estimated COOL provisions cost the pork industry $1.4 billion in lost U.S. exports since 2008.
Without a structured agreement in place and a third party organization to hear complaints, those losses would almost certainly continue for much longer. It is difficult to say precisely where the COOL dispute would be at now were it not for the WTO, but one has to doubt whether it would even be on the U.S. government’s radar screen.
The decision also coincided with U.S. and Canada acceptance into the Trans-Pacific Partnership trade agreement with Asian nations. As a nation keen on convincing others that it would follow the terms of any agreement the TPP talks might produce, the U.S. might want to settle its COOL ledger without further fuss. It will hopefully want to be seen as a willing trading partner rather than one that reneges on its agreements.
Countries that depend heavily on exports, as Canada does, must be especially vigilant in defending their interests abroad. As a middle power with little muscle to respond to unfair practices on its own, Canada must have faith that other nations respect the rule of law. WTO agreements and other multi-national and two-nation arrangements are critical to this country’s long-term health.
Agreements like the WTO become especially necessary during times of recession, when some nations withdraw into protectionist practices in a misguided attempt to defend their home industries. Protectionist measures ultimately have more to do with politics — politicians wanting to be seen to be taking action — than sound economic policy.
The question now is how long will it take the U.S. to comply with the WTO ruling and what will be its next step? Voluntary labels maybe?
Whatever the U.S. decides, we shouldn’t hold our breath for immediate action. Most people would be surprised if anything happened before the November presidential vote.
But this decision at least enables us to see a light at the end of the tunnel.
