Trade dispute process flawed despite Canada’s COOL win

Canada’s latest win at the World Trade Organization against American country-of-origin labelling rules gives producers cause for celebration but it also illustrates the work that lies ahead.

Canada must seek all alternatives in trying to find speedier ways to address future unfair trade practices instituted by its trading partners

The WTO, in its latest ruling in Canada and Mexico’s seven-year-long fight against COOL, has given Canada the right to impose retaliatory tariffs on American imports if no deal can be reached.

Federal agriculture minister Gerry Ritz says the tariffs, which include almost 40 categories of goods, should be in place by autumn.

However, the more immediate question is what will the U.S. do next? There were encouraging signs last week as the U.S. House of Representatives agriculture committee voted 38-6 in favour of repealing COOL. Republican majorities in both the Senate and House also bode well for Canadian trade interests.

The WTO has at least strengthened Canada’s ability to respond, but the case around COOL also exposes deep flaws. Seven years of U.S. legal stick-handling has cost Canadian cattle and hog producers about $1 billion each year.

They will never regain those losses.

The problem lies with the WTO dispute settlement process. Here is an abbreviated outline of how the system works:

  • Once a complaint is filed, a bilateral consultation process is set up to see if the two parties can find a solution between themselves.
  • If not, it goes through an adjudication process, where things often get bogged down.
  • A panel is established, and terms of references are decided upon. The panel examines the case and meets with the parties involved, as well as others who might have an interest. It may then be sent to a separate review group.
  • Then there’s an interim review stage, which gathers more input before issuing a report.
  • Court reviews may come into play at this point, followed by implementation of the report by the disputes settlement panel.
  • Added proceedings are necessary if there are disputes over implementation, including referrals back to the original panel. In this case, the U.S. changed its COOL legislation, which delayed the process by a year because the new legislation then had to be ruled upon.
  • In cases of non-implementation, parties negotiate compensation. If that’s not possible, retaliatory tariffs are drawn up and sent to the WTO for approval.

Throw in several appeals at various stages along the way and it isn’t hard to make a case for streamlining the process.

Canada needs to find allies that can help reinvigorate the WTO trade process and hopefully find a better approach to solving disputes.

If there is a key message, it is that any Canadian industry that relies heavily on U.S. trade had best develop a Plan B.

U.S. politicians have demonstrated in this case and in the past that they would rather pay armies of lawyers to win favour with the home electorate, and pound away at one undotted ‘i’ or uncrossed ‘t’ in the legal text, rather than live up to the spirit of the deal.

The federal government is dead right in continuing to aggressively pursue other trade deals outside of the WTO.

Trade arrangements with European and Pacific Rim countries, as well as two-country trade packages, are vital in ensuring Canada doesn’t put too many trade eggs into one unreliable basket.

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