Recent House Action

Lost amidst the debate over Trade Promotion Authority, Trade Adjustment Assistance, and the Trans-Pacific Partnership Agreement, the House recently voted 300-131 to pass H.R. 2393, the Country of Origin Labeling Amendments Act of 2015, which repeals country-of-origin labels (COOL) meant to allow consumers to know where animals in beef, poultry and pork products were born, raised and slaughtered. Originally enacted in 2002, the labeling requirements have been under attack since 2008. The House vote followed the World Trade Organization (WTO)’s latest ruling against U.S. efforts to salvage its labeling regime. Without subsequent action by the United States to remedy the trade violations inherent in the labeling requirements, the WTO ruling allows Canada and Mexico—the United States’ two largest export markets—to apply retaliatory measures amounting up to around 2.6 billion dollars in tariffs annually on U.S. exports to those countries. Enactment of H.R. 2393 would bring the U.S. into WTO compliance.

WTO Issues

Canada and Mexico had challenged U.S. COOL requirements at the WTO in 2009 claiming that the requirements violated U.S. obligations under the General Agreement on Tariffs and Trade (GATT 1994), the Agreement on Technical Barriers to Trade (TBT Agreement), the Agreement of Sanitary and Phyto-Sanitary Measures (SPS Agreement) and the Agreement on Rules of Origin. A dispute settlement panel found that the COOL measure violates Article 2.1 of the TBT Agreement by according less favorable treatment to imported Canadian and Mexican cattle and hogs than to like domestic cattle and hogs. The WTO Appellate Body upheld this finding, albeit for different reasons, in June 2012.

After making certain changes to the COOL requirements, the United States informed the WTO Dispute Settlement Body (DSB) on May 23, 2013 that it had brought its measures into compliance with the WTO’s recommendations and rulings. Canada and Mexico did not agree that the changes had brought the United States into full compliance and sought review of the revised U.S. measures by a WTO compliance panel. That panel issued a report in October 2014 finding that the revised COOL requirements continued to violate Article 2.1 of the TBT Agreement and that the revised measure also violated Article III:4 of the GATT 1994 by increasing the original COOL measure’s detrimental impact on the competitive opportunities for imported livestock. The WTO Appellate Body upheld the compliance panel’s rulings on May 18.

Soon after the DSB adopted the Appellate Body report, both Canada and Mexico requested authorization to withdraw concessions to the United States (i.e. retaliate) under the GATT 1994 at annual levels of $2.5 billion and $713 million, respectively. The United States objects to these levels of retaliation and has requested that a WTO arbitrator establish the appropriate levels of retaliation. No retaliation can occur until the arbitrator has issued its determination.

Country of Origin Labeling and Trade Retaliation Hearing

Following the House action, the issue has moved to the Senate. Members of the U.S. Senate Committee on Agriculture, Nutrition and Forestry convened at a hearing on June 25, 2015 to consider how best to protect America’s farmers, ranchers, business and consumers in the face of what Sen. Pat Roberts (R-KS), Chairman of the Committee, calls “imminent retaliation” from some of the United States’ largest trading partners.

The majority of those in attendance supported quick action to repeal the mandatory COOL requirements. Failing to do so, according to Iowa State University economist Dermot Hayes, could result in the loss of billions of dollars and an estimated 17,000 U.S. jobs. Witnesses testifying in favor of repeal, including Chris Cuddy, Senior Vice President and President of Archer Daniels and Midland’s Corn Processing Business United, believe that speedy repeal is the only way to respect the nation’s obligations as a WTO member, reinforce the nation’s standing as a responsible international trade partner, and avoid high costs across multiple sectors of the economy in almost every state.

There is not unanimity on the issue. Proponents of COOL argued for the development of a bipartisan pathway that would preserve the integrity of the labeling programs in place in the United States today and continue to empower U.S. consumers by providing them with relevant and useful information as well as choice in their local grocery stores. Toward that end, Sen. Debbie Stabenow (D-MI), Ranking Member of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, recently released a draft proposal that offers such a pathway by (1) removing beef and pork mandatory labeling provisions under COOL and (2) putting in its place a completely voluntary labeling provision.

The reactions to Sen. Stabenow’s draft proposal by members of Congress were mixed. In the House, Agriculture Committee Chairman Michael Conaway (R-TX) said in order to comply with the WTO ruling, a full repeal of COOL would be necessary before any alternative proposal could be considered.

What’s Next for COOL?

There is no action scheduled at this time in the Senate on the House bill. Considering the strength of the debate at today’s hearing, it is possible that the Senate could act when it returns from the July 4 recess or shortly thereafter.