The United States’ controversial meat labeling regulations, which have been struck down by World Trade Organization (WTO) panels three times in three years, are continuing to cause serious problems with its neighbors to the North and South. Top trade officials from Canada and Mexico issued a joint statement this week urging repeal of the regulations, threatening substantial economic retaliation if the U.S. fails to bring the regulations into compliance with WTO rules or remove them altogether.

This threat came shortly after a WTO compliance panel declared last week that an amended version of the U.S.’s country-of-origin (“COOL”) meat labeling regulations were still having a discriminatory effect on imports of beef and pork. The U.S. sought to address its loss in earlier rounds of WTO litigation by amending the labeling regulations to include information about where each of the production steps – including slaughtering and packaging – takes place, a move that the panel said actually worsened the rules’ discriminatory effects in some instances.

In a summary of the panel’s findings, the WTO concluded that “the amended COOL measure increases the original COOL measure’s detrimental impact on the competitive opportunities of imported livestock in the U.S. market because it necessitates increased segregation of meat and livestock according to origin, entails a higher record-keeping burden, and increases the original COOL measure’s incentive to choose domestic over imported livestock.”

In its report, the compliance panel affirmed the U.S. government’s right to require country-of-origin labeling for meat products, but ruled that the regulations conflicted with the WTO’s Agreement on Technical Barriers to Trade and national treatment obligations by giving less favorable treatment to Canadian and Mexican imports than what is granted to domestic producers.

The U.S. has been under substantial pressure to bring the rules in line with the WTO’s decision, not only from Mexico and Canada, but from a growing number of domestic industry organizations and members of the U.S. Congress. In a joint statement filed this week, the American Meat Institute and North American Meat Association commended the compliance panel’s decision, calling on the U.S. Trade Representative and the U.S. Department of Agriculture to halt litigation and instead to bring its labeling rules into full compliance. This came after a USTR spokesperson announced that the U.S. was “disappointed” with the WTO’s decision and that it may pursue additional appeals.

Separate from the WTO battle, the meat labeling rules have created controversy in U.S. federal courts, with the USDA most recently urging the D.C. Circuit not to revisit its July decision upholding the rules despite protest from industry groups that it violates the First Amendment’s restrictions on compelled corporate speech.

In short, if the U.S. does not bring its labeling regulations into compliance, Canada and Mexico may strike back with tariffs or trade restrictions on certain U.S. goods that could reach into the billions of dollars. Although the U.S. government has hinted at appealing the WTO’s decision, at least some U.S. officials agree that a negotiated solution (not further litigation) is the best answer to the protracted dispute, particularly given heightened market uncertainty that has resulted from the meat labeling battle. With any luck, the parties will reach a mutually agreed resolution soon, ensuring our nation’s esteemed right to bacon – Canadian or otherwise.