The World Trade Organization’s (WTO) appellate body spelled it out in its report last July. The enforced segregation of imported livestock under the U.S. country-of-origin-labeling (COOL) regulations discriminates against those livestock. Why then did USDA and its Agricultural Marketing Service (AMS) propose amendments to the COOL rule that don’t even address this issue?
The cynical view is that AMS focused only on one part of the WTO finding, what it called the “lack of correspondence between the recordkeeping and verification requirements, on the one hand, and the limited consumer information conveyed through the retail labeling requirements and exemptions there from.” That’s why AMS proposed new labels that would have to state where an animal was born, raised and slaughtered.
Such a label, incidentally, would have twice the number of words of the current labels. This would not only incur added costs for meat processors and retailers, it would also be a challenge to put that many words on a label large enough for consumers to be able to read. Never mind that a Kansas State University study late last year found that only 23% of respondents to an online survey were even aware of COOL.
A more charitable view is that AMS was fully aware of the problem with enforced segregation, but was unable to address it in the rulemaking process. WTO’s report clearly stated:
“… in reaching its finding of detrimental impact, the panel found that it is the recordkeeping and verification requirements that ‘necessitate’ segregation, and that create an incentive for U.S. producers to process exclusively domestic livestock and a disincentive to process imported livestock. That is, the panel found that the recordkeeping and verification requirements imposed under the COOL measure lead to the detrimental impact on imported livestock in the U.S. market.”
As I read it, “detrimental impact” means discrimination. Yet AMS’ proposal not only does not address this, it requires even more segregation, thereby enhancing the discrimination and detrimental impact on imported livestock. It’s little wonder that Mexico and Canada cried foul, with the latter already threatening retaliatory action if the U.S. doesn’t fix COOL to WTO’s satisfaction.
USDA and the Obama administration are in a bind. They surely know that the AMS proposal won’t bring COOL into WTO compliance. To do so, the COOL regulation would have to allow a “Product of the U.S.” label on all fresh meat produced in a U.S. facility.
This would be applied regardless of where an animal was born or raised. The animal would simply have to be slaughtered and processed in the U.S. Ironically, the label would be how USDA’s Food Safety and Inspection Service defines “Product of the U.S.”
The bind is that the move to such a label can’t be achieved by regulation, but only by an amendment to the COOL statute. This will require intensive lobbying of members of Congress and a legislative mechanism (maybe the new farm bill) to attach an amendment to.
Therefore, the COOL saga is far from over. Here’s how it might play out:
AMS, as required, will note comments from supporters and opponents of its proposed amendment. But it will ignore arguments that it improperly failed to consider its proposal to be economically significant and failed to conduct the appropriate economic analysis. It will ignore arguments that several beef plants might have to close. It will ignore pleas for AMS to withdraw the rule.
Instead, AMS will publish a final rule in time to meet WTO’s May 23 deadline for compliance. Within 90 days after that, WTO will respond by saying the amended rule doesn’t bring the U.S. into compliance with its WTO obligations. Canada and Mexico will then request permission to initiate retaliatory action. The U.S. will ask for more time and the political battle in Congress over COOL will restart.