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No Surprise: Injunction On Mandatory COOL Is Denied Again

No Surprise: Injunction On Mandatory COOL Is Denied Again

As expected, a federal court last Friday upheld a lower court decision that had denied a preliminary injunction over implementation of the mandatory country of origin labeling (MCOOL) rule while the lawsuit against it runs its course. The lawsuit argues that MCOOL requirements violate First Amendment rights and that they go beyond the original intent of Congress.

On the first point, First Amendment rights, regarding labeling, etc., is difficult to argue, as government has been allowed to compel all kinds of speech, and the court is unlikely to restrict the power of government to do so. It’s been interpreted that commercial speech can be compelled only where it serves a substantial government interest.  The key is that the courts have determined that essentially any reason is substantial and justifiable. The court ruling said a minimal intrusion free speech was justified.

The second point, that the MCOOL rules go well beyond the original intent of Congress, is obvious. But that could be argued about many regulations and rules issued by the various agencies regarding legislation passed by Congress. The courts have shown no inclination to reign in excesses of authority exercised by government agencies in the promulgation of rules.

One would think that the legislature would object to its power being usurped, but the reality is that Congress seems to have accepted its inability to act. Thus, this nation is left with the scary concept of a legislature that no longer legislates but has turned that power over to regulatory agencies. Of course, regulatory agencies are not answerable to the public.

Initially, the preliminary injunction against MCOOL was sought in an effort to minimize the damage while the World Trade Organization (WTO) process plays out. It was always understood that the lawsuit as originally written, and later rewritten, had little chance of prevailing, and that the MCOOL rule as written has virtually no chance of prevailing in the WTO.

Ironically, the rewritten rule probably is more problematic relative to the WTO position than the original version. Those who tend to lean toward conspiracy theories saw the rule rewrite as the USDA’s way of shifting the ultimate decision on COOL away from USDA and Congress and over to the WTO. Once the billions in retaliatory damages are implemented, then Congress will have to act, and with fewer political ramifications as a result.

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Of course, the kicker with the WTO is not that it will be able to ultimately force the U.S. to obey the trade agreements it made, but that it will take a long time. The initial WTO ruling against mandatory COOL came in May 2013; nearly a year later, the only thing that’s changed is that USDA’s interpretation of the legislation is even more contrary to WTO demands.

Another ruling from the WTO is expected in June. The billions of dollars in “penalties” will likely not be assessed for some time after that. The retaliatory tariffs will be assessed on a wide variety of products and are expected to total more than $2 billion annually. Until those are put in place, it’s unlikely that the legislation will be addressed. 

Opponents of MCOOL will have to decide whether to continue to seek relief from the judiciary, which is not likely to happen. And proponents of COOL will have to decide whether they will continue to insist on maintaining the legislation as currently constructed and which is not compatible with current WTO rules. It looks to me like both sides are committed to playing their losing hands out to the very end.

In the end, the industry will have lost significantly, both in terms of dollars and political capital. Also, in the end, there will be a few people who will have benefitted greatly from maintaining this crisis and divide, but the U.S. beef industry won’t be among them.

Call me an optimist, but I still believe there could have been a compromise that would have benefited both camps. As it is, we’ll now have a decade or more of industry infighting that will ultimately get us right back to the position we were where it all began. Both sides might feel vindicated, but their vindication will come at a great cost to the industry.


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TAGS: Regulatory
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