Canada, Mexico win WTO nod for $1 billion a year in sanctions against US

Canada and Mexico won World Trade Organisation's (WTO) approval today to impose some $1 billion a year in trade sanctions against the United States over its country-of-origin labeling requirement for beef and pork.

An arbitration panel at the Geneva-based WTO ruled that the US policy, known by its acronym COOL, was unfair because it puts imported livestock at a disadvantage to domestic livestock.

The panel concluded that Canada and Mexico, partners with the US in the North American Free Trade Agreement, could apply retaliatory tariffs on US exports.

Canada, the largest US trade partner, is authorised to impose up to Canadian Dollar 1.05 billion ($780.3 million) in sanctions annually in the goods sector, while Mexico can levy up to $227.8 million a year in retaliatory tariffs.

COOL requires labeling that states where livestock animals are born, where they are raised, and where they are slaughtered.

The labeling law, popular with US consumers for giving greater transparency to their food purchase, was enshrined in the 2002 five-year Farm Bill.

Congress strengthened it in 2013, even as Canada and Mexico were challenging the policy at the WTO.

The US meat industry, as well as Ottawa and Mexico City, have campaigned against COOL as an unfair and costly burden on producers.

"Country of origin labeling harms Canadian and Mexican livestock producers as well as US processors and producers. It also disrupts the highly integrated North American meat industry supply chain," the Canadian government said in a statement after the WTO ruling.

"Since 2011, the World Trade Organisation has repeatedly ruled that COOL discriminates against Canadian and Mexican cattle and hogs and violates the trade obligations of the United States," it said.

President Barack Obama's administration moved today to defuse the WTO decision, saying it would work with the US Congress on alternatives to the labeling law.

"We are disappointed with this decision and its potential impact on trade among vital North American partners," said Tim Reif, general counsel for the Office of the US Trade Representative, in a statement.

"We will continue to consult with members of Congress as they consider options to replace the current COOL law and additional next steps. In the meantime, if Canada and Mexico take steps to raise import duties on US exports, it will only harm the economies of all three trading partners," he said.