The WTO and Beef Labelling

 

By Simon Lester, CATO Institute

July 30, 2020

 

Yesterday, the Senate Finance Committee held a hearing on World Trade Organization (WTO) reform. There were a number of big picture points discussed, such as the role of WTO dispute settlement and the failure to negotiate new WTO agreements in recent years, but thereís a narrower point that I want to discuss here. Some people seem to think there was a WTO dispute settlement ruling that says one of the following two things: (1) U.S. beef canít be labelled with its country of origin when it is for sale in stores, or (2) that the U.S. government canít require beef to be labelled with its country of origin. Sometimes it can be hard to sort out which point they are making, but it doesnít matter because neither one of those things is true. (This issue comes up every few months on Twitter, and I figure if I explain it thoroughly here, I can just point people to this blog post in the future.)

 

The issue arose yesterday when Senator Thune stated the following (1:21:16 and then 1:24:39 of the linked video):

 

††† In many parts of my home state of South Dakota, and probably some in your home state of Iowa Mr. Chairman, WTO is a bad word.

 

††† Thatís because South Dakota ranchers feel like the WTO isnít with them. And I would say, who can blame them, when the WTO has ruled against them in major disputes impacting their livelihoods like the country of origin labelling case.

 

††† Still to this day, it makes no sense to most South Dakotans why the t​shirt they wear can say made in country Y but in most instances the beef that they eat cannot.

 

††† Ö

 

††† It is very hard to explain why some products that come into the United States are labelled accordingly, but for something that we consume, that we eat, we canít seem to get a ruling that recognizes that people in this country would like to know where in the world their beef is coming from.

 

I can see why that would be hard to explain, but itís not what happened in the WTO disputes brought by Canada and Mexico over country of origin labelling. Let me explain what actually happened.

 

After failed attempts by the U.S. industry to get anti​dumping and countervailing duties imposed on live cattle imports from Canada and Mexico, the industry was able to convince Congress to pass a country of origin labelling statute that was written in such a way that it could serve the purpose of discriminating against those imports. Under the statute, retailers (e.g. grocery stores) would have to include information on the product label about where the cattle was born, raised, and slaughtered (the statute also applied to pork products, but Iím going to focus on beef here). In order to fulfill this requirement, the stores needed the relevant information on origin from the upstream producers, which was costly for the producers to gather when part of their production relied on imports (if they only used U.S. cattle, the record​keeping was much easier). The statute itself was worded vaguely enough that it was not completely clear how it would apply, but when the regulations were developed and implemented, it was clear that there would be an extra cost involved where imports made up part of the production. Sometimes that cost was so high that it made financial sense to shift to using only domestic products.

 

In response to this, Canada and Mexico brought a complaint at the WTO, basically arguing that the measure discriminated against their products through the extra costs it imposed on the use of their (imported) products. On the basis of the evidence presented, when the panel hearing the case looked at the part of the U.S. statute/​regulation dealing with muscle cuts of beef, it found that discrimination existed. On appeal, the WTOís Appellate Body agreed.

 

The U.S. then amended the regulation, but not enough to change the impact. The new regulation was also found to be in violation by the panel and then also by the Appellate Body, for the same reasons.

 

At that point, Canada and Mexico obtained authorization, through a WTO arbitration, to retaliate with trade sanctions. In response, Congress repealed the statute. (The United States could have just accepted the retaliation as a way to rebalance the obligations under the WTO agreements while leaving the statute in place, but it decided that repeal was the better option.)

 

Now let me mention a couple key takeaways. First, the WTO panel/​Appellate Body rulings do not say that labelling requirements always violate the rules...

 

more, including links†

https://www.cato.org/blog/wto-beef-labelling