News and Analysis • Volume 14 • Number 1 • February 2010

9. New Disputes Shine Spotlight on Non-Tariff Barriers

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As of 16 March 2009, the US country-of-origin labelling (COOL) law requires companies in the United States to notify to their customers the country of origin of a number of food commodities, including beef, lamb and pork, as well as fish, shellfish, perishable farm products, ginseng, and peanuts, pecans and macadamia nuts. Such notifications must be made at every stage of transaction, starting from the first import and ending in a label at retail stores.

Canada and Mexico consider that the labelling law is designed to tilt US meat processors toward favouring goods of domestic origin. The two complainants are particularly concerned about the legislation’s impact on their exports of live animals (beef and hogs).

Under COOL, beef, pork, lamb, chicken and goats can qualify for a US origin label only if they are “derived from animals exclusively born, raised and slaughtered in the United States.” Since the law’s entry into force, the complainants have experienced significant export losses, which they put down to US processors and packers’ reluctance to face the cost of segregating operations for US and foreign origin meat. Their panel requests also noted that COOL requirements had reduced the price of their livestock exports, as well as increased costs for exporters, importers and processors.

Canada and Mexico maintain that COOL results in their exports being treated less favourably than products of US origin (violation of the national treatment principle). Specifically, they claim that the legislation violates the Agreement on Technical Barriers to Trade (TBT Agreement), because it is more trade restrictive than necessary to fulfil a legitimate objective, should such an objective exist. They also allege that the legislation breaches the WTO Agreement on Rules of Origin, which prohibits the use of such rules as ‘instruments to pursue trade objectives directly or indirectly’.

In addition, Mexico claims that, in the preparation and application of the legislation, the US did not take into account Mexico’s special development, financial and trade needs as a developing country, as mandated in Articles 12.2 and 12.3 of the Agreement on Rules of Origin.

Both countries also warned that they would invoke violations of the Agreement on Sanitary and Phytosanitary Measures if the US chose to defend the law as a public health measure.

The US delegate told the Dispute Settlement Panel in October that WTO Members had “long recognised that country-of-origin labelling is a legitimate policy. Indeed, that recognition predates the entry into force of the WTO Agreement. It is common for WTO Members to require that goods be labelled as to their origin.” He also emphasised that the US was “confident that our measures provide information to consumers in a manner consistent with our WTO commitments.” Danni Beer of the US National Cattlemen’s Beef Association defended COOL in an op-ed not so much as a consumer information tool, but as measure necessary to “improve our market arenas. Without COOL, US ranchers are forced to participate in an international commodity market where [...] the global market goes to the lowest-cost producer.”

How to Wash Chicken?

The US objects to the European Union’s ban on poultry imports processed with chemical washes, or so-called ‘pathogen reduction treatments’. These involve cleaning chicken carcasses with mostly chlorine-based washes to reduce the level of microbes. The dispute has been simmering since 1997, when the EU began prohibiting such treatments domestically, as well as in imported poultry.

Under EU rules, slaughterhouses may use only water or other ‘approved substances’ to rinse meat products. The four substances most commonly use by US chicken processors are not on the EU’s approved list.

The US argues that the prohibition of these treatments has ground its poultry exports to the EU to a virtual halt, and maintains that the methods used by US processors are safe. It cites two reports by the EU Scientific Committee on Veterinary Measures Relating to Public Health that did not find ‘any scientific basis’ for prohibiting the use of the treatments.

The US alleges that the EU ban on imports so treated is not based on a risk assessment as required by Articles 2 and 7 of the Agreement on Sanitary and Phytosanitary Measures, and also violates the national treatment principle under the GATT.

The EU expressed regret over the panel request. Litigation, a European Commission spokesperson said, was “not the most appropriate way to deal with complex issues such as this one. However, since the US has chosen this path, we will defend our food safety legislation, which does not discriminate against imported products.”

Last year, the commission floated a proposal to lift the import ban, but requiring chlorine-washed chicken to be labelled as ‘treated with antimicrobial substances’ or ‘decontaminated by chemicals’. This was rejected by EU member states, as well as US farmers, who said it would stigmatise their products and could lead to consumer boycotts.