WTO Arbitrator Rules against U.S. COOL Law

Written by M. Sean High – Staff Attorney

On December 7, 2015, the U.S. Country of Origin Labeling (COOL) law suffered a significant blow as a World Trade Organization (WTO) arbitrator determined that COOL violated international trade obligations, and awarded Canada and Mexico the right to impose over $1.2 billion in retaliatory tariffs against U.S. exports.

Under COOL, certain food retailers (such as supermarkets and grocery stores) are required to provide the name of the country of origin on the labels on specific food products including “muscle cut and ground meats: beef, veal, pork, lamb, goat, and chicken; wild and farm-raised fish and shellfish; fresh and frozen fruits and vegetables; peanuts, pecans, and macadamia nuts; and ginseng.” 

According to Canada and Mexico, through the enactment of COOL, the U.S. violated Article 2.1 of the Agreement on Technical Barriers and Trade (TBT Agreement) requiring that all signatory members (which include the U.S., Canada, and Mexico) “shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country.” Canada and Mexico contended that by requiring country of origin labeling, the two nations were “accorded less favourable treatment of imported livestock than to like domestic livestock,” and because of this treatment, the U.S. failed to carry-out its TBT Agreement obligations.

During the arbitration proceedings, Canada and Mexico’s asserted that because of COOL, they each experienced “export revenue losses” and “revenue loss as a result of domestic price suppression.” Canada claimed annual revenue losses totaling $1,054,729,000 and Mexico claimed annual revenue losses totaling $227,758,000.  Ultimately, the presiding arbitrator agreed with Canada and Mexico and awarded each nation the ability to impose retaliatory tariffs on the U.S. commensurate with their claimed annual revenue losses.  

Following the WTO arbitral ruling, U.S. House Agriculture Committee Chairman K. Michael Conaway (R-TX) stated, “We have known for some time that the Country of Origin Labeling law violates our international trade obligations.” Significantly, on June 10, 2015, legislation sponsored by Chairman Conaway that would repeal COOL (H.R. 2393), passed the U.S. House of Representatives by a vote of 300-131.  Currently, H.R. 2393 awaits action by the U.S. Senate. 

Crop Insurance Update: Bill Restoring Crop Insurance to Previous Levels Moves to President

Written by M. Sean High – Staff Attorney

On December 3, 2015, both houses of Congress voted to pass surface transportation legislation titled Fixing America’s Surface Transportation (FAST) Act (H.R. 22). Of importance to the agricultural industry, the legislation contained a provision that would repeal a $3 billion dollar cut to crop insurers included in the recently enacted Budget Act of 2015.

Under sec. 201 of the Budget Act of 2015, the overall rate of return for crop insurance providers was capped at 8.9% (a decrease from the previous overall rate of return capped at 14.5%).  Significantly, the 8.9% capped rate would have resulted in a cut to crop insures of $300 million annually and $3 billion over ten years.  Nevertheless, under sec. 32205 of FAST, sec. 201 of the Budget Act of 2015 is to be repealed and the overall rate of return for insurance providers capped rate is to be restored to the previous rate of 14.5%.

Prior to the December 3 votes, House Agricultural Committee Chairman Mike Conaway expressed his pleasure that through FAST, sec. 201 of the Budget Act of 2015 would be repealed. The Chairman stated that restoring the previous rates was necessary for “ensuring that crop insurance continues to be available, affordable, and accessible to America’s farmers and ranchers.”

Echoing Chairman Conaway, the Crop Insurance and Reinsurance Bureau (CIRB), American Association of Crop Insurers (AACI) and the National Crop Insurance Service (NCIS) issued a joint statement that declared:

The crop insurance industry fully supports efforts to return crop insurance to where it was before the budget bill was passed.  The budget bill contained a disastrous provision that would have devastated crop insurance as we know it today, harming U.S. farmers and taxpayers alike.

Crop insurance is a successful public-private partnership that has already sustained $12 billion in cuts since 2008. The likely result of additional cuts would be increased industry consolidation, reduced choice in insurance providers for all farmers, and a dramatic decline in the availability and service of policies.  Make no mistake - this cut would jeopardize effective private-sector delivery of crop insurance and take risk management for farmers in the wrong direction.

The final votes to approve FAST were 359-65 in the House of Representatives and 83-16 in the Senate.  As a result of the December 3 votes, FAST now moves to the President’s desk for final approval.