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March 13, 2009

Office of the United States Trade Representative
Office of the General Counsel
600 17th Street NW
Washington, DC 20508

Re: Docket No. USTR-2009-0004

Dear Sir or Madam:

The undersigned consumer, family farm, agricultural, manufacturing and labor organizations respectively submit the following comments to Docket No. USTR-2009-0004, “WTO Dispute Settlement Proceeding Regarding United States—Certain Country of Origin Requirements.” It is imperative that USTR vigorously defend these country of origin rules at the WTO.

The United States can prevail in this WTO dispute and preserve the country of origin labeling requirements.  The merits of the case are strong and USTR can present a compelling case before a WTO tribunal. The U.S. Department of Agriculture has determined that the final country of origin rules do not violate the United States’ international trade obligations under WTO rules, and we concur.  This WTO case is the first opportunity for the Obama Administration to demonstrate the President’s pledge to “aggressively defend our rights” before WTO dispute panels.

Most of these organizations have advocated for the enactment and implementation of country of origin labeling of food for more than a decade before these requirements were mandated in the 2002 and 2008 Farm Bills. Consumers have demanded the right to know where their food has been grown and harvested. The implementation of these regulations represents a significant step in disclosing essential information so consumers can make informed choices about the foods covered under the law.

Before a single label was applied to one steak or apple, these rules were challenged at the World Trade Organization as a barrier to trade. These labeling requirements are basic consumer protection measures that enjoy overwhelming popular support. USTR must not allow the WTO to overrule democratically enacted, consumer right-to-know labeling disclosure rules.

The WTO COOL challenge by two of the United States’ closest trading partners undermines key trade policy objectives of the Obama Administration. Defending these rules reaffirms President Barack Obama’s long-standing commitment to COOL. A strong defense of COOL at the WTO also furthers the administration’s commitment to the legitimacy of multilateral trade agreements. A WTO decision that overturned U.S. country of origin labeling program could exacerbate the public’s skepticism of global commercial agreements.

It should be noted that although plaintiffs prevail in the majority of WTO cases, the WTO did uphold France’s asbestos ban. In that case, a ruling overturning an obviously sensible public health policy could have damaged the credibility of the WTO dispute system. The merits of the asbestos case provided sufficient grounds for the WTO to rule in favor of the asbestos ban to prevent a public outcry from undermining the legitimacy of the organization.

While the organizations signed onto this comment all believe that the country of origin labeling requirements can and should be strengthened, the provisions of the final rule are not inconsistent with the United States’ WTO obligations. Canada and Mexico contend that the COOL measure violates the national treatment provision of the WTO; the WTO Technical Barriers to Trade Agreement (TBT), or, in the alternative, the WTO Sanitary and Phytosanitary Agreement (SPS); the Agreement on Rules of Origin and the provisions covering nullification and impairment. 

Generally, country of origin labeling requirements that are facially neutral and apply the same requirements to all countries equally without discriminatory intent or impact should not be found to violate WTO rules. Further, the implemented rules cover unprocessed food products that are outside the scope of international standards referenced by the complainants.

The complainants maintain that even if country of origin labels do not violate the WTO TBT obligations, the final rule does not meet the WTO requirements for a food safety standard under the SPS agreement. However, country of origin labels do further a legitimate objective by providing consumers with information that may be used to protect their own health and by providing food safety regulators with information to be used as a first step in investigations of foodborne disease.  Protection of consumer health and protection from deceptive practices are legitimate objectives consistent with the WTO TBT and the WTO SPS Agreement.

The complainants argue further that country of origin labels nullify and impair their anticipated benefits under the WTO.  Therefore, Mexico and Canada will seek to present evidence of economic damage to their exporters, even if they are unable to prove to WTO dispute panelists that the U.S. rule violates the TBT or SPS agreements. Since the marketplace needs informed consumers in order to fulfill the legitimate objective of the prevention of deceptive practices, these informed consumers cannot be a barrier to trade.

This comment elucidates the merits of the case to defend country of origin labeling at the WTO. The initial complaints were lodged against the interim final rule issued in August 2008. Thus, the promulgation of final rules in January 2009 and the subsequent clarifying recommendations by the U.S. Secretary of Agriculture in February 2009 would require new requests for consultations at the WTO and the restarting of the WTO Dispute Settlement process. However, in the interim, USTR must continue to pursue the defense of country of origin labeling at the WTO.  This temporary respite is unlikely to be the end of this dispute. 

The Mexican government had stated that it planned to pursue its WTO complaint after the final rules were issued. Mexico is now awaiting the implementation of the final rules to re-file a new WTO complaint.   Although Canada decided to suspend its challenge once the final rules were issued, Canada’s Agriculture Minister commented that although Canada was unlikely to immediately revive its WTO complaint, Canada could “move forward with [a WTO complaint] as soon as we see some negative responses.”

The Importance of Country of Origin Labeling to the Public

Country of origin labeling has broad and growing U.S. consumer support.  This labeling provides vital information consumers need and want to make informed choices about where their food is from and offers farmers an opportunity to distinguish their products in an increasingly international marketplace.  For years, consumer support for country of origin labeling has been consistently high, with numerous polls finding that well over 80 percent of the public wants country of origin labeling on their food.  A 2008 Consumers Union survey found overwhelming consumer support for COOL – 95 percent of people expressed support for always having country of origin labels.  

President Obama supported these goals in the Senate and reaffirmed these goals in the White House’s agenda. In 2007, then-Senator Obama signed a dear colleague letter to include “common-sense” COOL rules in the Farm Bill language to facilitate “long-awaited and successful implementation of mandatory COOL.”  The president’s agenda includes fully implementing country of origin labeling “so that American producers can distinguish their products from imported ones.”  U.S. Secretary of Agriculture Tom Vilsack reaffirmed the importance of country of origin labeling to give “consumers the information they need to make informed decisions while also allowing producers to differentiate their products.”

Country of Origin Labels Do Not Present a National Treatment Barrier

The WTO permits rules and regulations that treat imported and domestic goods equally. Country of origin rules can be applied in a facially neutral manner—all goods can be required to bear a label clearly designating their country of origin. The final U.S. COOL requirements meet this basic test. The country of origin rules do not apply different label requirements on foreign imports than on domestically produced goods – both will be required to bear a label designating the source of the food. 

Country of origin labels are neither uncommon nor new. The Government Accountability Office found that 48 U.S. trading partner nations require country of origin labeling for meat, produce, seafood and peanuts.  Canada adopted comprehensive country of origin voluntary guidelines that cover almost all food including processed foods like prepackaged soups in 2008.  In order to use a “Product of Canada” label, manufacturers must use no more than 2 percent imported ingredients in their product.  In the United States, the U.S. Tariff Act of 1930 requires the country of manufacture (but not the origin of the food ingredients) to be disclosed on many products, including some retail-ready manufactured food products.  None of these long-standing requirements have ever been challenged as barriers to trade.

Importantly, the final COOL rule does not designate imported goods as “foreign” or “imported,” it merely designates the source of the food in a clear, distinct manner that consumers can comprehend.  It is not inconceivable that American consumers would prefer to purchase Canadian or Mexican food products instead of foods that were raised or harvested further away than these neighboring countries.   

During the rulemaking process, the United States rejected a standard that would affirmatively label imported products but apply a presumptively domestic non-label standard for livestock or crops raised within U.S. borders.   A presumptive domestic standard would be considerably less facially neutral, because imported products would effectively bear a “foreign” brand or label. At least four countries that are trading partners with the United States require country of origin labels for imported products, but do not require that domestically produced products bear a country of origin label.

Claimants Contend Disadvantage Under New COOL Rules

Canada and Mexico maintain that their exports are disadvantaged under COOL because American meatpacking firms will be less inclined to purchase their livestock for slaughter, that their exported livestock will receive lower prices than they would without country of origin labeling and that the cost to retailers will deter the purchase of imported meat products.  This claim rests largely on the country of origin labeling requirements for meat and poultry products, especially those derived from imported livestock in comparison to livestock that was born, raised and slaughtered entirely within U.S. borders.

The final country of origin labeling requirements delineate four classes of labels for domestic and imported muscle cuts of meat. Products derived entirely from livestock born, raised and slaughtered in the United States can bear a “Product of the United States” label (known as category A).  Imported meat products must bear a label designating the country of origin of the import (known as category D).  The dispute centers on the two labels categories for imported livestock slaughtered in the United States and the extent to which these labels can be used for livestock of multiple countries of origin (both imported and domestic livestock).

Muscle cuts of meat from imported livestock would bear one of two different labels depending on whether or not the livestock was imported for immediate slaughter.  Livestock that was imported and raised in the United States (for example, farrow-weight hogs that were imported but raised to slaughter-weight in the United States) would bear a label stating “Product of the United States and Country X” (known as label B), but livestock imported for immediate slaughter would bear a label stating “Product of Country X and the United States” (known as label C).  

The final rule allows a blurring of the label A, label B and label C categories if animals of different origins are commingled during a single production day at a slaughterhouse.  The rule allows the application of category B labels for commingled meat processed during a single production day from both domestic livestock and imported livestock that was imported and raised in the United States but was not imported immediately prior to slaughter.  Additionally, the final rule effectively allows animals imported for immediate slaughter to bear a category B label if they are commingled with livestock that was imported but raised in the United States.

For ground beef, the final country of origin labeling requirements allow meatpacking plants to list all the “reasonably possible countries of origin” that can include the origin of any animal in the manufacturer’s inventory for the previous 60 days. 

Meatpackers have planned to utilize the category A labels for domestic livestock, but will maintain mixed country of origin labeling for some production. Tyson Foods planned to shift to category A labels for many lines of its premium lines of beef in early 2009 and all beef and pork products by mid-year.  Cargill began transitioning to category A “Product of USA” as well as category B mixed country of origin labels in separate production lines in early 2009.  JBS-Swift committed to providing “Product of USA” labels on applicable livestock and meat products.

The final labeling rules for both muscle cuts and ground beef provide significant flexibility that obviates the national treatment claims made by the complainants.  This allows meatpackers to continue slaughtering imported livestock and commingle the animals with domestic livestock – either for muscle cuts or ground beef – and bear a label that includes the United States as one of the countries of origin. Consumer and farm advocates consider these loopholes in the rules overly weak – but as written, the final rule does not present a national treatment violation for imports.

Country of Origin Labeling Rules Do Not Violate WTO Technical Barriers to Trade Agreement Obligations

The claimants maintain that the country of origin labeling requirements violate the WTO TBT Agreement’s rules because the U.S. measure does not use appropriate international standards regarding determination and labeling of the country of origin. The WTO TBT Agreement requires countries to utilize “relevant international standards” unless these standards would be an “ineffective or inappropriate means for the fulfillment of the legitimate objectives.”   Most countries apply some form of country of origin labeling requirement and there is little conformity between the applications of these standards. The Codex Alimentarius standards established under the United Nations permit country of origin labeling for prepackaged foods “if its omission would mislead or deceive the consumer.” 

Currently, almost all meat sold in American grocery stores – whether domestically or foreign raised or processed – is labeled as USDA-inspected or USDA-graded.  The USDA inspection and grading label appearing on imported meat or meat processed from imported livestock can mislead consumers into believing they are purchasing domestically produced meat.  USDA noted in its interim final rule that one benefit of country of origin label identification is to remove informational distortions that existed without the labeling.  Country of origin labels provide the most effective and legitimate remedy to avoid such consumer deception.

Indeed, Canada claims that the Codex Alimentarius standards for labeling prepackaged foods should be the presumptive standard for country of origin labeling.   The final U.S. country of origin labeling requirements are in close alignment with these standards. The Codex standard requires that if a food “undergoes processing” in the importing country (i.e. the United States) that “changes its nature,” the country where the processing occurs should be considered its country of origin.

The final country of origin labeling rules explicitly exclude processed food products from mandatory labeling requirements. The country of origin labeling interim final rule recognized that “substantial transformation” is the underlying basis for determining the country of origin under the WTO Agreement on Rules of Origin as well as the Codex’ standard for prepackaged food.  The final rule for country of origin labels are not mandated for foods that undergo “specific processing resulting in a change in the character of the covered commodity.”  For example, although country of origin rules cover ground beef, they do not apply to meatballs, meatloaf, or similar items made from ground beef containing binders and/or seasonings.  This language is substantively equivalent to the Codex standard for prepackaged foods referenced by the complainants.

Mexico further contends that the final country of origin labeling requirements are not justified as necessary to fulfill a legitimate objective and thus is an illegitimate requirement for imported goods.  However, the TBT agreement explicitly lists as a legitimate objective protection of consumer health and protection from deceptive practices.  Country of origin labels provide consumers with information that may be used to protect their own health and provide food safety regulators with information to trace foodborne disease. 

Canada has also contended that country of origin labels provide little benefit to consumers.  The consumer benefits of country of origin labels are basic disclosure to consumers who overwhelmingly desire access to this important information and the ability of consumers to avoid potentially risky imported food products.

Although it is not possible to clearly quantify the economic benefit of country of origin labeling to consumers, the high level of consumer support for labeling suggests that the qualitative and intangible benefits are important to nearly all consumers. The increased disclosure on the label removes unnecessary confusion that currently exists in the marketplace and furthers a legitimate goal under internationally accepted country of origin labeling standards. Even the referenced standard by the claimants permit country of origin labeling for prepackaged foods “if its omission would mislead or deceive the consumer.” 
 
Country of Origin Labels Do Not Violate WTO Sanitary and Phytosanitary Agreement Obligations

Canada and Mexico also claim that country of origin labels violate the United States’ obligations under the WTO Agreement on Sanitary and Phytosanitary Measures.  This claim was included in case their claim on TBT is unsuccessful.  This recognizes that TBT provisions “do not apply to sanitary or phytosanitary measures.”  

The United States identified the objective for the proposed country of origin rules as “protection of consumers and human health” in its notification to the WTO’s Committee on Technical Barriers to Trade in June 2007.   Measures that protect human health and life are covered by the SPS Agreement and are among the legitimate objectives under that agreement. 

The rising number of foodborne illness outbreaks associated with imported foods and increasing number of food recalls of contaminated or adulterated imported food justifies a basic measure that can help consumers know the source of their food.  While the SPS agreement only allows measures to the “extent necessary” to protect human life or health,  the country of origin labeling rules are amongst the least trade restrictive measures that could further these objectives.  Because country of origin labels are applied to products from all countries, including the United States, equally, the rules do not discriminate against any WTO members.

Country of origin labels would provide consumers with important information generally and especially in the case of a foodborne illness outbreak related to imported foods when such information is necessary to protect their health. 

Consumers are already turning to existing country of origin labeling as a tool to avoid the risks of foodborne contaminants and adulteration on imported food.   Country of origin labels can provide a first line of consumer defense during foodborne illness outbreaks.  For example, if country of origin labeling had been in effect last year, consumers could have chosen to buy American tomatoes during the waning weeks of the 2008 salmonella-tainted produce outbreak that was ultimately associated with farms and a packinghouse in Mexico.

Further, since much of the beef and pork sold in the United States comes from imported livestock processed in U.S.-based meatpacking plants, it has been impossible for consumers and regulators to associated meat-based foodborne illnesses with either imported or domestic meat. Canada has reported about a dozen cases of mad-cow disease (bovine spongiform encephalopathy) over the past several years that have led consumers to doubt Canada’s capacity to prevent BSE. In the summer of 2008, USDA inspectors found systemic food safety problems at 11 Mexican meat and poultry plants that led the USDA to hold imported meat from these plants until laboratory tests could verify the safety of the products.   If meat products from these problematic exporters entered into the United States, COOL would allow U.S. consumers to choose whether or not to buy products from a country that apparently does not have the capacity to enforce meat and poultry hygiene rules.

Imported fresh fruits and vegetables that are covered under country of origin labeling are significantly more likely to contain foodborne pathogens and pesticides than domestically grown produce, according to U.S. government data,  Imported fruit is four times more likely to have illegal levels of pesticides and imported vegetables are twice as likely to have illegal levels of pesticide residues as domestic fruits and vegetables.  Imported produce is more than three times more likely to contain the illness-causing bacteria Salmonella and Shigella than domestic produce.  The U.S. Food and Drug Administration has indicated that about half of the foodborne illness outbreaks in the United States are attributable to imported foods.

More than half of Americans do not believe there are enough border inspectors to ensure the safety of imported food, according to a July 2008 Associated Press/Ipsos poll.  A 2008 Hart/Public Opinion Strategies poll found that 61 percent of Americans think that the government is doing too little to ensure that imported fresh fruit and vegetable products are free of contamination.

The WTO SPS Agreement allows measures that “are not more trade restrictive than required to achieve the appropriate level of protection.”  Labeling regimes are among the least trade restrictive measures to increase safety oversight of imported foods. Country of origin labels are an appropriate level of protection to provide consumers and regulators more information about the source of food and are consistent with the United States’ WTO SPS obligations.

Country of Origin Rules Do Not Violate WTO Agreement on Rules of Origin

Finally, the claimants contend that the country of origin rules violate U.S. WTO commitments under the Agreement on Rules of Origin.  The facially neutral application of country of origin labels as directed in the final rule is in conformity with this WTO agreement. The country of origin labels are not an “instrument to pursue trade objectives.”  The use of the labels are not restrictive and are not more stringent than necessary.   The rules will be applied consistently and are based on a positive standard, not a presumptively domestic rule as noted earlier.   The country of origin rules were established entirely in conformity with the WTO Rules of Origin.
 
Conclusion

This WTO case is a kitchen table issue that will affect every American. USTR should provide total transparency and public input into this important WTO case.  The President’s Trade Policy Agenda properly identified the need for trade policy to “become more transparent” and the urgent need to “expand public participation.”  USTR should affirmatively and promptly release the complainants’ WTO filings to the public.  If the case proceeds from a request for consultations to the formation of a WTO dispute panel, all U.S. government communications and non-governmental evidence presented in the dispute should be posted on the USTR web site.  USTR should also urge the WTO to accept any amicus curiae briefs submitted in this dispute and/or submit any stakeholder brief as an attachment to the U.S. filing in this case.

USTR must successfully defend country of origin labeling against any and all WTO challenges to protect American consumers, fulfill the Obama Administration’s agenda, and solidify its goal of strengthening the long-term legitimacy of the global trading system.

Signed:

Coalition for Prosperous America
Consumer Federation of America
Food & Water Watch
Institute for Agriculture & Trade Policy
Iowa Citizens for Community Improvement
Missouri Rural Crisis Center
National Family Farm Coalition
National Farmers Union
Organization for Competitive Markets
Public Citizen
Ranchers-Cattlemen Action Legal Fund USA (R-CALF USA)
Rural Advancement Foundation International – USA (RAFI-USA)
Western Organization of Resource Councils