WTO slash Canada-Mexico damages claim by a third

By Keith Nuthall

- Last updated on GMT

Canada and Mexico receive $43.22 and $47.55m respectively after COOL dispute
Canada and Mexico receive $43.22 and $47.55m respectively after COOL dispute

Related tags: International trade, World trade organization, Beef, Pork

The World Trade Organization (WTO) has ordered that Canada and Mexico accept a third of the compensation they were seeking for economic losses caused by the USA’s country-of-origin labelling (COOL) rules for beef and pork. 

These have been found by the WTO to breach global trading rules and, as a result, Canada and Mexico had asked the WTO to approve retaliatory tariffs netting them – respectively - US$2.32 billion and US$713.4m annually, based on estimates of resulting annual losses for livestock trades.

The US argued these estimates were inflated, ultimately that Canada should only be compensated US$43.22m and Mexico US$47.55m, per year.

A WTO arbitrator has now ruled that while the American estimates were far too low, those of Canada and Mexico were too high, and has calculated that Canada should be compensated by WTO-approved retaliatory measures collecting annually CA$1.05bn (US$777m) for Canada and US$227.7m for Mexico.

'No appeal' against ruling​ 

The arbitrator rejected certain methodologies used by Canada and Mexico to calculate their export revenue losses through reduced prices and sales volumes, and excluded losses claimed in the domestic livestock markets of Canada and Mexico as a result of the USA’s COOL rules.

The two countries had argued the diversion of exports back to their home markets had depressed prices, harming producers. Other problems highlighted by the arbitrator included that Canada’s invoice-based estimation of feeder pig prices was unreliable and that its assessment of transport costs were faulty.

Under WTO rules, there can be no appeal against this ruling. Canada and Mexico are now expected to seek authorisation from the WTO Dispute Settlement Body (DSB) later this month to impose retaliatory duties on US exports to collect tax revenues equalling the compensation approved by the arbitrator. These duties are only likely to lapse should the US Congress repeal the COOL laws, which it has thus far refused to do.

'Retaliation could start'​ 

A statement from the USA-based COOL Reform Coalition, which opposes the legislation and regrets it impact said it “strongly urges Congress to repeal immediately the noncompliant provisions of law and to honour our international trade obligations​”.

It explained: “Today’s announcement signals that we have run out of time on this issue. Retaliation could start within days, posing a very real threat to our economy and thousands of American jobs. Unless Congress acts now, companies that export to our two largest trading partners are in jeopardy of losing significant market share that will be difficult to regain​.”

Related topics: Meat

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