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GENEVA/WINNIPEG, Manitoba (Reuters) - The World Trade Organization on Friday ruled a U.S. meat labeling program unfairly discriminated against Mexico and Canada, putting pressure on the United States to bring the scheme in line with global trade rules.
The WTO Appellate Body said the U.S. country-of-origin labeling rules, commonly known as COOL, were wrong because they gave less favorable treatment to beef and pork imported from Mexico and Canada, the countries that brought the case, than to U.S. meat.
The decision is not subject to appeal, but gives the United States time to comply and does not immediately alter the labeling rules.
U.S. officials hailed other parts of the decision, which they said affirmed the right to adopt country-of-origin labels, even though the United States will have to change how it operates the program.
Meat labels became mandatory in March 2009 after years of debate. U.S. consumer and some farm groups supported the requirement, saying consumers should have information to distinguish between U.S. and foreign products.
Big meat processors opposed the provision, which they said would unnecessarily boost costs and disrupt trade.
A WTO panel ruled in November that the labeling provision violated WTO rules on technical barriers to trade.
"Country of origin labeling is a lose-lose proposition for all players on both sides of the (border)," said Canadian Agriculture Minister Gerry Ritz, adding that within one year of the law, Canadian feeder cattle exports to the United States plunged by nearly half.
"Today's ruling is a key victory for the livestock industry," he said.
Mexican officials also welcomed the ruling and in a statement called on the United States to "modify its rules to conform to the WTO and guarantee that Mexican cattle is subject to the same competitive conditions of U.S. cattle.
"That would imply a reduction in the gap in price between Mexican and U.S. cattle of up to $95 per head. This ruling will benefit the Mexican cattle industry, which in 2011 exported around 1.4 million head of cattle worth more than $600 million to the United States," the officials said.
The U.S. labeling law requires grocers to put labels on cuts of beef, pork, lamb, chicken and ground meat or post signs that list the origin of the meat.
The WTO appeal body upheld an earlier WTO finding that COOL violates trade rules by giving less favorable treatment to imported cattle and hogs than domestic livestock.
It reversed an earlier finding that COOL fails to fulfill its goal of providing consumers with information on origin.
The United States highlighted that part of the decision in its response.
"We are pleased with today's ruling, which affirmed the United States' right to adopt labeling requirements that provide information to American consumers about the meat they buy," U.S. Trade Representative Ron Kirk said in a statement on his blog. "The Appellate Body's ruling confirms that families can still receive information on the origin of their meat and other food products when they shop for groceries."
U.S. officials said the ruling allows the United States to continue to require country-of-origin labels, but Washington will have to change the way it runs the program to ensure it is not an impermissible trade barrier.
The U.S. Cattlemen's Association, which supports the COOL program, said it believed the Obama administration could bring it into compliance with the WTO decision using its regulatory authority and without going to Congress for legislation.
"Much of this ruling is good news for U.S. cattle producers," Jon Wooster, the group's president, said.
To be listed as U.S. origin, meat must come from animals born, raised and slaughtered in the United States.
Meat from livestock raised in Mexico or Canada for slaughter in the United States must be labeled as a product of mixed origin. Canada and Mexico have sizeable cattle and hog trade with the United States.
The countries have until early September to agree on a reasonable amount of time for the United States to comply - which could be up to 15 months, said John Masswohl, director of government and international relations for the Canadian Cattlemen's Association.
The Canadian industry is seeking legislative changes that could include making the labeling rule voluntary, or labeling livestock according to where they are slaughtered or processed, he said.
"The World Trade Organization has been extremely clear that mandatory country of origin labeling is a clear WTO violation," said Bob McCan, vice president of the U.S.-based National Cattlemen's Beef Association, which opposes the COOL program, unlike the smaller U.S. Cattlemen's Association.
"This (appeal) did nothing more than jeopardize our strong trade relationship with Canada and Mexico, the two largest importers of U.S. beef," McCan said.
Public Citizen, a Washington-based nonprofit organization, said the decision will mean consumers have less access to information about the origin of their food, and health regulators may struggle to track food-borne bacteria.
"The WTO announcing that big agribusiness corporations must be allowed to sell mystery meat here, despite U.S. consumers and Congress demanding these labels, is yet another example of outsourcing our legal system to international commercial bodies that push corporate interests," said Lori Wallach of Public Citizen.
Many U.S. meat-packing plants, especially those near the U.S.-Canada border, either stopped accepting Canadian livestock or bought less due to the increased costs of segregating animals by domestic and foreign origin.
Changing the law would most affect packing plants that were once big buyers of Canadian animals, including those owned by JBS, Tyson Foods, Cargill Inc., Hormel Foods and Smithfield Foods, Canadian farm industry officials have said.
Additional reporting by Doug Palmer in Washington and Mica Rosenberg in Mexico City; Editing by Alison Williams, John Wallace, Bernard Orr and Leslie Gevirtz