On May 12, 2016, the European Parliament renewed its call for mandatory country-of-origin labeling (“COOL”) for meat and dairy products not currently subject to such marking rules. The reasoning behind requiring additional products to include origin labeling is that it would help improve consumer confidence in food products by making the food supply chain more transparent. Under existing EU rules, mandatory origin labeling is required for certain meat products (e.g., beef, swine, sheep, goat and poultry), certain fruit and vegetable products (e.g., honey and olive oil), and wine and spirits.1
However, in the wake of recent food scandals in the EU, where horse meat was marked and sold as beef, for example, the European Parliament is calling for a wider application of mandatory country-of-origin labeling. Specific products that the Parliament would like to see covered include all kinds of milk; dairy products; and meat from horses, rabbits, reindeer and deer.
The call for increased use of origin labeling by the European Parliament was made through a so-called “non-legislative resolution,” which is a political instrument where the Parliament asks the European Commission to submit a legislative proposal on the issue. So far, the Commission has been unwilling to submit such a proposal because it considers that a wider application of mandatory origin labeling would entail a higher regulatory burden for industry and authorities, and predicts that consumers would not be willing to cover the additional costs.2
It is important to note that as a Member of the World Trade Organization (“WTO”), the European Union is subject to certain legal obligations, should it decide to introduce further labeling requirements. These rules require that such product regulations be non-discriminatory, not more trade-restrictive than necessary, and contribute to a legitimate public policy objective.
The issue of origin labeling was the point of contention in a high-profile dispute brought by Canada and Mexico against the United States at the WTO, which recently came to a close. The case, which originates from 2009, concerned U.S. regulations requiring certain meat products to be labeled with the country of origin in an effort to provide consumers information on the origin of the meat products, based on where the animals were born, raised and slaughtered. Canada and Mexico argued that these labeling requirements violated the United States’ WTO obligations, including the obligation of non-discrimination in respect of technical regulations under Article 2.1 of the Technical Barriers to Trade Agreement (“TBT Agreement”).
The WTO Appellate Body found that the U.S. origin rules violated Article 2.1 of the TBT Agreement because they were discriminatory, as they modified the conditions of competition in the U.S. market to the detriment of Canadian and Mexican interests by creating an incentive in favor of processing livestock from the U.S.3 Specifically, the recordkeeping and verification requirements associated with the rules imposed on imported livestock were not commensurate with the information provided to U.S. consumers. Among other requirements, upstream livestock producers and processors were required to maintain and transmit an unreasonable amount of information (which ultimately did not reach consumers) at the same time that these recordkeeping and verification requirements incentivized U.S. producers to use domestic livestock (because doing so was the less burdensome option). The Appellate Body also did not find a rational basis explaining this disconnect of the U.S. rules.4
The United States subsequently amended its origin rules but was again brought before the WTO by Canada and Mexico, which alleged that the revised rules failed to comply with the Appellate Body’s rulings. The Appellate Body agreed with the panel that the revised recordkeeping and verification requirements of the amended COOL measure imposed an unreasonable burden on producers and processors of livestock that could not be explained by the need to provide origin information to consumers, and that the exemptions under the amended COOL measure supported a conclusion that the detrimental impact of that measure on imported livestock did not stem exclusively from legitimate regulatory distinctions. Canada and Mexico prevailed in their action and sought authorization to retaliate against the United States in 2015. A WTO arbitrator decided that Canada and Mexico could retaliate in the amounts of more than CAN$1 billion and US$227 million respectively, which were considered equal to the trade losses suffered.
Under existing rules in the EU applicable to certain meat products, the rules require the product label to indicate the country in which the animal was “reared in” and “slaughtered in,” or if the livestock was born, raised and slaughtered in the same country, then the label can state the “origin” country.5 For beef, the rules also require the place in which the livestock was “born.” While the European Parliament is pushing for additional origin labeling rules, it also recognizes that the food supply chain is often long and complex, involving many food business operators. Moreover, individual food business operators do not always have an overview of the entire product chain. It is important that the EU rules, both as they exist now and may exist in the future, are consistent with its WTO obligations, which require that the rules be non-discriminatory and proportionate to the policy objective pursued. Thus foreign producers, in principle, should not be required to collect information that is not subsequently used, or where the recordkeeping obligation is disproportionate to the objective of consumer protection (and distorts the conditions of competition to the detriment of imported products). The recent WTO victories by Canada and Mexico are a testament to these principles. The European Commission, which has to take the legislative initiative to develop additional COOL rules, will need to make sure to draw the necessary lessons from the U.S. experience if it does not want to find itself involved in the next generation of COOL disputes before the WTO.
1See European Commission Report regarding the mandatory indication of the country of origin or place of provenance for milk, milk used as an ingredient in dairy products and types of meat other than beef, swine, sheep, goat and poultry meat, COM(2015) 205 final, pp. 2-3.
2See European Commission Report regarding the mandatory indication of the country of origin or place of provenance for milk, milk used as an ingredient in dairy products and types of meat other than beef, swine, sheep, goat and poultry meat, COM(2015) 205 final, p. 13.
3 Appellate Body Report, US – COOL, para. 350.
4 Appellate Body Report, US – COOL, paras. 347-349.
5See Commission Implementing Regulation (EU) No 1337/2013 of 13 December 2013, OJ L 335, p. 19.
