WTO Appellate Body Brings Coherence to Trade Rules on Technical Regulations

Originally published July 9, 2012

Keywords: WTO, COOL, mandatory labeling regime, appellate body

On June 29, 2012, the Appellate Body of the World Trade Organization (WTO) circulated its decision in a dispute over US country-of-origin labeling (COOL) requirements for beef and pork products (WT/DS384/AB/R, WT/DS386/AB/R). This is the third decision this year by the Appellate Body dealing with the rules under the WTO Agreement on Technical Barriers to Trade (TBT Agreement). It is also the third time this year that the Appellate Body has found US technical (product) regulations inconsistent with the rules of the TBT Agreement. Through this trifecta of decisions, the Appellate Body has developed a more coherent approach to the interpretation of the TBT Agreement.

Mexico and Canada challenged the US mandatory labeling regime for beef and pork as inconsistent with the TBT Agreement before a WTO panel. The panel found that the COOL requirements were inconsistent with Articles 2.1 and 2.2 of the TBT Agreement. Article 2.1 requires WTO Members to ensure that technical regulations do not treat imported products less favorably than similar (i.e., "like") domestic products. Article 2.2 mandates that technical regulations be no more trade restrictive than necessary to fulfill a legitimate objective. The United States appealed the COOL panel's decision.

The Appellate Body has now upheld the panel's finding under TBT Article 2.1, but reversed the ruling on Article 2.2. The Appellate Body's decision brings the interpretation of these articles of the TBT Agreement in line with its recent decisions in two other cases against the United States—Mexico's case against US dolphin-safe labeling requirements for tuna (the "Tuna-Dolphin" case) and Indonesia's case against a US ban on clove cigarettes (the "Clove Cigarettes" case). See our earlier Legal Update for a discussion of these cases, The WTO Appellate Body Finds US Dolphin-Safe Label Rules Discriminatory, May 23, 2012.

On the Article 2.1 finding, the Appellate Body agreed with the panel that the COOL measure modifies the conditions of competition to the detriment of imported livestock because the measure's recordkeeping and verification requirements create an incentive for meat processors to use exclusively domestic livestock, and a disincentive against using like imported livestock. However, the Appellate Body faulted the panel for not completing its analysis under Article 2.1.

The Appellate Body noted...