Third Party Oral Statement of Australia

Geneva, 15 September 2010

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United States - Certain Country of Origin Labelling (COOL) Requirements - (WT/DS384 and WT/DS386) [PDF 34 KB]

A. Introduction

Mr Chairman, members of the Panel.

1. Thank you for the opportunity to present Australia's views on this dispute,
   which raises important issues of legal interpretation. Australia highlighted
   some of these issues in its written submission. We will not repeat all of
   those arguments today.
2. Instead, in this statement we will identify some of the key questions which
   Australia believes the Panel should address in relation to the claims by Canada
   and Mexico that the US COOL measure is inconsistent with Articles 2.1 and
   2.2 of the TBT Agreement; and in relation to the arguments put by the United
   States to the contrary.
3. Whilst noting the claims of Canada and Mexico extend beyond Articles 2.1
   and 2.2, Australia has chosen to focus on these articles, and on these questions,
   because many of the questions have not yet been specifically addressed by
   a panel or the Appellate Body.

B. Questions for the Panel's Consideration

(a) What is the nature of the COOL measure?

4. Canada and Mexico have broadly identified the COOL measure to encompass
   a number of individual measures, which together make up the measure at issue
   in these proceedings.
5. Australia submits that the Panel must decide whether the COOL measure, as
   identified by Canada and Mexico, is a measure for the purposes of dispute
   settlement under the DSU and a technical regulation for the purposes of the
   TBT Agreement.
6. Of particular interest in this calculus, is the Panel's characterisation
   of the so-called Vilsack Letter, sent by US Secretary of Agriculture Thomas
   J. Vilsack to Industry Representatives on 20 February 2009.
7. In Australia's view, the Vilsack Letter is an act directly attributable
   to the executive of a WTO Member, and therefore, consistent with the Appellate
   Body's comments in US – Corrosion-Resistant Steel Sunset Review, challengeable
   in WTO dispute settlement proceedings. The letter is an official document
   that sets out in detail the official position of the US Department of Agriculture
   as mandated by the Secretary of that department and is characterised by the
   Secretary as representing the will of the US Congress.
8. For the purposes of the definition of a technical regulation in Annex 1
   of the TBT Agreement, a further consideration is whether the Vilsack Letter
   is a mandatory element of the COOL measure. This issue is addressed by Mexico
   in its submission. Australia notes the argument by the United States that
   compliance with the Vilsack Letter is in fact voluntary. However, Australia
   believes that none of the factors set out by the United States in support
   of this contention are necessarily determinative of whether the Vilsack Letter
   is in fact mandatory, or "binding or compulsory". Nor is the US
   Department of Agriculture's characterisation determinative. Rather, the critical
   question for the Panel to examine is whether industry views the letter as
   mandating action.

(b) To what products does the COOL measure relate?

9. Canada and Mexico have based their claims under Article 2.1 of the TBT Agreement
   (and Article III:4 of GATT 1994) on an analysis of 'like product' between
   Canadian and Mexican live cattle on the one hand, and US live cattle on the
   other; and between Canadian and US live hogs.
10. Australia notes that the COOL measure applies broadly to a range of covered
    commodities, including beef trimmings for which Australia has a particular
    export interest. In its third party submission, Australia also submits that
    imported beef trimmings are a like product to US domestic beef trimmings used
    in ground beef.
11. In addressing this issue, the Panel should consider whether Canada and Mexico
    (with what appears to be agreement from the United States) are correct in
    applying the GATT Article III:4 analysis of like product to the analysis of
    like product under Article 2.1 of the TBT Agreement.
12. Further, the Panel ought to reject the US argument that the subject of the
    COOL measure is in fact meat and not livestock, and therefore Canada and Mexico's
    claim fails, as they have not demonstrated that Canadian and Mexican meat
    is a like product to US meat.
13. In this respect, Australia notes that such a narrow interpretation of the
    phrase "in respect of technical regulations" in Article 2.1 would
    in fact undermine the application of the Article. It would allow, for example,
    a country to actively discriminate against a broad range of source products,
    simply because those source products are not the subject of, or "in respect
    of" the actual technical regulation.
14. Australia submits the better view, in particular with respect to country
    of origin labelling requirements, is that Article 2.1 should be applied so
    as to encompass like products that, at whatever point of the supply process,
    are required to be identified for the purposes of labelling the end product.
    Applied to the COOL measure, all early stage products, whether livestock,
    muscle cuts or beef trimmings used in ground beef, would be subject to the
    disciplines of Article 2.1.

(c) Does the COOL measure provide for treatment less favourable?

15. Australia notes the approach taken by Canada and Mexico drawing upon the
    analysis developed under GATT Article III:4 in determining whether the COOL
    measure provides for less favourable treatment to like products of non-national
    origin. Should the Panel agree with this approach, then Australia believes
    the critical question for the Panel to examine is whether the COOL measure
    "modifies the conditions of competition in the relevant market to the
    detriment of imported products" (as articulated by the Appellate Body
    in the Korea – Various Measures on Beef dispute).
16. In this case, where the measure provides for formally identical treatment
    on its face, the Panel should also consider whether the measure has the potential
    to accord de facto less favourable treatment. Canada and Mexico both seek
    to demonstrate the COOL measure accords differential treatment to imported
    livestock that amounts to less favourable treatment within the meaning of
    Article 2.1 of the TBT Agreement. Put simply, Canada and Mexico contend that
    the COOL measure results in additional operational costs on imported product,
    in particular with respect to segregation and record-keeping, than the costs
    it imposes when domestic product is used.
17. Should the Panel agree with Canada and Mexico on this point, then Australia
    would submit this does constitute differential (and less favourable) treatment
    for the purposes of Article 2.1 of the TBT Agreement.
18. Australia also believes this differential (and less favourable) treatment
    extends to ground beef, as another covered commodity of the COOL measure.
    As the ground beef market in the United States is currently structured, it
    is more likely that US beef trimmings used in ground beef will be present
    in the inventory of a production plant compared to imported beef trimmings
    from any one country. Accordingly, the impact of the COOL measure would be
    felt most heavily when imported product is used, creating an incentive for
    processors to favour domestic product (and to discriminate against imported
    product).
19. Australia does not believe that country of origin labelling schemes generally
    are "inherently protectionist and discriminatory", as claimed by
    Mexico in its submission. Rather, the question for the Panel is whether the
    US COOL measure provides (or has the potential to provide) treatment less
    favourable by virtue of its "design, structure and application".

(d) Is the COOL measure's objective legitimate?

20. For the purposes of Article 2.2 of the TBT Agreement, Australia submits
    the Panel must first determine whether the objective of the measure at issue
    is legitimate.
21. Consistent with the findings of the Appellate Body in the EC-Sardines
    dispute, Australia believes that an examination of legitimacy is confined
    to whether an examination of the stated objective, as put forward by the United
    States, is legitimate within the meaning of Article 2.2. It does not extend
    to an examination of whether the stated objective is actually the objective
    of the measure. Rather, Australia invites the Panel to determine, with regard
    to the text of Article 2.2, whether the United States' stated objective of
    the COOL measure - to provide consumer information so as to minimise consumer
    confusion - is in fact legitimate.
22. In Australia's view, the United States, through the COOL measure, is seeking
    to provide consumers with additional useful information. Australia considers
    that such an objective is a legitimate objective, and accepts the US view
    that this objective is "closely related" to preventing deceptive
    practices.

(e) Does the COOL measure fulfil its legitimate objective?

23. Australia considers the Panel must then separately decide whether the COOL
    measure fulfils the stated objective. Australia submits the Panel must determine
    whether the COOL measure actually carries out, or at least has the capacity
    to carry out, its stated objective of providing accurate additional consumer
    information. Should the Panel conclude that a complainant has demonstrated
    that a measure does not or could not achieve its stated objective, it would
    be open to conclude the measure does not meet the terms of the second sentence
    of Article 2.2 and therefore amounts to an unnecessary obstacle to trade within
    the meaning of the first sentence of Article 2.2.
24. In this regard, Australia notes Canada's arguments in particular, that the
    COOL measure does not appear to achieve its stated objective of providing
    accurate consumer information, with respect to the labelling of meat products
    derived from livestock and of ground beef.

(f) Are there any reasonably available alternatives?

25. Australia submits that the correct analysis called for under Article 2.2
    also requires the Panel to decide whether there are other reasonably available
    alternatives that may be less trade-restrictive while still fulfilling the
    legitimate objective at the level the respondent considers appropriate.
26. Australia notes that the complainants, as well as a number of third parties
    to this dispute, have highlighted a number of reasonably available alternatives,
    including: voluntary labelling schemes; labelling schemes based on substantial
    transformation; and, in Australia's case, mandatory labelling which identifies
    imported or domestic product (without specifying the particular country of
    origin).
27. Australia submits if the alternative of marking product with 'imported'
    or 'domestic' were adopted, this would achieve greater accuracy with respect
    to the labelling of ground beef and be less trade-restrictive than the existing
    requirements under the COOL measure. Nonetheless, the objectives of the COOL
    measure would still be met: accurate, additional information would be available
    to consumers, in particular whether the source of the product was domestic
    or foreign. Adopting this approach would reduce associated segregation and
    recordkeeping costs, as processors would not need to segregate product by
    each particular country of origin. Notably, processors would always have the
    option of voluntarily identifying specific countries of origin if consumer
    demand justified the additional cost.

C. Conclusion

28. In conclusion, Australia considers the Panel should pay careful attention
    to the following questions, amongst others, in assessing the consistency of
    the COOL measure:
    1. What is the nature of the COOL measure?
    2. To what products does the COOL measure relate?
    3. Does the COOL measure provide for treatment less favourable?
    4. Is the COOL measure's objective legitimate?
    5. Does the COOL measure fulfil its legitimate objective?
    6. Are there any reasonably available alternatives?
29. Australia considers, in general, that mandatory country of origin labelling
    regimes must be designed and implemented in the least trade-restrictive manner
    possible so that imported products are not subject to less favourable treatment
    than like domestic products due to labelling requirements.
30. In Australia's view, contrary to the national treatment obligations in Article
    2.1 of the TBT Agreement and Article III:4 of GATT 1994, the COOL measure
    has not been designed in such a manner. It has the potential to detrimentally
    affect the conditions of competition so as to discriminate against imported
    product, resulting in treatment less favourable for such product.
31. Furthermore, in Australia's view, the COOL measure does not appear to be
    consistent with the obligation set out in Article 2.2 of the TBT Agreement
    in that the trade-restrictive nature of the COOL measure is not necessary
    to fulfill its objective given the less trade-restrictive and reasonably available
    alternatives identified by the parties and third parties, including by Australia
    in relation to ground beef.
32. Australia would be pleased to provide answers to any questions from the
    Panel, including as requested on Australia's mandatory country of origin labelling
    regime.