COOL Runnings

A WTO arbitrator ruled on Tuesday that the U.S. needs to hurry up and deregulate food labels.

A quick refresher: Back in July of this year, Mexico and Canada were successful in their efforts to convince the WTO that country of origin labels (COOL) on certain cuts of meat violated U.S. obligations under the Technical Barriers to Trade (TBT) agreement. These rules are very popular with consumers in the U.S. and around the world (who want to know more about where their food comes from), and are the result of decades of  campaigning. After the U.S. agreed to comply, Canada and Mexico in September pushed the WTO to push the U.S. to come up with a compliance timeline.

This is where things get interesting: the WTO faulted the U.S. back in April for implementing tobacco regulations too quickly, and created a rule that WTO members never formally agreed to that developed country regulations affecting developing countries require a six month buffer between publication and entry into force.

The Obama administration – trying to play in good faith, as they (sometimes all too often) do – requested a minimum of 18 months to comply.

(This consisted of six months to follow the WTO buffer requirement, and an additional 12 months to go through the six stages of the regulatory process: 1) five months for internal consultations and deliberations; 2) 90 days review at the budget office; 3) publication of a proposed rule, with a 60-day notice and comment period; 4) two months to review the comments and make revisions; 5) 90 days review at the budget office on the final rule; and 6) publication. If they pursued action in Congress, it would take even longer.)

The WTO arbitrator (Giorgio Sacerdoti) ruled that the buffer only works one way: new regulations should move slowly, but deregulation should happen quickly. (para. 117)

While this argument is couched through a lens of minimizing burdens on developing country producers in accordance with WTO rules, the reality is that regulation almost always poses burdens on producers generally, while deregulation does the opposite. Some producers will always be outside the country, so these double standard timelines could always work as a means for developing country producers to be the front-lines of a producer offensive on regulation more generally.

Sacerdoti’s take on the domestic regulatory process (the 12 month bit) was also noteworthy:

1. He noted that the default was immediate compliance and removal of the offending measure. (para. 77)
2. The Obama team noted that consumer groups are intensely interested in COOL, and that consultations with them are very important. (para. 23) After Canada argued that “contentiousness” of a deregulation (i.e. the need to build a political consensus, para. 40) shouldn’t affect how quickly it happens, Sacerdoti argued that smart stakeholders should have already seen the writing on the wall.
3. He noted that the fact that anti-COOL House GOP had already incorporated a repeal of COOL in the draft Farm Bill (and that the 2009 stimulus bill only took three months to get through Congress) was evidence that the U.S. could move quickly when it wanted to. (at paras. 84 ad 95).
4. So he shaved the time down to eight months (from the 12) for publishing the rule, and only a two month buffer before entry into force. (para. 97)

The reference to the Farm Bill is an interesting example of how clever international players are getting about utilizing the domestic political process. Canada argued that the Farm Bill could

“serve as a suitable legislative vehicle to implement statutory changes to the COOL statute. According to Canada, the US Congress faces tremendous pressure either to pass a new Farm Bill or to agree to extend the 2008 Farm Bill by the end of this year, and a failure to do either will create enormous repercussions in the market… Canada recalls that the House and Senate must agree on one identical bill before the President is able to sign it into law. To resolve their differences, members from both chambers enter into a “conference”, where they attempt to settle the “matter in disagreement between the two chambers”. Canada notes that Representative Randy Neugebauer added an amendment to the draft 2012 Farm Bill on 12 July 2012 regarding the COOL legislation (the “Neugebauer amendment”), just three days before the House Agricultural Committee voted to report the Bill back to the House. The Neugebauer amendment—now Section 12104 of the House version of the draft 2012 Farm Bill—creates a source of disagreement between the Senate’s version of the Bill (which does not contain any provision related to the COOL statute) and the House version of the Bill (which calls for the USDA to submit a report detailing the steps to modify the COOL statute in compliance with the DSB’s recommendations and rulings). Therefore, Canada submits, the inclusion of the Neugebauer amendment will allow the two chambers to adopt substantive modifications to the COOL statute during the conference, and, given the political pressure on Congress to adopt a new Farm Bill in 2012, the United States has the means, if it so chooses, to comply promptly with the recommendations and rulings of the DSB. (para. 43, 45)

In other words, U.S. fiscal woes and the impact that these have on legislative procedure should be marshaled towards the needs of international business interests. Gee, it’s almost like the Canadian and American interests against COOL are working together to put two ceilings on consumer policies! But I’m sure that’s not the case: international law is above such vulgar maneuvers.

This recalls the metaphor used by Harvard economist Dani Rodrik: the political trilemma of the world economy. In this theory, you can have two out of three of nation-state autonomy, democratic politics or international economic integration. I might put it a bit differently: the COOL debate has become a case of the nation-state teaming up with the integration-state to restrict the space for mass politics. The nation-state still feels the need to try to manage the internal debate, but it’s ability to do so is limited by the deal it has struck to follow the global rules (as evidenced by the administration’s agreeing to comply with the ruling, in the hopes that doing so will give it greater legitimacy with other nation-states at the WTO in future disputes.)