US-COOL Retaliation: The WTO’s Article 22.6 Arbitration

Chad Bown and Rachel Brewster

No 2016/68, RSCAS Working Papers from European University Institute

Abstract: This paper examines the Article 22.6 arbitration report of the WTO dispute over the United States’ country of original labeling (US-COOL) regulation for meat products. At prior phases of the legal process, a WTO Panel and the Appellate Body had sided with Canada and Mexico by finding that the US regulation had negatively affected their exports of livestock – cattle and hogs – to the US market. The arbitrators authorized Canada and Mexico to retaliate by over $1 billion against US exports; this is the second largest authorized retaliation on record and only the twelfth WTO dispute to reach the stage of an arbitration report. Our legal-economic analysis focuses on a number of issues that arise in the arbitration report. First, the complainants requested the arbitrators consider a new formula for computing the permissible retaliation limit that would also include the effects of domestic price suppression. We provide a simple, economics-based model explanation for the arbitrators’ rejection of such a proposal. Second, we provide market context for the $1 billion finding. While the arbitrators relied on the “trade effects” formula – which sets the retaliation limit as equivalent to the perceived loss of export revenue resulting from the WTO violation – we argue this amount to be implausibly large, given the actual conditions in the US market for cattle and hogs during this period. We then describe a number of the challenges facing arbitrators as they construct such estimates, including those likely to have arisen in this particular dispute.

Keywords: WTO; dispute; arbitration; retaliation; regulation; nontariff barrier; remedies (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: US–COOL Retaliation: The WTO's Article 22.6 Arbitration (2017)
Working Paper: US–COOL Retaliation: The WTO's Article 22.6 Arbitration (2016)
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