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Cattle graze in a field at Brooks, Alta.

TODD KOROL/REUTERS

Proposed changes to U.S. meat labelling laws are unsatisfactory and continue to discriminate against Canadian beef and hog producers, Ottawa says, raising the spectre of retaliatory action from the federal government.

The government and meat producers reacted angrily Thursday after the United States revealed long-anticipated changes to its labelling guidelines that are meant to put it in compliance with a ruling from the World Trade Organization.

The U.S. "country of origin labelling" (COOL) rules, initially put in place in 2008, forced meat packagers to put labels on products showing where they were produced. The move was intended to help inform consumers about the origins of their food, but one side effect was that Canadian cattle shipments to the United States plunged, as processors tried to avoid the complexities of tracking imported animals.

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Canada – and later, Mexico – complained to the WTO, saying the rules discouraged beef imports. After years of consideration and appeals, in 2012 the WTO issued a final decision that the rules discriminated against imports because the record-keeping and verification requirements created an incentive to use domestic animals.

The United States had until Thursday to bring its rules in line with the WTO ruling. Just at the deadline, the Department of Agriculture issued modifications that Agriculture Secretary Tom Vilsack said would bring the country "into compliance with U.S. international trade obligations."

Canada, however, begs to differ.

The new rules do not meet the WTO requirements and will actually intensify discrimination against Canadian cattle and hogs, Agriculture Minister Gerry Ritz said in a statement. "Canada will consider all options at its disposal, including, if necessary, the use of retaliatory measures," he said.

Mr. Ritz and other government officials would not say what retaliation is being considered, but on a conference call from a trade mission to Kazakhstan he said the first step is to go back to the WTO and tell it that the U.S. move is unsatisfactory. The U.S. "is completely off the mark," he said.

John Masswohl, director of government and international relations at the Canadian Cattlemen's Association, said the U.S. proposal makes things worse because it no longer allows U.S. and Canadian meat to be co-mingled and labelled as coming from multiple origins. New labels will also have to spell out where the animal was born, raised and slaughtered.

It is "absolutely absurd" for the U.S. to suggest that these changes meet the requirements of the WTO ruling, Mr. Masswohl said.

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The CCA said the new rules will increase regulatory costs on cattle to $90-to-$100 per head, compared with the $25-to-$40 per head that the old rules cost. This means there will be far less exporting of Canadian cattle to the United States, Mr. Masswohl said, and those that are shipped will be at very low prices.

It will now take months for the Canadian government to go back to the U.S. and file a protest, Mr. Masswohl said. Meanwhile, Ottawa should publish a list of U.S. exports to Canada that could be considered for retaliatory tariffs, he said. "They should put that out to the public and invite feedback. You'd want to make sure that they are products produced in areas represented by congressmen and senators that have not been particularly helpful on this issue."

The Canadian Pork Council said it was appalled by the U.S. move; it will "make a very bad situation of the last four years much worse," said chairman Jean-Guy Vincent. The U.S. is "tweaking regulations which avoid the real issues and permit discrimination to be continued and exacerbated," the council said. Existing measures cost Canadian swine and beef cattle producers more than $1-billion a year, it said.

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