Canada is looking at slapping duties on iconic U.S. products ranging from California wine to ketchup after the World Trade Organization (WTO) found the country's meat-labelling laws offside for a third time in five years.
A WTO appeal panel ruled that a U.S. law requiring grocery stores to list the country of origin on meat products discriminates against Canadian and Mexican livestock, in a decision made public Monday.
The Conservative government warned that it will strike back with punitive duties unless the U.S. ends the "blatantly protectionist" regulations, which its says are costing the North American cattle and hog industry more than $1-billion a year.
Canadian Agriculture Minister Gerry Ritz insisted Canada will use "any and all means" to get the United States to repeal its labelling country-of-origin (COOL) legislation.
"Should the U.S. not fix COOL . . . Canada will impose retaliatory measures," Mr. Ritz told reporters via conference call from Saskatoon, Sask. "They must be aware that Canada will not blink."
While the WTO has acknowledged that the U.S. has a right to impose country-of-origin rules, it has so far objected to the means.
Ottawa has already identified 38 target products for retaliation. The list includes U.S. cattle and hogs, as well as a number of symbolic products, including California wine, Vermont maple syrup, Florida orange juice, ketchup and breakfast cereal.
Canada and Mexico won a similar case in 2012, but the U.S. Congress responded with new labelling legislation that farmers and meat packers found even more onerous, prompting the latest appeal.
Canada will be in a position to get WTO approval to strike back as early as two months from now, or roughly the time it would take for the U.S. to complete a final appeal -- something Mr. Ritz acknowledged the U.S. almost certainly will do.
Trade experts said that while Canada would be within its rights to retaliate, a full-blown trade war is unlikely.
"It's in the interests of both sides to settle this," argued Toronto trade lawyer Lawrence Herman. "If the U.S. can't resolve a dispute with Canada, it doesn't look very good for all the other trade deals the U.S. is involved in."
But Mr. Herman pointed out there is virtually no chance of reaching a settlement before U.S. midterm elections in early November.
A spokesman for U.S. Trade Representative Michael Froman said Washington is considering "all options," including an appeal.
"While the WTO continues to affirm the right of the United States to require country-of-origin labelling for meat products, we are disappointed that the compliance panels have found that the country-of-origin labelling requirements for beef and pork continue to discriminate against Canadian and Mexican livestock exports," spokesman Matthew McAlvanah said.
The case has taken five years to get this far. The U.S. started enforcing its labelling rules in 2008, cutting Canadian meat exports in half, according to the industry.