By Tom Miles and Krista Hughes
GENEVA/WASHINGTON (Reuters) - The United States faces potential trade sanctions from Canada and Mexico after the World Trade Organization ruled on Monday it had failed to bring its meat labeling laws fully into line with international fair trading rules.
The WTO said the United States had not done enough to change its labeling laws, requiring retailers such as grocery stores to list the country of origin on meat, after it lost an earlier WTO challenge brought by Mexico and Canada.
Canada said it would watch for changes to U.S. labeling laws, which would likely require an amendment by Congress, and was prepared to retaliate with trade sanctions if necessary.
The WTO?s findings "effectively supply a clear message to the U.S.: End this protectionist policy that creates economic harm on both sides of our border, and comply with your international trade obligations," said Canadian International Trade Minister Ed Fast and Agriculture Minister Gerry Ritz in a statement.
U.S. pork producers urged Congress and the administration to fix the law and avoid "financially devastating" retaliation, while beef producers said it should be completely scrapped.
?The announcement today by the WTO dispute panel on the U.S. Country of Origin Labeling rule brings us all one step closer to facing retaliatory tariffs from two of our largest trading partners," said National Cattlemen's Beef Association President Bob McCan.
The WTO ruled in June 2012 that the U.S. meat labeling program, known as country-of-origin labeling (COOL), unfairly discriminated against Canada and Mexico because it gave less favorable treatment to beef and pork imported from those countries than to U.S. meat.
The United States said it had met a deadline to change its rules, but Canada and Mexico said it had not done enough, a claim that was at least partially upheld by the ruling published on Monday.
Under the regulations, meat carries labels such as "Born, Raised and Slaughtered in the United States" for U.S. animals. Meat from other countries could carry labels such as, "Born in Mexico, Raised and Slaughtered in the United States."
The U.S. law has resulted in fewer Canadian pigs and cattle being exported to the U.S. since 2009, according to the Canadian government.
The WTO said the revised U.S. labeling rules treated Mexican and Canadian livestock exports less favorably than U.S. livestock, which is illegal according to WTO rules.
Under a timetable agreed by the three countries involved, any of them can appeal within 20 days - an option the U.S. Trade Representative's office said it was considering.
Unless the revised U.S. labeling rules are given the all-clear by the WTO's Appellate Body, Mexico and Canada can ask the trade body to let them impose a certain amount of trade sanctions on the United States. The United States can challenge the amount.
A U.S. official said the best way to resolve the issue and end market uncertainty would be through a settlement, which would likely mean a change to U.S. farm laws.
?A negotiated solution, not further litigation at the WTO, is the most realistic path to getting this issue resolved in the near-term," the official said, speaking on condition of anonymity.
The heads of the House and Senate agriculture committees, Representative Frank Lucas and Senator Debbie Stabenow, both said they would support a compromise.
But consumer rights group Public Citizen said any weakening of labeling laws would mean consumers would lose access to critical information about where their meat comes from.
(Additional reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Stephanie Nebehay and Gunna Dickson)
