UNITED STATES – CERTAIN COUNTRY OF ORIGIN LABELLING (COOL) REQUIREMENTS RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES DECISIONS BY THE ARBITRATOR
Document: Addendum
Date: 7 December 2015
Document codes: WT/DS384/ARB/Add.1; WT/DS386/ARB/Add.1; WT/DS384/ARB; WT/DS386/ARB.
Complainant: Canada
Respondent: U.S.
Third parties: Argentina, Australia, Brazil, China, Colombia, EU, Guatemala, India, Japan, South Korea, Mexico, New Zealand, Peru, Taiwan
Dispute stage: Implementation & Compliance
Agreements cited: Art. 2.1, 2.2, 2.4  Technical Barriers to Trade (TBT)Art. 2, 5, 7  Sanitary and Phytosanitary Measures (SPS)Art. IX:2, IX, X:3(a)  GATT 1994Art. 2(b), 2(c), 2(e), 2(j)  Rules of Origin

UNITED STATES – CERTAIN COUNTRY OF
ORIGIN LABELLING (COOL) REQUIREMENTS
RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED STATES
DECISIONS BY THE ARBITRATOR
Addendum
This addendum contains Annexes A to C to the Decisions by the Arbitrator to be found in
documents , and

 •

LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF THE ARBITRATOR
Contents Page
Annex A-1 Working Procedures of the Arbitrator (WT/DS384) A-2
Annex A-2 Working Procedures of the Arbitrator (WT/DS386) A-5
Annex A-3 Procedures for an Open Substantive Meeting of the Arbitrator (WT/DS384) A-8
Annex A-4 Procedures for an Open Substantive Meeting of the Arbitrator (WT/DS386) A-9
Annex A-5 Procedures of the Arbitrator Conc erning Business Confidential Information
(WT/DS384)
A-10
Annex A-6 Procedures of the Arbitrator Concerni ng Business Confidential Information
(WT/DS386)
A-11

ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 Executive summary of the arguments of Canada B-2
Annex B-2 Executive summary of the arguments of Mexico B-13
Annex B-3 Executive summary of the arguments of the United States B-26

ANNEX C
ARBITRATOR'S DETERMINATION – DETAILS ON CALCULTATIONS
Contents Page
Annex C-1 Econometric results C-2
Annex C-2 Export supply elasticity calculations C-10
 •

- A-1 -

ANNEX A
WORKING PROCEDURES OF THE ARBITRATOR
Contents Page
Annex A-1 Working Procedures of the Arbitrator (WT/DS384) A-2
Annex A-2 Working Procedures of the Arbitrator (WT/DS386) A-5
Annex A-3 Procedures for an Open Substantive Meeting of the Arbitrator (WT/DS384) A-8
Annex A-4 Procedures for an Open Substantive Meeting of the Arbitrator (WT/DS386) A-9
Annex A-5 Procedures of the Arbitrator Conc erning Business Confidential Information
(WT/DS384)
A-10
Annex A-6 Procedures of the Arbitrator Concerni ng Business Confidential Information
(WT/DS386)
A-11
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- A-2 -

ANNEX A-1
WORKING PROCEDURES OF THE ARBITRATOR (WT/DS384)
6 July 2015

1. In its proceedings, the Arbitrator shall follow the relevant provisions of the Understanding on
Rules and Procedures Governing the Settlement of Disputes (DSU). In addition, the following
Working Procedures shall apply.
General
2. The deliberations of the Arbitrator and the documents submitted to it shall be kept confidential.
Nothing in the DSU or in these Working Procedures shall preclude a party to the dispute (hereafter
"party") from disclosing statements of its own positions to the public. The Arbitrator may adopt
special procedures concerning Business Confidential Information after consulting the parties.
3. The Arbitrator shall conduct its internal deliberations in closed session. The parties shall be
present at meetings only when invited by the Arbi trator to appear before it. The Arbitrator may
open its meetings with the parties to the public, subject to appropriate procedures to be adopted
by the Arbitrator after consulting the parties.
4. Each party has the right to determine the composition of its own delegation when meeting with
the Arbitrator. Each party shall have responsibility for all members of its own delegation and shall
ensure that each member of such delegation ac ts in accordance with the DSU and these Working
Procedures, particularly with regard to the confidentiality of the proceedings.
5. For the purposes of joining these proceedings with those in the parallel dispute DS386, Mexico
will be included in all communications of the Arbitrator and of the parties, including their
submissions. Mexico will also be allowed to be present throughout the joint substantive meeting in
DS384 and DS386.
Submissions
6. Canada shall transmit to the Arbitrator and to the United States a communication explaining
the basis for its request, including the methodolog y and data supporting it, in accordance with the
timetable adopted by the Arbitrator.
7. Each party to the dispute shall also transmit to the Arbitrator a written submission in which it
presents the facts of the case and its arguments, in accordance with the timetable adopted by the
Arbitrator.
8. A party shall submit any request for a preliminary ruling at the earliest possible opportunity
and in any event no later than in its written submission to the Arbitrator. If the United States
requests such a ruling in its written submission to the Arbitrator, Canada shall submit its response
to the request in its written submission. If Canada requests such a ruling in its written submission
to the Arbitrator, the United States shall submit its response to the request prior to the substantive
meeting, at a time to be determined by the Arbitr ator in light of the request. Exceptions to this
procedure shall be granted upon a showing of good cause.
9. Each party shall submit all factual evidence to the Arbitrator no later than in its written
submission, except with respect to evidence necessary for purposes of rebuttal, answers to
questions or comments on answers provided by the other party. Exceptions to this procedure shall
be granted upon a showing of good cause. Where such exception has been granted, the Arbitrator
shall accord the other party a period of time for comment, as appropriate, on any new factual
evidence submitted after the substantive meeting.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- A-3 -

10. Where the original language of exhibits is not a WTO working language, the submitting party
shall submit a translation into the WTO working language of the submission at the same time. The
Arbitrator may grant reasonable extensions of time for the translation of such exhibits upon a
showing of good cause. Any objection as to the accuracy of a translation should be raised promptly
in writing, no later than the next filing or meeting (whichever occurs earlier) following the
submission which contains the translation in question. The Arbitrator may grant reasonable
extensions of time for the filing of such object ion upon a showing of good cause. Any objection
shall be accompanied by a detailed explanation of the grounds of objection and an alternative
translation.
11. In order to facilitate the work of the Arbitrator, each party is invited to make its submissions
in accordance with the WTO Editorial Guide for Submissions attached as Annex 1, as relevant and
to the extent that it is practical to do so.
12. To facilitate the maintenance of the record of the dispute and maximize the clarity of
submissions, each party shall sequentially numbe r its exhibits throughout the course of the
proceedings. For example, exhibits submitted by the United States could be numbered US-1, US-2,
etc. If the last exhibit in connection with the fi rst submission was numbered US-5, the first exhibit
of the next submission thus would be numbered US-6.
Questions
13. The Arbitrator may at any time pose questions to the parties, orally or in writing, including
prior to the substantive meeting.
Substantive meeting
14. Each party shall provide to the Arbitrator th e list of members of its delegation in advance of
each meeting with the Arbitrator and no later than 5.00 p.m. the previous working day.
15. The substantive meeting of the Arbitrator with the parties shall be conducted as follows:
a. The Arbitrator shall invite the United States to make an opening statement to present
its case first. Subsequently, the Arbitrator shall invite Canada to present its point of
view. Before each party takes the floor, it shall provide the Arbitrator and other
participants at the meeting with a provisional written version of its statement. In the
event that interpretation is needed, each pa rty shall provide additional copies for the
interpreters, through the Arbitrator's Secretary. Each party shall make available to the
Arbitrator and the other party the final version of its statement, preferably at the end
of the meeting, and in any event no late r than 5.00 p.m. on the first working day
following the meeting.
b. After the conclusion of the statements, the Arbitrator shall give each party the
opportunity to ask each other questions or make comments, through the Arbitrator.
Each party shall then have an opportunity to answer these questions orally. Each
party shall send in writing, within a timeframe to be determined by the Arbitrator, any
questions to the other party to which it wishes to receive a response in writing. Each
party shall be invited to respond in writing to the other party's written questions
within a deadline to be determined by the Arbitrator.
c. The Arbitrator may subsequently pose questions to the parties. Each party shall then
have an opportunity to answer these questions orally. The Arbitrator shall send in
writing, within a timeframe to be determin ed by it, any questions to the parties to
which it wishes to receive a response in writing. Each party shall be invited to respond
in writing to such questions within a deadline to be determined by the Arbitrator.
d. Once the questioning has concluded, the Arbitrator shall afford each party an
opportunity to present a brief closing statement, with the United States presenting its
statement first.

WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- A-4 -

Executive summaries
16. The description of the arguments of the partie s in the Decision of the Arbitrator shall consist
of executive summaries provided by the parties, which shall be annexed as addenda to the
decision. These executive summaries shall not in any way serve as a substitute for the
submissions of the parties in the Arbitrator's examination of the case.
17. Each party shall submit an executive summary of the facts and arguments as presented to the
Arbitrator in its written submissions and oral statements, in accordance with the timetable adopted
by the Arbitrator. Each such executive summary shall not exceed 15 pages. The Arbitrator will not
summarize in a descriptive part, or annex to its decision, the parties' responses to questions.
Service of documents
18. The following procedures regarding service of documents shall apply:
a. Each party shall submit all documents to the Arbitrator by filing them with the
DS Registry (office No. 2047).
b. Each party shall file three (3) paper copies of all documents it submits to the
Arbitrator. However, when exhibits are provided on CD-ROMS/DVDs, three (3)
CD-ROMS/DVDs and two (2) paper copies of those exhibits shall be filed. The
DS Registrar shall stamp the documents with the date and time of the filing. The
paper version shall constitute the official version for the purposes of the record of the
dispute.
c. Each party shall also provide an electronic copy of all documents it submits to the
Arbitrator at the same time as the paper versions, preferably in Microsoft Word
format, either on a CD-ROM, a DVD or as an e-mail attachment. If the electronic copy
is provided by e-mail, it should be addre ssed to DSRegistry@wto.org, with a copy to
***.***@wto.org and ***.***@wto.org. If a CD-ROM or DVD is provided, it shall be
filed with the DS Registry.
d. Each party shall serve any document submi tted to the Arbitrator directly on the other
party. Each party shall confirm, in writing, that copies have been served as required at
the time it provides each document to the Arbitrator.
e. Each party shall file its documents with the DS Registry and serve copies on the other
party by 5.00 p.m. (Geneva time) on the due dates established by the Arbitrator. A
party may submit its documents to another party in electronic format only, subject to
the recipient party's prior written approval and provided that the Arbitrator's Secretary
is notified.
f. The Arbitrator shall provide the parties with an electronic version of its decision, as
well as of other documents as appropriate. When the Arbitrator transmits to the
parties both paper and electronic versions of a document, the paper version shall
constitute the official version for the purposes of the record of the dispute.
Modification of Working Procedures
19. The Arbitrator reserves the right to modify these procedures as necessary, after consultation
with the parties.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- A-5 -

ANNEX A-2
WORKING PROCEDURES OF THE ARBITRATOR (WT/DS386)
6 July 2015

1. In its proceedings, the Arbitrator shall follow the relevant provisions of the Understanding on
Rules and Procedures Governing the Settlement of Disputes (DSU). In addition, the following
Working Procedures shall apply.
General
2. The deliberations of the Arbitrator and the documents submitted to it shall be kept confidential.
Nothing in the DSU or in these Working Procedures shall preclude a party to the dispute (hereafter
"party") from disclosing statements of its own positions to the public. The Arbitrator may adopt
special procedures concerning Business Confidential Information after consulting the parties.
3. The Arbitrator shall conduct its internal deliberations in closed session. The parties shall be
present at meetings only when invited by the Arbi trator to appear before it. The Arbitrator may
open its meetings with the parties to the public, subject to appropriate procedures to be adopted
by the Arbitrator after consulting the parties.
4. Each party has the right to determine the composition of its own delegation when meeting with
the Arbitrator. Each party shall have responsibility for all members of its own delegation and shall
ensure that each member of such delegation ac ts in accordance with the DSU and these Working
Procedures, particularly with regard to the confidentiality of the proceedings.
5. For the purposes of joining these proceedings with those in the parallel dispute DS384, Canada
will be included in all communications of the Arbitrator and of the parties, including their
submissions. Canada will also be allowed to be present throughout the joint substantive meeting
in DS384 and DS386.
Submissions
6. Mexico shall transmit to the Arbitrator and to the United States a communication explaining the
basis for its request, including the methodology and data supporting it, in accordance with the
timetable adopted by the Arbitrator.
7. Each party to the dispute shall also transmit to the Arbitrator a written submission in which it
presents the facts of the case and its arguments, in accordance with the timetable adopted by the
Arbitrator.
8. A party shall submit any request for a preliminary ruling at the earliest possible opportunity
and in any event no later than in its written submission to the Arbitrator. If the United States
requests such a ruling in its written submission to the Arbitrator, Mexico shall submit its response
to the request in its written submission. If Mexico requests such a ruling in its written submission
to the Arbitrator, the United States shall submit its response to the request prior to the substantive
meeting, at a time to be determined by the Arbitr ator in light of the request. Exceptions to this
procedure shall be granted upon a showing of good cause.
9. Each party shall submit all factual evidence to the Arbitrator no later than in its written
submission, except with respect to evidence necessary for purposes of rebuttal, answers to
questions or comments on answers provided by the other party. Exceptions to this procedure shall
be granted upon a showing of good cause. Where such exception has been granted, the Arbitrator
shall accord the other party a period of time for comment, as appropriate, on any new factual
evidence submitted after the substantive meeting.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- A-6 -

10. Where the original language of exhibits is not a WTO working language, the submitting party
shall submit a translation into the WTO working language of the submission at the same time. The
Arbitrator may grant reasonable extensions of time for the translation of such exhibits upon a
showing of good cause. Any objection as to the accuracy of a translation should be raised promptly
in writing, no later than the next filing or meeting (whichever occurs earlier) following the
submission which contains the translation in question. The Arbitrator may grant reasonable
extensions of time for the filing of such object ion upon a showing of good cause. Any objection
shall be accompanied by a detailed explanation of the grounds of objection and an alternative
translation.
11. In order to facilitate the work of the Arbitrator, each party is invited to make its submissions
in accordance with the WTO Editorial Guide for Submissions attached as Annex 1, as relevant and
to the extent that it is practical to do so.
12. To facilitate the maintenance of the record of the dispute and maximize the clarity of
submissions, each party shall sequentially numbe r its exhibits throughout the course of the
proceedings. For example, exhibits submitted by the United States could be numbered US-1, US-2,
etc. If the last exhibit in connection with the fi rst submission was numbered US-5, the first exhibit
of the next submission thus would be numbered US-6.
Questions
13. The Arbitrator may at any time pose questions to the parties, orally or in writing, including
prior to the substantive meeting.
Substantive meeting
14. Each party shall provide to the Arbitrator th e list of members of its delegation in advance of
each meeting with the Arbitrator and no later than 5.00 p.m. the previous working day.
15. The substantive meeting of the Arbitrator with the parties shall be conducted as follows:
a. The Arbitrator shall invite the United States to make an opening statement to present
its case first. Subsequently, the Arbitrator shall invite Mexico to present its point of
view. Before each party takes the floor, it shall provide the Arbitrator and other
participants at the meeting with a provisional written version of its statement. In the
event that interpretation is needed, each pa rty shall provide additional copies for the
interpreters, through the Arbitrator's Secretary. Each party shall make available to the
Arbitrator and the other party the final version of its statement, preferably at the end
of the meeting, and in any event no late r than 5.00 p.m. on the first working day
following the meeting.
b. After the conclusion of the statements, the Arbitrator shall give each party the
opportunity to ask each other questions or make comments, through the Arbitrator.
Each party shall then have an opportunity to answer these questions orally. Each
party shall send in writing, within a timeframe to be determined by the Arbitrator, any
questions to the other party to which it wishes to receive a response in writing. Each
party shall be invited to respond in writing to the other party's written questions
within a deadline to be determined by the Arbitrator.
c. The Arbitrator may subsequently pose questions to the parties. Each party shall then
have an opportunity to answer these questions orally. The Arbitrator shall send in
writing, within a timeframe to be determin ed by it, any questions to the parties to
which it wishes to receive a response in writing. Each party shall be invited to respond
in writing to such questions within a deadline to be determined by the Arbitrator.
d. Once the questioning has concluded, the Arbitrator shall afford each party an
opportunity to present a brief closing statement, with the United States presenting its
statement first.

WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- A-7 -

Executive summaries
16. The description of the arguments of the partie s in the Decision of the Arbitrator shall consist
of executive summaries provided by the parties, which shall be annexed as addenda to the
decision. These executive summaries shall not in any way serve as a substitute for the
submissions of the parties in the Arbitrator's examination of the case.
17. Each party shall submit an executive summary of the facts and arguments as presented to the
Arbitrator in its written submissions and oral statements, in accordance with the timetable adopted
by the Arbitrator. Each such executive summary shall not exceed 15 pages. The Arbitrator will not
summarize in a descriptive part, or annex to its decision, the parties' responses to questions.
Service of documents
18. The following procedures regarding service of documents shall apply:
a. Each party shall submit all documents to the Arbitrator by filing them with the
DS Registry (office No. 2047).
b. Each party shall file three (3) paper copies of all documents it submits to the
Arbitrator. However, when exhibits are provided on CD-ROMS/DVDs, three (3)
CD-ROMS/DVDs and two (2) paper copies of those exhibits shall be filed. The
DS Registrar shall stamp the documents with the date and time of the filing. The
paper version shall constitute the official version for the purposes of the record of the
dispute.
c. Each party shall also provide an electronic copy of all documents it submits to the
Arbitrator at the same time as the paper versions, preferably in Microsoft Word
format, either on a CD-ROM, a DVD or as an e-mail attachment. If the electronic copy
is provided by e-mail, it should be addre ssed to DSRegistry@wto.org, with a copy to
***.***@wto.org and ***.***@wto.org. If a CD-ROM or DVD is provided, it shall be
filed with the DS Registry.
d. Each party shall serve any document submi tted to the Arbitrator directly on the other
party. Each party shall confirm, in writing, that copies have been served as required at
the time it provides each document to the Arbitrator.
e. Each party shall file its documents with the DS Registry and serve copies on the other
party by 5.00 p.m. (Geneva time) on the due dates established by the Arbitrator. A
party may submit its documents to another party in electronic format only, subject to
the recipient party's prior written approval and provided that the Arbitrator's Secretary
is notified.
f. The Arbitrator shall provide the parties with an electronic version of its decision, as
well as of other documents as appropriate. When the Arbitrator transmits to the
parties both paper and electronic versions of a document, the paper version shall
constitute the official version for the purposes of the record of the dispute.
Modification of Working Procedures
19. The Arbitrator reserves the right to modify these procedures as necessary, after consultation
with the parties.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- A-8 -

ANNEX A-3
PROCEDURES FOR AN OPEN SUBSTANTIVE MEETING OF THE ARBITRATOR1 (WT/DS384)
Adopted on 6 July 2015

1. The Arbitrator shall hold a joint substantive meeting in DS384 and DS386.
2. Subject to the availability of suitable WTO meeting rooms, the Arbitrator will start its
substantive meeting, on 15-16 September 2015, with a session with the parties open to the public.
At that session, each party will be asked to make an opening statement. After the parties have
made their statements, they will be given the opportunity to pose questions to the other party or
make comments on the other party's statement. The Arbitrator may pose any questions or make
any comments during such session. The parties will also have an opportunity to make their closing
statement during the session open to the public.
3. To the extent that the Arbitrator or any party considers it necessary, the Arbitrator will also
hold a session with the parties not open to public observation during which the parties will be
allowed to make additional statements or comments, and pose questions, that involve business
confidential information. The Arbitrator may also pose questions during such a session.
4. The following persons will be admitted into the meeting room during all sessions of the
Arbitrator's substantive meeting, whether open or closed to the public:
– the members of the Arbitrator;
– all members of the delegations of the parties to DS384 and DS386; and
– WTO Secretariat staff assisting the Arbitrator.
5. No person shall disclose any business confidential information at any session open to the
public.
6. WTO Members and Observers and the public ma y observe the Arbitrator's sessions that are
open to public viewing with observers in the gallery of the hearing room. The public viewing will be
open to officials of WTO Members and Observers upon presentation of their official badges.
Accredited journalists and representatives of relevant non-governmental organizations may
indicate to the Secretariat their interest in attending the public viewing (Information and External
Relations Division). Members of the general public will be invited to register their interest in
attending the public viewing via the WTO website, by close of business on 4 September 2015.

1 These procedures are adopted according to, and ar e an integral part of, the Arbitrator's Working
Procedures of 6 July 2015.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

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ANNEX A-4
PROCEDURES FOR AN OPEN SUBSTANTIVE MEETING OF THE ARBITRATOR2 (WT/DS386)
Adopted on 6 July 2015

1. The Arbitrator shall hold a joint substantive meeting in DS384 and DS386.
2. Subject to the availability of suitable WTO meeting rooms, the Arbitrator will start its
substantive meeting, on 15-16 September 2015, with a session with the parties open to the public.
At that session, each party will be asked to make an opening statement. After the parties have
made their statements, they will be given the opportunity to pose questions to the other party or
make comments on the other party's statement. The Arbitrator may pose any questions or make
any comments during such session. The parties will also have an opportunity to make their closing
statement during the session open to the public.
3. To the extent that the Arbitrator or any party considers it necessary, the Arbitrator will also
hold a session with the parties not open to public observation during which the parties will be
allowed to make additional statements or comments, and pose questions, that involve business
confidential information. The Arbitrator may also pose questions during such a session.
4. The following persons will be admitted into the meeting room during all sessions of the
Arbitrator's substantive meeting, whether open or closed to the public:
– the members of the Arbitrator;
– all members of the delegations of the parties to DS384 and DS386; and
– WTO Secretariat staff assisting the Arbitrator.
5. No person shall disclose any business confidential information at any session open to the
public.
6. WTO Members and Observers and the public ma y observe the Arbitrator's sessions that are
open to public viewing with observers in the gallery of the hearing room. The public viewing will be
open to officials of WTO Members and Observers upon presentation of their official badges.
Accredited journalists and representatives of relevant non-governmental organizations may
indicate to the Secretariat their interest in attending the public viewing (Information and External
Relations Division). Members of the general public will be invited to register their interest in
attending the public viewing via the WTO website, by close of business on 4 September 2015.

2 These procedures are adopted according to, and are an integral part of, the Arbitrator's Working
Procedures of 6 July 2015.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

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ANNEX A-5
PROCEDURES OF THE ARBITRATOR CONCERNING BUSINESS CONFIDENTIAL INFORMATION3
(WT/DS384)
Adopted on 6 July 2015

1. These procedures apply to any business confid ential information (BCI) that a party submits
to the Arbitrator. For the purposes of these procedures, and in line with paragraph 5 of the
Arbitrator's Working Procedures, the term "party" in these procedures refers to the parties in
DS384 and DS386.
2. For the purposes of these procedures, BCI is defined as any information that has been
designated as such by the party submitting the in formation, that is not available in the public
domain and the release of which could reasonably be considered to cause or threaten to cause
harm to an interest of the person or entity that supplied the business information to the party.
3. No person may have access to BCI except a member of the Secretariat or the Arbitrator, a
party's employee participating in the dispute, and a party's outside advisor for purposes of this
dispute. However, an outside advisor is not permitted access to BCI if that advisor is an officer or
employee of an enterprise engaged in the production , export, or import of cattle, swine, beef, or
pork. When a party provides BCI to an outside advisor who is an employee or officer of an industry
association of such enterprises, that party shall obtain written assurances from such advisor that
he or she has read and understands these procedures and will not disclose any BCI in
contravention of these procedures.
4. A party obtaining access to BCI as a result of the BCI being submitted in this dispute shall
treat it as confidential, i.e. shall not disclose that information other than to those persons
authorized to receive it pursuant to these procedures. Each party shall have responsibility in this
regard for its employees as well as any outside advisors for the purposes of this dispute. BCI
obtained under these procedures may be used on ly for the purpose of providing information and
argumentation in this dispute.
5. A party submitting or referring to BCI in a document shall mark the cover and each page of
the document to indicate the presence of BCI in the document as follows: BCI shall be placed
between double brackets (for example, [[xx,xxx.xx ]]). The cover and the top of each page of the
document shall contain the notice "Contains Business Confidential Information". Any BCI that is
submitted in electronic form shall be clearly mark ed with the phrase "Contains BCI" on a label on
the storage medium, and clearly marked with the phrase "Contains BCI" in the electronic file
name.
6. In the case of an oral statement containing BCI to be delivered in the session not open to
public observation as foreseen in paragraph 3 of the "Procedures for an open substantive meeting
of the Arbitrator," the Arbitrator should ensure th at only persons authorized to have access to BCI
pursuant to these procedures are permitted to hear the statement.
7. The parties and the Arbitrator shall store a ll documents containing BCI so as to prevent
unauthorized access to such information.
8. The Arbitrator shall not disclose BCI, in its decision or in any other way, to persons not
authorized under these procedures to have access to BCI. The Arbitrator may, however, make
statements of conclusion drawn from such information. Before the Arbitrator makes its decision
publicly available, the Arbitrator shall give each party an opportunity to ensure that the report
does not contain any information that it has designated as BCI.

3 These procedures are adopted according to, and are an integral part of, the Arbitrator's Working
Procedures of 6 July 2015.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

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ANNEX A-6

PROCEDURES OF THE ARBITRATOR CONCERNING BUSINESS CONFIDENTIAL INFORMATION4
(WT/DS386)
Adopted on 6 July 2015

1. These procedures apply to any business confid ential information (BCI) that a party submits
to the Arbitrator. For the purposes of these procedures, and in line with paragraph 5 of the
Arbitrator's Working Procedures, the term "party" in these procedures refers to the parties in
DS384 and DS386.
2. For the purposes of these procedures, BCI is defined as any information that has been
designated as such by the party submitting the in formation, that is not available in the public
domain and the release of which could reasonably be considered to cause or threaten to cause
harm to an interest of the person or entity that supplied the business information to the party.
3. No person may have access to BCI except a member of the Secretariat or the Arbitrator, a
party's employee participating in the dispute, and a party's outside advisor for purposes of this
dispute. However, an outside advisor is not permitted access to BCI if that advisor is an officer or
employee of an enterprise engaged in the production , export, or import of cattle, swine, beef, or
pork. When a party provides BCI to an outside advisor who is an employee or officer of an industry
association of such enterprises, that party shall obtain written assurances from such advisor that
he or she has read and understands these procedures and will not disclose any BCI in
contravention of these procedures.
4. A party obtaining access to BCI as a result of the BCI being submitted in this dispute shall
treat it as confidential, i.e. shall not disclose that information other than to those persons
authorized to receive it pursuant to these procedures. Each party shall have responsibility in this
regard for its employees as well as any outside advisors for the purposes of this dispute. BCI
obtained under these procedures may be used on ly for the purpose of providing information and
argumentation in this dispute.
5. A party submitting or referring to BCI in a document shall mark the cover and each page of
the document to indicate the presence of BCI in the document as follows: BCI shall be placed
between double brackets (for example, [[xx,xxx.xx ]]). The cover and the top of each page of the
document shall contain the notice "Contains Business Confidential Information". Any BCI that is
submitted in electronic form shall be clearly mark ed with the phrase "Contains BCI" on a label on
the storage medium, and clearly marked with the phrase "Contains BCI" in the electronic file
name.
6. In the case of an oral statement containing BCI to be delivered in the session not open to
public observation as foreseen in paragraph 3 of the "Procedures for an open substantive meeting
of the Arbitrator," the Arbitrator should ensure th at only persons authorized to have access to BCI
pursuant to these procedures are permitted to hear the statement.
7. The parties and the Arbitrator shall store a ll documents containing BCI so as to prevent
unauthorized access to such information.
8. The Arbitrator shall not disclose BCI, in its decision or in any other way, to persons not
authorized under these procedures to have access to BCI. The Arbitrator may, however, make
statements of conclusion drawn from such information. Before the Arbitrator makes its decision
publicly available, the Arbitrator shall give each party an opportunity to ensure that the report
does not contain any information that it has designated as BCI.
Procedures of 6 July 2015.
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ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 Executive summary of the arguments of Canada B-2
Annex B-2 Executive summary of the arguments of Mexico B-13
Annex B-3 Executive summary of the arguments of the United States B-26
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ANNEX B-1
EXECUTIVE SUMMARY OF THE ARGUMENTS OF CANADA
I. INTRODUCTION
1. This arbitration is the culmination of six years of WTO litigation, beginning with Canada's
request for the establishment of the Original Pane l in the WTO proceedings concerning the United
States' country-of-origin labelling requirements. Canada prevailed at all previous stages in this
dispute. In this proceeding, Canada is before the Arbitrator to defend its request for authorization
to suspend concessions to the United States in the amount of CDN $ 3.068 billion per annum,
which reflects the devastating losses that continue to be inflicted on the Canadian cattle and hog
industries. The United States chose to request this arbitration instead of bringing itself into
compliance with the recommendations and rulings of the DSB.
2. In accordance with the DSU, and as demo nstrated by previous arbitrations under DSU
Article 22.6, the United States must successfully ch allenge the accuracy of the level of nullification
or impairment proposed by Canada, rather than just proposing alternative scenarios of its own.
Previous cases have also been clear that it is only after the United States has met this burden, that
the Arbitrator can assess alternatives to determine the level of nullification or impairment. The
United States has failed to make its prima facie case in discrediting Canada's methodology.
3. Canada and the United States agree that the level of nullification or impairment should be
calculated based on the benefits that would accrue to Canada "but for" the amended COOL
measure: a comparison between the actual situatio n that existed following the expiration of the
reasonable period of time (RPT) to comply, and the situation that would have prevailed in the
period that follows the expiration of the RPT if no WTO-inconsistent COOL requirements had ever
been applied by the United States. Critically, in measuring the level of nullification or impairment,
Canada's methodology takes into account any lingering effects of the COOL labelling requirements.
4. Canada drew attention at the meeting of th e Parties to the real and devastating losses
experienced by Canada due to the introduction of the COOL requirements, by highlighting the
evidence in the marketplace that illustrates the damage. In particular, Canada focused on the fed-
hog industry, which suffered dramatic losses in ex port quantities. Fed hog exports dropped from
48,778 per week to 10,051 per week after the introd uction of the COOL requirements. After the
amendments to the initial COOL measure came into effect in November 2013, exports fell further
to 7,833 per week through the end of 2014.
5. The decline in fed-hog exports following the tw o-stage adoption of the COOL requirements is
so striking that restoring the volumes lost since September 2008 would require an increase of
500% from 2014 Canadian fed-hog export levels. In addition to the huge decline in export
quantity, the fed-hog industry also suffered a loss of price. Comparing the pre-COOL period to the
period after the amended COOL measure, the fed- hog price basis fell by about $0.09 per pound or
about 11% based on 2013/14 prices.
6. These remarkable losses that occurred in the real hog market should be compared to the
simulated world imagined by the United States, which suggests a negligible drop in imports and
price compared to reality. The drop in exports following the introduction of the COOL requirements
was large for each of the four livestock categories. In contrast, in every case the U.S. model
suggests that the impacts of the COOL requirements were tiny.
7. Canada's approach remains superior because it is a methodology that accurately captures
the impact of the amended COOL measure on the Ca nadian cattle and hog industries. It does so
by using real-world data, and by accurately capturing the differential impact of the amended COOL
measure on the Canadian cattle and hog industries. The model proposed by the United States fails
to do this as it relies on simulations without any connection to reality, and does not use real data
to measure the impact of the amended COOL measure.
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II. CANADA'S METHODOLOGY IS THE ONLY APPROPRIATE METHODOLOGY TO
MEASURE CANADA'S LOSSES
8. Canada's methodology is the only appropri ate method of assessing losses in this case
because it accurately and directly measures the level of nullification or impairment suffered by
Canada. Canada uses an econometric analysis to assess the losses, which employs real-world and
appropriate data that capture the differential impacts of the COOL requirements on Canada's cattle
and hog industries.
9. Econometric modeling is appropriate in this case because such models are routinely used to
estimate the market impact of a regulatory event. The assertion by the United States that an
econometric approach should not be used in a DSU Article 22.6 arbitration is unreasonable and
contradicts the basic economic principle that real-wor ld data should be used if they are available.
Moreover, the United States argument that it should not be used in this context is untenable,
given that the U.S. model relies on elasticities generated by econometrics.
10. The econometric model submitted by Canada is also the most direct way to assess the
impact of the COOL requirements on Canada's ca ttle and hog industries. The purpose of such a
model is not to capture all the complexities in the market, and reflects the current practice among
leading economists to reduce complexity and focus carefully and parsimoniously on the specific
policy question at hand.
11. At the heart of Canada's analysis is the di fferential impact of the amended COOL measure on
the price of Canadian livestock and the quantities exported. Canada's Methodology Paper captures
this differential impact, which is reflected in a widening of the price basis between fed and feeder
cattle and hogs in the United States compared to those exported from Canada, as well as a
reduction in import quantities of Canadian livest ock. Canada's model is the appropriate model to
use in this proceeding because the U.S. model, as explained below, fails to incorporate the
differential impact of the amended COOL measure and therefore does not accurately capture the
losses suffered by Canada.
12. Further, Canada's model focuses solely on the impacts of the labelling requirements and
avoids including extraneous variables that would introduce bias to the measured impacts of the
amended COOL measure. More specifically, Canada only included variables that have a differential
impact on either the price basis or quantity. The inclusion of any others is not needed for
Canada's approach of isolating the impact of the amended COOL measure.
A. Price Basis Captures the Differentia l Impact of the COOL Requirements
13. Canada's methodology uses the price basis as the dependent variable as it allows for the
isolation of the differential effect of the COOL re quirements on the export price of Canadian cattle
and hogs destined for the U.S. market. It does this by automatically capturing the impacts of a
host of variables that affect livestock prices in both countries in a similar way. With these factors
controlled for in the price basis, the methodology need only include those variables that represent
factors with differential impacts on Canadian and U.S. livestock prices. Canada has done so, by
including variables for the exchange rate, seasona lity, two BSE events (for cattle), and the closing
of the Maple Leaf Foods plant (for fed hogs). Th ese differential variables cause fluctuations in the
price basis, and they have been included on the right hand side of the equations to ensure that
they are controlled for in Canada's methodology.
14. To use the absolute price in Canada's methodology, as the United States advocates, would
mean that the effects of numerous other variables that affect U.S. and Canadian livestock demand
and supply would not be effectively controlled for in the methodology. As a result, any rise in the
Canadian price that is caused by other factors (including those that are inherently controlled for in
the price basis), could be erroneously interpreted as being caused by the amended COOL measure.
Further, to use the U.S. price as an explanatory variable would create bias in the regression model
because it is endogenous. This means the U.S. price is correlated with the error term in the
regression model and all estimated coefficients in such an equation are biased. Because many
additional variables would need to be included to control for COOL, statistical issues would arise
leading to the problem of spurious regressions. Despite these major problems, in response to a
request by the Arbitrator, the United States attempts to use absolute price in Canada's
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methodology. The result is an internally incoherent model with irrational results. In fact, the
results actually favour Canada as the effect of the COOL requirements become cumulative in such
a methodology.
15. The United States asserts that price basis exaggerates the estimate of the level of
nullification or impairment because it includes any increase in U.S. price that may be a result of
the COOL requirements. The United States is incorrect because the non-discriminatory shared
costs of COOL that increase the U.S. price also increase the Canadian price; likewise, any non-
discriminatory influence of COOL that causes a decrease in the U.S. price would decrease the
Canadian price by the same amount. These effects are not reflected in the price basis. Moreover,
any impact of the COOL requirements on raising the U.S. price is minimal because Canadian
imports of cattle and hogs only represent betwee n 2% and 4% of the massive U.S. market. To
suggest that the COOL requirements would raise the U.S. price when the Canadian share of the
market is so tiny just does not make any sense. Indeed, this conclusion is reflected in the Tonsor
et al. (2015) report commissioned by the USDA.
16. The United States has incorrectly characte rized the discussion in Pouliot and Sumner's Food
Policy article (Exhibit US-35 (22.6)) as supporting its position that price basis should not be used
in Canada's methodology. However, the authors of that paper did use price basis for their analysis
because it was and is the most appropriate measure to determine the impact of the COOL
requirements on price. Further, the United States has tried to argue that Canada's approach is at
odds with the academic literature generally, but in its own submission it cites more articles that
use the price basis rather than absolute price (see U.S. comments on Question 35).
B. The Variables Proposed by the United States Do Not Meet the Criteria for
Inclusion
17. Canada has consistently argued that the explanatory variables proposed by the United
States do not belong in Canada's methodology because they do not meet the criteria for inclusion.
18. Canada has shown that the variables proposed either do not have a compelling economic
rationale as to their differential impact, have not been supported by empirical evidence by the
United States, or both. Canada specifically addressed variables proposed by the United States in
respect of (i) economic fluctuations or recession; (ii) feed costs; (iii) transport costs; (iv) other
competing imports; and (v) drought. Each of these is addressed summarily below.
1. Economic Fluctuations or Recession
19. There is no compelling economic reason for inclusion of this variable as although
unemployment in the United States may have led to less meat consumption, this change did not
differentially affect demand for livestock buyers for U.S. anim als as compared to Canadian
animals. The United States has not been able to provide any empirical evidence to suggest
otherwise.
20. Further, the United States made a serious specification error in using a variable that reflects
only the recession in the United States, when it is the differential impact of the recession that
would be relevant. Canada has also noted that any attempt to measure the differences in the two
recessions would involve imprecision due to time lags in macro-economic conditions and the
impact on export shipments or price basis. Even the best proxy data available would have at most
a small and indirect influence on export quantities, and none at all on price basis.
2. Feed Costs
21. Potential feed cost variables that affect export quantity or price basis would need to reflect
any movement in the difference of costs per uni t of weight gain of cattle and hogs between
Canada and the United States, as it is the relative cost of a pound of weight gain that affects the
location of where an animal is raised in its lifecycle. Appropriate econometric specification would
require developing some information and assessment of livestock producer expectations of future
costs of feed and feed rations, and Canada knows of no such data. Further, the United States has
not provided any empirical evidence that such a variable would have a differential impact on prices
or quantities. In any event, even if there are fl uctuations in feed costs, these would not cause a
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U.S. livestock buyer to pay more or less for a U. S.-born animal as compared to a Canadian-born
animal.
3. Transport Costs
22. In theory, transport costs could affect the pr ice basis and export quantities. However, the
United States has provided no empirical evidence that transport costs have affected price
differences between Canada and the United States. In fact, the United States has provided
evidence with respect to fuel costs in the Unit ed States only. Canada provided evidence on
transportation costs with respect to feeder-pig transactions covered by the Procedures of the
Arbitrator on Business Confidential Information, which cannot be summarized here.
4. Other Competing Imports
23. Imports from Mexico could in theory affect th e quantity of imports from Canada, but there is
no empirical evidence that they have done so. Indeed, such an impact is highly unlikely given the
geographical separation of Canadian and Mexican imports, and the size differences in the feeder
cattle imported from the two countries. With respect to price, any influence of imports in the
market would affect prices of comparable U.S. and Canadian animals to the same degree, and
would be very small in any case because Mexican feeder cattle comprise a trivial share of the huge
U.S. feeder-cattle market. Further, because this variable is endogenous, controlling for Mexican
imports by including the variable in a price basis estimating equation would yield biased estimates.
5. Drought
24. The empirical evidence suggests that the theo ry put forward by the United States, that the
impact of the drought in the United States (and Mexico) would have led to an increase in supply
from Mexico and a decrease in demand for Canadian feeder animals, is incorrect: feeder-cattle
exports from Canada increased due to the drought by well over 100,000 head from 2013 to 2014.
Regardless, the feeder cattle in Canada are not substitutable for those in Mexico. Further, the
United States has not provided any evidence to suggest that the drought affected the price of
Canadian feeder animals compared to U.S.- origin f eeder cattle. Designing a variable to take into
account the drought would be difficult because of the complex timing of events, the cattle cycle
and producer expectations.
C. The Econometric Estimations with the United States Proposed Variables
25. At the request of the Arbitrator, Canada has produced estimations with all of the above
variables included in its estimations, both individually and cumulatively, to determine their effect
on the price basis. The regressions for all of the above variables are included in Exhibit CAN-68
(22.6) through Exhibit CAN-76 (22.6). Overall su bstantive and statistical results changed little
with the addition of these variables. Some of the DCOOL1 and DCOOL2 effects are higher, and
some are lower. As the United States has admi tted, there is no systematic pattern of changes
compared with the results in Canada's Methodology Paper. Therefore, there is no error in
Canada's approach. Further, these outcomes align with the results of the estimations done at the
request of the Original Panel.
26. As when included separately, most estimated coefficients of these variables included all
together are not statistically significant. Nevertheless, the inclusion of all the variables would
increase Canada's export losses by $210 million, to a total of $2.254 billion. Adjusting for the
errors the Arbitrator found in its Table related to Question 42, Canada's total losses increase even
more, from $2.981 billion to $3.234 billion. Even when the addition of these variables results in
higher losses to Canada, Canada's position continues to be that the losses calculated in its
Methodology Paper remain more appropriate and accurate.
27. Contrary to the requests of the Arbitrator , the United States did not produce estimations
with all of the above variables in all of its price calculations individually, and cumulatively.
Instead, the United States limited its analysis to 850-pound feeder cattle only, forgoing any
estimations on the other weight classes of feeder cattle, and the other three categories of livestock
entirely. Not only has the United States failed to provide any empirical evidence for its position
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that these variables should be included, it has also cherry-picked one category, which is the weight
class for which the price basis effects of COOL are the smallest.
28. Regardless, even when the United States uses its mis-specified variables, the estimations
that result favour Canada or are neutral to Canada. More specifically, when the United States
includes the recession variable the effect of COOL on the price basis is significantly larger than in
Canada's Methodology Paper. However, despite this result that favours Canada, Canada continues
to take the position that this variable should not be included. For both feed costs and
transportation costs, the inclusion of these variables by the United States changes the results very
little. When Canada corrects for the error the United States makes in its estimations for monthly
feeder-cattle exports, the results are similar to those in Canada's Methodology Paper. Canada was
unable to replicate the data the United States used for the drought because the United States
failed to provide interpretive information. In any case, the U.S. estimates only have a slight
impact on the price basis.
29. When these variables are added by both the United States and Canada, the results change
little. This proves that Canada's model is robust and its specifications are accurate.
D. Canada uses Real-World and Accura te Data to Assess its Losses while the
United States does not
30. An econometric approach requires real-wor ld marketplace data on the situation that
prevailed before and after the measure at issue. In the current case, detailed, official government
and industry data do exist before and after the amended COOL measure. In these circumstances,
it makes no economic or empirical sense to ignore the wealth of data available. This is especially
true when the alternative U.S. model is based solely on theory, and simulations built on faulty
assumptions. It is not only possible, but highly preferable to use the available marketplace data in
any calculation of Canada's losses.
31. Canada's Methodology Paper outlines the data sources it uses in its econometric assessment
of its losses in Appendices I and II. The weekly data go back twelve years in the case of hogs, and
ten years for cattle. They are drawn from both U.S. and Canadian government sources (with the
exception of feeder pigs where no such data are available), as well as industry, and are the most
detailed, accurate, relevant and specific data for the task at hand. The United States takes issue
with Canada's choice of the U.S. government data set, as if this were a major flaw with Canada's
methodology. This is simply not a valid argument. U.S. Department of Agriculture APHIS data are
derived from actual border inspections of livestock shipments, as opposed to the values of
shipments and associated quantities. The USDA APHIS data are valid, accurate and detailed.
Further, the Original Panel considered the use of USDA APHIS data as being acceptable and
reliable.
32. In contrast, the United States uses no real-world data to determine the impact of the
amended COOL measure or to determine how the markets have responded. The only real data the
United States uses is for its 2014 base-year calculations. The United States has essentially
abandoned the wealth of readily available data an d adopted a model that is suitable for use only
when there are no such data available.
33. The United States also did not use appropriate data for monthly imports of feeder cattle
when requested to by the Arbitrator. It not only failed to use the data it suggested it would (U.S.
Department of Commerce data), but then used an inaccurate USDA summary data set that
includes only some of the relevant livestock categories, leading to misleading and incomplete
results. The United States also mistakenly specified the key COOL variables. When these errors
were corrected by Canada, the results are very similar to when weekly data are used. None of the
effects is different to a statistically significant degree and all effects are strongly and significantly
negative.
34. Further, at the request of the Arbitrator, Canada used monthly data instead of weekly data
in its estimations. The results are found in a table in Canada's responses to Question 37. Despite
some expected differences, the results are very similar to the results using weekly data. None of
the differences is statistically significant. In fact, using monthly data causes the estimate of
Canada's losses to rise above the $3.068 billion that Canada reported in its Methodology paper.
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Also at the request of the Arbitrator, Canada chan ged the base period by several weeks, extended
the sample period for cattle, changed the dates of the COOL dummies, and used a different
implementation date for fed cattle, larger feeder cattle and fed hogs. The results were generally
not significantly different from those in Canada's Methodology Paper and any changes were
predictable.
E. Canada's Data for Feeder Pi gs are Accurate and Verifiable
35. The parties agree that there are no available feeder price data amenable for statistical
analysis in this case. As a result, Canada provided evidence covered by the Procedures of the
Arbitrator on Business Confidential Information, which cannot be summarized here. In any event,
Canada's evidence is further supported by econ ometric analyses and simulations. It is also
consistent with the losses suffered in the three other livestock categories.
III. METHODOLOGY AND CALCULATIO N OF PRICE SUPPRESSION LOSSES
36. In addition to the loss of revenue resulting from the reduction in livestock exports to the
United States and the lower prices received for those livestock that were exported, the amended
COOL measure has caused Canadian livestock producers to suffer losses resulting from the
reduction in the price received in Canada for cattle or hogs that were not shipped to the United
States.
37. Canada's estimate of these losses is carefully constructed and conservative. First, it avoids
double counting of suppressed exports that are already included in the estimate of the loss of
export revenue. It does this by ensuring that in the price-suppression equation, the quantity of
animals in Canada to which price suppression applie s is reduced by the implied loss of quantity of
exports that are estimated to be part of the loss of export revenue. Second, it does not include
the reduced production and supply from Canadian li vestock industries due to the lower prices that
they face.
38. The losses due to domestic price suppression for all categories of livestock except feeder
pigs were based on appropriate industry and go vernment data. The domestic losses for feeder
pigs were calculated on the basis of the most reliable data Canada could access. Both parties
agree that there is no public government source for data that provides consistent time-series price
data amenable for statistical analysis of the pric e of feeder pigs in Canada. Therefore, Canada
relies on evidence covered by the Procedures of the Arbitrator on Business Confidential
Information, which cannot be summarized here.
39. A high level of integration between the Canadian and U.S. markets results in price arbitrage
between the Canadian export price of live cattle and hogs and the price of domestic cattle and
hogs. As a result of the amended COOL measure, once a drop occurred in the export price, the
price of the domestic livestock adjusted accordingly. This arbitrage mechanism is well accepted as
a "given" in the industry. There are no domestic factors that impede this mechanism. Canada is a
price taker for all categories of cattle and hogs as it supplies only a trivial market share for each in
the massive U.S. market (in all cases less than 4%, and in most cases less than 2%.) There is
therefore a direct causal link between the amended COOL measure and the domestic price-
suppression losses experienced in Canada. Becaus e of this arbitrage between markets, the price
impacts for the domestic price-suppression analysis are the same as those that are used in the
calculation of export revenue losses.
40. In response to Question 42 from the Arbitrator, Canada acknowledged an inadvertent error
in its original calculation of price-suppression losses for feeder pigs (of $325,400,000, as
compared to the Arbitrator's calculation of the same losses in the amount of $237,805,000). As to
the price-suppression losses claimed by Canada in respect of the other three animal categories, it
explained the small discrepancies between the numbers contained in Canada's Methodology Paper
and those contained in the Tables to Question 42 from the Arbitrator.
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IV. LOSSES DUE TO DOMESTIC PRICE SUPPRESSION ARE SUPPORTED BY BOTH THE
DSU AND THE JURISPRUDENCE
41. The amended COOL measure impaired Canada's benefit by adversely affecting the
conditions of competition of Canadian livestock exports to the United States, which resulted in
reduced prices and export volumes. As a direct result of the violation of national treatment and
the highly integrated nature of the two markets, the livestock that were not exported to the United
States also received a lower price in Canada. The resulting increased supply in Canada and the
lack of an alternative export market suppressed the prices of these animals in the Canadian
market, resulting in specific and quantifiable losses.
42. Based on the highly integrated nature of th ese two markets, these are direct losses from the
denial of a direct benefit. In the alternative, domestic price suppression losses are at the very
least losses that result from the impairment of an indirect benefit of national treatment.
Regardless, both direct and indirect benefits ar e covered by DSU Article 3.3 and therefore by DSU
Article 22.4.
43. The United States concedes that the nullification or impairment suffered by Canada in this
case includes export losses. However, the United States challenges Canada's claim for domestic
price-suppression losses, arguing that these losses do not flow from one of the "benefits" accruing
to a Member under the provisions of the covered agreements, in this case the GATT 1994 and the
TBT Agreement. The United States is incorrect.
44. In this proceeding, the denial of the "benefit " in question is based on market access, as the
United States acknowledged at the meeting of the Arbitrator with the parties. As Canada has
explained, its entitlement to national trea tment under the GATT 1994 and the TBT Agreement
provides a benefit not to see the competitive positions of Canadian cattle and hogs adversely
affected by the amended COOL measure, including through domestic price effects. The
jurisprudence supports this position. As was stated in US-Byrd Amendment, the denial of benefits
accruing (which is a broader concept than the breach of an obligation) is not to be confused with
the violation of the obligations itself.
45. Contrary to what the United States argues, there is no indication that losses need to be
limited to those suffered in the territory of the respondent. Indeed, the indirect losses claimed by
requesting parties in US-Byrd Amendment were in the form of exports to other markets. These
were not rejected in principle, but because they were too speculative and unquantifiable. A limit
to the scope for a claim of indirect losses was decided in EC-Bananas where the panel rejected a
losses claim based on exports through a third country, because the claim was based on inputs into
the final product made by another country. In cont rast, Canada is the direct exporting party, the
price-suppression losses are in its own market.
46. Further and crucially, indirect losses, like direct losses, require causation by the impugned
measure, and verifiable information to support the claim. Canada's claim has both. Causation
occurs through the arbitrage mechanism, discusse d above, and Canada's careful calculation of
these losses is based on verifiable government and industry data.
47. The United States has repeatedly failed to define the "benefits" to which it refers; instead, it
vaguely states that these benefits "relate to trade effects". It erroneously relies on cases
interpreting the level of nullification or impairment as being concerned with the "trade effects" of
the impugned measure, in order to claim that the jurisprudence has limited the scope of "trade
effects" to export losses. This is a mischaracterization of the jurisprudence. On the contrary, WTO
jurisprudence suggests a broad interpretation of "t rade effects". Further, there is nothing in the
DSU that limits the level of nullification or impairment to export losses.
48. Contrary to what the United States argues, cases that focus on the "trade effects" of
nullification or impairment are not limited to an assessment of losses based on exports alone. For
example, in US-1916, "trade effects" included the settlement awards and judgments of the 1916
Anti-Dumping Act against the complainant's companies, and neither involved an assessment of
trade flows. In US-Byrd Amendment , the Arbitrator rejected a narrow interpretation of "trade
effects", dismissing the U.S. position that nullification or impairment was limited to the direct trade
loss resulting from the violation.
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49. It is incorrect for the United States to argue that all domestic losses claims are inadmissible
or ultra vires the DSU. In US-Gambling, a claim for domestic losses was based on the "multiplier
effect" of the impugned measure on the broader Antiguan economy. The Arbitrator did not reject
the claim for domestic losses because it was incompatible with the DSU but because the claim
contradicted some of the other Antiguan arguments.
50. There are no WTO arbitrations under DSU Article 22.6 that have rejected a claim for
domestic price-suppression losses. In the two cases that the United States cites as support for its
argument that "trade effects" are limited to export trade ( EC-Hormones and EC-Bananas), the
complainants only claimed and argued for export losses.
51. Unlike the cases of EC–Hormones, EC–Bananas, or other "trade effects" cases, in which the
markets concerned are not integrated, the live ca ttle and hog markets of Canada and the United
States were almost fully integrated before the ad option of the original COOL measure. The live
cattle and hog industries in both countries are structurally similar and interdependent. As a result
and as the United States has recognized, any change in supply or demand in the United States will
directly and causally affect Canada.
52. Further, there is absolutely no merit in the argument made by the United States that, if the
level of suspension of nullification or impairment includes domestic price-suppression losses, the
level of suspension has to be decreased by a calculation of the "broader economic effects on the
U.S. economy". The level of nullification or impairment is an independent calculation based on the
losses of the complaining party. There is no calculation with respect to the level of suspension of
concessions. The meaning of "equivalence" is th at the level of suspension of concessions will
equal the level of nullification or impairment that is determined by this arbitration.
53. Finally, the burden is on the United States to make a prima facie case that the level of
suspension is not equivalent to the level of nullification or impairment. In comparing the precise
domestic price suppression losses claimed by Canada, to the speculative impact that the
suspension could have on the U.S. economy, the United States has failed to meet its burden of
proof.
V. THE EDM IS MISSPECIFIED AND INAPPROPRIATE IN THESE CIRCUMSTANCES
54. As explained above, the United States has fail ed to meet its burden of proof because it has
not demonstrated that Canada's proposed level of suspension of concessions exceeds the level of
nullification or impairment that resulted from the COOL labeling requirements.
55. Instead of fulfilling this burden, the United States has presented a model that is conceptually
ill-suited for this case. However, more importantly, the Equilibrium Displacement Model (the
"EDM") proposed by the United States utilizes incorrect elasticities, fails to consider differential
segregation and compliance costs, fails to use real-world data outside of the base year, and is rife
with faulty assumptions. The model also suffers from serious numerical errors. As a result, the
U.S. model is fundamentally flawed and severely underestimates the losses faced by Canada.
A. The EDM is Inappropriate in these Circumstances
56. Economists are clear that when appropriat e market data are available, an econometric
analysis is preferable to a simulation model. Indeed, hundreds of refereed articles in the
economics literature have examined data before and after the introduction of a government
measure by using econometrics, including in the most up-to-date peer-reviewed academic
literature. There is simply no reason not to adopt an econometric methodology in this case.
Nevertheless, the United States has adopted an EDM, which is a simulation model that does not
use real-world data on the actual impacts of the amended COOL measure.
57. A simulation analysis is best suited for assessing the future impact of a policy change or
measure, when the impact of a policy or measure has not yet been observed. This is precisely
why a simulation analysis was used in Brester et al., Lusk et al., and Tonsor et al. These studies
were done before the policy was put in place and thus are predictive only, and do not benefit from
real-world data or the knowledge of how the COOL measure was actually applied.
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B. The EDM Uses the Wrong Elasticities
58. The EDM uses short-run elasticities when long-run elasticities should have been used. Short-
run elasticities are appropriate in situations in which very little time is needed for the domestic
market to reach equilibrium. In this case, the Canadian market has still not completely adjusted
after six years, and therefore the use of short-run elasticities is inappropriate. Further, using
short-run elasticities is inconsistent with the underlying assumption in the EDM of adjustment from
one full market equilibrium to another with no adequate market adjustment time. The United
States has in fact admitted that it may not have chosen the correct elasticities for this case.
59. As an example, the United States' model relies on a study in Brester et al., which obtained
low export-supply elasticities using Canadian export-share data that are no longer applicable and
by using short-run elasticities over an adjustment period of just three months. In reality, cattle-
supply adjustment takes much longer than this. The use of long-run elasticities and the current
export-share data would have produced much higher export supply elasticities, and as a result,
much higher losses. This assumption of full equ ilibrium using short-run elasticities highlights an
internal inconsistency in the EDM that leads to a major underestimation of losses suffered by
Canada.
60. The United States has also erred in using inappropriate "import supply elasticities" (which
should be called export supply elasticities) for U. S. imports of feeder and slaughter animals, which
are equivalent to Canadian exports of these animals. In essence, since no such elasticities exist,
the United States sets these categories to the suppl y elasticity for U.S. imports of wholesale meat.
Similarly, the U.S. assigns a certain elasticity value to beef import supply and two livestock
import-supply elasticities, with no explanation. These arbitrary assignments further undermine the
U.S. model.
61. The crucial point is that the United States has used export supply elasticities that are far too
small for each category of animals from Canada and feeder cattle from Mexico. This is a major
error because export supply elasticities are one of the most important parameters in a simulation
model since they determine the magnitude of the di fferent effects on export quantities and prices
in a simulation model. Specifically, the United States has used the wrong underlying domestic
(Canadian and Mexican) elasticities and market shares in the export supply elasticity formula,
which resulted in artificially low figures. To illustrate this grave flaw in the EDM, Canada provided
a chart containing the proper elasticities in its Comments on the Responses of the United States to
Question 46 of the Arbitrator (dated 8 October 2015). The United States position that the
elasticities proposed by Canada are not supported by academic literature is completely false, and
in any event, they are determined by a standard fo rmula included in the literature as well as in
Canada's submissions.
62. A stark example of the U.S.'s flawed export supply elasticities is found in the responses to
Question 46 of the Arbitrator. Canada has shown th at it was the larger export shares of Canadian
fed hogs and feeder pigs sourced from the dated Wohlgenant study that resulted in much smaller
implied export-supply elasticities than those obta ined by Canada using current export shares.
Even worse, for feeder cattle the United States failed to download the proper export data from
their own source table and use clearly misrepresented elasticities from their own source document.
Canada uses the much more recent supply and demand elasticities from the Tonsor et al. (2015)
report, also cited by the United States, to illustrate the correct calculation of export supply
elasticities with the proper export share. Simi l a r l y , i n r e s p o n s e t o Q u e s t i o n 5 1 , C a n a d a a l s o
showed that it is possible to obtain proper elasticities, which account for market realities, when
appropriate data are used.
C. The EDM Fails to Account for Differential Segregation Costs
63. One of the most fundamental errors in the EDM is its failure to take into account differential
compliance and segregation costs. A proper simulation analysis would consider how market forces
determine how imports of Canadian cattle and hogs are traded relative to the equivalent U.S.-
origin animals. Indeed, this is the very rationale for Canada's complaint. The COOL labeling
requirements have undeniably resulted in greater implementation costs for U.S. firms that use
imported livestock as opposed to U.S. firms th at exclusively use domestic-origin livestock.
However, in the EDM, the U.S. domestic supply chain is assumed to have the same segregation
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costs as a supply chain that uses both imported and U.S.-origin livestock. This assumption has
fatally biased the results of the EDM. For example, Equations 18-23 of the U.S. EDM contain the
misplaced U.S. assumption that changes in the pr ice of U.S. livestock must equal changes in the
price of imported livestock of the same weight categories.
64. The United States' denial of the existence of differential compliance and segregation costs
has been clear throughout these proceedings. While the United States continues to claim that the
EDM reflects the reality of the U.S. livestock an d retail beef and pork markets, this is totally
inaccurate. As both Canada and Mexico have noted, the EDM fails to consider the crucial fact that
the COOL measure influenced buyers to treat livest ock of different origins differently in order to
comply with the labelling requirements. Accordingly, the inaccuracy of the EDM could only be
corrected through a re-structuring that accounts for these differential costs imposed on all
intermediate buyers of livestock. However, the United States refused to do this, even when
requested to do so by the Arbitrator in Question 44.
D. The EDM is Plagued by Addition al Faulty Underlying Assumptions
65. In addition to the most serious flaws explai ned above, the results of the EDM are biased by
a host of other faulty assumptions, as Canada outlined in its submission of 12 August 2015.
66. For example, the EDM assumes perfect competition amongst firms in the U.S. meat
processing industry such that individual firms do not influence prices. The EDM also assumes
efficiency of all plants regardless of size, that all animals are used in all markets by all plants and
firms, and that all markets clear in a complete and perfect equilibrium both with and without the
amended COOL measure. Furthermore, it assumes that there are no market imperfections of any
sort, and no path for adjustment or transition.
67. These assumptions are obviously at odds with reality and therefore provide a flawed
foundation for the EDM. Because the EDM is based on these assumptions as well as others listed
above, its results are completely unreliable.
E. Reliability of the Data and Numerical Errors
68. Canada finally notes the many numerical errors that were made in the EDM calculations, as
discussed in Comments on the Responses of the Unit ed States to the Questions of the Arbitrator
(dated October 8 2015). Moreover, the reliability of the data used in the EDM calculations is
seriously flawed because some studies relied upon are decades old and unpublished.
69. Further, the United States has committed a series of serious data errors in its submissions.
For example, it uses United States Census data fo r the base year even when they are not suitable
because they do not provide information specific to imports of barrows and gilts for slaughter. The
United States arbitrarily divided total hog imports by half to create the data for the fed hog
category.
70. In short, a simulation cannot replace the n eed to examine the impact of the measure in the
real world. As demonstrated in Canada's calculations using the EDM in response to Question 51,
accurately calculated elasticities that account for market realities can yield results that are
plausible. However the U.S. calculations in the EDM are based on inaccurate and unrealistic
elasticities. These theoretical and practical flaws in the EDM illustrate the inappropriateness of
using a simulation model in these circumstances and further demonstrate the suitability of
Canada's econometric approach.
VI. CONCLUSION
71. The United States has failed to make its prima facie case to discredit Canada's methodology
to determine the level of the nullification or impairment of benefits it is entitled to. Canada has
demonstrated that its methodology is sound and accurately represents the devastating losses
Canada has been suffering for seven years.
72. Indeed, when Canada includes the variables proposed by the United States, uses monthly
instead of weekly data, and changes dates as re quested by the Arbitrator, the results do not
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change significantly, which demonstrates that Ca nada's methodology is robust. Similarly, even
when the United States makes the changes to Canada's methodology requested by the Arbitrator,
the results do not alter significantly and do not suggest that Canada's approach is flawed. The
fundamental integrity of Canada's Methodology Paper remains intact and its calculations are
accurate. Therefore, the Arbitrator should use Canada's methodology to award losses suffered by
Canada in this case.
73. Canada respectfully requests that the Arbitrator find that Canada's level of nullification or
impairment is as was specified in Canada's request to the DSB for authorization to suspend
concessions to the United States, i.e. CDN $ 3.068 billion per annum, subject to a correction
conceded by Canada in paragraph 40 of this Executive Summary.
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ANNEX B-2
EXECUTIVE SUMMARY OF THE ARGUMENTS OF MEXICO
1. Mexico's Methodology Paper demonstrates that the COOL measure has reduced the prices
paid for Mexican cattle in the United States, reduced Mexican export sales and supressed the
prices of feeder cattle in the Mexican domestic market. Because the United States has not taken
any steps to bring the COOL measure into conformity with its obligations, Mexico is seeking
authorization to suspend concessions in the amount of USD 713.4 million.
2. In the present case, the Arbitrator's mandat e under Articles 22.6 and 22.7 of the DSU is to
determine whether the proposed level of the susp ension of concessions requested by Mexico is
equivalent to the level of the nullification or impairment of benefits accruing to Mexico as a result
of the United States' failure to bring its WTO-inconsistent COOL measure into compliance. The
level of the nullification or impairment that Mexico has suffered is the difference between the
actual level of benefits accruing to Mexico at the time of expiry of the reasonable period of time
(RPT) to comply as a result of the adverse effect s of the COOL measure and the level of benefits
that would have accrued to Mexico in a counterfactual scenario in which the COOL measure had
never been adopted. This approach properly meas ures the full extent of the nullification or
impairment caused by the COOL measure because it measures its adverse effect against the level
of benefits that the parties negotiated under the covered agreements — i.e., benefits that prohibit
the COOL measure from ever existing.
3. Mexico's methodology uses an approach that combines detailed econometric estimates and
simulations to accurately calculate the level of nullification and impairment. First, an econometric
model using observed data is employed to estima te the adverse effects of the COOL measure on
the price of Mexican feeder cattle exported to th e United States. Second, this estimated export
price impact is then used to simulate a consistent reduction in exports of Mexican feeder cattle.
Third, the estimated export price impact is used to measure the corresponding price impact in
Mexico's domestic market. Export losses and price suppression losses are then calculated based on
the adverse effects of the COOL measure.
4. In response, the United States proposes a novel simulation that builds on the currently
observed market equilibrium and removes the costs associated with the COOL measure. The
approach used by the United States is flawed in many ways. First, instead of using the available
pre- and post-COOL data to directly estimate the adverse effects of the COOL measure, the United
States purports to measure the impact of removing the COOL measure through a complicated
theoretical model that is inconsistent with the ac tual effect of the COOL measure as found in the
WTO rulings. Second, the United States' concept of calculating losses based on market outcomes
with the COOL measure in place is fundamentally flawed as it assumes, inter alia, that the impact
of imposing a measure is equivalent to that of removing it. Importantly, under the approach
proposed by the United States, if the harms caused by a measure are not fully reversible, then the
amount of nullification or impairment would inevitably be understated.
5. In US – Upland Cotton (Article 22.6 – US) , the Arbitrator confirmed that the party objecting
to the proposed countermeasures bears the initial burden of establishing a prima facie case that
the proposed countermeasures are not in accordance with the requirements of the relevant WTO
provisions; if this initial burden is discharged, then it falls to the party proposing the
countermeasures to rebut such a presumption.
1 T h i s s t a n d a r d i s c o n s i s t e n t w i t h t h e b u r d e n o f
proof applied in other arbitrations, including EC – Hormones (US) (Article 22.6 – EC) , EC –
Bananas III (Ecuador) (Article 22.6 – EC) and US – 1916 Act (EC) (Article 22.6 – US) . Similarly,
the arbitrator in US – Gambling (Article 22.6 – US) confirmed that the burden rested upon the
United States, as the objecting party, to demonstrate that the level of suspension proposed by
Antigua was not equivalent to the level of nullification or impairment resulting from the continued
application of the WTO-inconsistent measure. For the purpose of discharging this burden, the
Arbitrator emphasized that the United States must successfully challenge the accuracy of the level

1 Decision by the Arbitrator, US – Upland Cotton (Article 22.5 – US I), paras. 4.21-4.22.
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of the nullification or impairment reflected in the counterfactual scenario proposed by Antigua,
rather than merely proposing alternative scenarios of its own.2
6. Thus, the United States bears the initial burden of establishing a prima facie case that the
level of suspension of benefits requested by Mexico is not in accordance with the requirements of
the DSU. The United States has failed to dischar ge its burden. There are significant legal and
conceptual errors in the United States' criticisms of Mexico's methodology and also in the
alternative methodology that the United States proposes. Mexico's comprehensive analysis is the
correct approach under the circumstances, and it ha s been properly applied to accurately estimate
the level of nullification and impairment caus ed by the amended COOL measure. The United
States' inaccurate criticisms and flawed alternative "Equilibrium Displacement Model" (EDM) are
therefore insufficient to establish a prima facie case the Mexico's methodology is inconsistent with
DSU Article 22.4.
7. In the event that the Arbitrator disagrees and finds instead that the United States has
established a prima facie case, in whole or in part, then Mexico submits that its methodology
remains the most appropriate approach to assessing the level of the nullification or impairment of
the benefits that would accrue to Mexico but for the adverse effects of the amended COOL
measure, subject to any adjustments that the Arbitrator determines are required.
8. Mexico emphasizes that, although Canada's approach is very similar to Mexico's, the
Canadian methodology is not identical to that of Mexico. In particular, Mexico is able to rely on
pricing data for Mexican cattle from sales within the United States, and that eliminates the
relevance of certain variables discussed by the United States. For this reason, Mexico's analysis
must be reviewed independently and evaluated on its own merits. The United States has not even
attempted to explain how any alleged errors, omissions or defects would materially affect the
outcome of Mexico's model if "corrected". Rather, the United States' approach is to avoid engaging
with Mexico's proposed methodology altogether.
Mexico's estimation of export losses from th e impact on prices for Mexican cattle in the
U.S. market
9. Mexico's Methodology Paper uses regression an alysis to estimate the economic impact of the
COOL measure on the price of Mexican feeder cattle imported into the United States. The price of
Mexican feeder cattle is measured in New Mexico and Texas and is compared to the price of U.S.
feeder cattle measured at the same locations. Since prices are measured at the same locations, a
limited number of factors explain their difference . Mexico's Methodology Paper found that the
COOL measure depressed exported feeder cattle price by $0.187/lb.
10. The prices used in the Mexican regression model are measured in the United States. Once
Mexican feeder cattle have crossed the U.S. border and are at their selling points in the United
States, transportation costs and exchange rates do not matter as these costs are already sunk.
Given that these costs have already been incurred, the price of Mexican feeder cattle is determined
solely by the valuation for feeder cattle by U.S. buyers.
11. Before the COOL measure, U.S. and Mexican born feeder cattle of the same weight were
perfect substitutes. Prices for animals of either origin at selling points in the United States were
essentially the same, as animals of both origins were physically identical and because animals
were not differentiated by origin in the U.S. supply chain.
12. The COOL measure caused differential treatment of feeder cattle across origins in the U.S.
cattle supply chain. Since the price of Mexican fed cattle in the United States, which were imported
from Mexico as feeder cattle, is discounted compared to fed cattle of U.S. origin, the prices of
Mexican feeder cattle are discounted. In other words, the discount is passed back from
transactions for fed cattle to transactions for feeder cattle.
13. Mexico's regression model estimates the impact of the COOL measure as revealed by the
price basis. It is well-established in economics that prices summarize all the information in a
competitive market setting. In a supply chain, this means that a shock at any stage of a supply

2 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), paras. 3.23-3.24.
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chain is distributed through the entire supply chain. Thus all demand and supply shifters that
affect the U.S. cattle and beef industry are su mmarized in the prices for feeder cattle. The
regression model does not attempt to explain a price-in level but instead seeks to explain the price
basis. Given that both the prices of U.S. feeder cattle and Mexican feeder cattle summarize the
supply and demand shifters that impact the U.S. beef and cattle supply chain, the price basis
measures what differentially impacts these prices. Because U.S. feeder cattle and Mexican feeder
cattle are identical except for their differential tr eatment because of the COOL measure, the price
basis regression is able to measure the total impact of the COOL measure that is distributed down
the supply chain onto the price paid for Mexican feeder cattle. Thus, the relevant variables to
include in the regression model are those that explai n the differential value to U.S. buyers that is
distributed down the supply chain rather than all the variables that explain individual feeder cattle
prices. The equations are not "truncated," as the United States alleges; rather they include the
relevant factors and exclude those that are not relevant. Accordingly, Mexico's price basis equation
reflects the difference between the price paid for Mexican feeder cattle and U.S. feeder cattle
rather than the "difference between the U.S. price and the Canadian price" as stated by the United
States.
14. The objective of Mexico's regression model is to explain how the differential treatment of
cattle in the United States according to their origin affected the price paid for Mexico feeder cattle.
As explained in the Methodology Paper and above, Mexico's regression model measures how the
COOL measure differentially impacted the price paid for U.S. and Mexico feeder cattle as revealed
by the price basis. With prices measured in the same locations, the number of variables that affect
the basis is limited. A regression of the price paid for Mexico feeder cattle in the United States as a
dependent variable with the U.S. price for feeder cattle would require the same set of explanatory
variables as the basis regression presented in Mexico's Methodology Paper. However, such a
regression model would be plagued with problems that the basis regression does not have. For
example, the price of Mexican feeder cattle exported to the United States contains a unit-root as
shown in Table 1 of Mexico's Methodology Paper. Thus, a conventional linear regression model
would yield biased coefficients unless it is possible to find a cointegration relationship. The basis
does not have a unit-root and thus can be used as a dependent variable in a linear model.
15. Contrary to the argument of the United States,
3 the Pouliot and Sumner (2014) study does
not undermine Mexico's methodology. Pouliot and Sumner (2014) are correct in stating that it is
theoretically possible that imposing the COOL measure would result in higher prices in the
importing country and lower prices in the exporting country. 4 The increase in the domestic U.S.
price, however, would be small in practice beca use the market share of imported cattle is small
relative compared to the total size of the U.S. domestic cattle and beef industry. Moreover, the
relevant import volumes change caused by the COOL measure is an even smaller share of the U.S.
market. Further, there is a limited amount of commingling in the U.S. market, and thus most of
the U.S. livestock supply chain handles single origin animals or meat, keeping costs of compliance
with the COOL measure to a minimum.
16. In fact, a significant increase in prices for products of U.S. origin in the U.S. livestock supply
chain would indicate large compliance costs and the regulation would not have been adopted if it
imposed significant costs on U.S. firms. Arbi trage between animals of different origins would
cause these prices to differ only by the difference in cost from the differential treatment associated
with the COOL measure. Thus, even though the U.S. domestic price may marginally increase and
the price of the imported animal decrease, the di fference between the two prices reflects exactly
the costs associated with the COOL measure that is passed on to Mexican feeder cattle. Note that
even though the United States' EDM is wrongly specified in many ways, it yields results that are
consistent with Pouliot and Sumner (2014) with the finding that the removal of COOL measure has
a small impact on US domestic prices.
17. The United States' criticisms of Mexico's pricing data are also unfounded. Mexico's
Methodology Paper uses price data collected by the U.S. Department of Agriculture's Agricultural
Marketing Service (AMS). These data offer an un biased measure of the price paid for Mexican
feeder cattle exported to the United States and fo r the U.S. price of feeder cattle in New Mexico
and Texas. The data provided by the AMS are approp riate for this analysis and in fact the United
States used the same data source to calibrate its own EDM.

4 Exhibit US-35.
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18. The United States claims that the reports of the U.S. Department of Agriculture on which
Mexico relies for pricing data are from auctions, and should be considered unrepresentative of
Mexican exports. But Mexico did not use reports from auctions. Rather, it used the Department of
Agriculture's reports on its daily survey of the prices of Mexican cattle sold in direct sales after
crossing the border in New Mexico and Texas. The quantities of cattle covered by those reports
comprise over 70 percent of all U.S. imports of Mexican cattle. Exhibit MEX-26 contains a
statement by the Mexican industry explaining that Mexican cattle are sold immediately after they
have been transferred to the U.S. side of the border.
19. Also importantly, Mexico's price basis analysis compares prices for Mexican cattle from
Department of Agriculture reports with the prices for U.S. cattle from Department of Agriculture
reports. Mexico's comparisons also control for the weight and muscle categories available from the
Department of Agriculture reports. This results in the "apples to apples" comparison that the
United States says is so important.
20. Remarkably, the United States criticizes Mexico's model for relying on actual market data for
the relevant period. In fact, Mexico's Methodology Paper uses a careful, thorough and state-of-the-
art approach. The econometric models include the relevant sets of control variables to measure
the causal impacts of the COOL measure on prices and quantities.
21. Econometric modeling is not only a tool for forecasting as the United States asserts, but is
also a well-accepted approach in economics to find causal relationships. A correctly specified
regression controls for the relevant set of variab les that affect a dependent variable. The inclusion
of variables that do not pertain to the economic model and that are correlated with the variables of
interest (dummies for the COOL measure in this specific case) biases the coefficients. Mexico's
Methodology Paper uses a careful approach to include only the variables that are economically
relevant in the regression models.
22. Mexico's regression model includes monthly dummy variables and a dummy variable for the
drought to control for weather effects on the quality of feeder cattle. For instance, higher
temperatures can cause more significant weight loss over the long distance.
23. Macro-economic variables (e.g. unemployment and GDP) and input cost variables are not
relevant because the regression model compares the price of two substitute goods for which
demands are affected by the same shocks. Input costs previously incurred are not relevant as they
are already sunk costs at the moment when feeder cattle are sold.
24. Changes in quantities are not relevant in the regression model because the model compares
prices for two substitute goods measured at the same locations that are impacted by the same
demand-side variables. U.S. production volumes and Mexican export volumes of feeder cattle have
nothing to do with how U.S. feeder cattle buyers differentiate the value of feeder cattle of different
origins.
25. Increase in Mexican beef processing and beef exports are irrelevant to the difference in the
U.S. prices paid for U.S. born feeder cattle and Me xican born feeder cattle. The decision to export
Mexican feeder cattle has already been made once feeder cattle cross the U.S. border. As the
regression model compares prices for feeder cattle of two origins at the same locations, it is their
relative values to U.S. buyers that determine the difference in their prices. Mexican beef
processing and beef exports have nothing to do with how U.S. feeder cattle buyers differentially
value feeder cattle of different origins.
26. Mexican feeder cattle exported to the United States meet all animal disease requirements for
exports to the United States. Although in the past animal diseases have had market impacts, they
do not affect U.S. feeder cattle buyers' differential valuation of feeder cattle of different origins and
thus should not be included in the regression model.
27. The data used in Mexico's Methodology Paper are monthly, and monthly dummy variables
control for the effect of U.S. holidays, if any.
28. Including variables that do not have a causal effect on the relative price of U.S. and Mexican
feeder cattle prices would bias the coefficients for the COOL variables if these variables are
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correlated with the COOL variables. Thus, the re gression model used in Mexico's Methodology
Paper includes only the variables that are relevant to explain the difference between the price for
U.S. feeder cattle and the price of Mexican feeder cattle, both measured by sales within the United
States.
29. Contrary to the argument of the United Stat es, all the variables to explain the difference in
the valuation of U.S. buyers of feeder cattle from the United States and Mexico are included in the
regression model. As explained in the Methodol ogy Paper and above, macro-economic variables
and other variables that can impact the livestock industry have nothing to do with the difference in
value that U.S. buyers assign to feeder cattle of different origins. The United States asserts that
other variables are relevant, but does not explain why.
Impact of the COOL Measure on Export Volumes
30. To estimate the impact of the COOL measur e on the export of feeder cattle, Mexico's
methodology uses a small simulation model. A simulation is the most appropriate approach to
estimate the loss in export volume because there are causal variables that are missing to explain
the export of feeder cattle. Notably, a variable to measure expectations about the drought does
not exist. The model found that the COOL measur e suppressed export volumes of Mexican feeder
cattle by 342,476 for 2014.
31. The simulation is based on the estimated impa ct of the COOL measure on the price that is
estimated econometrically. Given that the export price for Mexican feeder cattle is suppressed,
there is a corresponding decline in the export volu me of feeder cattle. This decline in the export
quantity is measure based on calculated export supply elasticity that is based on elasticity
estimates from the literature and a carefully measured export share of Mexican feeder cattle.
32. The United States attacks Mexico's export su pply elasticity. But the export supply elasticity
for feeder cattle exported to the United States is derived based on observed data in a transparent
way in Mexico's Methodology Paper. The value of 4.0 for the export elasticity is very reasonable
given the size of Mexican cattle market, the st ructure of Mexican cattle market and empirical
evidence on supply and demand elasticities provided in Marsh (2003), among others. An elasticity
of 4.0 is a conservative estimate that is consis tent with observed data, the presented empirical
evidence and the length of run over which the market adjusts to the introduction or the removal of
COOL measures. The approach employed by Mexico is transparent and consistent with economic
theory, unlike the elasticity employed by the Unit ed States in its EDM which considers the wrong
length of run and employs an elasticity estimated for a completely different product, wholesale
meat.
33. The United States also criticizes Mexico's suggested level of nullification or impairment based
on its relative size compared to the current value of Mexican feeder cattle exports to the United
States. The large relative value is not surprising given that the basis used to calculate the relative
value, trade volumes and prices are depressed under the COOL measure. As an example of why
the comparison offered by the United States is incorrect, if the volumes of trade under COOL had
fallen to zero, then the relative size would have been infinite. Mexico notes that the United States
alleges that it is incredible that Mexico could export 30 percent more feeder cattle. But Mexico's
2014 exports were 1,115,855 head, while its exports previously have been as high as 1,653,408 in
1995 and more recently in 2012 – before the amended COOL measure was implemented – were
1,468,189. It is therefore completely realistic that the Mexican industry can increase the quantity
of its exports by 30% over the 2014 figures.
34. The United States' criticisms of Mexico's calculation of the impact of the COOL measure on
Mexican exports of feeder cattle to the United States are both superficial and illogical. Equation (5)
in Mexico's Methodology Paper (relating to the quantity of exported cattle) is the same as equation
(31) in Exhibit US-4 that describes the United States' EDM. The single equation is sufficient and
does not need to account for the complexity of th e feeder cattle market in Mexico and the United
States because, as explained previously, this is accounted for in the estimated coefficient of the
impact of the COOL measure on the price of Mexican feeder cattle exported to the United States in
the price basis regression. The United States attempts to mix the different analyzes together in a
confusing and incorrect manner.
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35. Exports of livestock from Mexico and Canada to the United States are significant but
nonetheless represent a small share of the total U.S. livestock market (2013 Final Rule, 78 Fed.
Reg. at 31367). Changes in export volumes from Mexico and Canada would thus have a small
impact on U.S. livestock prices. Furthermore, the United States is a very large country and exports
of cattle from Mexico are made to a very different area than the exports from Canada, thus
limiting direct competition between Mexican and Canadian cattle.
The United States' EDM is Unreliable
36. The United States argues that only an EDM is appropriate for use in evaluating the impact of
the COOL measure on Mexico, but that is incorrect . The relevant economic literature – e.g., peer-
reviewed economic journals that focus on applied economics – confirms that econometric analysis
is the standard approach for ex post evaluation of policy programs. Importantly, the U.S.
government itself has collected and published most of the relevant data needed to estimate the
impact of the COOL measure as used in Mexico's Methodology Paper. Therefore, there is no lack
of reliable data needed to estimate the impacts of the COOL measure and no reason not to use it.
37. The United States also argues that econometric analyzes are not favored in WTO disputes,
but overlooks that the Panel in US – COOL found that an econometric model provided robust
evidence that the COOL measure had a negative and significant impact on Canadian imports
shares and price basis.
38. The United States' EDM suffers from a number of deficiencies. In particular, the U.S. EDM is
calibrated using short-run elasticities, while the full impact of the COOL measure can only be
measured with a long-run economic analysis. The use of a short-run analysis grossly
underestimates the impact of the COOL measure.
39. Also, the structure of the U.S. EDM is fundamentally flawed. Mexico's Exhibit MEX-29
provides a schematic of the structure of the U.S. model. The U.S. analysis assumes that all cattle
in the United States are identical, so that th e same costs of the COOL measure are incurred as
products move through the supply chain regardless of the country of origin. The model ignores
costs from segregating livestock and meat accord ing to the country of origin which have been
recognized by the panel in earlier rulings.
40. For the correct application of the labels at retail, cattle and meat must be segregated
according to their origin. A correct structure for an EDM requires taking into account that cattle of
different origins be kept separated and with different costs of the COOL measure according to the
cattle's country of origin. An illustration of such a structure is provided on page 4 of Exhibit
MEX-29.
30. Moreover, the United States bases its calcul ation on export prices and volumes that are
suppressed by the COOL measure. A correct calculation of impairment is one where the baseline is
the situation where the COOL measure has not yet been implemented and then the COOL measure
is introduced. Mexico's methodology follows this correct approach.
41. Instead of using the available data to directly estimate the impact of the COOL measure on
the export of Mexican feeder cattle to the United States, the United States proposed a fictional
world that is examined within an EDM and proposes to use this fictional world for the calculation of
nullification and impairment. The modeling assumptions in the EDM presented by the United States
assume that there has been no denial of equal competitive opportunities for Mexican cattle, which
conflicts with the findings of the Panel and the Appellate Body.
42. Specifically, a complex EDM such as the one proposed by the United States relies on a large
number of assumptions that result in a poor approximation of the causal effects of policy changes.
In particular, the United States' EDM ignores the specifics of the segregation technology utilized by
firms to comply with the COOL measure and igno res corner solutions, while assuming there is
perfect competition in the US livestock industry. These modeling flaws cause the United States'
EDM to grossly underestimate the impacts of the COOL measure. The United States' EDM
oversimplifies market conditions and is inconsistent with market realities with respect to the path
that the U.S. livestock industry has taken to comply with the COOL measure.
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43. An EDM cannot be an appropriate substitute fo r econometric analysis to evaluate the impact
of policy changes ex post. Actual changes in market prices and quantities reveal the true impact of
policy changes given existing market realities. Unlike a supply chain model such as the one offered
by the United States, econometric analysis does not rely on assumptions about market structure
and model calibration and instead allows the data it self to reveal impacts on prices and quantities.
Data to evaluate the market impacts of the COOL measure, as demonstrated in Mexico's
Methodology Paper, are readily available and can be used to estimate the causal impacts of the
COOL measures.
44. Even if one were to accept that an EDM is appropriate to apply in these circumstances ( ex
post), there are a number of specific problems with the United States' EDM. Tonsor et al. (2015)
made a proper use of an EDM in their ex ante analysis of the costs of the COOL measure.
5 This is
the type of analysis that is typically performed using EDMs, unlike the United States ex post
analysis. The EDM of Tonsor et al. (2015) does no t specifically consider imports but does account
for the segregation costs as described in the report prepared by Informa Economics on the impact
of the COOL measure by using the weighted av erage of the costs associated with the COOL
measures for firms that source animals from a single origin and firms that source animals from
multiple origins.
45. The United States' EDM is inconsistent with the fact that processing plants accepting
imported animals pass the cost of the COOL measure onto the price they pay for animals that were
previously imported as feeder cattle. The Pane l in the underlying proceedings made findings on
this issue:
In fact, there is direct evidence of major slaughterhouses applying a considerable
COOL discount of USD 40-60 per head for imported livestock. This proves that major
processors are passing on at least some of the additional costs of the COOL measure
upstream to suppliers of imported livestock. We have no evidence of a similar discount
being applied to suppliers of domestic livestock, nor has the United States responded
to the evidence submitted by Canada and Mexico in this respect.
6
46. Also in the original proceedings, the Panel undertook a detailed examination of the impact of
the COOL measure on imported livestock, and found that competitive opportunities were reduced
in at least sixteen significant ways, namely:
a) a considerable COOL discount being applied by several major processors to imported
livestock and the absence of a similar discount being applied to domestic livestock,
b) plants and companies simply refusing to process any imported livestock,
c) fewer processing plants accepting imported livestock,
d) certain suppliers having to transport imported livestock longer distances,
e) plants processing imported livestock at specific limited times, namely on specific days
of the week or only after specific hours of the day,
f) additional logistical problems and additional costs for certain imported livestock
suppliers,
g) due to congestion resulting from limited specific-time deliveries, certain imported
livestock suppliers faced increased difficulty in obtaining delivery trucks or using
trucks in the most efficient way,
h) transportation delays for certain suppliers of imported livestock,
i) increased transportation costs for certain suppliers of imported livestock,

5 Appendix 15 to Exhibit MEX-2.
6 Panel Reports, US – COOL, para. 7.356. See also Panel Reports, US – COOL (Article 21.5 – Canada
and Mexico), paras. 7.170 and 7.176.
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j) less efficient transportation for certain suppliers of imported livestock because of
fewer deliveries due to the longer distance and less turn-around time,
k) changes to contractual terms for suppliers of imported livestock to incorporate a COOL
opt-out clause to allow processors to unilaterally terminate or amend their contracts
with suppliers of imported livestock,
l) cancellation, termination or non-renewal of supply contracts for imported livestock,
m) replacement of long-term contracts with spot contracts at lower purchase prices,
n) 14 days advance notice being required for suppliers of Mexican cattle at various U.S.
processing facilities,
o) certain suppliers of domestic livestock su ffered significant financial disadvantages due
to price discounts for imported livestock as a result of the COOL Measure, and also
due to the refusal of financial institutions to provide credits and loans to Canadian
livestock producers because of the risks resulting from the COOL Measure, and
p) exclusion of imported cattle from prem ium beef programs which are particularly
profitable for livestock suppliers.
7
47. In addition, the Informa Study clearly describes that firms that handle single origin
animals/meat incur substantially smaller costs of compliance with COOL than firms that deal with
animal/meat from multiple origins. The United States' EDM is therefore inconsistent with the actual
cost structure and impact of the COOL measure.
48. Moreover, equations (18) to (23) of the Unit ed States' EDM in Exhibit US-3 are based on an
implausible assumption that removal of the COOL measure will have the same impact on the
prices of imported livestock as on the prices of U.S. livestock of the same weight categories. This
is inconsistent with the pattern of discrimination found to exist under the COOL measure. Under
the COOL measure, animals of different origin s are imperfect substitutes. The COOL measure
requires that feeder cattle imported from Mexico be differentiated from U.S. born cattle at later
stages of the supply chain, so that the meat from these animals can be correctly labeled according
to their origins as specified by the COOL meas ure. The requirement to differentiate animals
according to their origins impose additional costs that can be averted by using animals of a single
origin, which is precisely why the COOL measure has a differential impact in the price of imported
Mexican cattle. Equations (18) to (23) simply assume away this reality.
49. The United States' EDM is set up in such a manner that the results regarding livestock prices
are given by what the United States calls the "import wedge." For instance, in tab 16 (Complete
Results) of Exhibit US-3, the change in the impo rted Mexican feeder cattle price in the United
States is USD 12.63 while the change in the Imported Mexican feeder calf price in Mexico is USD
14.88. The difference between these two values is USD 2.25, which is the value of what the United
States calls the "import wedge" for "farrowing and cow calf calves from Mexico" in tab 13 (COOL
costs) in Exhibit US-3. This feature of the EDM is inconsistent with the fundamental economic
theory that the costs of a policy program are distributed through the whole supply chain. It is also
inconsistent with established facts that all the cost of the COOL measure for the entire supply
chain are passed onto the price of imported anim als, not just the cost of the COOL measure
associated with the imported animals. Moreover, it is inconsistent with the evidence established
during the proceedings that, even before the implementation of the amended COOL measure,
processors were imposing a much higher "COOL discount" of up to USD 40 to 60 per head. Indeed,
the Panel in the original proceedings observed that "[i]n the absence of a large share of US
consumers willing to pay a price premium for country of origin labelling, the cheapest way to
comply with the COOL measure is to process only US-origin livestock, all other things being equal",
that the "other possibility is to continue processing imported livestock through segregation, which

7 Panel Reports, US – COOL, paras. 7.373-7.381.
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entails additional costs in virtually all cases" and that "[e]ither process configuration is likely to
cause a decrease in the volume and price of imported livestock".8
50. Another problem with the United States' EDM is that the set of elasticities utilized are
inappropriate to measure the full impacts of with drawing the COOL measure. Incorrect elasticities
values contribute to a severe underestimation of the impacts of the COOL measure on imported
feeder cattle from Mexico. The United States uses elasticities from previously published works, but
those studies had a very different objective than measuring nullification or impairment and a
different length of run. In some cases, the United States uses elasticities for a completely different
product. The United States' model uses some of the elasticities reported in Tonsor, et al. (2015) to
derive short-run estimates (one-year). But comp lete removal of the COOL measure would require
a period of adjustment that exceeds one year. The inappropriate length of run of the United
States' model causes underestimation of the market impacts of the COOL measure.
51. Moreover, the United States' EDM uses the same elasticity of supply for U.S. fed and U.S.
feeder cattle. There is no economic rationale for this assumption and this is not supported by the
work of Tonsor et al. (2015).
52. The United States set the export supply elasti city of Mexican feeder cattle at 1.83 to equal
the supply elasticity for U.S. imports of wholesale meat. However, there is no economic rationale
to set the export supply elasticity of feeder cattle to be the same as for wholesale meat. The
Mexican feeder cattle export supply elasticity depends on the Mexican domestic demand and
supply elasticities and the export share. There is no economic rationale for the export supply
elasticity of feeder cattle to equal the export supply elasticity of meat. The supply and demand
conditions for these two products are significantly different.
53. In its EDM in Exhibit US-3, the United Stat es uses cost estimates from the Regulatory
Impact Analysis (RIA) prepared by the Agricultur al Marketing Service of the U.S. Department of
Agriculture, which were prepared in connection with the 2009 and 2013 versions of the COOL
regulations (Exhibit US-1 and Exhibit US-2). Th e RIA is a costs and benefits analysis that is
concerned with regulatory impacts on the Unit ed States' economy. The 2009 and the 2013 RIA
therefore mainly focus on labelling and completely ignore segregation costs that are the source of
the differential treatment of imported livestock. The United States accordingly ignores in its model
a significant source of costs, which leads to seve re underestimation of the amount of nullification
and impairment. As an alternative, the United States could have used the Informa Study as an
objective and unbiased source of information about the costs of the COOL measure. The
estimated costs in the Informa Study are substantially higher than those in the RIA, in particular
for firms that source livestock from more than one country of origin. The EDM presented by the
United States fails to account for the cost of segregation and segmentation described in the
Informa Study.
54. The United States' EDM also includes an adjustment for the United States' assertion that
costs should be reduced to account for the exemptions from the COOL measure, such as for
processed products. But the Panel in the underly ing proceedings found that the burdens of the
COOL measure were imposed on all imports of Mexican cattle, because at the time of importation
the purchasers do not know their ultimate use. The United States pursued this argument with the
Appellate Body and it was rejected. Accordingly, there is no justifiable basis for including such an
adjustment in the United States' model.
Impact on Mexican Domestic Market Prices
55. Mexico's Methodology Paper established that the COOL measure's impact on Mexico's
exports of cattle has had effects not only on Mexican exports, but also on sales of cattle in
Mexico's domestic market. The impact of the domestic price suppression is calculated to be
USD 198 million. Like the export price and volume effects, this domestic price suppression effect is
directly related to the nullification or impairment at issue. In simple terms, the relevant benefit
accruing to Mexico is the right of not having to face a measure like the COOL measure. By virtue of
the nullification or impairment of this benefit by the COOL measure, Mexican domestic prices have
been suppressed. It would fundamentally under mine the balance of concessions in the WTO
Agreements if the full extent of the benefits accruing to WTO Members were not recognized in this

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arbitration. The COOL measure has disrupted th e previously integrated North American cattle
market. The price suppression in the Mexican market is a direct result of this disruption. In legal
terms, the price suppression is the direct effect of the nullification or impairment of the benefits
accruing to Mexico under the WTO Agreements.
56. The United States argues that, as a matter of law, the harmful economic effects of price
suppression in the Mexican domestic market for cattle cannot be considered at all. It claims that
prior arbitrators have found that they must only consider trade flows, and seeks to characterize
Mexico's quantification of the harm from domestic price suppression as "some broader, subjective
measure of the overall economic impacts supposedly related to non-compliance."
9 But Mexico has
not claimed that it should be compensated for general effects in its domestic economy; rather, it
has shown the causal effects of the COOL measur e specifically on the Mexican cattle industry.
Moreover, the covered agreements contemplate that nullification and impairment can have indirect
effects, and prior arbitrators have not excluded the possibility that effects in domestic markets can
be taken into account. These points are explained in detail below.
57. In evaluating claims for economic harm, arbitrators in prior disputes have focused on
whether there was a sufficient "causal link" between the measure at issue and the alleged harm,
such as in in EC – Hormones (US) (Article 22.6 – EC) . The requirement of a causal link between
benefits being nullified and impaired and the measure at issue derives from the language of GATT
Article XXIII:1, which establishes that a nullification or impairment must arise "as the result of …
the failure of another contracting party to carry out its obligations".
58. The concept of "causal link" has been discu ssed in cases arising under other agreements.
For example, in US –Steel Safeguards , the Appellate Body, in the context of examining the term
"as a result of" in Article XIX:1(a), found that th ere is a need to establish a causal link between
increased imports and unforeseen developments when imposing a safeguard measure:
Turning to the term "as a result of" that is also found in Article XIX:1(a), we note that
the ordinary meaning of "result" is, as defined in the dictionary, "an effect, issue, or
outcome from some action, process or design". The increased imports to which this
provision refers must therefore be an "effect, or outcome" of the "unforeseen
developments". Put differently, the "unf oreseen developments" must "result" in
increased imports of the product ("such product") that is subject to a safeguard
measure.
10
59. Similarly, in US – Wheat Gluten, the Appellate Body stated:
The word "causal" means "relating to a cause or causes" while the word "cause", in
turn, denotes a relationship between, at least, two elements, whereby the first
element has, in some way, "brought about", "produced" or induced" the existence of
the second element. The word "link" indi cates simply that increased imports have
played a part in, or contributed to, bringing about serious injury so that there is a
causal "connection" or "nexus" between these two elements.11
60. This case does not involve a situation in which economic harm is based on speculation
and/or is not capable of quantification. Mexico has demonstrated an extremely close causal link
between the COOL measure and price suppression in the Mexican domestic market. In particular,
it is undisputed that the Mexican and U.S. markets for cattle are tightly integrated. The Mexican
cow-calf industry was structured over one hundred years ago to supply the U.S. market. There are
no export markets for Mexican cattle other than the United States. Mexico's methodology takes
into account the loss of exports caused by the COOL measure, to avoid double-counting.
61. The only criticism the United States makes of the methodology is to state, vaguely, that
"Mexico does not account for other factors impacting its domestic sale of livestock that are
completely unrelated to the impact of the amended COOL measure on export volumes. For
instance, Mexico does not account for the drought's impact on the quality or life span of Mexican

10 Appellate Body Report, US –Steel Safeguards, para. 315.
11 Appellate Body Report, US – Wheat Gluten, para. 67.
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cattle."12 To the contrary, Mexico's methodology isolates the impact of the COOL measure, and
measures the impact in terms of lowered prices in the Mexican market.
62. The calculation of the price suppression in the Mexican domestic cattle market builds on the
estimate of the impact of the COOL measure on th e price of Mexican feeder cattle exported to the
United States. The U.S. and Mexican cattle industries are highly integrated and it is a natural
outcome of economic forces that a shock on the price of Mexican feeder cattle exported to the
United States to be transferred onto prices in the domestic Mexican cattle market. The approach in
Mexico's Methodology Paper is to estimate a price transmission regression to measure price
linkage between the U.S. feeder cattle market and the Mexican feeder cattle market. It is found
that in the long run, $0.678/lb of a $1/lb increase in the price of feeder cattle exported to the
United States is transmitted to the Mexican domestic price of feeder cattle. Thus, given that the
COOL measure depressed exported feeder catt le price by $0.187/lb, the corresponding price
suppression to the Mexican domestic price is -$0.127/lb. Applying the price suppression to the
Mexican domestic feeder cattle market yields a total prices suppression loss to Mexico of
$198,628,204.
63. The calculations of the price suppression lo ss to Mexico focus on the feeder cattle market.
The losses however certainly extend to the whole Mexican domestic cattle market. On a per pound
basis, the losses to other cattle categories are smaller and more difficult to measure. However,
applied to the whole Mexican cattle industry, these losses are certainly substantial. Hence, the
calculations offered by Mexico, which focus on the feeder cattle market, should be understood as a
lower bound of the total damage caused to the Mexican cattle industry by the COOL measure.
64. In Mexico's view, the price suppression in the Mexican market is a direct effect of the COOL
measure. However, to the extent it might not be direct, it would fundamentally undermine the
balance of concessions in the WTO Agreements if th e full extent of the benefits accruing to WTO
Members were not recognized in this arbitration. Thus, when examining the nullification or
impairment of benefits under the provisions of all of the WTO Agreements including under Article
22 of the DSU, it is essential to interpret those benefits broadly so that they include obvious direct
benefits but also benefits that are less direct but are nonetheless real. In this instance, the price
suppression in the Mexican market is undoubtedly real and the benefits accruing to Mexico under
the WTO Agreements should have prevented this price suppression from occurring but have not
because they have been nullified or impaired.
65. For both violations of the TBT Agreement and the GATT 1994, a Member may bring a
dispute if it considers "any benefit" accruing to it "directly or indirectly" is being nullified or
impaired "as the result of" a violation by another Member of its WTO obligations. The "nullification
or impairment" referred to in DSU Article 22.4 is the nullification or impairment of "benefits"
accruing to a member in the sense of GATT Article XXIII:1. In other words, the benefits may be
direct or indirect benefits.
66. The United States nonetheless argues that the Arbitrator may only consider "trade flows,"
claiming that arbitrators in past cases have found that the level of nullification and impairment
must be based exclusively on the impact on trade flows. It cites to the EC – Hormones , US –
Gambling, and EC – Bananas cases in support of this claim. However, the United States is wrong
to suggest that the arbitrators in prior disputes have found that the effects of measures on
domestic markets are excluded from consideration. For example, the arbitrator in US – Byrd
Amendment stated:
We do not agree with the United States that nullification or impairment is to be limited
in all instances to the direct trade loss resulting from the violation. We agree with the
Requesting Parties that the term "trade effect" is found neither in Article XXIII of
GATT 1994, nor in Article 22 of the DSU. Pr evious arbitrators' decisions based on
direct trade impact are not binding precedents.
13
67. The arbitrator in that case further commented that "[t]he use of direct trade effect in most
cases reflects the fact that trade loss is generally more directly identifiable and quantifiable and

13 Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), para. 3.70.
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that, in such a context, arbitrators preferred to rely on verifiable figures",14 and also stated that "…
the ‘trade effect' approach has been regularly applied in other Article 22.6 arbitrations and seems
to be generally accepted by Members as a correct application of Article 22 of the DSU" (emphasis
original).
15 In other words, it is not the only correct application of Article 22.
68. The United States also cites to EC – Bananas (US) (Article 22.6 – EC). In that case , the
United States included a claim for economic harm arising from lost exports to third countries of
inputs, such as fertilizer, for the third countries' production of bananas. The arbitrator rejected this
claim, stating "[t]o the extent the US assessment of nullification or impairment includes lost US
exports defined as US content incorporated in Latin American bananas (e.g. US fertilizer,
pesticides and machinery shipped to Latin America and US capital or management services used in
banana cultivation), we do not consider such lost US exports for calculating nullification or
impairment in the present arbitration proceedi ng between the European Communities and the
United States".
16 (emphasis original)
69. In this regard, the key point for the Panel was its view that the third countries could make
their own claims for nullification or impairment based on effects on their own exports of bananas
to the EU, and that it was inappropriate for the United States to make, in effect, a claim of harm
based on the harm to those other countries' exports. Mexico is not claiming harm from loss of
exports to third countries. Furthermore, third countries could not make claims for nullification or
impairment based on the price suppression effects caused by the COOL measure on Mexican cattle
in the Mexican domestic market. Thus, the arbitrator's findings in EC – Bananas do not support the
United States' argument that indirect effects can never be considered.
70. In US – Gambling, Antigua argued that losses to the Antiguan remote gambling industry led
to additional losses in other sectors of the economy, including lower income and government
revenues. It characterized these as indirect effects that should be taken into account in addition to
direct trade effects. To compensate for those effects, it proposed to apply a "multiplier" to its
calculation of the trade effects to arrive at an approximation of the indirect effects. The arbitrator
rejected the multiplier, finding that "the use of a multiplier reflecting the aggregate change in
output for a unit change in demand would be contrary to some of Antigua's other arguments
concerning the limited impact of remote gambling revenues on GDP."
17 Unlike Antigua in the US –
Gambling case, Mexico has not made a claim of harm from negative effects to its general economy
but rather has identified concrete effects on the Mexican cattle industry arising from the COOL
measure. Mexico has not made other arguments that are contrary to its position.
71. In the EC – Hormones (Canada) (Article 22.6 – EC) determination cited by the United
States, Canada did not propose to include any economic harm except that to trade flows, so it is
unclear why the United States believes that determination is a relevant precedent. In EC –
Hormones (United States) (Article 22.6 – EC) , the arbitrator rejected a U.S. effort to include an
estimated amount for additional exports of edible beef offal that would have been made as a result
of U.S. marketing and promotional efforts that would have taken place but for the hormone ban.
In other words, there had been no such marketing efforts. The arbitrator declined to take those
projected exports into account on the basis that they were too speculative. The effects on the
Mexican domestic market for cattle, in contrast, are not speculative; they are quantifiable and
have a close causal connection to the COOL measure.
72. The United States cites to a recent propos al to amend the DSU as evidence that the DSU
currently prohibits the inclusion of domestic price suppression. The proposal, contained in
TN/DS/26, is to amend the DSU to expressly allow the level of nullification and impairment to
include an estimate of the effect of the inconsistent measure on a country's economy as a whole.
Mexico has not proposed to include in the level of nullification and impairment the impact of the
COOL measure on Mexico's economy as a whole; rather, Mexico has included the effects of the
inconsistent measure on the Mexican market for cattle – effects that have a close causal link to the
U.S. measure. Accordingly, TN/DS/26 is not relevant to this dispute.

14 Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), para. 3.39.
15 Ibid., para. 3.71.
16 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 6.12.
17 Decision by the Arbitrator, US – Gambling (Article 22.6), para. 3.123.
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73. The United States also puts forth an argume nt that there is a requirement to evaluate the
effect of Mexico's proposed suspension of benefits on the U.S. economy as a whole, claiming that
"[t]he corresponding level of suspension would need to be decreased by an appropriate calculation
of the broader economic effects on the U.S. economy of the suspended trade."18 The United States
cites no provision of the covered agreements or any prior arbitration ruling in support of this
argument, because there is none. The level of nullification and impairment is not measured in
terms of its impact on the country that mainta ins the inconsistent measure. The appropriate
measure is the value of the denial of benefits, direct and indirect, to the complaining member.

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ANNEX B-3
EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE UNITED STATES

I. INTRODUCTION
1. Both Canada and Mexico calculate the level of nullification or impairment as the sum of
"export revenue losses" and domestic "price suppression losses." In the first instance, these
estimates dwarf the historical and current export value of livestock and in no way reflect the
"benefit" impaired by the amended COOL measure. Specifically, Canada and Mexico are arguing
that if the amended COOL measure were withdraw n, their exports of livestock would increase 92
percent and 70 percent, by value respectively, to never before seen levels, and even as overall
demand for beef and pork muscle cuts in the United States has been in decline since 2008 – with
no sign of rebound. In the second, the claimed "price suppression losses" are not part of the level
of nullification or impairment of benefits accruing under the Agreement on Technical Barriers to
Trade ("TBT Agreement") or the General Agreement on Tariffs and Trade 1994 ("GATT 1994").
2. In response, the United States explains why the econometric calculations of the requesting
parties produce highly inflated levels of nullification and impairment. In contrast to the flawed
methodologies proffered by Canada and Mexico, the United States puts forward a type of partial
equilibrium model, which more accurately estimates the trade effects of the COOL measure, as
amended, in the context of the complex North Am erican market. Specifically, an equilibrium
displacement model ("EDM") is the most suitable tool for estimating the trade effects of the
amended COOL measure. And finally, the United States has explained why the requesting parties'
claims for non-trade related damages cannot succeed.
II. APPROPRIATE CALCULATION OF THE LEVEL OF NULLIFICATION OR IMPAIRMENT
3. Pursuant to Article 22.6 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ( " D S U " ) , t h e U n i t e d S t a t e s o b j e c t e d t o C a n a d a a n d M e x i c o ' s p r o p o s e d
levels of suspension of concessions or other obligations because each party has submitted a
proposed level of suspension that is far in excess of the level of nullification or impairment
attributable to the measure at issue. Article 22.4 of the DSU is explicit and requires that the "level
of suspension of concessions or other obligations authorized by the DSB shall be equivalent to the
level of nullification or impairment." The requesting parties' calculations suffer from conceptual
flaws and methodological errors that result in grossly inflated estimates of the levels of nullification
or impairment.
4. In this proceeding, Canada and Mexico have each gone far beyond an "equivalent" level of
nullification in offering a two-part asserted level of nullification or impairment, which in the first
instance exceeds all possible trade effects, and which in the second instance is not attributable to
the nullified or impaired benefit. As to the former, Canada and Mexico attempt to quantify the
"export revenue losses" attributable to the amended COOL measure, i.e., the volume and value of
livestock that would have been exported "but for" the amended COOL measure. The
methodologies employed to estimate the quan tity and value effects of the amended COOL
measure are fundamentally flawed and result in re quests for levels of suspension of concessions
that are unsupportable. As to the latter, Canada and Mexico argue that domestic "price
suppression losses" should also be included in the total level of nullification or impairment. Even if
this "loss" level was determined through a clear and rational methodology, which it is not, the
alleged effects on domestic price are not trade effects and do not relate to the "benefits" accruing
under the relevant covered agreements (the TBT Agreement and the GATT 1994) that are being
nullified or impaired.
5. The DSU does not prescribe any particular way to demonstrate that the level of suspension
requested by each party is excessive in light of the requirements of the DSU. The United States
has established its prima facie case in three different, and independent, ways. First, the United
States has provided a methodology – the EDM – that more accurately estimates the level of
nullification and impairment than the one proposed by the requesting parties. Second, the United
States has explained why, even aside from the EDM approach, the somewhat differing econometric
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calculations of the requesting parties produce highly inflated levels of nullification and impairment.
Third, the United States has explained why the requesting parties' claims for non-trade related
damages – i.e., their claims regarding domestic "price suppression losses" – are legally invalid.
A. Applied Economic Analysis Is Necessa ry to Accurately State the Level of
Nullification or Impairment in the North American Livestock Industry
6. To calculate the amount of nullification or impairment, one must compare on a prospective
basis the imports of the relevant livestock from Canada and Mexico under the amended COOL
measure to the imports that would occur were the amended COOL measure withdrawn. And to
make that comparison, one would look at the actual relevant U.S. livestock imports during the
most recent period (actual situation), and then estimate the relevant imports of livestock that
would exist during the same period if the amen ded COOL measure were withdrawn and all other
factors were held constant (the counterfactual).
7. Recognizing these challenges, and the complexi ty of the North American livestock markets,
the United States uses a type of partial equilibrium model, an EDM, to estimate the prospective
trade effects of coming into compliance with the DSB recommendations and rulings
 through
withdrawal of the amended COOL measure. This model compares a baseline of 2014 trade data to
what would happen to supply and demand across all three countries if the amended COOL
measure were withdrawn.
1. Overview of the Equilibrium Displacement Model
8. EDMs are a well-accepted and widely used type of partial equilibrium model used for applied
economic analysis, particularly in the agricultural sector. In particular, EDMs are well accepted by
economists, and have been widely used in the economic literature to model and measure the
impact of policy changes in the agricultural sector. In the context of COOL, the United States
notes that there have been at least three significant studies of the U.S. livestock market using
EDMs.
9. Further, prior arbitrators in Article 22.6 proceedings have in the past relied on partial
equilibrium or stimulation models similar to the EDM proposed by the United States. In this
regard, the United States notes that the arbitrator in US – CDSOA (Article 22.6 – US) considered
that where "evaluating the trade effects of the scheme cannot be accomplished with mathematical
precision," "economic science allows for the consid eration of a range of possible trade effects with
a certain degree of confidence." That is, the use of well-supported and reasoned economic models
that recognize the varying effects of a measure, as the EDM does, has been an important tool for
arbitrators.
2. Explanation of the Equilibrium Displa cement Model for the U.S. Cattle/Beef
and Hog/Pork Sectors
10. The United States uses an EDM in order to estimate the difference between the value of
trade flows in 2014 and a counterfactual situation where compliance with the DSB
recommendations and rulings is achieved. The EDM is a series of linearized equations that provide
economic estimates of the trade shifts that would occur if the amended COOL measure were
withdrawn.
11. The EDM utilizes a multi-animal (covering cattle/beef and hogs/pork), and multi-sector
(representing five levels of the beef and pork marketing chain), structure. For each species and at
each level, the model establishes baseline quanti ties and prices, and then estimates the price and
quantity changes due to an external "shock."
12. In this case, the shock is the immediate e limination of the amended COOL measure and its
associated compliance costs, which appear in the first four marketing levels. All other independent
variables are held constant at their 2014 levels. In this context, the resulting quantities and prices
are endogenous variables, meaning they are dete rmined within the EDM by a set of exogenous
and computed components. Exogenous componen ts include the baseline quantity and prices,
demand and supply elasticities, and COOL compliance costs.
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3. 2014 Baseline Quantities and Prices
13. The EDM's baseline utilizes 2014 market quantities and prices sourced from the U.S. Census
Bureau trade data. The most recent full year data reflects all current market conditions such as
transport costs, feed costs, exchange rates, ownership structures, Canadian and Mexican domestic
policies, and environmental factors as they existed in 2014. The year 2014 thus provides the most
appropriate baseline for the purposes of determining the nullification or impairment of benefits
accruing to Mexico and Canada under the TB T Agreement and the GATT 1994 on a prospective
basis.
14. Construction of the 2014 baseline, as well as the EDM, depends on certain additional
assumptions. The EDM assumes that all marketin g levels are in perfect competition. The EDM
utilizes "fixed proportions" between inputs and outputs through the marketing channel. The EDM
also assumes that technologies used in the "value-added" sectors provide a constant return to
scale. The EDM further uses certain "conversion factors" to translate animal standard-sized
livestock from the number of head of livestock into the retail weight in pounds. Finally, the
conversion factors and the EDM, more generally, are based on an assumption that fed cattle are
1,400 lbs. and fed hogs are 300 lbs.
4. Multi-Animal, Multi-Market ing Sector Model Structure
15. To accurately estimate the trade effects of the amended COOL measure at each level of the
marketing chain from farm to consumer, the EDM explicitly models the five distinct levels of the
livestock market: (1) cow-calf and farrowing, (2) finishing, (3) packing/wholesale, (4) retail, and
(5) consumers. To model the complete and integrated livestock-to-retail meat market, this model
also incorporates imported livestock from Mexico and Canada, as well as imports and exports of
pork and beef. The model therefore captures the elements of supply and demand relevant to the
livestock/meat market in North America.
16. The EDM uses four sets of equations, "ident ity," "price," "value-added," and "structural," to
define the market and analyze shifts resulting from withdrawal of the amended COOL measure.
These equations are based on the assumption that equilibrium conditions exist at each stage of
production.
5. Explanation of Elasticities and COOL Compliance Costs
17. There are two primary input parameter values utilized by the EDM: elasticities and COOL
compliance costs.
a. Elasticities
18. The EDM's structural supply and demand equations are linearized and use the elasticities,
consistent with previous COOL EDM studies, to determine the responsiveness of prices and
quantities in the model to exogenous shocks. As discussed in academic literature and noted in
Mexico's Methodology Paper, data and time constraints render impractical estimating all supply
and demand elasticities econometrically. Therefore, the EDM follows the same approach as other
EDM studies and uses supply and demand elastici ty estimates established in and vetted by peer-
reviewed academic literature.
19. The EDM utilizes short-run supply elasticities for the supply of U.S. feeder animals and the
supply of imports of feeder anim als, slaughter animals, and wholesale meat drawn from academic
sources. In this context, short-run is typicall y defined as one to two years, while long run is
typically defined as ten years. The EDM also utiliz es demand elasticities for U.S. retail meat (own-
price and cross-price elasticities) and U.S. wholesale meat exports.
20. Previous academic studies of the North Amer ican livestock market do not provide supply
elasticities for U.S. imports of feeder or slaughter animals. The United States has thus set these
elasticities to equal the supply elasticity for U.S. imports of wholesale meat imports. This is
consistent with the expectation that the import supply elasticities for these animals would be
higher than those for domestic supplies, and is supported by other studies that developed lower
estimates for these parameters. Canada claims, however, that these elasticities are inappropriate
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because the ratio of export supply to total supply is important, and the (alleged) long-run must be
calculated on an annual basis (and purports to do so for 2014). Canada provides no clear
methodology or data to support its extreme export supply elasticities (which range from 12.6 to
126.3), which are much higher than those develo ped by academics specifically considering the
underlying markets.
b. COOL Compliance Costs
i. RIA Cost Estimates
21. To estimate the trade effects of withdrawing the amended COOL measure, the costs of COOL
compliance are estimated and removed from the EDM at each level of the beef and pork
production chain. The COOL cost estimates in the EDM are based on the Regulatory Impact
Analyses ("RIAs") conducted by the U.S. Departme nt of Agriculture ("USDA") with respect to the
2009 and 2013 COOL final rules. The United States has also put forward an alternative based on
the Informa Economics report costs which form the far upward bound of likely costs.
22. Although the RIA costs assume that exclusively U.S.-origin meat and mixed origin meat are
subject to the same incremental direct costs at the farm, finishing, packer and retail levels,
differential impacts arise due to differing elasticities for import supply and domestic supply. The
EDM captures and measures these differences by imposing appropriate import and domestic
supply elasticities. That is, imported products are more sensitive to incremental cost increases
and reflect these changes more severely in price and quantity changes. This difference reflects the
differential compliance costs imposed on Canadian and Mexican livestock suppliers.
23. But for the compliance costs related to the 2009 and 2013 COOL measures, the value of
Canadian and Mexican livestock exports to the United States would have exceeded the 2014
baseline level of exports. Specifically, Canadian feeder pig exports would be US$3.75 million
higher than 2014 levels, and Canadian slaughter hogs would have been US$0.35 million higher.
Canadian feeder calf exports would have been US$21.45 million higher and slaughter cattle would
have been US$17.64 million higher. Mexican feeder calf exports would have been US$49.18
million higher than 2014 export levels.
ii. Informa Economics Cost Estimates
24. Recognizing that the original panel and compliance panels have found that some portion of
U.S. costs may be shifted up the supply chain an d imposed on importers, the United States has
also put forward an alternative based on the Informa Economics report costs which form the far
upward bound of likely costs. As the original panel noted, however, the "Informa Report is silent
on its methodology and the sample considered ( i.e., time period, geographical zone, number of
firms surveyed)," and thus is not "reliable and pr ecise as regards its exact quantification of the
costs of the COOL measure." These costs in fa ct represent an exaggeration of the compliance
costs for mixed origin product, and the far upward bound of potential segregation and compliance
costs.
25. Using this cost wedge and assuming that U.S. retailers and packers will push costs
associated with mixed origin animals up the supply chain, the value of Canadian and Mexican
livestock exports to the United States would have exceeded the 2014 baseline level of exports.
Specifically, Canadian feeder pig exports would be US$62.30 million higher than 2014 levels, and
Canadian slaughter hogs would have been US$5.10 million higher. Canadian feeder calf exports
would have been US$34.30 million higher and slaughter cattle would have been US$27.01 million
higher. Mexican feeder calf exports would have been US$78.95 million hi gher than 2014 export
levels.
6. Conclusion
26. As demonstrated by the EDM, the more appropriate level of nullification or impairment is
approximately US$43.22 million per year for Canada, and certainly no more than US$128.71
million per year. With respect to Mexico, the more appropriate level of nullification or impairment
is approximately US$47.55 million per year, and certainly no more than US$78.95 million per
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year. This analysis demonstrates that the levels of suspension of concessions requested by
Canada and Mexico are in excess of the appropriate levels of nullification or impairment.
III. THE LEVELS OF SUSPENSION OF CONCESSIONS OR OTHER OBLIGATIONS
PROPOSED BY CANADA AND MEXICO FAR EXCEED THE LEVELS OF NULLIFICATION
OR IMPAIRMENT
27. The requesting parties utilize econometric methods that are fundamentally incapable of
estimating the impact of the amended COOL measure in the complex North American livestock and
meat market. Their "export revenue loss" calculations depend on unrealistic assumptions and
suffer from serious methodological deficiencies th at render their estimates incorrect. As noted
consistently by previous arbitrators, the proposed level of nullification or impairment must reflect
the "benefit" accruing under the relevant covered agreement allegedly nullified or impaired "as a
result of" the breach found by the DSB.
 That is, the proposed level must be an accurate reflection
of the trade that would have occurred "but for" the inconsistent amended COOL measure, and not
a reflection of unrelated market drivers or circumstances.
A. Canada and Mexico's Proposed "Exp ort Revenue Losses" Methodologies Are
Fundamentally Flawed and Result in Overstatements of the Levels of
Nullification or Impairment
28. The United States, Canada, and Mexico agree that the "trade effects" of an inconsistent
measure are determined by evaluating the differe nce between a baseline annual export value and
the estimation of what that export value woul d be if the amended COOL measure costs were
eliminated. However, neither Canada nor Mexico's alleged level of nullification or impairment
reflects the established patterns of supply and demand in North America or the realities of the
livestock industry. Canada's total hog and cattle export value for 2014 was US$1.744 billion.
Canada's estimated level of nullification or impairment, US$1.61 billion, suggests that export
revenues would increase by 92.3 percent by value if the COOL measure was eliminated. Mexico's
total feeder cattle export value for 2014 was US$737 million. Mexico's suggested level of
nullification or impairment suggests that marginal revenue will increase by as much as 70 percent
by value.
1. Econometric Modeling Is Not Well Suit ed to Accurately Determining Trade
Effects
29. Canada's Methodology Paper attempts to use linear regression analysis to econometrically
estimate the "reduction in the average weekly exports from Canada to the United States caused by
the amended COOL measure," and the "price basis." Mexico's Methodology Paper seeks to
determine "price basis" through econometric analysis, but abandons this methodology when
determining the impact of the amended COOL measure with respect to exports.
30. Econometric modeling analysis seeks to esti mate the statistical relationship between a
variable of interest (the dependent variable) and other explanatory variables (the independent
variables) as a tool for forecasting how changes to those independent variables would impact the
dependent variable. Econometric modeling, however, is not an appropriate approach for
determining the level of nullification or impairment. For example, it is widely understood that
econometric models are dependent on the inclusion and accurate estimation of exogenous
variables, are limited by the ability to incorporate accurate real world data, and must ensure that
the relationship between the variables and data is accurately identified. Failure to address these
issues will lead the model to attribute to the amended COOL measure trade effects that are due to
some other factor. The concept of "non-attribution" is one that is familiar under the covered
agreements and was addressed by the recent China – GOES compliance panel. These concerns
make econometric models poorly suited for analyzing complex markets, such as integrated and
vertically linked animal and meat markets, which are subject to numerous and overlapping
variables that may impact the dependent variables.
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2. Canada and Mexico's Models Are Mi s-specified Because the Models Omit
Numerous Necessary Explanatory Variables
31. The reduced form econometric modeling proposed by Canada and Mexico is far too simplistic
to accurately isolate and quantify the magnitude of any potential effects of the amended COOL
measure. In particular, Canada and Mexico's limited analysis does not consider a number of
important explanatory variables impacting the North American livestock and meat markets
between 2005 and 2015. Failure to accurately control for relevant factors results in attributing to
the amended COOL measure effects that are instead due to other factors. For this reason, Canada
and Mexico's proposed levels of nullification or impairment far exceed the "benefit" being impaired.
32. To accurately isolate and assess the quan tity and price impact of the amended COOL
measure, the requesting parties' models should not choose to include or exclude explanatory
variables based on the bias requesting parties assume the variable will create or on the
assumption that the effect is small – as they have done in these arbitrations. Rather, all
explanatory variables should be included in the analysis.
33. Specifically, the requesting parties must effectively control for numerous independent
variables, which also had an impact on quantity and price during this period. These independent
variables include, but are not limited to:
 Economic Fluctuations and Recession: Significant economic fluctuations affecting the
price and quantity of livestock exports to the United States have occurred during the
period used by Canada and Mexico. The global economic crisis resulted in a worldwide
slowing of trade and an overall contractio n of agricultural markets between 2007 and
2009. The recessions had different origins and impacted each of the three economies
differently. The U.S. recession, which lasted between December 2007 and June 2009,
was largely driven by domestic factors in the housing and banking sectors. Canada
entered economic recession in December 2008, which is a full year after the United
States. Mexico's recession lasted from October 2008 to March 2009.
Despite addressing the most significant economic downturn in recent memory in other
submissions and academic papers, Canada and Mexico provide no assessment of the
recession's effect on export quantities or the price basis. Instead, Canada and Mexico
attribute the total effect of the economic downturn to the amended COOL measure.
 Increased Feed Costs: Feed costs, as one of the single largest input into livestock
production, play a significant role in determining price and trade flows. For instance,
when the cost of feed is high, the profitab ility of feeding cattle declines, encouraging
increased slaughter or export of animals. Between 2005 and the present, feed costs
in North America have shifted for a number of reasons, including drought, biofuels
policy, changing export demands, and shifting domestic demand. In fact, feed costs
not only change throughout the period of the amended COOL measure, impacting the
price and quantity of livestock shipped, but feed costs affect Canada, Mexico, and the
United States differently and must be accounted for in econometric price and quantity
equations to ensure that changes in feed costs over time are not incorrectly attributed
to the estimated effects of the amended COOL measure.
 Shifting Transportation Costs: Transportation costs can significantly impact cattle
trade between Canada and the United States, and Mexico and the United States.
When transportation costs, which are linked to the price of fuel, are high the incentive
to ship Canadian cattle to the United States diminishes. Therefore, U.S. packers will
purchase fewer Canadian livestock and Mexican cattle, and the price of imported
livestock will decline. This is particularly clear as Canada's own submission specifies
differences in transportation costs between costs for Canadian and U.S. producers.
Unless these costs are properly accounted for, there is no way through an econometric
analysis to precisely isolate the effects of the amended COOL measure on the price
basis.
 Lingering Effects of BSE and Other Animal Diseases: The discovery of bovine
spongiform encephalopathy ("BSE") in Canada in 2003 has also had lingering effects
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on the Canadian market. While Canada has attempted to account for the trade
disruption between Canada and the United States, it has not addressed the impact of
bans enacted by other trading partners on imports of live cattle, beef, and beef
products. Conversely, Mexico continues to benefit from its increased market share in
a number of Canada's prime export markets, which are periodically closed to Canadian
exports due to BSE cases (reported as recently as February 2015).
 Shifting Livestock Processing: Both Canada and Mexico have functioning slaughter
and processing sectors which provide meat for domestic consumption as well as
export. The relative health of this sector and, in particular, shifts in production
capacity have a significant impact on the domestic price of livestock and the
competitive opportunities for Canadian/Mexican farmers and feedlot owners. This
should be considered in any econometric analysis.
 Weather Patterns: Weather related disruptions, such as drought, can significantly
impact export levels. For instance, be tween 2011 and 2014 a significant drought
affected Mexico and the U.S. Southwest. Drought both encouraged exports from
Mexico, and increased slaughter (and a decline in stocks) in the United States.
Canada has not controlled for the impact of this drought or other weather conditions.
Rather, Canada suggests that if this were included in the econometric model
specification the COOL impact would be larger because the drought had increased
demand for imports of Canadian cattle to be used for breeding stock rather than for
slaughter. However, Canada misunderstands the impact of the drought in the context
o f t h e i n t e g r a t e d m a r k e t . A s M e x i c o indicated, the drought and expectations
regarding its length and cost encouraged Mexican farms to export to the United States
more feeder animals at lower weights and lower prices. This increased supply from
Mexico decreased demand for Canadian feeder animals, and this effect should not be
attributed to the amended COOL measure.
 U.S. Holidays: Significant holidays are ofte n preceded by an increase in demand for
beef and pork. But in their Methodology Pa pers, Canada and Mexico fail to address
the influence of these holidays on quantity impacts or price basis.
 Competing Imports: Canada does not appear to consider the impact of U.S. or
Mexican production on the ability of Canada to export to the United States, and
M e x i c o d o e s n o t c o n s i d e r t h e i m p a c t o f C a n a d i a n a n d U . S . p r o d u c t i o n o n M e x i c a n
exports. Canada suggests that the United St ates is so large that the presence of an
additional significant supplier of feeder cattle is irrelevant. This is erroneous. Canada
further suggests that imports on the southern border do not affect the prices or
quantities imported on the northern border. This stands in contrast to Canada's
statements regarding the single integrated market, and is also in error. Failure to
include another significant market player will result in Canada attributing to the
amended COOL measure the impact of factors related to the supply of Mexican feeder
cattle and in Mexico attributing to the amended COOL measure impacts related to the
supply of Canadian livestock.
34. Finally, a wide variety of factors influence th e quantity of livestock crossing the border and
the price at which the livestock is sold, and beca use Canada and Mexico are seeking to determine
both price and quantity effects, it is important to ensure that both the price and quantity equations
are correctly specified with all the variables affecting either term. These additional variables
include sales variables (such as lot size, average animal weight, animal sex, homogenous lots,
type of sales contract, and other characteristics that may differ between Canadian and U.S. sales),
demand shifters (such as relative prices of substitutes including consumer income, consumer
preference, demographics, health concerns, and seasonality), and supply shifters (such as changes
in slaughter capacity in both Canada and Mexico, or decisions to export at feeder or fed levels).
3. Including Additional Variables Is In sufficient to Increase the Accuracy of
Canada's Econometric Model
35. Even if Canada and/or Mexico attempted to include additional explanatory independent
variables, the econometric modeling still would not pr ovide accurate results. Rather than focus on
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the actual price of livestock, Canada and Mexico both utilize equations specified in terms of "price
basis." The flaw with this equation specification is that the estimation of trade effects should
measure how much the amended COOL measure impacts or lowers Canadian and Mexican
livestock prices. Thus, changes to the price basis, which reflects changes in both the U.S. price
and Canada or Mexico export prices, is not appropriate because any widening basis captures both
the decline in Canada or Mexico export prices and the increase in the U.S. price.
36. Canada states that estimating an equation "with the absolute price as the dependent
variable" will be "biased and unreliable and yield no meaningful results that can be interpreted in
the calculation of losses." Mexico suggests this approach is less efficient and will yield a less
reliable estimate than a model specified with price basis as the dependent variable. However, the
question before the Arbitrators is not whether the "price basis" widened or contracted due to the
amended COOL measure, but rather what quantity of livestock would be exported and at what
price but for the amended COOL measure. For these reasons, Canada and Mexico's econometric
analysis and its resulting overestimation of the level of nullification or impairment should be
rejected.
4. Canada and Mexico's Methodologies Utilize Truncated Equations that Have
Little Explanatory Power
37. Canada and Mexico use faulty "reduced form equations" to estimate the impact on the
quantity of Canadian livestock exports to the United States and on the price basis from the
amended COOL measure. These equations do not adequately evaluate the complex livestock and
meat industry or the relevant demand and supply shifters.
38. Requesting parties' "reduced form equations" do not provide quantity equations that factor
in price, or price equations that factor in quantity . In particular, the price and quantity equations,
which are mutually linked (and in fact determinative), should have the same exogenous variables.
Specifically, in a system attempting to identify both price and quantity, two reduced form
equations should be specified with price and quanti ty as the dependent variables on the left hand
side of the equations. On the right hand side should be all the variables affecting the price and
quantity in the livestock market. It is important for all variables affecting either price or quantity
to appear in both equations, otherwise the relevant variables affecting price and quantity are being
omitted in the reduced form resulting in bias. Indeed, Canada itself conceded at the hearing that
its quantity equation should, but does not, control for all causal factors. However, Canada
inconsistently – and inaccurately – does not make the same concession for its price equation.
5. Canada and Mexico Rely on In complete and Unsubstantiated Data
39. Canada relies on unofficial weekly cattle and hog import data derived from veterinary
certificates collected by USDA's Animal and Plant Health Inspection Service ("APHIS"). This is not
the appropriate data to use because APHIS's responsibility is to ensure that health certificates are
in order, not to track import numbers for official purposes.
40. With respect to the pricing data provided for feeder pigs, Canada notes that "no consistent
time series of price data amenable for statistical analysis is available for feeder pigs in Canada."
Canada now seeks to rely on a limited, handpicked selection of transactions, which are completely
unverifiable. Such evidence simply cannot satisfy Canada's burden in this regard.
41. Mexico utilizes weekly pricing data collected by USDA's Agricultural Marketing Service
("AMS"). This data reflects a limited sample of weekly Texas and New Mexico feeder cattle prices.
The AMS price data provided is not necessarily cons istently reflective of the types of feeder cattle
that are imported from Mexico. Moreover, it is significantly different from both the U.S. Census
data and Mexico's reported export value. The AMS reported prices reflect both the export price
and value added in the United States. However, Article 22.6 arbitration focuses on the trade effect
of the inconsistent measure. This means it must reflect the impact of the measure on the product
as it crosses the border not any later added value.
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6. Mexico's Quantity Impact Analysis Is Also Subject to Significant Flaws
42. With respect to evaluating the impact of the amended COOL measure on the quantity of
livestock exports from Mexico to the United States, Mexico does not conduct an econometric
analysis. Just one omitted variable – drought – in Mexico's opinion has undermined its ability to
use econometric modeling to determine the quan tity impact of the amended COOL measure.
Mexico describes at length the difficulties associated with creating a variable to represent the
economic impact of the drought. Shifts in produc er expectations with respect to the length of the
ongoing drought may affect the timing of sales, as well as expectations about whether input prices
may be higher or less certain in the near future. Mexico notes that it is impossible to provide a
variable that would represent these unknowable and unpredictable expectations. This alone was
sufficient for Mexico to discredit the econometric analysis of the quantity impact of the amended
COOL measure.
43. Instead, Mexico uses a simple elasticity calculation to estimate the quantity impact. The
quantity equation is insufficient to account for the complexity of the feeder cattle market in Mexico
and the United States, much less to account for linkages to demand for fed cattle and beef or to
substitute products such as pork. Even though Mexico's estimation only applies to one category of
livestock and level of production, Mexico's calculation should account for all factors influencing
quantity outcomes.
44. Mexico's simple calculation has two inputs. The first is 100 percent of the price basis
attributed to the amended COOL measure as determined using the price basis econometric
equation. The United States has explained why a ttributing 100 percent of the change in the price
basis estimated using this econometric technique to a change in prices received by Mexico (or
Canada) for feeder cattle (or other animals) is incorrect and overstates the impact of the amended
COOL measure.
45. The second input is Mexico's elasticity of export supply for feeder cattle to the United
States. Elasticity is a measure of how responsive the market will be, in terms of quantity, to the
changes in price. It appears that Mexico recogniz es that a specific supply elasticity has not been
previously estimated "because of confounding e ffects from the drought and the COOL measure."
Mexico nevertheless attempts to develop its own elasticity. Mexico bases its estimated elasticity
on a single year, 2012, a period of time most cert ainly affected by drought and other factors. It
also appears to make unsupported assumptions about the rate of export, and ultimately with little
explanation concludes that the export supply elasticity is 4. This elasticity exceeds the appropriate
level.
46. Mexico inputs the price basis estimates de rived from the econometric modeling into the
calculation of export supply to determine the quan tity impact. Using a derived elasticity coupled
with an estimated price basis calculation does nothing more than compound Mexico's
methodological errors and further distance Mexico's proposed level of nullification or impairment
from the actual level of benefits nullified or impaired by the amended COOL measure.
Furthermore, using the entire price basis estimate to determine the impact of the amended COOL
measure on Mexican feeder prices overstates the trade effect.
7. Canada and Mexico's Price and Quanti ty Estimates Result in Unsupportable
Levels of Nullification or Impairment
47. Finally, Canada and Mexico uses the inaccurately estimated quantity impact and price basis
to derive an overall level of nullification or impairment for each livestock category. That is,
Canada and Mexico essentially multiples the price basis it attributes to the amended COOL
measure times the quantity impact it attributes to the amended COOL measure. However, Canada
and Mexico's methodology erroneously attributes to the amended COOL measure the impact of a
wide variety of other factors concurrently affecting the North American market. For this reason,
the trade effect figures provided by Canada and Mexico are unsupported and do not accurately
estimate the level of nullification and impairment resulting from the amended COOL measure.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- B-35 -

B. The Level of Nullification and Impa irment Should Reflect Only the Trade
Effect of the Amended COOL Measure
48. Both Methodology Papers argue to include in the level of nullification or impairment of
benefits accruing under a trade agreement estimated economic effects in Canada or Mexico's
domestic market, referred to in the Papers as "price suppression losses." With respect to the
"price suppression losses," the requesting parties allege that the amended COOL measure resulted
in a surplus of animals in their respective domestic markets, which ultimately "suppress[ed] the
domestic price of feeder cattle in Mexico," and "s uppressed prices for livestock in Canada." There
is, however, no basis under the DSU for considering domestic price suppression as a part of the
level of nullification or impairment of benefits under the TBT Agreement or the GATT 1994.
49. First, the DSU establishes that nullification or impairment relates to the benefits accruing to
a Member under the provisions of the covered ag reements. For example, DSU Article 3.3 states
that prompt settlement of situations in which "any benefits accruing to [a Member] … under the
covered agreements are being impaired" is essential. Similarly, Article 10.4 speaks of whether a
measure already the subject of a panel proceeding "nullifies or impairs benefits accruing to" a
Member "under any covered agreement." In this dispute, Canada and Mexico's request to include
in the level of the suspension of concessions authorized an amount equivalent to alleged price
suppression losses is inconsistent with the DSU and goes beyond any possible nullification or
impairment of Canada and Mexico's benefits under the TBT Agreement and the GATT 1994.
50. The request to include alleged domestic pr ice suppression losses cannot be reconciled with
the DSU. An analysis of the level of nullification or impairment must focus on the "benefit" under
the trade agreement allegedly nullified or impaired "as a result of" the failure of the Member to
fulfill its obligation – i.e., as a result of the inconsistency found by the DSB. Here, a trade benefit
under these agreements relates to international trade in livestock, not to domestic markets.
Indeed, it is notable that neither Canada nor Mexico has, until this very arbitration , considered
that the "benefits accruing" under the WTO Agreement meant anything other than the trade in
livestock. Thus, in their GATT 1994 Article XXIII claims before the compliance panels, Canada and
Mexico claimed that the "benefits accruing" relate to the market access of the livestock exported to
the United States, a point that the compliance panels recognized.
51. Second, the specific DSU requirement is that the "level of suspension of concessions . . .
shall be equivalent to the level of nullification and impairment." Even aside from the fact that the
DSU does not provide for the alleged "price suppression losses" approach advocated by Canada
and Mexico, any analysis of whether the level of suspension of concessions is equivalent to the
level of nullification or impairment would need to account for the economic effects of the
suspension of concessions in the United States. In other words, to the extent that the level of
nullification or impairment is increased by a lleged price suppression losses to reflect broader
economic effects in Canada and Mexico of the amended COOL measure, then it would be
necessary to include broader economic effects on both sides of the equation.
52. The corresponding level of suspension would need to be decreased by an appropriate
calculation of the broader economic effects on the U.S. economy of the suspended trade.
Otherwise, the arbitration would not be an appl es-to-apples determination of equivalency, as
required under the DSU.
53. Finally, and again aside from the fact that Canada's and Mexico's alleged price suppression
losses are not part of the level of nullification or impairment, Canada's and Mexico's estimates of
those alleged losses are unsupported and incorrect. Both Canada and Mexico have provided
estimates that are vague, at best, and do little to accurately assess or attribute the economic
impact of the amended COOL measure on domestic livestock transactions. For instance, there are
numerous additional factors that would need to be considered in an econometric analysis of
domestic price suppression – including Canadian and Mexican demand for livestock and differential
input costs for domestic production.
IV. CONCLUSION
54. For the reasons set forth above, the United St ates respectfully requests that the Arbitrators
find that the levels of suspension of concessions requested by Canada and Mexico are in excess of
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- B-36 -

the appropriate levels of nullification or impairment. As described above, the more appropriate
level of nullification or impairment is approximately US$43.19 million per year for Canada, and
US$49.18 million per year for Mexico, and even assuming extreme compliance costs, the level of
nullification or impairment would certainly be no more than US$128.71 million per year for
Canada, and US$78.95 million per year for Mexico.

WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-1 -

ANNEX C
ARBITRATOR'S DETERMINATION – DETAILS ON RESULTS AND CALCULTATIONS
Contents Page
Annex C-1 Econometric results C-2
Annex C-2 Export supply elasticity calculations C-10
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-2 -

ANNEX C-1
ECONOMETRIC RESULTS
Table 1: Variables list
Variable name Variable description Data sources23
350 lb. Mexican feeder
cattle price basis
Weekly price basis for 350 lb. Mexican
feeder cattle (USD/lb)
United States Department of Agriculture
Market News report; Exhibits
MEX Appendix 1, MEX Appendix 2
550 lb. Mexican feeder
cattle price basis
Weekly price basis for 550 lb. Mexican
feeder cattle (USD/lb)
United States Department of Agriculture
Market News report; Exhibits
MEX Appendix 1, MEX Appendix 2
450 lb. Canadian feeder
cattle price basis
Weekly price basis for 450 lb. Canadian
feeder cattle (CAD/lb)
CanFax; United States Department of
Agriculture Market News report;
Exhibits CAN-35, CAN-68, CAN-81
550 lb. Canadian feeder
cattle price basis
Weekly price basis for 550 lb. Canadian
feeder cattle (CAD/lb)
CanFax; United States Department of
Agriculture Market News report;
Exhibits CAN-35, CAN-68, CAN-81
650 lb. Canadian feeder
cattle price basis
Weekly price basis for 650 lb. Canadian
feeder cattle (CAD/lb)
CanFax; United States Department of
Agriculture Market News report;
Exhibits CAN-35, CAN-68, CAN-81
750 lb. Canadian feeder
cattle price basis
Weekly price basis for 750 lb. Canadian
feeder cattle (CAD/lb)
CanFax; United States Department of
Agriculture Market News report;
Exhibits CAN-35, CAN-68, CAN-81
850 lb. Canadian feeder
cattle
Weekly price basis for 850 lb. Canadian
feeder cattle (CAD/lb)
CanFax; United States Department of
Agriculture Market News report;
Exhibits CAN-35, CAN-68, CAN-81
Canadian fed steers
price basis
Weekly price basis for Canadian fed steers
(CAD/lb)
CanFax; United States Department of
Agriculture Market News report;
Exhibits CAN-35, CAN-68, CAN-81
Smaller Canadian feeder
pigs price basis
Monthly price basis for smaller Canadian
feeder pigs (CAD/head)
United States Department of Agriculture
Market News report; Exhibit CAN-82
Monthly basis for larger
Canadian feeder pigs
Monthly price basis for larger Canadian
feeder pigs (CAD/head)
United States Department of Agriculture
Market News report; Exhibit CAN-82
Canadian fed hogs price
basis
Weekly price basis for Canadian fed hogs
(CAD/lb)
Bank of Canada; United States
Department of Agriculture Market News
report; Exhibit CAN-69
Exchange rate Weekly exchange rate (USD/CAD) Bank of Canada; Exhibits CAN-68,
CAN-69, CAN-81, CAN-82
Drought Percentage of area in Texas subject to
severe to extreme and exceptional
drought
National Drought Mitigation Center;
Exhibits CAN-68, CAN-81
Diesel price Weekly diesel retail price (USD per
Gallon)
United States Energy Information
Administration; Exhibit USA-61B
Difference in
unemployment between
the USA and Mexico
Difference between the United States and
Mexico national monthly unemployment
rates
Bureau of Labor Statistics; Instituto
Nacional De Estadistica Y Geographica;
Exhibit MEX-43
Difference in
unemployment between
the USA and Canada
Difference between the United States and
Canada national monthly unemployment
rates
Bureau of Labor Statistics; Statistics
Canada; Exhibits CAN-68, CAN-69,
CAN-81, CAN-82
US corn price Nearest expiring futures price of corn in
the US market (USD per bushel)
Quandl.com; Exhibits CAN-68, CAN-69,
CAN-81, CAN-82; MEX-43
US imports of Canadian
feeder cattle
US imports of feeder cattle from Canada United States Department of Agriculture
Market News report; Exhibits CAN-35,
CAN-68, CAN-81
US imports of Mexican
feeder cattle
US imports of feeder cattle from Mexico United States Department of Agriculture
Economic Research Service;
 Exhibits MEX-30, MEX-43
PEDV cases 12 weeks
previously
Number of cases of porcine epidemic
diarrhea virus (PEDV) in the United States
12 weeks previously (4 weeks moving
average)
American Association of Swine
Veterinarians; Exhibit CAN-69

23 See Exhibits CAN-35, CAN-36, CAN-68, CAN-69, CAN-81, CAN-82, MEX-30, MEX-43, and USA-61B.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-3 -

Variable name Variable description Data sources23
Original COOL measure Original COOL measure dummy taking the
value of 1 after 29 September 2008
Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B
Amended COOL
measure (23 May 2013)
Amended COOL measure dummy taking
the value of 1 after 23 May 2013 (for
small/medium feeder livestock)
Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82
Amended COOL
measure (1 July 2013)
Amended COOL measure dummy taking
the value of 1 after 1 July 2013 (for large
feeder livestock)
Exhibits CAN-35, CAN-68, CAN-81
Amended COOL
measure (2 November
2013)
Amended COOL measure dummy taking
the value of 1 after 2 November 2013 (for
fed livestock)
Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B
Reopening of US border
following BSE ban
Reopening of US border to Canada cattle
over 30 months old following the BSE ban
Exhibits CAN-35 CAN-68, CAN-81
SRM regulation Dummy variable for Canada's specified
risk material (SRM) regulation
Exhibits CAN-35 CAN-68, CAN-81
Maple Leafs plant
closing
Dummy variable for the closing of Maple
Leafs plant
Exhibits CAN-36, CAN-69, CAN-82
US recession Dummy variable for the US recession Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, USA-56, USA-
61B
January Dummy variable for the month of January Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B
February Dummy variable for the month of
February
Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B
March Dummy variable for the month of Ma rch Exhibits CAN-35 , CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B

April Dummy variable for the month of April Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B
May Dummy variable for the month of May Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B

June Dummy variable for the month of June Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B
July Dummy variable for the month of July Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B

August Dummy variable for the month of August Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B
September Dummy variable for the month of
September
Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B

October Dummy variable for the month of October Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B
November Dummy variable for the month of
November
Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B

December Dummy variable for the month of
December
Exhibits CAN-35, CAN-36, CAN-68,
CAN-69, CAN-81, CAN-82, MEX-30,
MEX-43, USA-61B
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-4 -

Table 2: Canada's econometric results on cattle's price basis†
 450 lb.
feeder
cattle's
weekly
price basis
550 lb.
feeder
cattle's
weekly
price basis
650 lb.
feeder
cattle's
weekly
price basis
750 lb.
feeder
cattle's
weekly
price basis
850 lb.
feeder
cattle's
weekly
price basis
Fed cattle's
weekly
price basis
Lagged dependent variable 0.488*** 0.735*** 0.630*** 0.594*** 0.631*** 0.752***
 (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
Original COOL measure 0.0214 0.00347 0.0163 0.00399 0.00365 -0.0128**
 (0.398) (0.849) (0.314) (0.762) (0.734) (0.038)
Amended COOL measure
(23 May 2013)
-0.206*** -0.0936*** -0.0857***
 (0.000) (0.000) (0.000)
Amended COOL measure
(1 July 2013)
 -0.0648*** -0.0431***
 (0.000) (0.000)
Amended COOL measure
(2 November 2013)
 -0.00789*
 (0.065)
Change in exchange rate 1.216*** 1.592*** 1.219*** 1.354*** 1.244*** 0.870***
 (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
Reopening of US border
following BSE ban
0.0591* 0.0301 0.0301 0.0460** 0.0364** 0.0197**
 (0.093) (0.233) (0.174) (0.012) (0.016) (0.029)
SRM regulation in Canada -0.00245 -0.00701 -0.0129 -0.0171 -0.0126 -0.000145
 (0.915) (0.674) (0.377) (0.155) (0.203) (0.981)
Diesel retail price 0.0136 0.00247 0.00730 0.000949 0.00189 -0.00182
 (0.195) (0.738) (0.269) (0.861) (0.666) (0.483)
Change in diesel retail
price
0.225*** 0.0929* 0.0654 0.0566 0.0254 0.0224
 (0.004) (0.097) (0.184) (0.170) (0.450) (0.285)
Change in unemployment
rate difference between
the US and Canada
0.0827* 0.0268 0.0446 0.0252 0.0553*** 0.00977
 (0.081) (0.433) (0.138) (0.307) (0.006) (0.406)
US recession -0.0579*** -0.0238* -0.0252** -0.0263*** -0.0211** -0.00452
 (0.003) (0.083) (0.037) (0.008) (0.010) (0.332)
Change in corn near term
futures price
0.00569 0.0192 0.0277** 0.0153 0.0242*** -0.00183
 (0.800) (0.231) (0.047) (0.187) (0.010) (0.756)
Change in drought areas in
Texas
2.50e-05 0.00131* 0.000403 0.000230 -7.89e-06 -0.000309
 (0.980) (0.076) (0.524) (0.657) (0.985) (0.235)
Change in export volumes
of Mexican feeder cattle
-1.94e-07 1.20e-07 8.84e-08 2.24e-09 2.29e-08
 (0.498) (0.561) (0.624) (0.988) (0.851)
February 0.0163 -0.00439 -0.000345 -0.00244 -0.00507 -0.00202
 (0.533) (0.817) (0.984) (0.858) (0.651) (0.714)
March 0.0285 -0.00430 0.000534 -0.00497 -0.00745 0.00337
 (0.277) (0.820) (0.974) (0.712) (0.502) (0.538)
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-5 -

 450 lb.
feeder
cattle's
weekly
price basis
550 lb.
feeder
cattle's
weekly
price basis
650 lb.
feeder
cattle's
weekly
price basis
750 lb.
feeder
cattle's
weekly
price basis
850 lb.
feeder
cattle's
weekly
price basis
Fed cattle's
weekly
price basis
April 0.0216 -0.000569 0.00503 -0.00154 -0.00675 0.00486
 (0.412) (0.976) (0.765) (0.910) (0.546) (0.376)
May 0.0325 0.0163 0.00910 0.000474 -0.0152 0.00770
 (0.220) (0.400) (0.593) (0.973) (0.177) (0.166)
June 0.0308 -0.000886 0.0105 -0.0136 -0.0174 0.0116**
 (0.294) (0.965) (0.548) (0.328) (0.117) (0.039)
July 0.0677** 0.0225 0.00347 -0.00106 -0.0108 0.00633
 (0.015) (0.255) (0.838) (0.939) (0.335) (0.268)
August 0.0174 -0.00272 -0.00567 -0.00661 -0.00828 0.00222
 (0.516) (0.887) (0.732) (0.624) (0.455) (0.688)
September 0.0693** 0.0168 0.0143 -0.000677 -0.00974 -0.00750
 (0.010) (0.384) (0.395) (0.961) (0.386) (0.165)
October 0.0717*** 0.0225 0.00705 -0.00289 -0.0155 0.00113
 (0.008) (0.243) (0.671) (0.830) (0.159) (0.839)
November 0.0526* -0.00841 -0.0134 -0.0212 -0.0289*** 0.00399
 (0.051) (0.661) (0.419) (0.115) (0.009) (0.460)
December 0.0196 -0.0104 -0.00729 -0.0150 -0.0255** 0.00673
 (0.464) (0.590) (0.666) (0.276) (0.025) (0.217)
Constant -0.224*** -0.0697** -0.0911*** -0.0664*** -0.0571*** -0.0261***
 (0.000) (0.016) (0.000) (0.002) (0.001) (0.002)

Observations 413 425 433 429 434 449
Adjusted R-squared 0.761 0.851 0.767 0.732 0.752 0.755

† Note: The p-values are reported in parenthesis.
*** p-value<0.01, ** p-value<0.05, * p-value<0.1.

Table 3: Canada's econometric results on pigs' price basis†
 Small
feeder pigs'
monthly
price basis
Large
feeder pigs'
monthly
price basis
Fed hogs'
weekly
price basis
Lagged dependent variable 0.688*** 0.751*** 0.781***
 (0.000) (0.000) (0.000)
Original COOL measure -0.214 -0.0872 -0.00592***
 (0.775) (0.965) (0.005)
Amended COOL measure (23
May 2013)
-1.620** -5.680***
 (0.024) (0.007)
Amended COOL measure (2
November 2013)
 -0.0113***
 (0.000)
Change in exchange rate -3.918 17.37 0.821***
 (0.751) (0.591) (0.000)
Maple Leafs plant closing 0.0844 -1.177 0.00207
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-6 -

 Small
feeder pigs'
monthly
price basis
Large
feeder pigs'
monthly
price basis
Fed hogs'
weekly
price basis
 (0.931) (0.645) (0.440)
Diesel retail price 0.373 1.104 -0.00162
 (0.366) (0.288) (0.124)
Change in diesel retail price -0.544 1.184 -0.00715
 (0.709) (0.758) (0.484)
Change in unemployment rate
difference between the US and
Canada
-0.590 2.596 0.000660
 (0.591) (0.366) (0.913)
US recession -0.999 1.835 0.00120
 (0.175) (0.329) (0.532)
Change in corn near term
futures price
1.066* 2.140 -0.00233
 (0.063) (0.160) (0.442)
Change in PEDV cases 12 weeks
previously
0.000726 -0.0486 -0.000184
 (0.958) (0.183) (0.187)
February 1.214 1.070 -0.00151
 (0.203) (0.668) (0.577)
March 1.651* 0.632 -0.00146
 (0.091) (0.806) (0.583)
April 1.961** 3.504 -0.00147
 (0.047) (0.178) (0.583)
May 1.803* 10.11*** 0.00121
 (0.068) (0.000) (0.649)
June 0.761 9.420*** -0.00276
 (0.441) (0.000) (0.302)
July 1.131 9.493*** -0.00238
 (0.264) (0.000) (0.375)
August 1.719* 9.374*** 0.00254
 (0.082) (0.000) (0.344)
September 1.029 8.056*** -0.00183
 (0.301) (0.003) (0.501)
October -0.0128 2.863 0.00101
 (0.990) (0.281) (0.706)
November -0.0936 3.241 0.00184
 (0.922) (0.210) (0.492)
December -0.481 -2.002 0.00375
 (0.618) (0.434) (0.162)
Constant -3.215** -10.98*** -0.0192***
 (0.021) (0.001) (0.000)

Observations 132 132 565
Adjusted R-squared 0.634 0.830 0.880

† Note: The p-values are reported in parenthesis.
*** p-value<0.01, ** p-value<0.05, * p-value<0.1.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-7 -

Table 4: Mexico's econometric estimation results on cattle's price basis†
 350 lb.
feeder
cattle's
price basis
550 lb.
feeder
cattle's
price basis
Lagged dependent variable 0.210*** 0.147***
 (0.000) (0.004)
Original COOL measure -0.0970*** -0.0917***
 (0.000) (0.000)
Amended COOL measure (2
November 2013)
-0.0246** 0.00848
 (0.041) (0.447)
Change in diesel retail price -0.00247 -0.0383
 (0.971) (0.574)
Change in unemployment rate
difference
-0.0177 0.0239
 (0.436) (0.269)
US recession -0.0215* -0.0119
 (0.068) (0.325)
Change in corn near term
futures price
0.0134 0.00988
 (0.520) (0.611)
Change in export volumes of
Canadian feeder cattle
-0.00133 0.000549
 (0.146) (0.537)
Change in drought areas in
Texas
3.94e-07 6.49e-07
 (0.839) (0.727)
February 0.0362 0.0144
 (0.123) (0.519)
March 0.0488** 0.0204
 (0.037) (0.358)
April 0.0580** 0.0255
 (0.014) (0.256)
May 0.0750*** 0.0345
 (0.002) (0.125)
June 0.0739*** 0.0340
 (0.002) (0.129)
July 0.0627*** 0.0272
 (0.009) (0.228)
August 0.0268 0.0531**
 (0.254) (0.018)
September 0.0578** 0.0761***
 (0.015) (0.001)
October 0.0787*** 0.0797***
 (0.001) (0.001)
November 0.0710*** 0.0733***
 (0.002) (0.001)
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-8 -

 350 lb.
feeder
cattle's
price basis
550 lb.
feeder
cattle's
price basis
December 0.00667 0.0131
 (0.781) (0.566)
Constant -0.0701*** -0.100***
 (0.001) (0.000)

Observations 421 416
Adjusted R-squared 0.449 0.377

†Note: The p-values are reported in parenthesis.
*** p-value<0.01, ** p-value<0.05, * p-value<0.1.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-9 -
ANNEX C-2
EXPORT SUPPLY ELASTICITY CALCULATIONS24
Table 5: Computation of Canada's export supply elasticities of feeder cattle
Definition of
export share
Export
share
Demand
elasticity
Supply
elasticity
Export supply
elasticity25
export cattle fed andFeeder cattle laughteredS
export cattleFeeder
 
26 0.15 -0.14 0.22 2.33
export cattleFeeder cattle laughteredS
export cattleFeeder
 
27 0.14 -0.14 0.22 2.49
production crop Calf
export cattle fed andFeeder

28 0.19 -0.14 0.22 1.71
Average 2.18

24 For each definition of export share submitted by the parties, the computation uses the data and corresponding baseline period provided by each party in
connection with its definition of the export share.
25 The export supply elasticity is computed as [(εs - η ( 1- ω)]/ ω, where εs is the supply elasticity in the domestic market of livestock, η is the demand elasticity
in the domestic market of livestock, and ω is the export share of livestock in the domestic supply.
26 See Canada's response to Arbitrator question No. 31, paras. 91-94. Data taken from Exhibit CAN-63. Baseline period's export share: July 2014-June 2015.
27 See United States' response to Arbitrator question No. 46, para. 87. Data taken from United States' response to Arbitrator question No. 46, para. 87 and
Exhibit USA-3. Baseline period's export share: January 2014-December 2014.
28 See United States' response to Arbitrator question No. 31, para. 121. Data taken from Exhibit USA-51. Baseline period's export share: January 2014-December
2014.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-10 -
Table 6: Computation of Canada's export supply elasticities of fed cattle
Definition of
export share
Export
share
Demand
elasticity
Supply
elasticity
Export supply
elasticity29
export cattle fed andFeeder cattle laughteredS
export cattle Fed
 
30 0.10 -0.40 0.26 6.50
export cattle Fed cattle laughteredS
export cattle Fed
 
31 0.12 -0.40 0.26 5.30
 production crop Calf
export cattle fed andFeeder 32 0.19 -0.40 0.26 3.00
Average 4.93
Table 7: Computation of Canada's export supply elasticities of feeder pigs
Definition of
export share
Export
share
Demand
elasticity
Supply
elasticity
Export supply
elasticity33
export hogs fed and pigsFeeder hogs laughteredS
export pigsFeeder
 
34 0.16 -0.32 0.64 5.56
export pigsFeeder hogs laughteredS
export pigsFeeder
 
35 0.17 -0.32 0.64 5.38
production crop Pig
export hogs fed and pigsFeeder 36 0.18 -0.32 0.64 5.01
Average 5.32

29 The export supply elasticity is computed as [(εs - η ( 1- ω)]/ ω, where εs is the supply elasticity in the domestic market of livestock, η is the demand elasticity
in the domestic market of livestock, and ω is the export share of livestock in the domestic supply.
30 See Canada's response to Arbitrator question No. 31, paras. 91-94. Data taken from Exhibit CAN-63. Baseline period's export share: July 2014-June 2015.
31 See United States' response to Arbitrator question No. 46, para. 87. Data taken from United States' response to Arbitrator question No. 46, para. 87 and
Exhibit USA-3. Baseline period's export share: January 2014-December 2014.
32 See United States' response to Arbitrator question No. 31, para. 121. Data taken from Exhibit USA-51. Baseline period's export share: January 2014-
December 2014.
33 The export supply elasticity is computed as [(εs - η ( 1- ω)]/ ω, where εs is the supply elasticity in the domestic market of livestock, η is the demand elasticity
in the domestic market of livestock, and ω is the export share of livestock in the domestic supply.
34 See Canada's response to Arbitrator question No. 31, paras. 95-97. Data taken from Exhibit CAN-63. Baseline period's export share: July 2014-June 2015.
35 See United States' response to Arbitrator question No. 46, para. 87. Data taken from Exhibit USA-3 and Exhibit CAN-67. Baseline period's export share:
January 2014-December 2014.
36 See United States' response to Arbitrator question No. 31, para. 121. Data taken from Exhibit USA-51. Baseline period's export share: January 2014-December
2014.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-11 -

Table 8: Computation of Canada's export supply elasticities of fed hogs
Definition of
export share
Export
share
Demand
elasticity
Supply
elasticity
Export supply
elasticity37
export hogs fed and pigsFeeder hogs laughteredS
export hogs Fed
 
38 0.021 -0.51 0.41 40.40
export hogs Fed hogs laughteredS
export hogs Fed
 
39 0.036 -0.51 0.41 24.91
production crop Pig
export hogs fed and pigsFeeder 40 0.180 -0.51 0.41 4.62
Average 23.31

37 The export supply elasticity is computed as [(εs - η ( 1- ω)]/ ω, where εs is the supply elasticity in the domestic market of livestock, η is the demand elasticity
in the domestic market of livestock, and ω is the export share of livestock in the domestic supply.
38 See Canada's response to Arbitrator question No. 31, paras. 95-97. Data taken from Exhibit CAN-63. Baseline period's export share: July 2014-June 2015.
39 See United States' response to Arbitrator question No. 46, para. 87. Data taken from Exhibit USA-3 and Exhibit CAN-67. Baseline period's export share:
January 2014-December 2014.
40 See United States' response to Arbitrator question No. 31, para. 121. Data taken from Exhibit USA-51. Baseline period's export share: January 2014-December
2014.
WT/DS384/ARB/Add.1 • WT/DS386/ARB/Add.1

- C-12 -

Table 9: Computation of Mexico's export supply elasticities of feeder cattle
Definition of
export share
Export
share
Demand
elasticity
Supply
elasticity
Export supply
elasticity41
crop beef Eligible
export cattleFeeder 42 0.75 -0.14 0.22 0.34
crop beef Total
export cattleFeeder 43 0.23 -0.14 0.22 1.41
export crop beef Eligible
export cattleFeeder 44 1.00 -0.14 0.22 0.22
)production ( crop Calf
export cattleFeeder 45 0.17 -0.14 0.22 2.04
population cattle Total
export cattleFeeder 46 0.04 -0.14 0.22 8.56
Average 2.52