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WASHINGTON — Canada and Mexico have defeated the United States’ meat-labelling rules at the World Trade Organization, winning a final appeal that could pave the way to retaliatory sanctions.

The body upheld previous decisions that the U.S. has violated international trade law with a requirement that meat be labelled by the country where it was raised and slaughtered.

Canada and Mexico argued the requirement created costly overhead, and logistical problems for an integrated industry where livestock might cross the border multiple times.

The Canadian government argued that it was actually a protectionist measure, designed to discourage imports of foreign meat while doing nothing to benefit food safety.

It blamed the measure for a drastic decline in Canadian meat exports to the U.S. in recent years, and had repeatedly warned that it would retaliate if successful at the WTO.

That moment has arrived.

The U.S. is now left with two options, according to the Canadian government: Fix the law, or suffer punitive tariffs on a range of American goods.

“The United States has used and exhausted all possible means to avoid its international obligations,” said a statement from Canada’s agriculture and trade ministers, after the ruling was released Monday.

“In light of the final ruling…Canada will be seeking authority from the WTO to use retaliatory measures on U.S. agricultural and non-agricultural products.”

The Canadian government said it will now prepare an application to the WTO for punitive measures — a process that involves setting a dollar value on the retaliation, and identifying products subject to tariffs.

Canada has already identified a series of products that could be subject to a 100 per cent surtax. The products chosen were intended to single out states whose lawmakers have supported the meat-labelling requirements.

The list of products identified by Canada suggests a couple of main targets: California and Pennsylvania are at the top of the list.

Wine, frozen orange juice, chocolate, ketchup, pasta, cereals — stats show Canadians import hundreds of millions of some of those products from the U.S. each year, and California or Pennsylvania are key producers of almost every single one.

Michigan, Minnesota and Illinois also produce some of the goods on the hit-list.

The U.S. government said it hopes to find a solution before such talk escalates. It says it’s working with lawmakers in an attempt to find a legislative fix.

“We are considering all options going forward, and will continue to consult with members of Congress and interested members of the public regarding possible next steps,” said Tim Reif, chief counsel of the U.S. Trade Representative.

He said the ruling confirmed the U.S. view that the labels weren’t trade restrictive, but expressed disappointment that it upheld lower-level findings that current U.S. law discriminates against Canadian and Mexican livestock.

International Trade Minister Ed Fast has said in the past the legislation costs the Canadian pork and beef industries about $1 billion annually.

Alexander Panetta, The Canadian Press

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