The United States said on Friday it would appeal a World Trade Organization ruling against a law requiring country-of-origin labels on all meat sold in grocery stores, a move that disappointed Canada and Mexico, both of which want the law changed.

The meat labels became mandatory in March 2009 after years of debate. U.S. consumer and mainline farm groups supported the requirement, saying consumers should have information to distinguish between U.S. and foreign products.

Big meat processors opposed the provision, which they said would unnecessarily boost costs and disrupt trade.

A WTO panel ruled in November that the country-of-origin labeling, or COOL, provision violated WTO rules on technical barriers to trade. The case was brought by Canada and Mexico, which have sizeable cattle and hog trade with the United States.

Andrea Mead, a spokeswoman for the U.S. Trade Representative's office, said the November ruling confirmed the United States has the right to adopt mandatory COOL requirements to help consumers make informed purchasing decisions.

But we were disappointed that the panel disagreed with the way that the United States designed its COOL requirements with regard to beef and pork. Accordingly, we are challenging the panel's report before the WTO Appellate Body, she said.

In their complaint, Canada and Mexico said cattle and hog shipments to the United States declined sharply after the law took effect. They said the U.S. rules were too stringent and put their livestock at a disadvantage.

The WTO panel decision recognized the integrated nature of the North American supply chain and marked a clear win for our industry, Canadian Agriculture Minister Gerry Ritz said in a statement expressing disappointment with the U.S. appeal.

We are confident that the decision will be upheld so trade can move more freely, benefiting producers and processors on both sides of the border, Ritz said.

Mexico's economy ministry said in a statement late Friday that it would defend its interest in the appeal process.

U.S. consumer group Food & Water Watch welcomed the appeal.

We are heartened that the Obama administration has finally stood up against the meat industry's attack on common-sense rules that let people get vital information about what they are eating, the group's executive director, Wenonah Hauter, said in a statement.

The move allows President Barack Obama's administration to delay the politically difficult task of trying to change the law during a U.S. election year in the hope of obtaining a more favorable outcome in the second round of litigation.

The U.S. labeling law requires grocers to put labels on cuts of beef, pork, lamb, chicken and ground meat or post signs that list the origin of the meat.

Labeling also is required for seafood, fruits, vegetables and ginseng as well as peanuts, pecans and macadamia nuts, but the WTO ruling only covered meat trade.

To be listed as U.S. origin, meat must come from animals born, raised and slaughtered in the United States. Meat from livestock raised in Mexico or Canada for slaughter in the United States must be labeled as a product of mixed origin.

Changing the law would most affect packing plants that were once big buyers of Canadian animals including those owned by JBS, Tyson Foods, Cargill Inc., Hormel Foods, and Smithfield Foods, Canadian farm industry officials have said.

Many U.S. meat-packing plants, especially those near the U.S.-Canada border, either stopped accepting Canadian livestock or bought less due to the increased costs of segregating animals by domestic and foreign origin.

If the country of origin (law) wasn't there, I believe the competition would be quite stiff among the killing plants in the U.S. for Canadian livestock, said Martin Unrau, a Manitoba rancher and president of the Canadian Cattlemen's Association. Some of the plants won't kill Canadian cattle because they just don't want to be bothered with it.

(Reporting By Doug Palmer; Editing by Vicki Allen and Stacey Joyce)

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