WASHINGTON – Both sides in a debate over meat labeling have begun pressing their cases over a World Trade Organization decision against labels that specify where animals are born, raised and slaughtered.

The WTO said that new U.S. rules requiring those specifics on meat packages would put Mexican and Canadian livestock producers at an unfair disadvantage.

Now, the U.S. must decide how to react.

The labeling issue has ignited a huge legal and regulatory battle pitting American consumer and farm groups against the meat industry and foreign livestock producers who fear that a “buy American” movement will cut their U.S. sales.

The American Meat Institute, which includes Minnesota-based Cargill and Hormel, has sued the government to stop the new labeling measures. It welcomed the WTO report on the U.S. Department of Agriculture’s so-called COOL — country of origin labeling — rules.

“USDA’s mandatory COOL rule is not only onerous and burdensome on livestock producers and meatpackers and processors, it does not bring the U.S. into compliance with its WTO obligations,” the institute said in a statement. “By being out of compliance, the U.S. is subject to retaliation from Canada and Mexico that could cost the U.S. economy billions of dollars.”

Cargill wants the labeling rules changed.

“We have to ensure marketplace efficiencies the best ways we can -- including repealing COOL,” spokesman Mike Martin said in an e-mail statement. “The last thing we need in North America is a trade war, and unless this is addressed, it is where we may be headed. We are hopeful the three governments can work this out. It is costing all three countries, and there are no winners.”

Labeling supporters are also working to get their voices heard. In an editorial circulated to reporters Monday, Minnesota Farmers Union president Doug Peterson called for an appeal.

“The U.S. needs to appeal the WTO’s ruling in defense of rights of American citizens,” Peterson wrote. “And MFU looks forward to working with the USDA and other key stakeholders on a conclusion that is positive both for farmers and for consumers.”

Meanwhile, the chances of tariffs and other import restrictions for U.S. farmers and livestock producers who sell to Canada and Mexico remain real. The Canadian and Mexican governments have both threatened to slap supplemental charges on U.S. meat, wine, cheese and exports unless the U.S. reverses meat-labeling rules.

The WTO said Mexican and Canadian livestock producers face new requirements for segregating animals that U.S. producers do not. At issue is the cost in money and time of identifying cattle and pigs by their countries of birth, countries of raising and countries of slaughter. The record-keeping burden will be worse for foreign producers than for U.S. producers, making them discriminatory.

Large meatpackers like Cargill would like to have a single labeling standard that designates a more general identification such as “product of North America.”

Many U.S. consumer groups and farm organizations counter people deserve the right to “buy American.”

The U.S. Trade Representative expressed disappointment with the WTO report.

“While the WTO continues to affirm the right of the United States to require country of origin labeling for meat products, we are disappointed that the compliance panels have found that the country of origin labeling requirements for beef and pork continue to discriminate against Canadian and Mexican livestock exports,” the agency said in a statement. “We are considering all options, including appealing the panels’ reports.”

The government has 60 days to choose whether to appeal, but can also ask for an extension of that deadline.

Whatever happens with the WTO, the meatpacking industry lawsuit against the labeling rules remains unresolved. The meatpackers lost a federal appeals court decision that challenged the born, raised and slaughtered label as a constitutional violation of companies’ free speech.

Now, the meat institute and others in the industry are pursuing an appeals court hearing on their argument that the USDA lacks the authority to prohibit them from “commingling” livestock.