U.S. report favours harmonization in meat sector

Beyond the Border agreement | The report recommends a single regulatory system for inspections, grading and food safety

RED DEER — Canada and the United States have been urged to harmonize their food safety and meat grading standards to fully integrate the red meat industries.

A report from the Fraser Institute makes the case for a standardized beef and pork market in its analysis of the damage created by country-of-origin labelling in the United States.

“We recommend a single national regulatory regime, including all the provisions on animal health and food safety and meat quality, should be negotiated between the two countries,” said economist Alexander Moens, one of the report’s authors.

The full report will be released later this spring.

Federal agriculture minister Gerry Ritz said efforts to harmonize are already underway.

“We started working in agriculture on some of the other issues like pesticides, chemicals and veterinary drugs, but we are taking it more further to harmonize the beef industry,” he said.

“For all intents and purposes for the beef industry, the border doesn’t exist. There is a free flow of cattle back and forth.”

This is part of the Beyond the Border agreement first announced by U.S. president Barack Obama and prime minister Stephen Harper last December to harmonize regulations, inspections and other trade issues between the two countries.

The agreement did not include Mexico because it does not have the same equivalency for grades and inspections. It could make the same request for harmonization once it rises to the same level.

“It wouldn’t violate NAFTA if we started earlier as long as we had the proviso that Mexico could join when it meets the standards,” Moens said.

“The top decision makers have to say this is like the auto industry. It is a joint industry. We make cars together.”

However, he acknowledged that politics can interfere with business.

He said Canadians are more in favour of integration, while the White House seems to listen to protectionist farm lobby groups when implementing laws such as COOL.

“We find quite often in the U.S., narrow based interest groups outperform broad based groups,” he said.

When mandatory COOL was first proposed in the 2002 U.S. farm bill, American farm lobby groups that supported the law spent $17.5 million while its opponents spent less than $6 million.

“The small, but highly effective, vocal R-CALF lobby in the U.S. was in that group,” he said.

R-CALF spent slightly less than $1 million on lobbying during this period. Groups opposing COOL later spent more, but it was a catch up effort that came too late.

Not all the lobbying money was spent on COOL, but Moens said the budgets showed how these groups can influence policy makers.

The World Trade Organization has ruled that the law violates international agreements, but the battle is not over for Canada and Mexico.

“American narrow special interest groups will look for a third opportunity to whack the Canadian product a little lower yet,” he said.

“That victory is far from over and it probably is never over. We still have a long way to go.”

The report said COOL had a greater impact than the BSE trade embargo.

Canadian live exports declined 23 percent when the U.S. closed its borders because of BSE.

The research showed a 23.5 percent decline from COOL.

“There appears to be a correlation between price depression and the implementation of COOL in 2008 on Canadian livestock exports to the U.S.A.,” he said.

Live markets have rebounded to record levels in 2011 but would have been greater without COOL.

Moens said this bill was the first of its kind in the world.

Country-of-origin labelling is usually done to increase product value, he added, but the American law added only costs.

Sorting cattle and hogs was expensive for processors, increasing the costs of imported cattle by an estimated $45 to $59 per head while the cost for handling U.S. cattle was just an extra $1.50 per head.

The cost of sorting Canadian hogs increased by $6.90 to $8.50 per head while the cost for American owned pigs was 25 cents per head.

The costs created a strong incentive for processors to buy only American product rather than pay for extra segregation, paperwork and labels.

The study also found little support for the law among Americans. Surveys indicate that consumers rank freshness, food safety, leanness, quality, tenderness, colour and nutritional value higher than origin.

“Maybe this is why American retailers and suppliers were not doing this on a voluntary basis because there is not much money in it,” Moens said.

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