Canada’s position as a major agricultural exporter could be seriously
undermined if country-of-origin labelling becomes mandatory in the
United States.
Written into the 2002 U.S. farm bill, the voluntary labelling
guidelines are the framework for mandatory regulations due in September
2004.
Agriculture Canada and affected groups are developing a response, but
it is not known how seriously the U.S. might take a foreign country’s
comments on American law, said trade analyst Alan Schlachter.
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“The United States is not trade dependent and is more influenced by
domestic policy,” Schlachter said.
“Part of our challenge is to be heard, but that is not always the most
effective method. It is more effective if U.S. producers make the
argument in terms of us being their clients.”
The legislation surprised many, even in the U.S. where it was opposed
by groups such as the American Meat Institute, National Cattlemen’s
Beef Association and individual processors.
Country-of-origin labelling is required for beef, pork, lamb, fish,
shellfish, vegetables, fruit and peanuts. The greatest onus is on the
retail sector to ensure all packages provide clear and complete
labelling.
The Canadian livestock industry fears the law could deeply discount
Canadian cattle and hogs, or even stall livestock movement, because the
costs of labelling would make foreign meat less attractive.
Value adding provides some protection, because processed products are
already labelled.
Schlachter said the new national agricultural policy framework
encourages value adding as a way to promote building a Canadian brand
of quality. Canada has not considered developing its own label.
Chicken and small retailers with annual sales under $230,000 are
excluded. Such inconsistency may be grounds for a challenge under the
World Trade Organization or the North American Free Trade Agreement.
“The legislation per se is flawed,” Schlachter said. “It has a lot of
holes that do not make sense.”
He said Canada may have a case before NAFTA if it proves labelling
impedes trade because of excess costs. Commodity groups argue the issue
has more to do with politics and has nothing to do with food safety or
improved quality for consumers.
Neil Jahnke, president of the Canadian Cattlemen’s Association, blames
the legislation on a few states and small lobby groups.
“It started in the northern tier states and they thought it was going
to end all their problems with low prices,” he said.
Martin Rice of the Canadian Pork Council agrees.
“They saw it as a burden on the imports. They didn’t anticipate
something that was going to create a lot of paperwork and compliance
costs for everybody.”
Cost is the major threat for red meat exports.
Mandatory labelling demands that animals be segregated from those born,
raised and slaughtered in the U.S. CCA executive vice-president Dennis
Laycraft said this might cost up to $30 per head.
Canadian product is already sold below the American price and with the
added cost of segregation, the final discount could be about $100 per
head.
Kevin Grier, market analyst with the George Morris Centre in Guelph,
Ont., said recently that country-of-origin labelling could cost the
Canadian red meat industry $1-$2 billion.
The beef industry is already seeking American allies, such as the
cattlemen’s association and processors who oppose labelling.
“There are packers in the U.S. that would probably close their doors
because they rely on Canadian beef to such an extent, especially
packing houses in the northwest,” Jahnke said.
Another challenge is the onerous requirement for ground meat.
Labels must list meat origin in descending order by weight. Since
ground beef is often a blended product containing trimmings from many
sources, the label could state the origin as being from the U.S.,
Canada, Australia and New Zealand. Consumers might be leery of buying
ground beef if they see a detailed list of countries on a single
package.
The Canadian industry has decided to move more beef to other markets,
such as Mexico and Asia, as well as the food service, where no labels
are required.
The law also casts a shadow over programs such as the restricted feeder
program. The calves are American born, Canadian fed and may be
processed in the U.S. or Canada.
“They become cattle without a home,” Jahnke said.
The new record-keeping requirement to prove meat is a U.S. product will
be a challenge for American producers. Records must be saved for two
years and must trace an animal’s movement from birth to plate. That
could mean a national identification program previously rejected by
U.S. beef producers.
Other groups argue record keeping and animal segregation is not a
problem.
R-Calf, the United Stockgrowers of America, said in a written
submission to the U.S. Department of Agriculture that Canadian Cattle
Identification Agency tags would adequately identify animals as they
move through the processing system.
The Canadian pork industry could suffer even greater losses.
Canada shipped almost 400,000 tonnes of pork and more than five million
live hogs to the U.S. in 2001. Stu Irvine, CEO of Mitchell’s Gourmet
Foods in Saskatoon, said loss of this trade could be disastrous to hog
producers.
“There will be four to five million extra hogs in Canada that will not
have a market. They will have to go to the Canadian processors, who at
the moment have sufficient number of hogs,” Irvine said. “This thing
could be a wreck for the Canadian hog industry.”
His company has started selling more processed meat outside the U.S.
and is developing a strong food service customer list.
The legislation has no food safety justification and could result in
more problems than it was intended to solve for American red meat
producers, meat industry producers said.
“It’s bad news for the entire North American meat complex because there
are going to be record-keeping requirements, auditing and databases
developed, even if there is not a single piece of foreign meat coming
in,” Rice said.
“It’s going to add to the cost of marketing meat period, no matter
where it comes from.”
He is also concerned it could set a precedent for more extensive
labelling for such things as feed programs, animal husbandry, welfare
conditions and genetic modification.
Until now, the issue bypassed the pork industry because of strong
lobbying efforts from the National Pork Producers Council.
“They see this is going to add a lot of cost that pork producers are
going to get stuck with,” Rice said.
The law also strikes a blow against a staggering sheep industry.
Canadian lamb and mutton exports for 2001 totaled 355 tonnes, but the
U.S. is a major market for heavy lambs, said Fred Baker of the Sheep
Federation of Canada. He fears American packers could refuse them.
Meat exports are much lower because Canada does not have enough
federally inspected lamb plants to produce branded lamb.
“If the country-of-origin goes ahead, that’s what we will have to work
on,” he said.
“It is obviously predatory and that is not what free trade was all
about,” said Chris Kyte of the Canadian Food Processors Association.
” ‘Buy American’ is quite a strong proposition in the U.S., but I have
been told by marketers that consumers are really only concerned about
price,” he said.
“I don’t think putting three countries of origin on the front of the
package in bold letters adds to the attraction.”
