Bloomberg News

Canada Plans Meat-Trade Fight as U.S. Imposes Origin-Label Rule

May 23, 2013

Canada vowed to escalate a dispute with the U.S. over plans to impose stricter country-of-origin labeling rules for meat that are opposed by industry groups on both sides of the border.

The U.S. Department of Agriculture said yesterday it will tighten provisions that specify where animals are born, raised and slaughtered, even after the World Trade Organization backed complaints from Canada and Mexico that challenged the policy. Canada will examine all of its options, including appeals or retaliatory measures through the WTO, Agriculture Minister Gerry Ritz said.

“We have no intention of backing off or backing down,” Ritz said yesterday on a conference call with reporters. The government in Ottawa will do “everything within our power” to make sure the U.S. is aware Canadian and American industry groups oppose the labeling provision, he said.

Under U.S. law in force since 2009, food processors must identify the nations where cattle, hogs and some fresh produce originate. The legislation was introduced in response to the discovery of bovine spongiform encephalopathy, or mad cow disease, in a Canadian-bred animal in 2003. The government estimates the measure will cost meatpackers including Tyson Foods Inc. (TSN:US) as much as $192 million.

The labeling provision led many U.S. processors to stop buying animals born in Canada, which cost that nation’s livestock industry millions of dollars, according to Canadian farmer and rancher groups. Many are losing money, according to Gordon Cove, the chief executive officer of Alberta’s provincial Livestock and Meat Agency.

‘Negative Impact’

“It will have a negative impact on us,” Cove said during a telephone interview from Red Deer, Alberta. “It’s more restrictive. We’re just not being treated fairly.”

Canada and Mexico told the WTO the label program discriminated against their products.

“USDA remains confident that these changes will improve the overall operation of the program,” Agriculture Secretary Tom Vilsack said yesterday in a statement. The revised rule also will bring the labeling program “into compliance with U.S. international trade obligations,” he said.

Canadian livestock exports to the U.S. totaled $1 billion in 2012, up 26 percent from the previous year, Statistics Canada data show. Five years ago, exports totaled $1.6 billion.

The rule bans the mingling of meat cuts of commodities from different nations, according to the USDA regulation to be published in tomorrow’s Federal Register.

Regulatory Uncertainty

Meatpackers including Springdale, Arkansas-based Tyson, the biggest U.S. meat processor, Cargill Inc. and hog producer Smithfield Foods Inc. (SFD:US) will face regulatory uncertainty because of the decision, said Mark Dopp, general counsel for the American Meat Institute, a trade group based in Washington.

“It is incomprehensible that USDA would finalize a controversial rule that stands to harm American agriculture, when comments on the proposal made clear how deeply and negatively it will impact U.S. meat companies and livestock producers,” Dopp said in a conference call with reporters.

The rule, which “is more costly, complex and burdensome than the earlier version, when WTO and our trading partners have sent strong signals that this is no ‘fix,’ shows a reckless disregard for trade relations and for companies,” Dopp said.

Canada and Mexico said the label requirement imposed unjust costs on their exports. WTO judges agreed last year that beef and pork from Canada and Mexico were treated less favorably than the same U.S. products.

Press officials at Mexico’s agriculture ministry didn’t respond to e-mail messages and phone calls requesting comment.

The National Farmers Union, a U.S. group that has supported the labeling, in a statement welcomed the move to tighten rather than scrap the rule, an approach the Mexican and Canadian governments have criticized.

Union President Roger Johnson praised the “proactive approach” to comply with the WTO “by providing more information on the origins of our food, instead of simply watering down the process.”

To contact the reporters on this story: Alan Bjerga in Washington at abjerga@bloomberg.net; Jen Skerritt in Winnipeg at jskerritt1@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; Steve Stroth at sstroth@bloomberg.net


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