Where’s the Beef (Going)? The U.S. is effectively denying market access for Alberta’s beef
Despite two rulings in Canada’s favour at the World Trade Organization
by Michael Ganley
In the rolling grasslands outside Lethbridge, the Kasko family has built a thriving business. In industry terms, Kasko Cattle is a “cattle feeder,” a middleman of sorts that buys cows from ranchers, fattens them up and ships them to the slaughterhouse. With four sprawling feedlots and the ability to handle 44,000 cows at a time, Kasko Cattle is one of the biggest operations of its kind in the country.
Ryan Kasko is the second-generation CEO of Kasko Cattle, and says that seven years ago he sold 95 per cent of his cattle to the U.S. The Montana border is just an hour south of Lethbridge and the market is huge. But Kasko says that figure has plunged to just five per cent of late, thanks to U.S. regulations that require all beef and pork sold to be labelled by country of origin. That labelling must include where cows or pigs were born, where they were raised and where they were slaughtered. Supporters of the regulations say consumers have the right to know where their food comes from. But with no evidence that Canadian beef is any less safe than American, the labelling requirements have, opponents argued, placed an unnecessary burden on the industry. Meanwhile, many American ranchers quietly like the protectionist effects of the regulations. “They saw our shiny cattle liners bringing cattle down into their packing plants and they didn’t like that,” Kasko says.
The regulations have certainly hurt his, and many other, businesses. For years Kasko Cattle has shipped live cattle into Washington State, Utah, Colorado, Nebraska and more. But since the country of origin labelling policy went into effect, many of the packing plants have decided not to take any Canadian cattle, or to take them only on specific days of the week, which allows them to be more easily sorted. “That makes it really difficult for us,” Kasko says. “The trucking industry is used to doing two or three loads a week. To try and get all these trucks going on one day while the rest of the week they have nothing to do has been a challenge.”
The labelling regulations have led to a huge spread between Canadian and U.S. beef prices (ironically, at a time when prices are strong by historic standards). Kasko says the spread is similar to that seen at the height of the BSE crisis in 2003. “It’s absolutely ridiculous,” he says. “Normally we’d be eight or 10 cents a pound less than the U.S. [beef], and that spread was largely made up of the freight to ship our product down there. Now it’s 20 to 25 cents a pound less. That equates to maybe $350 less a head [of cattle].” The Alberta Beef Producers and the Canadian Cattlemen’s Association have been lobbying against the regulations and are fighting them in court. The groups estimate the annual cost to Canadian producers is $639 million. “It’s a big deal,” says Greg Bowie, chair of the Alberta Beef Producers. “It’s cost our industry a huge amount.”
Canada and the U.S. have argued the legality of the regulations twice before the World Trade Organization – first in 2011 and then, on appeal, in June 2012. Canada won both times. The appellate panel gave the Americans until May 2013 to get onside. The U.S. announced changes they had decided to make, but provincial Minister of Agriculture Verlyn Olson says they’ve only made matters worse by adding further requirements to the labelling process. So Canada went back to the WTO in mid-February to get a ruling on whether the U.S. had complied with the June directive. Olson says he expects an interim ruling in June and a final one by September. “The expectation is that the U.S. will be told, ‘You have not complied,’ ” he says.
The problem comes down to internal U.S. politics. R-CALF, a powerful lobby group for American ranchers, has loudly argued in favour of the regulations, saying that not only do farmers like the rules, but so do consumers. And it doesn’t help that the regulations are buried within the massive U.S. Farm Bill, an omnibus bill that covers everything from food stamp programs to agricultural subsidies. It is passed every five years or so, most recently this past February. Leading up to that vote, the federal and provincial governments lobbied for the regulations to be dropped, or at least brought in line with a ruling from the WTO. Olson was part of that effort. “The House of Representatives is dominated by Republicans and we had lots of allies there,” he says. “The issue seemed to be the Senate Democrats. We were making some headway there but, at the end of the day, it sounds like the Republicans couldn’t afford another failure in terms of getting something done. If you think back to the gridlock they had on the budget, this Farm Bill needed to get passed.”
And, he says, the country-of-origin labelling was not a big enough issue to sideline passage of the bill. “There were probably about 30 issues in the Farm Bill,” Olson says, “and one of the staffers in a senator’s office said our issue is probably number 30.”
The Canadian cattle industry has seen declining production for years, due not only to the BSE crisis and U.S. protectionism, but also because the general public is eating less meat.
Canadian producers do have some allies in the U.S., in part because the U.S. is producing fewer cattle than it has in years, and many packing plants are struggling to keep busy. The National Cattlemen’s Beef Association in the U.S., together with a coalition of other industry groups, is challenging the regulations in the U.S. courts on the basis that they constitute unfair trade discrimination and hurt both the U.S. meat processing industry and Canadian producers. The case has been joined by the Canadian Cattlemen’s Association. But while changes to the Farm Act would have provided an immediate solution, “Going through the WTO and the courts is very long term,” says Bowie.
Assuming the U.S. does not fall in line with the WTO ruling, Canada will be free to take retaliatory measures. Federal agriculture minister Gerry Ritz has already given the Americans the list of proposed measures, which target specific items from states that have shown support for the country-of-origin labelling, things like wine from California and furniture from the midwest states. “We’ve been trying to be a good neighbour and reason and advocate,” says Olson, “but at the end of the day, if we have to retaliate, we will.”