The Future of Animal Agriculture in North America - Farm Foundation

In the final analysis, economic forces—specifically whether
consumers will be willing to pay any additional costs and
domestic producers will still be able to make a profit—are likely
to be the major determinants of the success of initiatives to raise
animal welfare standards in North America.
Welfare Standards and Competition
If all producers are required to adhere to a particular standard,
they will all be on an equal basis in terms of competitive
position. As noted above, this does not mean their competitive
position will be unaffected. Product prices will tend to rise as
higher costs associated with the standards are passed through to
the market. If competing products are less affected, consumers
may switch their purchases to those products in response to a
change in relative prices. There is considerable potential for
substitution among animal products, so this could have an
impact on the market share of individual products and their
final prices. If products are exported, an increase in price will
lead to a deterioration of competitive position with respect to
suppliers in other countries who are not required to meet the
standard, i.e., supply non-conforming products.
Producers who operate under the higher standard and have
difficulty differentiating their product face particular risks from
non-conforming products. Domestic or foreign nonconforming
producers operating at lower costs and able to offer
lower product prices may increase their market share at the
expense of conforming producers. Domestically, the problem
can be solved by requiring that all producers meet the standard.
As discussed above, it may be possible to achieve this through
voluntary means, but, if not, a legislative approach will be
required. Addressing the issue when non-conforming supplies
originate from other countries is more complicated.
The body of law that governs international trade is the General
Agreement on Tariffs and Trade (GATT) and its associated
agreements. The responsibility for these agreements rests with
the World Trade Organization (WTO) in Geneva, Switzerland.
The WTO promotes free and fair trade, in the sense that all its
member countries are required to obey an agreed set of rules.
Two key principles that underlie these rules are equality of
treatment and non-discrimination. Countries should not be
able to discriminate among trading partners nor among
products that meet agreed international standards.
There are no specific provisions in the GATT that deal with
animal welfare, though two agreements are relevant to the issue.
The Agreement on Technical Barriers to Trade (TBT) deals
with the application of product standards in international trade.
The Sanitary and Phytosanitary Standards (SPS) agreement
deals with sanitary and phytosanitary measures that may
directly or indirectly affect international trade. It is limited to
the protection of animal health resulting from the entry,
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establishment or spread of pests, diseases or disease-causing
organisms. The agreement recognizes international standards for
animal health and zoonoses, the standards, guidelines and
recommendations developed under the auspices of the OIE.
Technical regulations cannot be applied that create unnecessary
barriers to international trade. WTO members are required to
ensure that in using technical regulations, imported products
are accorded treatment no less favorable than that for “like”
products of national origin. Legitimate justifications are the
protection of human health or safety, animal or plant life or
health, or the environment. Risk assessments must be
scientifically based. The agreement requires countries to use
international standards, where these exist, as the basis for
developing their own standards. As currently drafted, the TBT
does not cover animal welfare standards. However, in 2005,
OIE agreed on adoption of four international standards for
animal welfare. This could go some way to addressing concerns
over unfair competition from non-conforming products, but it
is unlikely that international standards will be able to satisfy the
requirements of all countries.
It seems likely that animal welfare standards will become an
increasingly important issue in international trade, not only for
governments but also for companies operating in global
markets. A key issue for North American producers is whether
to take a proactive or reactive approach to the development
of standards.
Conclusions and Options for the Future
The majority of the general public in North America has little
direct contact with agriculture. In Canada and the United
States, less than 3 percent of the working population is
employed on farms. Even in Mexico, where roughly 17 percent
of the labor force is employed in agriculture, the share of the
population on farms is declining steadily. As a result, most
consumers of meat and animal products are increasingly
removed from how animals are raised. Nevertheless, the wellbeing
of farm animals is becoming an important issue for the
animal industries in North America.
A range of concerns are expressed about how animals are raised,
transported, handled and slaughtered. Many of these concerns
are associated with methods that have increased productivity in
the animal production industries and reduced costs to
consumers. Innovations, such as the use of confinement, have a
mixed effect on animal well-being. Potential positive effects,
such as reduced mortality from disease, predators and the
effects of weather, must be balanced against potential negative
effects. While animal welfare issues may create the potential for
some producers to adopt less intensive systems, such as that
reflected by free-range eggs, and to sell at a price premium in
niche markets that covers the additional costs, this is unlikely to