The Future of Animal Agriculture in North America - Farm Foundation

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provide guidelines for animal health and food safety that are accepted by most trading countries. Their role as reference bodies in international trade is increasing as disease outbreaks arise. World Trade Organization The 150-member WTO was created in 1995 as a result of the Uruguay Round of the General Agreement on Tariffs and Trade (UR-GATT). The goal of the WTO is to help producers and exporters conduct business. Specific functions are to administer WTO trade agreements; serve as a forum for trade negotiations; handle trade disputes; monitor national trade policies; and provide technical assistance and training for developing countries. The dispute resolution process is the WTO’s key mechanism to enforce international rules, including market access, the Sanitary and Phytosanitary Standards (SPS) agreement, and domestic agricultural policy disciplines. This process allows one country to submit a petition against the policies or other actions of another country alleged to be breaking the rules. The most prominent example involving animal products is the case that the United States and Canada filed against the EU for not allowing imports of beef from animals treated with synthetic growth hormones. The United States and Canada contend the EU decision to prohibit hormone-treated beef imports violated the SPS agreement because scientific evidence indicated no measurable risk to consumers. The EU contended it was using the precautionary principle, that no science could show that risk to consumers was zero. The WTO upheld the argument of the United States and Canada. However, instead of allowing imports of hormone-treated beef, the EU opted to allow the United States and Canada to impose punitive tariffs on certain EU imports. While the resolution is allowable under the WTO, many U.S. and Canadian beef exporters believe the process did not result in a satisfactory outcome. Following the discovery of two cases of BSE in the United States in 2003 and 2004, U.S. beef was banned in most world markets. The United States regained access to some markets later that year, including Canada and Mexico, with Mexico now becoming the largest export market for U.S. beef. Access to the Japanese market was granted in December 2005, but U.S. beef was banned again less than a month later due to a violation of the terms of the agreement by a U.S. company. Access to the Korean beef market is pending. At issue in Japan is the age at which cattle might contract BSE. It is generally accepted in the scientific community that it is highly unlikely bovine under 30 months of age could manifest the disease. Japan contends cases have occurred in cattle under 30 months of age and imposed a 20-month age limit on cattle from which beef is exported to Japan. The 2005 OIE guidelines state that boneless beef cuts from animals under 30 months old have a low risk of BSE. While the U.S. government would prefer to resolve this issue Global Competitiveness and Trade 63 bilaterally, a petition to the WTO could be a possibility if the issue remains unresolved. A successful outcome of the current WTO negotiations in Doha is important to trade in animals and meats. FAO estimates that if trade liberalization were fully implemented under the WTO agreement, the EU would shift from being an exporter to an importer of beef, increasing imports 165 percent. That might not lead to more imports from the United States or Canada; however, it would result in more export opportunities in other countries as EU exports declined. FAO estimates also indicate increases in U.S. prices of 8 percent for beef, 10 percent for lamb, 3 percent for pork and 6 percent for poultry. FAO estimates that with trade liberalization U.S. exports of beef may increase 18 percent, sheep meat 27 percent, pork 25 percent and poultry 20 percent. While these estimates are modest when viewed on the basis of annual increases over 10 or 15 years, they are significant in terms of additional market potential over the long term. SPS Agreement The SPS agreement of the Uruguay Round is designed to protect human, animal and plant health and to ensure that SPS regulations are not used to unduly restrict trade. SPS restrictions must be supported by scientific risk assessment. The SPS agreement also allows countries to establish disease- or pest-free zones from which to export, should an outbreak occur in another part of the country. It is the responsibility of the exporting country to establish the zone and to ensure that it is free and likely to remain free before regional pest- or diseasefree status is granted by an importer. It is on this basis that the United States has granted Uruguay access to the U.S. market for fresh beef. OIE Created in 1924, the 167-member OIE—now known as the World Organization for Animal Health—promotes international cooperation to control the spread of transboundary animal diseases (Otte et al., 2004). OIE objectives include: • transparency in animal disease and zoonosis; • collect, analyze and disseminate scientific veterinary information; • provide expertise and international solidarity in animal disease control; • safeguard world trade by publishing animal and animal product health standards; • improve the legal framework and resources for veterinary services; and
64 • provide better guarantee of safety and animal welfare through science. OIE sets international standards, but does not have the authority to enforce those standards. Compliance with OIE is voluntary and often results in sporadic reporting of disease incidence. As a result, bilateral agreements and protocols are often used to ensure importing countries of the integrity and safety of food shipments. Codex Alimentarius Commission Codex was created by the United Nations in 1963 to develop food standards, set guidelines and write codes of practice for the joint FAO/WHO Food Standards Program. Codex rules affect food products, food labeling, recommendations on pesticide residues, food additives and food contaminant levels, and codes on hygienic practice (Lupien, 2000). Codex has 171 member countries. Private-sector firms and nongovernmental organization participate as observers. Objectives of the Codex are to protect the health of consumers, ensure fair trade practices in food products and promote coordination of food standards. Measures consistent with principles established under Codex were adopted by the Uruguay Round. Codex standards are developed in an eight-stage process that relies on consensus among all members. There are no mechanisms for enforcing standards within Codex; reliance on voluntary compliance is needed to have a system with the integrity to support a sciencebased set of rules. Agreed-on standards are not always adopted by member countries. WTO relies on Codex as the primary institution to provide standards for food safety and quality. Codex will likely become more prominent in dispute settlement within the WTO. The relationship between Codex and the WTO, particularly the SPS agreement, may need to be clarified and refined to avoid duplication and ensure that Codex does not divert its attention from food safety. North American Free Trade Agreement NAFTA was implemented January 1, 1994, by the United States, Canada and Mexico. Even before NAFTA’s implementation, market integration within North American animal agriculture was increasing (Rosson and Adcock, 2005). NAFTA facilitated further integration across member countries, leading to increased trade and investment. SPS provisions of NAFTA mirror those of the WTO, relying on science-based trade restrictions and the use of regionalization guidelines to facilitate trade. NAFTA proceeded without major disruption until the discovery of BSE in Canada and the United States. The degree of market integration has since declined, as witnessed by a rather large and rapid expansion of cattle-processing capacity in Canada and the reduction of cattle exports to the U.S. market. Global Competitiveness and Trade These events call into question whether market integration in NAFTA countries has exceeded regulatory integration. The primary implication is that when animal disease outbreaks occur, governments tend to close international borders, regardless of the international standard that may apply. The NAFTA countries have agreed on a North American BSE Protocol to guide actions should another incidence occur. The new harmonized approach to BSE risk mitigation within NAFTA relies on a science-based framework. Objectives are normalization of trade in ruminants and ruminant products throughout North America and promotion of an international BSE strategy consistent with OIE guidelines. This integrated NAFTA approach has been presented to OIE to promote international harmonization of BSE risk mitigation measures. While this is an important step toward reliance on science rather than protection to facilitate animal trade, it is not clear it will set a precedent for other animals or animal product trade. As noted in several chapters of this report, there is a need to harmonize food safety/animal health regulations within NAFTA. Private-Sector Innovation and Implications About 75 percent of the growth potential for U.S. food industry expansion lies outside the United States. What is unclear is the role of private-sector investment and technological innovation in shaping consumption and trade trends in key markets. During the past 10 years, retail groceries in many developing countries in Latin America, the Middle East and Asia have adopted scanner and inventory control technology that required the previous 50 years to develop and implement in the United States, Canada, Europe and Japan. Just-in-time delivery is now a reality in parts of the world that only 20 years ago lacked in-home refrigeration and microwave ovens. As consumer incomes rise in the developing world, there is a rapid and significant increase in demand for processed foods, requiring less time to prepare and serve. Nearly 60 percent of processed food sales occur in retail stores. The retail grocery sector is becoming more concentrated in many countries, with the four-firm concentration ratios approaching 90 percent for ice cream in the Philippines and 30 percent for all packaged foods. Food companies are also expanding their geographic diversity. Kraft, Unilever and Nestle, for example, now each operate in more than 120 countries, offering foods in more than 20 categories (Regmi and Gehlhar, 2005). ConAgra, General Mills and Heinz operate in 20 to 50 countries, each offering 10 to 15 product lines. Product suppliers today must compete on the reliability and frequency of delivery, along with high standards and quality. Global meat markets are increasingly consumer driven, with safety, wholesomeness, quality and price among the most important attributes. Multinational food retailers have expanded in this global market, bringing efficiency and
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The Future of Animal Agriculture in
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Consumer Demand Working Group Helen
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Foreword Farm Foundation is a catal
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Executive Summary The Future of Ani
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Page 20: The Future of Animal Agriculture in
Page 23 and 24: 16 growth in the number of Canadian
Page 25 and 26: 18 Consumer Demand The demand for m
Page 27 and 28: 20 Nutrient loading on farmland fro
Page 30 and 31: Chapter 2 Economics of Production,
Page 32 and 33: Economics of Production, Processing
Page 38 and 39: The Future Economics of Production,
Page 44 and 45: References Economics of Production,
Page 46 and 47: Chapter 3 Consumer Demand Issues Co
Page 48 and 49: The consumer food demand pyramid, i
Page 50 and 51: devote less time and effort to food
Page 52 and 53: dollar. Many of the retail environm
Page 54 and 55: economies will increase demand for
Page 56 and 57: Information Needs Long term, how wi
Page 58 and 59: Table 1. 2005 Population and Recent
Page 60 and 61: Figure 3. U.S. Meat Consumption Pou
Page 62 and 63: Consumer Demand Issues 55 Figure 7.
Page 64 and 65: Chapter 4 Global Competitiveness an
Page 66 and 67: tariff-rate quota (TRQ) in place on
Page 68 and 69: 2004 EU enlargement is expected to
Page 72 and 73: affordable foods to many developing
Page 74 and 75: With NAFTA, and indeed before, seve
Page 76 and 77: competitors. Economic logic, howeve
Page 78 and 79: Global Competitiveness and Trade 71
Page 80 and 81: Figure 4. World Beef Consumption So
Page 82 and 83: Figure 8. World Poultry Meat Produc
Page 84 and 85: Figure 12. Major Dairy Exporters So
Page 86: Global Competitiveness and Trade 79
Page 89 and 90: 82 and medical professions. This in
Page 91 and 92: 84 produced under specific contract
Page 93 and 94: 86 establishing food safety system
Page 95 and 96: 88 In the United States, FDA, under
Page 97 and 98: 90 Policy Options and Implications
Page 99 and 100: 92 A national structure coordinated
Page 101 and 102: 94 Food Safety and Animal Health Pr
Page 104 and 105: Chapter 6 Environmental Issues The
Page 106 and 107: positive and negative externalities
Page 108 and 109: environmental damage. Climate, soil
Page 110 and 111: Managing or changing the components
Page 112 and 113: transportation access and costs; in
Page 114 and 115: could also be integrated air and wa
Page 116 and 117: and services. The success of the lo
Page 118 and 119: Environmental Issues 111 Metcalfe,
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Figure 2. Environmental Issues 113
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Chapter 7 Community and Labor Anima
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Slow economic growth in recent year
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informational hearing, at which com
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An aspect that should not be overlo
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States, FSIR would consider the no-
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• compensate parties harmed by an
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Community and Labor 127 Flora, C.B.
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Community and Labor 129 Senthilselv
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Community and Labor 131 Table 3. Un
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Chapter 8 Animal Welfare Animal agr
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In 2005, the Canadian Pork Council
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voluntary codes of practice are bei
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eak the rules; discipline is far mo
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In the final analysis, economic for
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References Animal Welfare 143 Agra
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Box 1. Animal Welfare Legislation i
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Animal Welfare 147 Box 3. Animal We
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Source: Agra CEAS Consulting Ltd. (
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Chapter 9 A Look to the Future Ther
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safety, animal welfare, process ass
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The Future of Animal Agriculture in North America - Farm Foundation

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