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Will COOL Have a Negative Impact on Canada?

by 5m Editor
21 November 2008, at 9:32am

CANADA - US-based food companies are unsure about the impact that COOL (Country of Origin Labelling) will have on their operations, and some Canadian food industry pundits are responding with anxiety.

Rather than fear COOL, Canadian producers must look for the opportunities it holds forth, writes Sylvain Charlebois for the Financial Post.

This new regulation, which went into effect on October 1 received little press because of the recent Canadian and US elections. However, the main requirement is labels that identify the country of origin on certain foods, such as pork, beef, produce and nuts, when sold in retail establishments.

A primary concern for both countries is that US consumers - out of concern for their national economy and being safety-conscious, will opt against Canadian products. This month, the Canadian Cattlemen's Association and the Canadian Pork Council called on the federal government to challenge US laws under the North American Free Trade Agreement and World Trade Organization rules.

COOL is just one of the many hindrances Canadian producers have been facing lately. Since the BSE episode that started in May, 2003, the US government has implemented more and more restrictions in an effort to ensure food safety. The soaring Canadian dollar, which hovered for months near parity with the US dollar, and an increase of input costs have had lasting effects on producer confidence and international trade.

COOL represents a unique opportunity for producers and processors alike to reconsider options for the near future. Building processing capacity domestically is one obvious solution to counter the possibly deleterious effects of COOL. Maple Leaf's plant in Brandon, Man., just increased its production capacity to 80,000 hogs a week. But this is not a generally viable strategy because vertical integration to export value-added products exceeds the strategic scope of most producers. Another viable option for producers would be to continue to develop niche markets locally.

Recent changes to the economic environment may provide short-term benefits to Canadian agriculture. First, the weakening of the Canadian dollar versus the greenback may spur second thoughts on the US side. Since Americans can now buy Canadian-based products for less money, cheaper products for financially-struggling US consumers may become an attractive proposition for the US government.

Second, it will be interesting to see how the new US administration will deal with this issue. We all know president-elect Barack Obama challenged the ideological underpinnings of NAFTA during his campaign for the presidency. But as with every campaign, political agendas tend to shift once their advocators are elected. COOL is a protectionist apparatus, spurred by an administration known for engendering insecurity to reinforce security-based policies. A different approach from the Obama camp should be expected, but it is currently unclear how different that approach will be. The focus will likely be on moderate security entrenched in level-headed economic models. Fearing healthy Canuck cattle is anything but rational.

The conventional knowledge is that Republican administrations are less protectionist. Perhaps, but considering that we had to deal with softwood lumber, mad cow and many other disputes over the past eight years, Canadian food industries would be well advised to try something new. With an Obama administration, COOL's final implementation may be delayed, or even suspended indefinitely. The Harper government will likely wait before moving forward with a trade dispute. COOL may even be a blessing for Canadian agriculture, but we need to capitalize on the opportunity.