Tougher 'Made in Canada' Regs Kick In
by Jeff Davis
Published January 7 2009
As Canadians rang in the new year, the government rolled out a series of stringent new regulatory controls governing what can—and cannot—be labelled a product of Canada.
And while the government says the new rules aim simply to better protect and inform Canadian consumers, some see this as a protectionist move aimed to counteract similar country of origin labelling rules recently enacted in the United States.
Under the new regime, which came into effect Dec. 31, a food product can only be labelled "Product in Canada" if all or virtually all of its contents, as well as processing and labour, are Canadian. A few exceptions are permitted for minor ingredients such as spices, additives and vitamins, but foreign content is not to exceed two per cent.
The new regulations set the bar much higher than the previous law, which dated back to the 1980s. Under the old regime, a food product could be labelled "Made in Canada" if 51 per cent of its production costs were incurred in Canada.
"Our new guidelines are designed to redefine Canadian food content labels to better reflect the true origins of products in today's global marketplace," said Prime Minister Stephen Harper when announcing the new regulations in May. "Our government is tightening the definitions of these familiar labels so Canadians know exactly what they're getting, and get exactly what they want."
The new regulatory regime also changed the rules regarding products labelled "Made in Canada." Now, the made-in-Canada statement must be qualified by adding "from domestic and imported ingredients" or "from imported ingredients."
The new regulations are not mandatory, which means companies can choose not to identify where a product comes from. However, if they want to identify something as a product of Canada, for example if they feel it will increase sales, they must abide by the new rules.
The Canadian law comes four months after the U.S. Congress's Farm Security and Rural Investment Act came into effect, which requires mandatory country of origin labelling for beef, lamb, pork, fish and other perishable agricultural commodities.
Some economists characterized the new Canadian regulations as protectionist measures aimed at counteracting the new U.S. rules.
Michael Hart, a former Canadian trade negotiator and professor of trade policy at Carleton University's Norman Paterson School of International Affairs, called the new regulations a "tit-for-tat" move designed to offset the effects of the new U.S. regulations.
"It's protectionism, covered with a veneer of consumer protection," he said.
Those who will benefit most, he said, are Canadian producers of primary agricultural products. Food processors, he said, will henceforth be obliged to buy Canadian if they want to label their products "Product of Canada."
Those who will be most negatively affected, he said, are food processors such as Campbell's Soup, which imports ingredients from all over the world and assembles its products in Canada.
"Anyone who is in food processing business is going to find this will complicate their business," Mr. Hart said.
The new Canadian regulations were announced in May at a time when the Canadians were being bombarded by news stories about the dangers of some imported food products, particularly from China.
Across Canada in 2007, pets died of kidney failure after consuming pet food containing contaminated Chinese wheat gluten. Chinese milk products were also pulled from Canadian shelves when more than 50,000 babies across China became ill after consuming milk products containing the additive melamine.
Frank Graves, president of polling firm EKOS Research, said Canadian concern over food safety has spiked sharply over the past years as issues of mad cow and avian flu caught public attention. Likewise, he said, the recent stories on dangerous Chinese products have had a "corrosive impact on consumer confidence on Chinese products."
He said that his polling indicates that Canadians tend to see Chinese food products as "fairly sketchy" and are concerned the old regulations allowed products containing Chinese ingredients to be marketed as products of Canada.
The new regulations, Mr. Graves said, are good news for firms producing truly made-in-Canada products.
"There is a reputational advantage for the Canadian products, and this will serve those who are producing truly 100 per cent made-in-Canada products as they will have competitive advantage," he said.
Another winner, he said, will be the government. The new rules, he predicted, will likely increase public confidence in food safety, and will be "recognized and applauded to some extent by the consuming public."
The new Canadian regulations were introduced after the government solicited the opinions of 1,500 consumers, farmers, manufacturers, processors, distributors and retailers.
Also, in the summer, the House of Commons' Standing Committee on Agriculture and Agri-Food tabled a report entitled "'Product of Canada' claims: Truth and transparency are necessary."
All parties agreed that changes must be made to beef up product of Canada rules. Nevertheless, the Conservative Party included a dissenting opinion calling for more stringent regulations than were recommended by the committee as a whole. The new regulations reflect the Conservative Party's dissenting opinion.
Canada Turns to WTO
Despite introducing similar regulations of its own, the Canadian government is taking legal action against the United States over its mandatory new country-of-origin labelling (COOL) rules.
On Dec. 1, International Trade Minister Stockwell Day and Agriculture Minister Gerry Ritz announced Canada was seeking formal consultations with the United States under the World Trade Organization dispute settlement process on country-of-origin labelling measures.
The ministers indicated they are acting in defence of Canadian livestock producers, who have expressed loudly and often over the past months that the new U.S. COOL regulations are damaging their business.
"While Canada is firmly committed to a cooperative trading relationship, we believe that the country-of-origin legislation is creating undue trade restrictions to the detriment of Canadian exporters," Mr. Day said in a press release. "Under these circumstances, Canada has no choice but to assert its WTO rights in the defence of our exporters."
"This government continues to take a strong stand for Canadian producers on the issue of country-of-origin legislation," added Mr. Ritz. "We are committed to a respectful working relationship with our American neighbours, but have always made it clear that these new regulations must not discriminate against Canadian producers."
John Masswohl, the Canadian Cattlemen's Association director of government and international relations, said meat producers are very supportive of the government's WTO action.
He added that the CCA was "a major force behind getting this to happen" and has been working closely with Minister Ritz, opening their books to provide the evidence that will be needed at the WTO.
Mr. Masswohl says Canadian cattle producers have seen a sharp downturn in business since the mandatory COOL regulations came into effect. Cattle born in Canada then raised in the U.S. can no longer be marketed as products of the USA, something he said is badly hurting Canadian producers.
Due to the new regulations, he said, American meat processors have severely limited where and when Canadian beef can be slaughtered in the U.S., and some processors have stopped buying Canadian beef altogether.
Mr. Masswohl said he welcomed the new Canadian regulations, saying CCA members are particularly pleased that the rules are not mandatory.