Latest BSE case in Alberta a setback for beef export strategy

Food safety concerns werefenced off quickly after officials reported Canada's19th case of mad cow disease, orbovine spongiform encephalopathy, three weeks ago.

No part of the cow reached any food system. The cow came from the same farm and so mighthave contractedBSEthe same way as a case found in 2010. Andthe latest cow was born in 2009, before any changes resulting from the investigationofthe 2010 case.

This early information from theongoing investigation may reassure North American consumers. It's still business-as-usual in anow-boomingindustry.Butsomething strategically important hasbeenlost.

• Beef industry soaring despite Alberta's slump
• Canadian beef restricted by China after BSE case
• Canadian beef banned in Peru, Taiwan and Belarus
• Mad cow case in Alberta won't harm exports: officials

Fast-growing export markets Canadafought hard to capture have escaped.

Borders in six countries slammedshut once again:Korea,Taiwan, Peru, Belarusand, finally, China cruellest of all, givenhow hardCanada works to promotetrade there.Indonesia also blocked non-edible products (carcass partsrendered forother uses.)

Could be worse?

"Everyone's pretty calm," said JohnMasswohl, the director of government relations for the Canadian Cattlemen's Association.

"We're not happy, but it could have happened at a worse time," he said.

Disruptions faced by some exporters are not onthe same scale as a decade ago.

BSEcost the Canadian beef industry and the parts of Canada's economy that rely on it billions. Producers and processors bailed or went bankrupt. Othersdramatically downsized.

Today, those who hung inenjoyrecord-high prices, with demandup and the supply of cattletight worldwide.

This new demand means Canadian exporters marketthepremium virtues of grain-fed beef and negotiate forthe highest possible price.

A decade ago, producers struggledto dumpvolumes asthe country that still buysnearly 70 per cent of Canada's beef, the U.S., blocked imports until the initial BSE storm passed.

Government and industry officials never want to weather that again. The hard lesson learned when adominant buyer shuts you down is that market diversification is necessary.

How painful, then, to lose the newer, hotter markets last month.

Asian market hopes

Agriculture Minister Gerry Ritz told the Commons agriculture committee last November the government's mix of trade negotiations, marketing missionsand on-the-groundoutreach were paying off in Asia.

"If everyone in the middle class in China had a bacon cheese burger and a beer once a month, we couldn't supply it as a country. That's the size and scope of what's going to be required," he said.

On beef in particular, he said, "It's always been the second- and third-tier cuts that we've had a problem moving. A lot of it was just going as trim to the U.S. to be ground into hamburger."

"Now a lot of that's being diverted to the Pacific Rim Korea, Japan, Chinaand so on for hot pot," the ministersaid, explainingthat AA beef in Asian dishes commands more than plain old ground beef.

"It's made a difference of a couple of hundred dollars an animal. It's keeping everybody else honest when they're bidding on our animals," saidRitz.

Losing the"delicate market" in China is disappointing, Cattlemen's spokesman Masswohlsaid.

Producers were"all set for expansion," and now they don't know how long they'll be out of the game.

Chinese trade relations are "relationship-based," Masswohl said. Beef producershave hired their own marketersto work alongside governmenttrade officialsacross China.

Ritz's department saysthe government "remains engaged with Chinese government officials."

In the meantime, Canada's competitors havean edge.

'Sensitive commodity'

Canada's free-trade agreementwithKorea came into force on Jan. 1, but a border closure based on food safety is not subject to dispute settlement under that deal, said trade lawyerGreg Kanargelidis.

"You are allowed to pass laws to protect plant and human health," said the partner withBlakesInternational Trade Group, "but you have to show that they are truly necessary."

ThinkKorea's safety protocol is trade restriction in disguise? Then you haveto goto the World Trade Organization.

It's a lengthy and costly process, but Canada'sdone it before, leading up to the2012 deal thatreopenedtrade last time.

"Beef is a sensitive commodity for Korea," said Kanargelidis.

Delays favourdomestic industries. "That's what it's all about."

Canada's deal includesa 15-year phasingout ofbeeftariffsthat's "longer than what I've seen in other agreements," Kanargelidissaid. "It's definitely a special case."

Masswohl remembers the 18th case of BSEemerging when Canada and Korea were at the table in 2011.

"We did ask the question, 'what about next time?'" he said, adding they were assured aprotocol would be followed and customs clearance would resume.

"In another month, we may start to wonder: was our faith in Korea misplaced?"

Low-impact dispute?

Despite promising growth, all sixcountries together amounted to less than five per cent of Canada's total beef exports last year.

But when countries continue to accept American beef, despite the highlyintegrated North American industry, it raises questions ofunjust trade discrimination,Kanargelidissaid.

"We've been through this before. To have it come offand come back on again is unfortunate, but not surprising," hesaid.

Masswohl remains relatively optimistic, saying it's "way too premature" to think about amulti-year trade dispute.

"I would never sayany market is unimportant," he said. But other customers are available now.

"There is no indication there are any concerns related to U.S. market access,"Agriculture and Agri-Food Canada'sspokesman wrote to CBC News this week.