TRADE-BRAZIL/CANADA: Ban on Beef – Part of a Trade War?

By Mario Osava Reprint | | Print |

Commentary Mario Osava

RIO DE JANEIRO, Feb 5 2001 (IPS) - Canada dealt Brazil a blow of unforeseeable consequences with its ban on imports of beef from this country – a decision that some local experts say has more to do with a trade war involving airplanes than with the supposed fear of mad cow disease.

Brazil, where no cattle have been diagnosed with mad cow disease, or Bovine Spongiform Encephalopathy (BSE), is one of the world’s biggest exporters of beef, and enjoys the greatest possibilities of growth.

The potential for growth is due to the fact that like in neighbouring Argentina and Uruguay, cattle in Brazil roam free and graze on extensive pastureland.

That supposedly “backward” stockbreeding technique means they are at much lesser risk of contracting BSE, which scientists say is caused by consumption of fodder containing meat and bone meal from other animals.

By banning imports of Brazilian beef last Friday on the argument that there was no guarantee that it was not infected with BSE, Canada dealt a blow of incalculable consequences at a time of a widespread scare about mad cow disease.

The United States and Mexico automatically went along with Canada’s decision, as stipulated by the North American Free Trade Agreement (NAFTA) that links the three countries.

But the most serious effects could occur in Europe, the biggest foreign market for Brazilian beef, where the epidemic is causing panic.

Rumours have begun to spread that Britain and the Netherlands, the two biggest importers of Brazilian beef, may follow in Canada’s footsteps.

The position taken by Canada is “strange,” said Agriculture Minister Marcus Pratini de Moraes, because it is widely known that Brazilian beef is grass-fed, and that it does not eat fodder containing animal meal.

BSE is attributed to the use of high risk materials like nervous systems and carcases, especially of sheep, in fodder for livestock in Europe.

Pratini de Moraes had predicted that Brazil would become the world’s leading exporter of beef within five years. Canada’s decision could stand in the way of meeting that goal, however, if the government is unable to check the decline in the image of its beef.

It was a “low blow,” said the secretary of the Interministerial Chamber of Foreign Trade, Roberto Giannetti da Fonseca, who was echoed by local stockbreeders.

The Canadian government has come under fire even within its own country. “Something stinks – and it’s not Brazilian beef,” quipped columnist Madelaine Drohan, writing in the Toronto daily Globe and Mail. She added that the damage had already been done, even if Brazil proved that its beef was healthy.

Accusing a country of exporting products that pose a health risk is the most mortal trade weapon available today, commented Drohan.

The Canadian government said the measure was taken because the information provided by Brazil in response to a request submitted in 1998 did not completely clarify the doubts raised by the fact that Brazil imported European livestock some years ago.

But it is hard to believe that the question has nothing to do with the dispute between the two countries’ airplane manufacturers.

Last year, Canada won a complaint filed with the World Trade Organisation (WTO), which ruled that it could take commercial reprisals for 233 million dollars over six years against Brazil, which was found guilty of subsidising the exports of the Brazilian Aeronautics Company (Embraer).

Embraer, privatised in 1994, has become competitive in the global market for medium-sized airplanes, and in the past few years it has outstripped the Canadian firm Bombardier in sales of 50-seat jet planes.

Canada has not yet decided which Brazilian products will suffer reprisals.

The ban on beef is a health-related measure, but adopted in this context it looks like an informal reprisal. “It has no technical justification,” which is why it is being interpreted as a political decision, said Brazil’s deputy Minister of Agriculture, Marcio Fortes.

Canada also openly offered a 300 million dollar subsidy last month to help Bombardier win a contract for a sale of 150 airplanes to a U.S. company, thus stepping up the fight with Brazil in the WTO.

Canada is not a big importer of Brazilian beef, buying just 5.6 million dollars worth last year.

The damages, however, will be felt in other markets, like the United States, which imported 82 million dollars worth of Brazilian beef in 2000, and in European and Asian countries that could reduce their imports due to fears of BSE.

The measure violates a WTO rule which stipulates that no country can demand better health conditions than its own, said Luiz Carlos Oliveira, Brazilian secretary of Agricultural Defence, who pointed out that unlike Canada, no case of BSE had ever been reported in Brazil.

Trade wars taken to the extremes seem to be aimed at teaching developing countries a lesson.

Brazil has dared to excel in a high-tech industry. Embraer is conquering markets that were previously the exclusive realm of countries in the industrialised North.

It has also dared challenge the drug giants. Brazil’s patent law allows “compulsive licensing”, which means medicine necessary in cases of national emergencies, such as the spread of AIDS, can be produced locally without the patent-holder’s consent. That law is now being challenged in the WTO by the United States.