Sunday, October 5, 2008

Food Procectionism in the U.S. and Japan

The Intersection of BioEthics and Market Regulations - from The Volokh Conspiracy and Food Law Prof. Blog
So, Japan and Korea both have limited beef imports from the United States for fear of bringing BSE (mad cow disease) into their food supply. Both countries argue that the U.S. does not adequately guarantee the safety of their foods (they made the case after mad cow disease was found to have been imported from the U.S. to them a few years ago). The three links do a great job of introducing the recent decision by the D.C. Appellate Court, I also recommend this link from the Iowa State University Bio-Ethics folks. But why don't I also summarize?

Creekstone Farms wants to be able to purchase the BSE testing kit that the USDA has exclusive license to. The ranchers at Creekstone claim to have lost 30% of their sales because of these bans in place by Japan and Korea. Creekstone paid to have a lab built on site (which probably wasn't cheap) and now would like to buy the testing kits so that they can assure the Japanese and Koreans that they have safe beef. There will be many in the U.S. that will see this court case as simply a case of the Fed (and liberals, always the lib'rals) imposing harmful regulations on what should simply be laissez-faire capitalism. What these people will fail to see is that this is more properly understood as protectionism on the part of both the U.S. and Japan.

The Japanese cannot fail to have egg on their face this month because of the recent tainted rice scandal. Japan's Agriculture Ministry has been selling rice that they deem unfit for human consumption (but could be used for making glue, say) at auctions for years now. Mikasa, a major food supplier, has been buying this rice at ridiculously low prices (their bids were always much, much lower than the competitors), and claiming that they would be selling this moldy, toxic rice to glue manufacturers. The Ministry looked the other way, even when they could have seen that Mikasa, had they actually sold this rice to the glue makers as they said, would be doing so at a very steep loss. Mikasa was, yup, selling the toxic rice to others (like rice ball makers, candy makers, school lunch makers) and claiming it was regular-ol' rice, and so making quite a handsome profit.

So, the idea that American food is somehow more unsafe is likely a ruse on the part of the Japanese food safety folks (I mean, the Japanese don't even have a USDA or FDA type regulatory agency). Making it difficult for the Americans to send their beef here means that Kobe beef is cheaper, though. It means that Japanese beef (and New Zealand or Australian beef) is more readily available and ensures that these players have less competition. Now, it seems that the USDA is a bit concerned that if Creekstone tests its beef, they will have a competitive advantage in foreign markets over the rest of the American Ranchers. Or, as Jonathan Adler put it, the USDA is afraid that if one Rancher insists its beef is more safe than the rest of the beef in the U.S., then the domestic beef market will shrink as American consumers are afraid of eating tainted beef.

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