Economic downturns create more casualties than just financial investors; climate change programs and social programs are just as likely to suffer. So it is not surprising that when the debt ceiling was raised in the United States earlier this month, food safety quickly became a target. Because of the deal, Congress will have difficult decisions ahead as they work to trim almost a trillion dollars from a wide variety of programs, including the FDA and USDA, key food safety regulators in the United States. The enforcement of the Food Modernization Act and subsequent inspection mandates, which President Obama signed into law in January, will likely be compromised as a result of inevitable budget cuts.
Last January, food safety was very much a priority in the United States. President Obama signed a 1.4 billion dollar overhaul of the nation's food safety system with the Food Safety Modernization Act, the first major food reform since 1938. The Food Modernization Act was meant to become an audacious attempt to provide Federal Agencies with more authoritative power to proactively intervene in the event of a looming outbreak. Canada, which has a voluntary-based recall system, would have had likely no choice but to make similar policy changes related to food safety regulations, if only to please our most important trading partners. However, deepening financial turmoil in the United States and Europe has put the implementation of new food safety measures on the back burner.
Ironically, all of this comes on the cusp of one of the largest food recalls in United States history, a recall that has garnered very little media attention in Canada. Agribusiness giant Cargill just issued a recall of 36 million pounds of ground turkey in what's being called the largest food recall ever. Nevertheless, in spite of such a glaring example for the need of regulations and inspections, food safety agencies in the US are facing major cuts that will likely exceed 300 million dollars.
These circumstances remind us that food systems cannot solely rely on governments to protect consumers from outbreaks. Economic cycles, and political tug-a-wars, as preposterous as they seem to be, compel even the strongest willed governments like the Obama administration to consider food safety as a secondary issue. And understandably so, given the defense and entitlement budget cut debates that the United States government will face in the upcoming months. Surely, the Obama Administration would never admit to that, but priority will be given to the government programs that are in the public eye every day.
The industry will have to play a more proactive role in the implementation phase of the Food Safety Modernization Act. Certainly they can afford it. Despite the major economic headwinds our global economy is facing, the second quarter earnings season was strong and the mood surrounding earnings remained remarkably upbeat as of this writing. Most food companies are doing well financially, so it is very much possible for them to bear the burden of food safety that the government itself cannot afford. For example, the Act encompasses a food traceability pilot project that was to stretch over 18 months. Food traceability systems allow food supply chains to better trace and track products in case of a food recall. These systems are usually quite onerous and very expensive to implement but the food industry has more means than it ever had in the last decade or so, both financially and technologically. Around the world, including in Canada, the industry is usually ahead of the food safety regulation game, but trade and consumer trends are making food safety compliance more challenging and at times the industry can miss the mark. The unprecedentedly large Cargill recall reminds us how complicated food systems have become and that the industry should take greater steps to ensure food safety. If the industry will not take this step for their customers, then they should certainly do so for their investors.
Despite the fact that governments around the world may not be able to invest in further food safety systems in the short term, a stronger partnership between regulators and industry has merit and should prevail. Canada itself is not immune to the pressures of the global economic downturn and the Canadian Food Inspection Agency may soon face the same reality as its American counterparts. While governments are slowly licking their financial wounds, the industry now has opportunity to demonstrate leadership by becoming even more accountable towards the public. It is an opportunity they should not miss.