FOOD LABELLING LAW AND POLICY

NFF SUBMISSION

May 2010

2

Table of Contents

The National Farmers’ Federation .................................................................... 3

Statistics on Australian Agriculture ................................................................. 3

Introduction .......................................................................................................... 4

CoOL ....................................................................................................................... 4

Labelling laws should not impose unreasonable costs ............................... 7

Labelling laws must be practical to implement ............................................ 7

Labelling laws must not lead to adverse trade implications ...................... 7

Labelling for other consumer attributes .......................................................... 8

GM labelling ...................................................................................................... 8

Environmental attribute labelling .................................................................. 9 Carbon labelling .................................................................................................... 10

Farm production system attribute labelling ............................................... 12

NFF Contact ......................................................................................................... 12

3

The National Farmers’ Federation The National Farmers‟ Federation (NFF) was established in 1979 and is the peak national body representing farmers, and more broadly, agriculture across Australia. The NFF‟s membership comprises of all Australia‟s major agricultural commodities. Operating under a federated structure, individual farmers join their respective state farm organisation and/or national commodity council. These organisations form the NFF. The NFF has recently implemented a re-structure of the organisation. Through an associate category this has enabled a broader cross section of the agricultural sector to become members of the NFF, including the breadth and the length of the supply chain. Each of NFF‟s members deal with state-based “grass roots” issues or commodity specific issues, respectively, while the NFF represents the agreed imperatives of all at the national and international level.

Statistics on Australian Agriculture

There are approximately 140,000 farm businesses in Australia (99% of which are family owned and operated), utilising 54% of Australia‟s landmass. The agricultural sector, at farm-gate, generates approximately 3% of Australia‟s total Gross Domestic Product (GDP). The gross value of Australian farm production in 2007-08 was $43.3 billion.1 However, when factoring in the „value adding‟ activities post farm-gate, and the value of all the economic activities supporting farm production in the farm-input sector, agriculture has averaged a contribution of 12% of GDP (approximately $137 billion in 2008).2 Australian farming underpins domestic food consumption, and is also a significant export industry. Australian farmers also export approximately two thirds of its total agricultural production, demonstrating the importance of the export market to our producers as well as the domestic market. In 2008, Australian farm exports were valued at $31 billion. This accounts for approximately two-thirds of Australia‟s agricultural production. Despite deep and widespread drought, over 2007-08, agricultural product accounted for 15% of Australia‟s merchandise exports.3

1 ABARE, 2009 Australian Commodity Statistics, Canberra

2 Australian Farm Institute, March 2005, Australia’s Farm Dependent Economy and ABARE, Australian

Commodity Statistics 2008 3 ABARE, 2009 Australian Commodity Statistics, Canberra

Page 4 of 38

4

Introduction The NFF is supportive of efforts to improve truth in labelling of food purchased by Australian consumers and agrees that Australian consumers should be provided with clear information to enable them to make informed choices about the food they purchase and consume. Indeed, we believe that Australian farmers should have every opportunity to capitalise on their reputation as being one of the world‟s best suppliers of clean, green and quality food produce, and indeed, generate premiums for this reputation wherever possible. While the NFF recognises that predominant driver of food labelling is in relation to the intent to provide consumer information in relation to health, our focus in the labelling policy debate has been on the issue of country of origin labelling (CoOL). In recent times however, the NFF has also expanded its policy interest into the labelling of other consumer attributes such as GM, environmental claims and farm production method claims as the debate about labelling in these areas has escalated. While the NFF on principle supports the rights of industries to implement voluntary measures that provide non-health related attribute information to assist consumers in making informed purchasing decisions, the NFF acknowledges that specific factors can require variations and caveats on this principle to apply.

CoOL The NFF has demonstrated its commitment to the issue of promoting improved country of origin labelling (CoOL) standards through its participation on the Board of the Australian Made Australian Grown program. The NFF strongly believes that educating consumers on the issues surrounding CoOL labelling and delivering marketable options to food manufacturers to entice them to leverage off the Australian image and reputation is a vital ingredient to this debate. The NFF also recognises and is supportive of ensuring that this is complemented by a robust CoOL system underpinned by legislation that provides consumers with clear information. The NFF believes that Australia‟s current CoOL provisions for packaged food are convoluted and potentially misleading for consumers. It is the NFF‟s view that most consumers have little understanding about the meaning of current CoOL requirements for packaged foods. As a result, it is the NFF‟s belief that Australian CoOL laws for packaged foods do very little to allow Australian producers to generate premiums based on Australia‟s positive food production reputation. Action is required to address the lack of clarity in these labels, and to ensure that consumers understand the meaning and implications of these labels.

5

In addition, as of June 2006, certain unpackaged fish, fruit and vegetables, and pork have been subject to new country of origin laws. The NFF may consider supporting the further expansion of the CoOL requirements for other unpackaged fresh produce, but believes that expansion of these laws should not be contemplated until compliance with the existing CoOL requirements has been demonstrated. The NFF believes that significant resources should be applied to addressing this issue to ensure consumers have confidence in the current labelling arrangements. The NFF also notes that there is a growing trend towards the promotion of local or regional origins of fresh produce within Australia, and the NFF questions the suitability of regulatory frameworks and resourcing available to check against these claims.

Country of origin labelling requirements for food4 FSANZ sets out the requirements for CoOL of packaged and certain unpackaged fish, fruit and vegetables, and pork. The standard does not apply to unpackaged cereals, meat other than pork, eggs, edible oils, dairy products, sugar and honey, vinegar and related products, and salt. It applies to food sold to catering establishments in catering packs, but not to food sold to the public by restaurants, canteens, schools, caterers or self-catering institutions where the food is offered for immediate consumption. The standard requires businesses to label all packaged and certain unpackaged food with their country of origin: For packaged food: • Label packaged food with a statement on the package that clearly identifies

where the food was made or produced, or a statement on the package that identifies the country where the food was made, manufactured or packaged for retail sale and to the effect that the food is constituted from imported ingredients or from local and imported ingredients.5

4 Food Standards Australia New Zealand (March 2006), Country of Origin Labelling of Food - Guide to

Standard 1.2.11 Country of Origin Requirements, Canberra 5 Packaged food has the following labelling requirements:

a) a statement on the package that identifies where the food was made or produced; or

b) a statement on the package –

(i) that identifies the country where the food was made, manufactured or packaged for retail sale; and

(ii) to the effect that the food is constituted from ingredients imported into that country or from local and

imported ingredients as the case may be.

The provisions above must follow the principles of the Trade Practices Act 1974 (Commonwealth) which

contain requirements concerning the place of origin of goods. These are:

‘Product of’ - the country of origin claimed must be the country of origin of each significant ingredient

of the food and all or virtually all the processes of production or manufacture of the goods must have

happened in that country. ‘Product of’ includes other declarations such as ‘produce of’ and ‘produced

in’.

‘Made in’ – the goods must have been substantially transformed in the country claimed to be the origin

and 50% of the costs of production must have been carried out in that country. Under the Trade

Practices provisions, substantial transformation is defined as – ‘a fundamental change...in form or

6

In this context „ingredients‟ should be understood to include any food component or substance used in the preparation, manufacture or handling of a food. For unpackaged food: • Label unpackaged fresh and preserved fish with the country or countries of

origin of the fish, or a statement indicating that the fish is a mix of local and imported food or a mix of imported food, as the case may be.

• Label unpackaged fresh pork with the country or countries of origin of the pork, or a statement indicating that the pork is a mix of local and imported food or a mix of imported food, as the case may be.

• Label unpackaged preserved pork that has not been mixed with food not regulated by CoOL of unpackaged food with the country or countries of origin of the pork, or a statement indicating that the pork is a mix of local and imported food or a mix of imported food, as the case may be.

• Label unpackaged fresh vegetables or fruit with the country or countries of origin of the vegetables or fruit, or a statement indicating that the vegetables or fruit are a mix of local and imported food or a mix of imported food, as the case may be.

• Label unpackaged preserved vegetables or fruit that have not been mixed with food not regulated by CoOL of unpackaged food with the country or countries of origin of the vegetables and fruit, or a statement indicating that the vegetables or fruit are a mix of local and imported food or a mix of imported food, as the case may be. In connection with the display of unpackaged fish, pork, and fruit and vegetables, provide a label that is legible and in a size of type of at least 9 mm.

Because the standard deals with processed as well as unprocessed food, the standard uses the word „food‟ instead of „ingredient‟. In this context „food‟ should be understood to include unprocessed whole food and components as well as ingredients. For unpackaged food the standard allows two options for declaring the country of origin: 1. a label on or in connection with the food stating either the country or countries of

origin 2. a statement indicating that the food is a mix of local and/or imported food, as the

case may be.

nature such that the goods existing after the change are new and different goods from those existing

before the change’. ‘Made in’ includes other declarations such as ‘manufactured in’ or ‘Australian

made’ for example.

Where it is not possible for a ‘Made in’ claim to be made, either due to uncertainty around the question of

substantial transformation and whether 50% costs of production is met, or to adjust to seasonal changes in

availability of individual ingredients, manufacturers may make a qualified claim. Common examples of a

qualified claim are ‘Made in Australia from imported ingredients’ or ‘Packaged in Australia from local and

imported ingredients’.

7

However, while acknowledging that Australia‟s current CoOL regime for food is convoluted and at times confusing, the NFF recognises that significant pitfalls must be avoided when considering alternatives. These include the following:

Labelling laws should not impose unreasonable costs Government must ensure that any labelling law changes do not lead to excessive costs to implement - costs that the NFF believes will merely be passed back to farmers in the form of lower prices for their produce.

Labelling laws must be practical to implement The NFF is keen to ensure that labelling laws are not impractical to implement. For example, the changes should recognise the potential need to vary CoOL in response to seasonal Australian domestic food supplies. It must be taken into account that at some times in the year it may be necessary for manufactures to import produce. As manufactures are unlikely to modify labels on a seasonal basis, requirements should not be so inflexible so as to provide a disincentive for manufacturers to utilise any form of Australian labelling and in doing so, devalue some of the benefits of striving for an Australian grown point of difference.

Labelling laws must not lead to adverse trade implications It is the NFF‟s strong view that CoOL systems should not be used as a form of non-tariff trade barrier and must be WTO consistent. Under WTO rules and in particular under GATT Article 3, National Treatment, Australia must treat imports no less favourably than domestic product. For example, whatever labelling rules CoOL or other Australia requires on imported product we must also apply to product produced in Australia. The WTO Agreement on Technical Barriers to Trade (TBT) also requires Australia to ensure that technical regulations and standards including packaging, marking and labelling requirements do not create unnecessary obstacles to international trade. In addition, noting that Australia‟s number one priority in the current WTO negotiations is to significantly market access and that Australia is the Chair of the Cairns Group, Australia should avoid casting doubts over our trade liberalising credentials wherever possible. Indeed, the NFF has advocated against international CoOL systems that have imposed labelling requirements on imports and in doing so have artificially restricted market access for Australian exports, purely due to implementation complexities. The NFF therefore seeks assurances that Australian primary produce will not be jeopardized on international markets through retaliation for any proposed CoOL measures, bearing in mind that Australian farmers rely on export markets for two thirds of their production.

8

Labelling for other consumer attributes

The NFF recognises that the mandatory inclusion of CoOL has “muddied the water” in terms of whether consumer attributes should be included within food labels. The NFF recognises that issues such as genetically modified (GM) ingredients, environmental attributes and animal welfare standards are important to some sections of the community, regardless of the fact that they have no impact on the health and safety of the food they are able to purchase from Australian retailers. The NFF accepts that in some instances, premiums may also be attainable for food that has certain consumer attributes and we are supportive of manufacturers who look to extract these premiums. For all consumer attributes reported on food, the NFF reinforces that the truth in labelling principle must apply. We are supportive of these attributes being tightly managed by the Australian Competition and Consumer Commission (ACCC) and the laws surrounding misleading & deceptive conduct must be strictly enforced. On this issue the NFF supports the ACCC comments that “No matter how a business communicates with you—whether it is through packaging, advertising, logos, endorsements or sales pitch—you have the right to receive accurate and truthful messages about the goods and services that you buy.”6 Provided claims are accurate, the NFF supports the rights of industries to implement voluntary measures beyond the scope of mandatory CoOL labelling requirements that provide additional information to assist consumers in making informed purchasing decisions. It is the NFF‟s view that manufacturer‟s decisions to include consumer attribute claims should be made on a voluntary basis, underpinned by rules in the Trade Practices Act surrounding misleading & deceptive conduct. These rules should be stringently enforced by the ACCC. However, the NFF is concerned about information overload in relation to consumer attribute claims. Today‟s consumer is already faced with more information on the food label that is becoming increasingly complex. The provision of too much complex or conflicting information can leave the consumer no better informed. Due to the complex and variable nature of the debates surrounding the various consumer attributes, the NFF has outlined its views on specific issues below:

GM labelling The NFF supports the current GM food labelling laws. The NFF recognizes that this labelling regime does not relate to health and safety but provides for consumer

6 ACCC Website, http://www.accc.gov.au/content/index.phtml/itemId/815335, accessed on 22/04/10

9

choice, and provide a practical, pragmatic and enforceable mechanism for achieving this. The current arrangements are consistent with the principles that labelling laws should not impose unreasonable costs and that the laws must be practical to implement. The NFF supports the current regulatory arrangements which ensure the safety of foods and ingredients derived from genetically modified (GM) crops through approvals made by Food Standards Australia New Zealand (FSANZ). This ensures that GM ingredients approved for use in Australia have undergone a scientific assessment of their safety. This process of approval ensures food safety is secure, and provides confidence to Australian consumers and food producers. The NFF supports the current arrangements for highly refined products derived from GM crops, such as oils and sugars. Where food products derived from GM crops cannot be differentiated from conventional (non-GM crops) there is no scientifically defensible rationale for labelling to be required. In these refined products DNA and/or proteins are effectively removed and/or denatured, and as such are essentially identical whether they are derived from GM or non GM crops. To differentiate between the products through mandatory labelling would require an expensive and complex trace-back process which would require separate handling, storage and processing facilities and would result in additional costs for farmers and consumers, without benefit for food health or safety. The NFF does not support changing the current food labelling laws to include the labelling of animal products, such as meat, eggs and milk, from animals fed on feed which includes GM ingredients. Animal products derived from animals fed GM feed have been shown to be identical to those from animals fed non-GM feed. Requirements to differentiate between animals fed GM and non-GM diets through mandatory labelling will create the same complexities and costs as changing the labelling requirements for highly refined products derived from GM crops. This includes expensive trace back, processing and handling systems for both the animals and their feed. The NFF also notes that there is no international precedent for differentiating the labelling of animal products fed GM and non-GM diets, and would not expect such a system to be implemented in Australia.

Environmental attribute labelling A growing number of environmental claims are emerging in modern food marketing channels in an attempt by marketers to generate premiums from food sales. Attributes such as carbon footprints, water utilisation, waste, or biodiversity are now being marketed through various means involving what is termed as “eco labelling”. This trend is supported by Teisl et al. (2002), who note that there have been three important developments in eco labelling in recent years: 1. knowledge about the environmental attributes of products has become

increasingly important to consumers,

10

2. governments and nongovernmental organisations have responded by organising, implementing and verifying eco labelling programs, which cover thousands of products in more than 20 countries,

3. there have been international efforts to standardise environmental labelling schemes. 78

While the NFF in principle supports the rights of industries to implement voluntary measures to provide additional information to assist consumers in making informed purchasing decisions, environmental labelling can lead to a range of issues and problems that FSANZ should be wary of. The NFF has focussed on carbon labelling to demonstrate where issues can arise. Carbon labelling Since the early 1990‟s, carbon labelling has emerged as an increasingly high profile issue that has been supported by a range of environmental, community and farmer groups – often for varying reasons. The origins of this debate emerged through the conception of food miles which has now been highlighted as a highly unreliable indicator of carbon emissions in the food chain. Yet despite the issues surrounding food miles and its failed attempt to „oversimplify‟ the issue of carbon attributes of food, the drive for carbon labelling is still intense from some sections of the community. This has been demonstrated by the development in 2007 by Carbon Trust of a carbon reduction label in partnership with several companies. Other carbon labelling initiatives around the world are also in the process of being introduced or are under development.9 The NFF has been concerned about the introduction of carbon labelling for the following reasons: • It is difficult and costly to verify carbon foot print information - a carbon

footprint is a credence attribute which cannot be reasonably checked by consumers and has methodological uncertainty.10 In addition, the broad adoption of carbon footprint labels would result in significant cost increases. Thus, resources would merely be diverted from the

7 Hogan, L and Thorpe, S 2009, Issues in food miles and carbon labelling, ABARE research report

09.18, Canberra, December. 8 Teisl, MR, Roe, B and Hicks, RL 2002, ‘Can eco-labels tune a market? Evidence from dolphin-safe

labeling’, Journal of Environmental Economics and Management, vol. 43, no. 3 9 Hogan, L and Thorpe, S 2009, Issues in food miles and carbon labelling, ABARE research report

09.18, Canberra, December. 10

Hogan, L and Thorpe, S 2009, Issues in food miles and carbon labelling, ABARE research report

09.18, Canberra, December.

11

objective of identifying and acting upon the most significant GHG reduction opportunities for a given product or category.11

• Which carbon foot printing methodology to use – Life cycle assessment of

carbon profiling is still quite an uncertain science and subject to considerable debate. Numerous methodologies still exist to calculate claims and each can derive significantly different outcomes – some of which could be unfairly detrimental to Australian farmers. 12

• Risk of consumer confusion – There is a risk of consumer confusion about the

reliability and interpretation of information provided in a carbon label. Already, empirical evidence from Lincoln University in New Zealand has demonstrated how food miles is an unreliable indicator of carbon emissions in the food supply chain and does not reflect the carbon emissions embodied in many products. This has demonstrated the danger of how unjust carbon claims can result in less informed consumption choices.13

Furthermore carbon footprints are the output of a modelling exercise that requires hundreds of inputs from the product lifecycle, requires numerous decisions, and are subject to almost constant change given the dynamic nature of supply chains, methodological difficulties, data variability, and the variability of the use phase. Given the resulting uncertainty and the complexity of carbon footprint estimates, it is almost impossible for a consumer to make a like for like comparison of carbon footprint labels on competing products. 14

• Carbon footprint is just one of many relevant environmental indicators –

Carbon profiling can often be used as an overall indicator of how eco-friendly a product is, without taking the broad range of environmental factors into account. Placing a singular focus on carbon as a environmental gauge is misleading.15

• Why is the carbon labelling debate confined to food labelling? - It is

interesting to note that the vast majority of the eco labelling debate, including attributes such as carbon foot print claims, appear to be confined to the labelling of food products, despite the fact that the same issues are equally valid for non-food products. The NFF questions why food should be targeted in an unfair manner compared with other non-food products.

11

AIM (European Brands Association), 2010 Product carbon footprinting and product carbon footprint labels,

Brussels, January 12

Hogan, L and Thorpe, S 2009, Issues in food miles and carbon labelling, ABARE research report

09.18, Canberra, December. 13

Hogan, L and Thorpe, S 2009, Issues in food miles and carbon labelling, ABARE research report

09.18, Canberra, December. 14

AIM (European Brands Association), 2010 Product carbon footprinting and product carbon footprint labels,

Brussels, January 15

AIM (European Brands Association), 2010 Product carbon footprinting and product carbon footprint labels,

Brussels, January

12

Farm production system attribute labelling The NFF recognises that there is interest from consumers about how food is produced, and demands for clear descriptors which can differentiate between particular farm production systems or practises used. The NFF recognises that consumers require clarity and truth from labels. Significant consultation with farmers would be required on the development of definitions if a set of farming systems descriptors is being considered for use. Farm production systems vary considerably between individual businesses. A single farmer may use a range of farming techniques in their business, and each of these individual techniques could be variously described as organic, conventional, conservation etc.. The NFF notes that as a consequence of this, there is the potential for significant confusion in labelling related to farming production system descriptors. A prescriptive system of labelling may also prevent farmers from adopting more efficient and effective farming practices over time as farming systems develop to take advantage of new knowledge and technology. The NFF also notes that a range of third party certification systems also exist which are used to promote the use of various farming systems and practices, and provide assurance to consumers. The role of the descriptors used under these existing systems would also need to be considered in the development of label descriptors for farm production systems.

NFF Contact Charles McElhone Manager – Economics and Trade Ph: 02 6273 3855 Fax: 02 6273 2331 Email: cmcelhone@nff.org.au Sam Nelson Manager – Rural Affairs Ph: 02 6273 3855 Fax: 02 6273 2331 Email: snelson@nff.org.au