As markets become globalized, food safety policy and international trade policy are increasingly intertwined. Globalization also means that food safety incidents are widely reported internationally. One result is that food safety incidents can negatively impact products where no food safety issue exists as consumers lose trust in both foreign and domestic food safety institutions. While the policy framework for dealing with directly effected imported foods is well understood, how to deal with the market failure associated with indirectly affected products within the existing trade policy rules has not been explored. Using the example of China’s 2007 problems with a spate of products safety incidents, a theoretical framework is developed and the response of both the Chinese and Canadian governments analyzed. A cooperative approach to the issues appears to have a number of advantages and does not contravene trade policy commitments.