Horse meat is more commonly consumed in Europe than here in the US. The issue isn't that there was horse meat in the food supply, the issue is that it was mis-labeled as beef.
If you set the threshold at zero, then meat processing plants that handle horse meat would not be able to also handle beef.
That said, 1% does seem a little high to me; but zero is too low, for the reason stated above.
Edit: They probably chose 1% because it is A) low enough to catch intentional cases of fraud; B) high enough that incidental/accidental low-level cross-contamination in plants that handle multiple types of meat won't constitute a violation; and C) a nice round number that even mathematically challenged legislators, bureaucrats, and members of the public can understand.
Nostalgia isn't what it used to be.