R-CALF: Comments Urge USTR To Address Global Market Distortions
11/05/2009 07:13AM
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In comments filed Tuesday with the U.S. Trade Representative (USTR), R-CALF USA laid out how the world marketplace for cattle and beef is one of the most grossly distorted markets of any sector, and how the inability to achieve any semblance of balance between disparate tariffs, subsidies and sanitary/phytosanitary (SPS) standards has wreaked havoc upon, and threatens to destroy, the U.S. live cattle industry, which historically has been the single largest segment of U.S. agriculture and which also provides the economic cornerstones for most rural communities across the United States.
“We are encouraging the USTR to initiate fundamental trade reforms that will address the systemic problems that are associated with global beef and cattle market distortions,” said R-CALF USA CEO Bill Bullard. “The U.S. cattle industry has been devastated by the failure of current trade policies, and the future of the U.S. cattle industry hangs in the balance.
“We hope that USTR will identify these foreign trade barriers in the cattle and beef sector in the preparation of its annual National Trade Estimate Report, and that immediate and fundamental reform becomes a priority,” he added.
Foreign trade barriers include:
* Tariff distortions: U.S. tariffs on cattle and beef imports are among the lowest in the world. The U.S. has only minimal tariffs and no quotas on cattle imports. In-quota tariffs on beef imports range from 4.4 to 13.2 cents per kilogram, and calculated duties for all beef imports in 2008 equaled less than 2.6 percent of the value of those imports. In addition, dozens of countries receive duty-free access to the U.S. market for in-quota beef imports, either through bilateral free trade agreements or unilateral trade preference programs. Major U.S. trading partners, on the other hand, apply tariff rates four to 10 times higher than the effective U.S. rate. The European Union, for example, imposes tariffs of at least 12.8 percent on beef imports. Japan applies a tariff of 38.5 percent on beef imports, and Korea’s tariffs on beef imports are 40 percent or higher. U.S. cattle and beef producers face a profound disadvantage in overseas markets due to such disproportionately high tariffs.
* Subsidy Distortions: Major cattle and beef producing nations provide billions of dollars of subsidies to cattle and beef producers through export subsidies and domestic support programs. Australia, Brazil, Canada, China, the EU, Japan, Korea, Mexico and other producers all subsidize cattle and beef production, while the U.S. provides no subsidies to the cattle and beef industry outside of disaster assistance and drought relief. Commodity-specific support to beef and veal producers in 2006 was 6.3 percent in Mexico, 2.1 percent in Canada, 48.8 percent in the European Union, and zero in the United States. Moreover, Mexico, a major exporter of live cattle to the U.S., gives its producers approximately 300-500 pesos (U.S. $27-45) for each head of cattle to improve pastureland. And, in 2004 Canada provided $400 million to encourage increased slaughter capacity and to assist producers affected by BSE.
* SPS Distortions: In addition to contending with tariffs and subsidies to cattle and beef producers through export subsidies and domestic support programs, the U.S. cattle industry is hamstrung with a U.S. policy that has irresponsibly relaxed essential sanitary and phytosanitary (SPS) standards in order to facilitate the importation of higher-risk cattle and beef. The first of these relaxations occurred in the mid-1990s when the United States abandoned its requirement that beef from foreign countries meet standards at least equal to U.S. standards:
The United States can no longer require foreign countries wishing to export meat and poultry products to have meat and poultry inspections that are ‘at least equal’ to those of the United States; instead, foreign inspection systems must be [only] ‘equivalent to’ domestic inspection systems.
More recently, the U.S. further relaxed essential SPS standards to facilitate the importation of cattle and beef from Canada, a country with an inherently higher risk for the invariably fatal disease known as bovine spongiform encephalopathy (BSE). The U.S. currently meets eligibility criteria to be designated as having a negligible BSE-risk profile because it has not detected BSE in an indigenous animal born within the past 11 years. Canada, on the other hand, has detected 10 cases of BSE in cattle born after March 1, 1999, with one case known to be born as recently as 2003. Therefore, Canada, and its cattle herd, are ineligible for the more favorable negligible risk classification and will remain ineligible for many years. The U.S. Department of Agriculture (USDA) predicts that current U.S. regulations will cause the introduction and subsequent spread of fatal BSE within the United States.
Despite this, Canadian cattle born after March 1, 1999, and beef from Canadian cattle of any age are allowed into the U.S. and mingle with the U.S. cattle herd and the U.S beef supply, respectively. Thus, the U.S. has assumed Canada’s higher BSE risk and has relegated itself to the less favorable status of a BSE controlled-risk country, just like Canada, while it continues to practice BSE controls that are considered too lenient by every major export customer with which the U.S. maintains a positive trade balance. This reprehensible situation has not changed in the past six years.
“Until the U.S. restores its SPS standards to a level that would genuinely protect the United States from the introduction of substandard beef products, and from the introduction and spread of pernicious animal diseases like BSE, the U.S. will continue to assume an unnecessary and avoidable risk for BSE and the global beef market for U.S. cattle producers will remain highly distorted and the U.S. cattle industry will continue to shrink,” Bullard emphasized. “Together these distortions drive down prices for U.S. cattle producers, close markets for U.S. exports and flood the U.S. with cheaper and higher-risk imports. R-CALF USA believes that these trade-distorting subsidies in this sector need to be addressed in order to create a balanced international cattle and beef market in which the domestic industry can compete and thrive.”
Background: R-CALF USA’s comments were submitted in response to USTR’s “Request for Public Comments to Compile the National Trade Estimate Report on Foreign Trade Barriers and Reports on Sanitary and Phytosanitary and Standards-Related Foreign Trade Barriers,” at 74 Fed. Reg. 48811-48813 (Sept. 24, 2009), Docket Numbers USTR-2009-0031 and USTR-2009-0032.