R-CALF USA has just released its 2011 report titled “U.S. Trade Balance in the Trade of Live Cattle, Beef, Beef Variety Meats, and Processed Beef: Decades of Neglect,” and the picture it paints is that the promises made by free trade idealists have not materialized for cattle producers, and the U.S. continues to accumulate huge trade deficits in beef and cattle under the North American Free Trade Agreement (NAFTA), the Central American Free Trade Agreement (CAFTA), as well as the U.S.-Australia Free Trade Agreement.
In fact, the report shows that over the past 22 years, the 17 countries with which the U.S. has free trade agreements (FTAs) has resulted in the U.S. realizing a cumulative trade deficit of an incredible $41 billion. The report was prepared by R-CALF USA using data compiled by the U.S. Department of Agriculture’s (USDA’s) Foreign Agricultural Service (FAS) and USDA’s Economic Research Service (ERS).
In 1985, 10 percent of all available beef in the U.S. market was imported into the U.S., and as of 2010, it was 14 percent. Currently, 17 countries participate in FTAs with the United States: Australia, Bahrain, Canada, Chile, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Mexico, Morocco, Nicaragua, Oman, Peru and Singapore.
Over the past 15 years, the U.S. cattle herd has shrunk down to the lowest levels since the 1950s causing domestic beef production (beef produced exclusively from cattle born, raised and slaughtered in the U.S.) to fall below 1999-2000 levels.
“This is disturbing because we have been sending more female cattle to slaughter while we’ve been liquidating our herd since 1996, and this additional female slaughter has helped to prevent our domestic production from sinking to historical lows,” said R-CALF USA Bill Bullard. “The U.S. cattle industry has not been able to keep pace with the growth in domestic beef consumption, and it is imported beef and imported cattle that continue to make up the shortfall.”
Bullard said imported cattle and beef have played a significant role in preventing the U.S. cattle herd from expanding as these imports effectively suppress domestic beef production. The increases in U.S. beef exports experienced recently are only able to minimize the negative effect that decades of annual beef and cattle trade deficits have had on the economic well-being of the U.S. cattle industry. The report shows that the cumulative trade deficit over the past 22 years in cattle and beef between the U.S. and the rest of the world is now $20 billion.
Bullard also said the unique characteristics of the cattle industry have been neglected and ignored for decades, and the U.S. must adopt a trade policy that can recognize and address:
- The highly perishable nature of U.S. fed cattle (making the value of fed cattle highly susceptible to increases in imported supplies)
- The fact that cattle have the longest biological cycle of any farmed animal (making those in the industry incapable of timely adjustment of their production schedules in response to changes in demand)
- The fact that non-participating FTA countries can nevertheless export their live cattle to a participating FTA country, with the resulting beef shipped to the U.S. duty free under the FTA (due to the inappropriate rules of origin that facilitate transshipment of cattle, and
- The fact that the U.S. beef industry is sufficiently concentrated to facilitate the beef packers’ exercise of abusive market power.
President Obama has three FTAs under consideration: the U.S.-South Korea FTA, the U.S.-Colombia FTA and the U.S.-Panama FTA. R-CALF USA has asked the president to place a moratorium on these and any future FTAs until the following conditions are met:
- Thoroughly assess the impacts that current FTAs have had, and are having, on the profitability and viability of independent U.S. cattle producers and take into account the market concentration and cattle procurement practices in the industry, as well as the perishable nature of live cattle and the cyclical nature of the live cattle industry in the assessment.
- Revise the current standard of “substantial transformation” used to determine a product’s country-of-origin for trade purposes by establishing that the origin for beef and products derived from cattle shall be the country where the animal from which the beef is derived was born, raised and slaughtered, which also shall be the only beef eligible for the U.S. grade stamp.
- Reverse the United States’ recently weakened disease import standards and food safety standards by prohibiting imports from countries where pernicious diseases are known to exist and by requiring monthly inspections of foreign meat establishments and requiring those establishments to meet food safety standards that are at least equal to those of the United States.
- As required in the Trade Act of 2002, incorporate special rules that include both volume-based and price-based safeguards in recognition of the perishable and cyclical nature of cattle and beef, that are applicable to both cattle and beef, and that they be automatic in application.
- Designate cattle and beef as like/kind products and recognize that beef is imported in two distinct forms: pre-slaughtered beef (live cattle) and post-slaughtered beef (beef).
“This report clearly shows that the export hype created by USDA and conventional industry analysts regarding increased exports is based on only half the trade equation – you can’t measure the impact of trade on an industry when you only report and measure exports, particularly when our U.S. cattle industry has such a long history of being a net beef and cattle importer,” Bullard concluded. “Cattle producers deserve much more than the propagandized message that these industry analysts are disseminating in their attempt to persuade them to make no changes to current trade policy.”