Trade Policy for a Dynamic U.S. Pork Industry

Laurie HuenekeDirector of International Trade Policy, Sanitary and

Technical AffairsNational Pork Producers Council

BIVI Summer Health Seminar ● Wrightsville Beach NC August 10, 2012

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U.S. Pork ExportsCanada FTA

NAFTA(Mexico)

WTO Uruguay Round(Japan & South Korea)

U.S. -Taiwan Pork Deal

ChinaWTO Accession

Russia Pork TRQs

Australia FTA

DR-CAFTA

U.S. - Korea

U.S. - Colombia

U.S. Pork Exports

2011 EstimatedPercent Exported: 23% (Muscle Meat Only)27% (Plus Variety Meat)Export Value per Hog: about $55About 25 percent higher than 2010

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U.S. Pork ExportsPercentage of Production

% Exported

Country/Region 2010 2011 % Change 2010 2011 % Change

Japan 434,799 493,315 13% 1,645,254 1,962,674 19%

Mexico 545,914 537,531 -2% 986,987 1,041,998 6%

Canada 183,027 206,278 13% 618,325 737,594 19%

China/Hong Kong 294,171 483,323 64% 462,665 909,954 97%

Russia 82,902 69,382 -16% 204,345 217,076 6%

South Korea 86,970 188,307 117% 189,801 497,089 162%

Australia 52,449 64,351 23% 148,422 204,637 38%

ASEAN 66,618 53,471 -20% 134,457 129,175 -4%

Central and South America 59,696 72,172 21% 142,206 187,113 32%

Caribbean 42,806 34,147 -20% 92,586 85,652 -7%

European Union 14,993 8,228 -45% 46,695 32,042 -31%

Taiwan 31,012 26,981 -13% 56,925 53,832 -5%

Other 21,642 17,969 -17% 52,261 49,828 -5%

World Total 1,916,999 2,255,456 18% 4,780,929 6,108,664 28%

January-December January-December

U.S. Pork and Pork Variety Meat Exports

(Metric Tons) (US $1,000)Volume Value

Country/Region 2011 2012 % Change 2011 2012 % Change

Japan 209,939.9 199,062.1 -5% 790,592 869,147 10%

Mexico 220,129.0 254,059.3 15% 408,811 463,551 13%

Canada 80,335.3 91,423.8 14% 275,408 328,719 19%

China/Hong Kong 144,373.1 192,924.9 34% 212,476 389,197 83%

Russia 26,883.9 37,074.40 38% 79,750 109,547 37%

South Korea 113,565.4 77,789.6 -32% 275,397 222,804 -19%

Australia 28,819.2 29,751.0 3% 92,159 92,209 0%

ASEAN 22,856.6 17,995.9 -21% 50,804 47,250 -7%

Central and South America 29,572.1 33,398.1 13% 73,419 85,427 16%

Caribbean 14,946.1 13,976.8 -6% 35,068 34,862 -1%

European Union 3,760.7 3,369.1 -10% 14,234 9,828 -31%

Taiwan 14,762.7 8,108.0 -45% 25,722 18,195 -29%

Other 6,922.5 9,549.8 38% 20,488 26,348 29%

World Total 916,866.5 968,482.8 6% 2,354,328 2,697,084 15%

January-May January-May

U.S. Pork and Pork Variety Meat Exports

Volume Value

(Metric Tons) (US $1,000)

Free Trade Agreements (FTAs)

Free Trade Agreements• Focus now shifts to implementation of

FTAs • Korea FTA entered into force March 15,

2012– Opposition party did not take control in April– Opposition wanted certain provisions

renegotiated:• i.e. auto provisions and tariff schedules

for pork• Colombia FTA entered into force May

15, 2012

• Panama FTA expected to enter into force later in 2012

Free Trade Agreements

Why are these three FTAs important to U.S. pork

producers?

• Increase U.S. pork exports by more than $770 million annually

• Add more than $11 to U.S. live hog prices

• Generate more than 10,200 pork industry jobs

• Removal of trichinae barrier sets a precedent for addressing it in other markets

Trans-Pacific Partnership(TPP)

TPP = $$

• NPPC 1st in private sector to support• Address tariff, but real payout for U.S.

pork is resolving sanitary (SPS) issues– Trichinae risk mitigation requirements– Ban on products due to PRRS or PMWS– Ban on the use of pathogen reduction

treatments (PRTs)– Limited plant approvals for export– Residue level differences for vet drugs

TPP

• Vietnam market potential = $600 million• Malaysia market potential = $100 million • Mexico and Canada were invited to join the TPP

negotiations in June 2012• Japan expressed interest in joining negotiations in

Nov. 2011 – U.S. and Japan continuing consultations

• U.S. officials have highlighted outstanding issues to Japan’s entry

– NPPC supports Japan’s entry as soon as possible• Just finished the 13th Round of negotiations in San

Diego, July 2012• Next Round in September, Leesburg, VA

TPP

Japan & TPP

U.S.-European Union FTA

U.S.-EU FTA• U.S.-EU Working Group considering options to

increase trade through a reduction of barriers – a possible FTA

• EU has PTAs, not FTAs – Must include agriculture• NPPC led coalition letter with 49 ag orgs and

businesses• NPPC filed comments on EU pork barriers

– TRQ smaller than Uruguay Round minimum access– Ban on Ractopamine– Trichinae mitigation– Prohibition on pathogen reduction treatment– Plant approvals

• U.S. and EU leaders have urged the working group to reach a recommendation on negotiations later this year

Codex Alimentarius

Codex Alimentarius• International standard setting body for food safety

and harmonization of trade standards• Ractopamine hydrochloride went through the

process, found to be safe THREE times by international independent scientists, approved for use in 26 countries, and held at final step for 4 years

• Outreach and coordination within US and outside of US

• Final international standards adopted in July 2012– Beef and pork muscle, fat, liver, kidney

• Countries not obligated to adopt standards, only a guideline

• Increasing importance of Codex due to trading partners adopting for domestic and international trade

South Africa

South Africa• South Africa notified the WTO that it is imposing

additional requirements on pork from countries with PRRS, including the U.S.

• PRRS is not a food safety issue and does not pose a risk to human health

• NPPC will be advocating for South Africa to reconsider their proposed requirements and not move forward with implementation of this unscientific barrier to trade.

• Also impose a stringent time/temp requirement• NPPC working with USG to renegotiate pork

export certificate• If lift all barriers, market increases $40 million

Mandatory Country of Origin Labeling (MCOOL)

MCOOL

• U.S. Mandatory Country-Of-Origin Labeling law found in violation of the United States’ WTO trade obligations

• U.S. appealed WTO Panel decision in late March

• An Appellate Body decision due late June• Risks retaliation from Canada and Mexico

if U.S. does not comply

MCOOL

Nov. 18, 2011WTO: MCOOL ViolatesU.S. WTO Obligations

Mar. 23, 2012U.S.: Appealed

WTO Ruling

June 29, 2012WTO: Upholds

Nov. 2011 Ruling

July 23, 2012 Implementation Period

Begins(Avg. 12-15 months)

July - October 2013Implementation

Period Ends

May 2014Compliance Panel

Concludes

November 2014 - If the United States has failed to comply, the retaliation process can commence May or June 2015 - retaliation award should be issued

Russia’s WTO Accession

Meat Exports to Russia

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U.S. Meat Exports to Russia, 2005-2011 (Quantity)

Pork

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Poultry

Russia’s WTO Accession

Russia Political Situation• Presidential election was in March 2012• Vladimir Putin returned as president• Putin faces a new political and economic environment

Timeline• November 10, 2011, Russian WTO Accession Working Party concluded• Approved at WTO Ministerial Conference, December 15-17• Will become a member of the WTO on August 22• Congress must pass Russia Permanent Normal Trade Relations

(PNTR) in order to get all the benefits of Russia’s WTO accession.

Russia’s WTO Accession

Working Party Report for Pork• Significant achievement with TRQs

• Global 400,000 MT with no country specific TRQ, plus 30,000 MT trimmings.

• In-quota tariff rate of 0%.• Out-of-quota rate of 65% (down from 75%).• TRQ will be replaced by a flat top rate of 25% as of January 1,

2020.

• However, we need more on SPS!!

TRQ Level (MT) Global (Country Specific) In-Quota Rate Out-Quota Rate

Pork 400,000 Global 0% 65%

Beef 560,000 Global (U.S. 60,000 MT) 15% 55%

Poultry 350,000 Global (EU 90,000 MT) 25% 80%No set phase out for Beef & Poultry TRQs

Pork TRQ will be replaced by a flat tariff of 25% on of January 1, 2020.

Russia—SPS Barriers

• Freezing requirements for trichinae, do not allow fresh/chilled

• Zero tolerance for pathogens• Zero tolerance for tetracyclines• Do not recognize systems-based inspection &

certification/equivalence• Threatening ban on use of ractopamine

Russia

Why is Russia’s WTO accession important to U.S. pork producers?

• Without SPS commitments from Russia the beneficial TRQs mean very little. NPPC trying to get a bilateral SPS deal.

• In 2008, prior to Russia’s actions, U.S. pork reached a record level of over 200,000 MT. Since then exports have fallen by 60%.

• Dr. Hayes of Iowa State forecasts U.S. pork exports to be at least $400 million per year the next few years – IF Russia stops using illegitimate SPS measures to limit U.S. pork.

China

• Domestic pork consumption 50 million (MT)

• Estimated that the market for U.S. pork in China could be well over 1,000,000 MT.

• U.S. pork imports are constrained by:• Ban on the use of ractopamine in imported pork• Discriminatory value added tax (VAT)• Large subsidies to domestic producers• Other restrictive practices

• U.S. pork imports through the roof in 2011.• China: $713 million• China/HK: $909 million

China

Comparison of Production

China$113

USA$63

Dollars per Hundredweight

Feed costin China: $61

China

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Net Chinese Pork Imports as a Percent of Chinese Pork Consumption

Why important to U.S. pork producers?

Impact of Additional Chinese Imports of U.S. Pork on the US Economy

Additional Imports as a Percent of Chinese Consumption

Economic Indicators One Quarter

Percent One Half Percent

One Percent Five Percent

US Pork Export Value (Thousands Dollars)

267,173 534,346 1,068,693 5,343,463

US Pork Export Volume (Thousand Metric Tons - CWE)

125.13 250.25 500.50 2,502.50

Total U.S. Jobs Created 6,849 13,698 27,396 136,981

Direct U.S. Pork Industry Jobs Created

3,393 6,786 13,572 67,862

Share of U.S. Production (Percent)

1.24 2.49 4.98 24.90

Impact on U.S. Live Hog Prices ($/Head)

3.72 7.44 14.88 74.39

Taiwan

Taiwan• Started banning pork raised with ractopamine in 2007,

beef in 2011.• Notified to WTO in 2007 adoption of Codex draft MRL.• Some in Taiwan have indicated that it is possible to set safe

levels for ractopamine• Taiwanese pork producers are largest segment of Taiwan

agriculture. • Legislative Yuan passed legislation on beef MRLs on July

25, 2012• Maintaining all bans on the drug in pork• Department of Health reached agreement for an MRL of 10

ppb for beef, the standard adopted for muscle by Codex in July

• Taiwan is concerned TIFA is stalled while rest of the region is negotiating trade deals without them

• Must address both beef and pork ractopamine MRLs for TIFA to restart

Thailand

Thailand

• Ban on ractopamine despite their FDA risk assessment that it is safe.

• Dept. of Livestock and Development rarely grants import licenses for U.S. pork with no justification.

• Import duties range from 30% to 40%.

• Import permit fee for pork– 5 Baht per kg or US$162 per MT

• Removing these barriers will result in annual U.S. pork exports of $30-35 million.

Japan’s MHLW PositiveList of Vet Drugs

Japan’s MHLW Request• Japan’s Ministry of Health, Labor and Welfare

(MHLW) is asking for scientific data for on-going work to develop a negative list

• Over 300 compounds on list and 6 compounds on list approved and used in U.S. pork production

• Working with FAS, USTR, AHI & individual companies to submit data to ensure compounds not banned by Japan 1) Altrenogest – Merck 2) Bacitracin – Pfizer 3) Carbadox – Phibro

4) Neomycin – Pfizer 5) Sulfachloropyridazine – BI6) Virginiamycin – Phibro

Thank you