Current Issue Review - Library of Parliament · 79-14E Current Issue Review BEEF IMPORTS: REGULATION LEONARD A. CaRISTIE CONTROL BY OR LEGISLATION Science and Technology Division

79-14E

Current IssueReview

BEEF IMPORTS:

REGULATION

LEONARD A. CaRISTIE

CONTROL BY

OR LEGISLATION

Science and Technology Division

Library ofParliamentBibliothequedu Parlement

14 September 1979Reviewed 13 January 1982

ResearchBranch

T’~{°’~

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N.B. Any substantive changes in this Review which have been made sincethe preceding issue are indicated in bold print.

CE DOCUIENT EST AUSSIPUBLI~ EN FRAN~AIS

aCANADA

LIBRARY OF PARLIAMENT

BIBLIOTHEOLJE DU PARLEMENT

BEEF IMPORTS: CONTROL BY REGULATION OR LEGISLATION

ISSUE DEFINITION

The beef industry is of major importance in the agricultural

and manufacturing sectors of the Canadian economy. During the period 1976—

1980, the marketing of cattle and calves constituted about 23% of the total

national sales of farm products. With shipments valued at over $7 billion in

1980, slaughtering and meat processing is the fourth largest manufacturing

industry in Canada. International trade is an important aspect of the

industry, by which it is closely linked to the American market and by which we

obtain needed supplies of lean manufacturing beef from the Oceanic countries

to balance consumer needs for hamburger and other budget priced beef. In

1969, Canada lost its traditional position as a net exporter of beef because

of rising imports which have become a prime concern of beef producers.

The issue intensified as imports, particularly from Australia

and New Zealand, increased in quantity and in their share of domestic

consumption. In the absence of any consistently applied trade policy or

instrument to regulate beef imports, Canadian producers suffered the hazards

of a depressed market and a reduced share of the domestic market. A

consistent, long—term beef import policy is needed to provide stability in our

own beef production and that of our trading partners. Canadian producers and

their supporters believe the solution lies in beef import control legislation.

Opponents maintain that the present arrangements under the Export and Import

Permits Act are adequate to deal with excessive imports. The beef industry

wants the Federal Government to resolve the question in order to cope with a

destabilizing factor affecting the Canadian industry and that of our trading

partners, and ultimately the price of beef to the consumer.

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2

BACKGROUNDAND ANALYSIS

Beef production in Canada and the Canadian market for beef are

set within a North American context. Our production cycles closely follow

those in the United States, although with sufficient difference in timing

that the Canadian beef industry can he vulnerable to the effects of American

imports when our prices are higher or during periods of excess supply. Never-

theless, even with its imposing effects on the Canadian market, the United

States has been an important export market for feeder cattle, dressed beef

and, from time to time, surplus slaughter cattle. In trade with the United

States in both beef and slaughter cattle, Canada has more frequently been in a

net exporting position. Prior to 1969, a similar situation prevailed in

Canada’s trade in beef with all countries.

Since 1967, beef production in Australia and New Zealand has

increased substantially to meet growing demand in the international market and

has also become more closely synchronized with production in North America.

As Canadian producers began to build up their herds, in response to a grain

surplus situation and a rising market for beef, there was an increasing

opportunity for imports to meet the rising demand for lower quality beef in

the form of hamburger. That need was met in l~69 by an increase in the volume

of imported beef from Australia and New Zealand of over six times the average

quantity imported in the two preceding years. Beef imports from the Oceanic

countries continued at these elevated levels during the 1970s, even during our

recent surplus situation, claiming an increased share of Canadian beef

consumption. In the process, Canada has become a net importer of beef.

The premature collapse of the world beef cycle, following a

series of ricocheting trade restrictions precipitated in other beef importing

countries by the increase in the price of oil by OPEC in 1973, worsened the

import situation in Canada. As Oceanic beef was restricted access to the

European Economic Community and Japan, it entered Canada in increasing quanti-

ties and frequently at low prices. During this period, Canada’s beef trade

policy was a series of ad hoc responses to the problems as they arose. The

weakness of these measures and the vulnerability of the Canadian beef market

to the injurious effects of excessive imports was eventually demonstrated in


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1976. In that year, total beef imports, 90% of which originated in Oceanic

countries, reached their highest level since 1969, 311,664 thousand pounds

carcass weight basis or 11.95 per cent of domestic consumption. This occurred

with Canadian beef production at a peak and with cattle prices being

depressed. Beef producers across Canada called for legislation to give their

industry consistently applied, long—term trade protection.

A. Beef Import Situation, 1973—1981

During this period, beef imports into Canada reached critical

levels and led to calls for more formal and consistent control measures,

particularly in the form of legislation. The problem began in the last

quarter of 1973 with an unusually large number of slaughter cattle coming into

Canada from the United States in the wake of American price controls, the

subsequent backlog of marketable cattle and the deterioration of cattle prices

in the United States. Beef imports from Australia were also particularly high

in 1973, with the result that total imports of beef were running at 10.5% of

domestic consumption, or the highest level attained to that time. Slaughter

steer prices weakened in Canada and slaughter cow prices began to fall.

During 1974, our trade in beef and slaughter cattle with the

United States was on a net import basis for the second year because of the

continued imports of slaughter cattle. Lower imports of beef from the Oceanic

countries and the United States contributed to a moderate reduction in total

imports of beef and slaughter cattle. However, commercial cow slaughter

accelerated in the United States and cow prices continued to fall there.

Moreover, the price of Australian beef imported into Canada began to fail

during 1974. Slaughter cow prices in Canada continued downward during that

year and ultimately reached a level of less than half the peak prices of 1973.

Even though imports of beef and slaughter cattle had moderated in 1974, cattle

prices weakened in Canada. Our cattle cycle was on the threshold of decline

and domestic beef production was about to increase.

In 1975, Canadian trade with the United States in beef and

slaughter cattle returned to an export basis. Imports of beef from the

Oceanic countries increased, but not in sufficient volume to raise their share


BIBLIOTHEQUE CU PARLEMENT

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of domestic consumption. Nevertheless, the price of Australian boneless beef

at Montreal was now frequently less than the price of Canadian cow beef at the

same location and was entering Canada at prices often lower than in the United

States. Cow prices in Canada remained depressed. During this year, the

liquidation of the cow herd commenced in Canada and increased domestic beef

production got underway.

At the beginning of 1976, Canada was an unrestricted market for

beef imports. Imports of beef from the United States and the Oceanic coun-

tries increased greatly. In fact, total imports into Canada reached an all—

time record level in both quantity and share of domestic consumption. Imports

of beef from Australia were particularly heavy during the second and third

quarters of the year. Moreover, Australian beef continued to enter Canada

until November 1976, at prices below those in the United States. This volume

of imports arrived as Canadian beef production was running at a peak level.

Fortunately, the pressure of these imports was relieved somewhat by consider-

ably increased exports of beef and slaughter cattle to the United States.

Nevertheless, slaughter cow prices, which had rallied earlier in the year,

declined during the remainder of 1976. With an excess supply of beef from

domestic and foreign sources, slaughter steer prices also declined during the

year.

In 1977, the quantity of imported beef dropped considerably to

191,690 thousand pounds carcass weight basis and claimed 7.6% of domestic

consumption, a lower share than in 1969. This reduction of beef imports was

timely because Canadian beef production was still near the peak level of 1976

and Canada was now under a voluntary restraint agreement on exports of beef to

the United States. Even though Canadian beef production was beginning to

slacken off, the cattle cycle was still in its downward phase with continued

reduction in the number of beef cattle on farms. Exports of slaughter cattle

to the United States, which were not under voluntary restraint, continued at a

level only slightly below 1976. These exports of slaughter cattle put

Canadian net trade with all countries, in both beef and slaughter cattle, on

an export basis for the first year since 1968. Under these circumstances,

slaughter cattle prices began to strengthen during the latter half of 1977.


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In 1978, Canadian beef production continued to decline. As

permitted by the new global quota, imports of beef rose above the 1977 levels

in both quantity and share of domestic consumption, which share increased to

9.1%. The increased inflow of beef to domestic supply was offset by a

continuing high level of exports of slaughter cattle to the United States.

Canadian net trade with all countries in both beef and slaughter cattle

returned to an import basis, but at a very low level of 11,327 head of

slaughter cattle equivalent. It was the lowest level of net imports in beef

and slaughter cattle since 1969. During the first 10 months of 1978,

slaughter cattle prices increased and soon exceeded the former high levels of

1973. These improved prices would help Canadian producers to recover an

estimated loss in net income of over $400 million, during the period 1974—

1976.

Domestic beef production decreased further in 1979, by 10.3%

below the level of the preceding year, as cattle slaughter was curtailed and

the reduction in the farm inventory of beef cows began to stabilize. The

prices of slaughter steers rose sharply until June, to about $80 per 100

pounds. For the remainder of the year, under the pressure of large supplies

of pork and poultry, slaughter cattle prices levelled off at about $5.50 below

the peak prices. As beef production in the Oceanic countries and the United

States decreased, the total imports of beef declined 16.3% from the preceding

year to 180,048 thousand pounds or to 8.6% of domestic consumption. Australia

and New Zealand filled about 88% of their respective 1979 quotas. The United

States supplied only 45% of its quota. Canadian exports of chilled and frozen

beef increased some 22% over the 1978 level. However, net exports of

slaughter cattle to the United States were about 47,000 head (or 28%) lower

than the preceding year. Consequently, Canadian net trade in both beef and

slaughter cattle was on an export basis by only a narrow margin.

Contrary to initial expectation of herd rebuilding, Canadian

beef production increased in 1980 by 2.4% over 1979. The continuation of

lower production in the Oceanic countries, a weak domestic market for

manufacturing beef and devalued currency contributed to a reduction of 3.7% in

imports of fresh and frozen beef to 154,462 thousand pounds. Total imports

of beef and veal were 177,367 thousand pounds carcass weight or 8.2% of

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BIBLIOTHEQUE DU PARLEMENT

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domestic consumption. Imports of both beef and veal were well below the

global quota of 171.7 million pounds. Australia and New Zealand filled only

72% and 75% respectively of their quotas. The United States maintained

shipments at about 44% of its quota. Exports of fresh and frozen beef were

132,312 thousand pounds or 25% greater than in 1979. During 1980, exports of

111,008 slaughter cattle to the United States were some 19% below the

preceding year. Net exports of such cattle were greatly reduced by imports of

51,769 head of slaughter cattle or 2.7 times the number imported in 1979.

Nevertheless, Canada’s net trade in both beef and slaughter cattle continued

on an export basis by a small margin.

tn 1981, at mid—year, the number of beef cows and heifers for

breeding in Canada were 1% below 1980 levels and even lower in Alberta and

Ontario. Slaughter of cattle and particularly calves increased for the second

year to higher levels than in 1980. By mid—December, total inspected

slaughter of cattle was 4.6% above 1980. Beef production increased by nearly

4%.

At 19 December 1981, the imports of dressed beef totalled

117,167 thousand pounds on a product weight basis or only 0.25% over 1980.

These imports were 11% lower from Australia, 5% lower from New Zealand and 68%

higher from the United States, the principal source of this yearts increase.

The main trade problem in 1981 was the influx of slaughter cattle from the

United States, 148,608 to 13 December 1981 or the largest number since 1973.

At the same date, exports of slaughter cattle totalled 89,867. Most of the

imported cattle entered Canada, particularly Ontario, during the first four

months of 1981 and again in November and December, with a depressing effect on

Canadian prices. Consequently, trade in both beef and slaughter cattle was on

an import basis by a substantial margin.

B. Development of Import Controls

Cattle prices in the United States and Canada rapidly

deteriorated in 1974 and the Canadian Government instituted a Beef Stabiliza-

tion Program, which commenced on 12 August 1974, under the Agricultural

Stabilization Act. To implement this program, it was necessary to apply

import controls on slaughter cattle, beef and veal. Accordingly, by

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SOR/74—48l, live cattle weighing over 700 pounds and destined for slaughter

within 90 days of entry, and beef and veal in fresh and frozen form were added

to the Import Control List under the Export and Import Permits Act. Global

import quotas of 82,835 head of live cattle and 125.8 million pounds of fresh

and frozen beef and veal were applied for a one—year period commencing

12 August 1974. The quota was based on quantities equivalent to average

Canadian imports during the preceding five years. The American Government

retaliated on 16 November 1974, with quotas of 17,000 head of live cattle and

17 million pounds of beef and veal, at levels below the usual Canadian

exports. In August of 1975, import controls on live cattle were simultaneous-

ly removed by Canada and the United States. At the same time, the Canadian

quota on beef was revised for the remainder of 1975. At the end of 1975, this

phase of import controls also terminated as Canada and the United States

removed the import controls on beef and veal.

At 1 January 1976, Canada returned to an open market position

without quotas, wherein the Canadian beef industry’s only protection was

minimal tariffs of 1.54 per pound on cattle and 34 per pound on beef. Their

effect was weakened by the premium value of the Canadian dollar. Since Canada

was the only open market for exporting countries, it had created an inviting

opportunity for Oceanic exporters and Canadian importers. Oceanic beef flowed

into Canada during the second and third quarters of the year in greatly

increased quantities and at prices which continued to be lower than the

c.i.f.O-) price in New York.

In an attempt to reduce the price differential which existed

during 1975 and 1976 between Australian beef landed in Canada and the United

States, the Canadian Government entered into a price agreement with the

Governments of Australia and New Zealand, which required that the contracted

price of beef imports to Canada from each country after specified dates in

June was to he not more than 64 U.S. per pound lower than the c.i.f. price at

U.S. ports. That agreement was announced on 7 July 1976. In spite of this

action, Oceanic beef continued to enter Canada at a price differential greater

than 64 until November of 1976.

(1) c.i.f. refers to the cost, insurance and freight or charged—in—full basisfor reporting the value of imported goods.

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Finally, on 18 October 1976, action was taken under the Export

and Import Permits Act on the quantity of beef imports by the application of a

global quota of 17.5 million pounds for the remainder of the year. This

action was a direct response to the imposition of mandatory quotas on 9

October 1976 by the President of the United States under the Meat Import Act.

The Serican quota of 86 million pounds allocated to Canada, the United

Kingdom, Ireland and Belize was intended to control excessive imports from

areas which were not covered by agreements of voluntary restraint. (During

1976, as Oceanic beef was pouring into Canada and Canadian beef producers were

liquidating their herds, exports of beef and slaughter cattle from Canada to

the United States had greatly increased, resulting in our inclusion in the

mandatory quota.) In December, Canada had to negotiate a voluntary restraint

agreement with the United States for the export of 75 million pounds of beef

and veal during 1977. In return, on 23 December lQ75, Canadian quotas were

established for the voluntary restraint of beef imports from the United

States, Australia and New Zealand during 1977. The global quota of 144.75

million pounds for beef and veal only was allocated as follows: 24.75 million

pounds from the United States; 59.35 million pounds from Australia; and 60.65

million pounds from New Zealand.

The next phase of Canadian beef import controls began on

30 March 1978 when the Minister of Agriculture and the Minister of Industry,

Trade and Commerce announced that the Federal Government had established an

ongoing formal procedure to control imports of beef and veal. Live cattle

were not included in these import controls. Quotas were to be set under the

Export and Import Permits Act in relation to the average level of beef and

veal imports between 1971 and 1975, adjusted for changes in domestic beef

consumption since this base period. In 1978, the quotas based on that

relationship were set as follows: 25.1 million pounds from the United States;

60.2 million pounds from Australia; and 61.5 million pounds from New Zealand.

A further 1.45 million pounds was included in the global quota for imports

from other supplying countries. For 1979, the quota was raised to allow 26.25

million pounds from the United States, 63.0 million pounds from Australia and

64.5 million pounds from New Zealand. A further 1.25 million pounds from

other suppliers rounded out the global quota. These quotas are ratified by an



9

exchange of letters between the governments of the respective countries. When

this procedure was first announced, the Ministers stated that it would be used

for the next three years and its effectiveness would be evaluated during that

time. If at any time the procedure failed to give satisfactory protection to

the Canadian beef industry, the Ministers promised to introduce legislation to

control imports.

On 31 December 1979, pending the introduction and enactment of

legislation already drafted on beef import controls, the Minister of Agricul-

ture and the Minister of Industry, Trade and Commerce announced that the

maximum level of beef and veal imports into Canada in 1980 was 171.7 million

pounds. The allocation of that total was 69.7 million pounds to Australia,

71.3 million pounds to New Zealand, 29.0 million pounds to the United States

and 1.7 million pounds reserved for new entrants. This quota was based on a

counter—cyclical formula contained in the draft legislation. The maintenance

of the higher quota was subject to the establishment of satisfactory agree-

ments on voluntary restraint with the exporting countries, otherwise imports

would revert to the 1979 level of 155 million pounds.

In the Tokyo Round of trade negotiations for the General Agree-

ment on Tariffs and Trade, concluded in July 1979, the Canadian Government

agreed to guaranteed minimum access for beef and veal with a minimum import

quota of 139.2 million pounds of fresh, chilled and frozen beef and veal from

all countries, to come into effect in January 1980. This quota will be

increased annually in proportion to population growth. In addition, Canadian

and American tariffs on imports of feeder cattle and several categories of

beef and veal, canned beef and by—products will he reduced in three stages

between 1980 and 1982.

On 31 December 1980, the Minister of Agriculture and the

Minister of Industry, Trade and Commerce announced that there will be no

restrictions on beef and veal imports into Canada during 1981. However, this

decision will be reviewed when the Meat Import Act is enacted, or if the

United States applies restrictions on beef imports, or if any other relevant

factors change.

An announcement on the import quotas which may be established

under Bill C—46 will be given after a decision is made by the Minister of

Agriculture on the need for import restrictions in 1982 and on any changes in

domestic beef marketing systems.

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C. Issues To Be Resolved

The prime issue to be resolved is between the adequacy of the

control mechanism under the Export and Import Permits Act or the need for

specific legislation to control beef imports. On the route to specific

legislation, two of the more contentious issues are the inclusion of live

cattle and the choice of a counter—cyclical formula to regulate imports in

relation to domestic needs and supply.

Proponents of the control procedure for the establishment of

quotas under the Export and Import Permits Act maintain that, if used

decisively, it could be an adequate and flexible means of dealing with unusual

trade situations. They claim that these measures are easily adapted to

changing market conditions and are not likely to result in excessive import

restriction. However, until the establishment on 30 March 1978 of a new

program of annual import quotas, the application of control measures under

this Act had been indecisive and had taken place after imports reached unusual

or even harmful levels. This may have occurred because the Act does not

contain provisions on the price or quantity of imports which determine the

application of control measures. In the event that imports exceed an agreed

quota, Canada would enter into consultation with the respective exporting

country and could then move from a general import permit basis to individual

import licensing at the discretion of the Minister of Industry, Trade and

Commerce. The new control program did not encounter unusual trade circum-

stances to test its adequacy. Moreover, the fact that it could be readily

changed to suit conditions, consumer demands or the lobbying of exporting

countries worried cattlemen.

The experience of recent years has made these deficiencies very

evident to beef producers. Consequently, they have concluded that only

specific legislation with mandatory restrictions will give them adequate

protection from unexpected beef imports. The Standing Senate Committee on

Agriculture agreed with their conclusion and recommended that legislation be

enacted to regulate the importation of beef, veal and live slaughter cattle.

The Committee noted that a beef import policy was a necessary prerequisite and

an essential element in the achievement of long—term stability in the Canadian

beef industry. The objectives of the proposed import policy should be as

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follows: (1) to assist Canadian producers to maintain a viable beef industry

which produces most of Canada’s beef requirements; (2) to apply equitably to

all countries supplying Canada with beef and to provide them with the

assurance of continued access to the Canadian market; and (3) to assure

Canadian consumers that it will not be used to raise beef prices to unreason-

ably high levels. The incorporation of these principles in legislation might

overcome some of the objections to such action.

It has been proposed, as in Bill 5—13, to include live

slaughter cattle in the determination of import quotas to prevent possible

disruption of the Canadian market by American exports as in 1973 and to

regulate more closely the contribution of imports to supply. The opponents

have stated that such action does not recognize the reality of the Canadian

cattle industry being a part of the North American livestock system and of the

traditional trading pattern in which cattle have moved freely across the

border in both directions as determined largely by price differentials

influenced by the dominant American market. Furthermore, the inclusion of

slaughter cattle in legislated quotas invites American retaliation as happened

on 16 November 1974 in response to the Canadian import quota on live beef

cattle. In emergency situations, import control mechanisms that are

permissible under Article 19 of GATT could be used to control cattle imports.

The cattle trade acts as a safety valve and serves to keep prices to Canadian

consumers and beef producers in line with the North American situation. It

has been economically advantageous to Canada; during 1971—1981, the cumulative

net trade balance for commercial live cattle was over $347 million in Canada’s

favour. During 1971—1981, with six years of net imports of slaughter cattle,

net exports of slaughter cattle exceeded $27 million. For such reasons,

Canadian cattlemen and the meat packing industry oppose the inclusion of live

slaughter cattle in import quotas.

The determination of import quotas on a counter—cyclical basis

by which the quantity of imports is related inversely to domestic production

is generally accepted. It is recognized as a means of setting fair quotas

beyond a minimum access level and of providing protection to producers partic-

ularly during the liquidation phase of the cattle cycle. The recent Canadian

quotas determined under the Export and Import Permits Act were counter—

cyclical.



12

Quotas under the U.S. Meat Import Act of 1979 (P.L. 96—177),

which amends the 1964 legislation (P.L. 88—482), are now countercyclical.

Meat articles subject to import quotas under the new law include fresh,

chilled or frozen meat of cattle, goats and sheep (except lambs) and of

specified prepared beef and veal (except sausage). Imported live cattle are

not included in the quota or in the domestic production component of the quota

formula. The annual quota is determined from an historic base quantity of

1,204,600,000 pounds, representative of average annual imports during the

1968—1977, which is increased or decreased by a specified percentage. It is

the percentage that the average annual domestic commercial production of the

specified meat articles during the current calendar year and the two preceding

years are of the average annual domestic commercial production of those meats

during 1968—1977. Furthermore, the calculated quota is multiplied by a

countercyclical factor derived from the average annual per capita production

of domestic cow beef (from cow slaughter) during the current calendar year and

the preceding four years divided by the average annual per capita production

of domestic cow beef during the current calendar year and the preceding year.

However, no quota imposed by this formula for any calendar year may be less

than the guaranteed minimum access level of 1.25 billion pounds. Import

quotas determined according to the law may be modified by Presidential action

subject to conditions specified in the iegisiation.(1)

The Oceanic countries are greatly concerned about the degree of

counter—cyclical variation in the quotas calculated by any formula and the

consequent effects on meat export earnings and on their cattle cycles. They

assert that the resulting increased variation in North American imports and

the occurrence of larger import quotas during periods of herd rebuilding and

reduced supply for export could produce more severe beef cycles in Australia

and New Zealand and eventually lead to greater instability in world beef

trade.

(1) U.S. Code Congressional and Administrative News, No. 11, January 1980,p. 1291—1294, 4858—4869.


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In legislation, the chief issue to be resolved is how to

combine the variables of domestic production, consumption and population in an

appropriate formula which is related to historical average imports In a

selected base year period. The hearings on Bill 6—13, by the Standing Senate

Committee on Agriculture, and the observations of the Canadian Cattlemen’s

Association on various formulas give some appreciation of the complexity of

this problem. A complementary issue is the definition of ministerial powers

to make any permissible modifications of the formulated import quota. The

kinds of meat included in the legislation could also be an issue of some

international importance where Canada and the United States operate virtually

within a common market for livestock and meat. Bill C—46 differs from the

U.S. Meat Import Act by concentrating on fresh, chilled and frozen beef and

veal, without inclusion of meat of goats and sheep or categories of prepared

beef and veal which are in the American legislation to prevent circumvention

of their quota.

The guaranteed minimum access level for beef and veal imports,

agreed upon in the Tokyo Round of GATT negotiations, has become a concurrent

issue. Canadian cattle producers have been very critical of the initial

magnitude of the minimum import quota of 139.2 million pounds and of the

arrangement for an annual increase proportional to population growth. The

Canadian Cattlemen’s Association considers that this guaranteed access level

is proportionally too high in comparison with the fixed minimum access level

of 1.2 billion pounds agreed to by the United States. Furthermore, the

population growth factor is inappropriate in that it allows excessive growth

in the guaranteed level. They have indicated that this GAIT import agreement

has two main adverse effects: (1) the growing minimum access level cuts the

bottom half off any counter—cyclical import quota and thus partially

neutralizes the effect of the counter—cyclical formula; (2) it awards a

permanently growing share of the Canadian market to offshore suppliers. The

Canadian Cattlemen’s Association continues to press the Government to

renegotiate the guaranteed minimum access level with Australia and New Zealand

and, in the process, to remove the growth factor in order to make the Canadian

access level compatible with that of the United States.


14

PARLIAMENTARYACTION

A. Standing Senate Committee on Agriculture

On 16 December 1976, the Committee began an inquiry into the

desirability of long—term stabilization in the Canadian beef industry.

Between that date and 23 June 1977, numerous briefs were presented by producer

and marketing associations, universities and government departments at public

meetings in Ottawa and elsewhere in Canada.

On 14 October 1977, the Committee tabled an interim report

entitled “Recognizing the Realities: A Beef Import Policy for Canada”. The

report specifically recommended that Canada adopt a long—term beef import

policy and that legislation be enacted to regulate the importation of beef,

veal and live cattle for slaughter. Other recommendations indicated some of

the desired content of such legislation and proposed that the Canadian Govern-

ment also seek amendment of Article XI of the General Agreement on Tariffs and

Trade to provide for the adoption of quantitative restrictions in conjunction

with governmental measures to stabilize the supply of agricultural commodi-

ties.

The Committee’s mandate was renewed from time to time, most

recently on 28 Nay 1980 to permit the continuation of its inquiry into beef

industry problems during the 32nd Parliament. In October and November of

1980, the Committee met with livestock economists of Agriculture Canada and

with representatives of the Canadian Egg Marketing Agency to examine commodity

marketing methods. Further meetings were held in 1981 with the Alberta Pork

Producers’ Marketing Board, the Canadian Dairy Commission, the Ontario

Flue—Cured Tobacco Growers’ Marketing Board, OBEX (Ontario Beef Exchange) and

Telidon.

On 7 August 1981, the Committee published a working paper

entitled “Alternative Marketing and Stabilization programs for the Beef

Industry in Canada” which described four supply management programs and

related import controls: income stabilization modeled on the Canadian Dairy

Commission, central selling modeled on the Canadian Wheat Board, supply

management with central selling and producer—operated income stabilization

with central selling. Hearings on the Committee’s propositions were held

with several sections of the industry in Western Canada during the latter part

of 1981 and will be completed in 1982.



15

B. Bill 6—13

The Beef Import Bill, given first reading in the Senate on

20 February 1979, conferred on the Minister of Agriculture the authority to

establish and modify annual import quotas as outlined in the bill and to

allocate the annual quota by country in a defined manner. These quotas were

related on a countercyclical basis to the average annual imports existing

during the base period of 1967 to 1974 and to current needs. Four categories

of beef and veal were covered by the quota —— cold dressed carcasses, bone—in

cuts, boneless beef and live cattle excluding those weighing between 200 and

700 pounds. To protect consumers against unusual price increases, there was a

provision to increase annual quotas up to 30%, based on beef prices exceeding

a signal price. This adjustment and the establishment of a signal price was

subject to consultation with consumers and beef producer organizations.

Importation of beef would be made only under permits issued by the Minister of

Agriculture.

After debate, bill 6—13 was referred to the Standing Senate

Committee on Agriculture on 1 March 1979. Between 14 to 22 March 1979,

submissions were received from four beef producer organizations, two neat

trade organizations and the Federal department of Agriculture. When Parlia-

ment was dissolved on 26 March 1979 for the election, the hearings terminated

and Bill 6—13 died on the Order Paper.

C. House of Commons Debate on Private Member’s Motion

On 5 March 1979, the House of Commons debated a Private

Member’s Notion moved by Mr. Bert Hargrave (Medicine Hat):

That, in the opinion of this House, the governmentshould consider the advisability of introducing beefimport legislation to establish reasonable quotas on theimportation of fresh, chilled and frozen beef and veal,including provisions to relate imports counter cyclicallyto the domestic beef supply cycle, and to thereby assureconsumers of more stable supplies.


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During the short debate, practically all the arguments were in

favour of such a measure, including the countercyclical regulation of imports.

Furthermore, there were some arguments to exclude live cattle from import

controls. However, it was also noted that legislation to control beef imports

would be only of partial benefit to beef producers without further action for

the orderly marketing of beef or for assistance in the area of income

stabilization. Mr. John Wise (Elgin) stated that the intent of this motion

represented the official position of his party since September 1976.

General reference was made in this debate to two Private

Members’ Bills for beef import controls, which had been given only first

reading in the 30th Parliament: Bill C—238, a re—introduction of Bill C—443

from the preceding session, and Bill C—356.

D. Beef Import Consultative Committee

On 17 August 1979, the Minister of Agriculture announced the

establishment of a committee of Members of Parliament to consult with all

sectors of the beef industry and consumers, and to advise him on proposed heef

import legislation. The Committee was chaired by Mr. Bert Hargrave (PC —

Medicine Hat) and included four other Members from the same party. At the

time of this announcement, the Honourable John Wise, Minister of Agriculture,

said that legislation was being considered to protect both beef producers and

Canadian consumers from the instability of world markets.

The Committee held public hearings in Ottawa between 19 to

21 September 1979. A summary of 23 submissions, as well as the briefs

received and a transcript of the public hearings were transmitted to the

Minister of Agriculture.

All of the cattle producers’ organizations, United Co—opera-

tives of Ontario, the Canadian Federation of Agriculture and the Meat Packers

Council of Canada were in favour of beef import legislation in which maximum

import quotas were determined by a countercyclical formula. There was broad

support among these organizations for the principles outlined by the Canadian

Cattlemen’s Association on the legislated determination of import levels as

follows: (1) any beef import regime must take account of previous Canadian

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import levels and the historical market share of trading partners; (2) import

quotas must be predictable by domestic producers and exporting countries and

subject to consultation with participants in the trade prior to amendment; (3)

over the long—term, imports should increase in relation to domestic consump-

tion and retain their market share; (4) short—term import levels should

respond inversely to the supply of Canadian—produced beef through a linkage to

the slaughter levels of female cattle.

The Ontario Cattlemen’s Association proposed that beef imports

during the growth phase of the cattle cycle should not exceed 10% of domestic

consumption and should be less than 8% of domestic consumption during the

liquidation phase of the cycle, to avoid levels associated with former crisis

conditions. Many cattlemen’s organizations insisted that there be no

discretionary powers in the legislation or only limited discretionary powers

which should be closely defined and subject to prior consultation with

producer, industry and consumer representatives. These producer organizations

were in general agreement on the exclusion of live cattle from the legisla-

tion.

The National Farmers Union proposed a marketing board approach

under a National Meat Authority which would have regulatory powers over beef

imports, management of supply, and the marketing of livestock and livestock

products. However, if legislation is introduced, the organization favours the

inclusion of controls on live cattle and opposes discretionary adjustment of

quotas based on signal price criteria.

The Retail Council of Canada, Consumers’ Association of Canada

and the Canadian Importers Association recognized the need to safeguard the

economic viability of Canadian beef producers. They were in general agreement

that the existing Import and Export Permits Act provided adequate protection

from injurious imports while it preserved market flexibility with minimum

distortion of market forces contributing to the efficiency and competitiveness

of the beef industry. The retailers thought that further restrictions on the

importation of beef could raise inflationary pressures on the commodity. The

other two organizations proposed an advisory group of representatives from all

areas of the beef trade and predetermined guidelines on import levels to

determine annual import quotas and to facilitate speedier and more equitable

response of existing regulations to changing market conditions.


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The Australian Meat and Livestock Corporation and the New

Zealand Meat Producers Board concentrated criticism on the countercyclical

concept. They maintained that it was unrealistic to expect beef producers in

Australia and New Zealand to shift their production out of phase with Canadian

or North American cattle cycles. The probable result of such legislation

could be more exaggerated cyclical changes in prices and output in the

exporting countries to such an extent that the supply of beef could be greatly

reduced when higher levels of meat imports are needed.

B. Action in the 32nd Parliament

The Throne Speech of 14 April 1980 specifically stated that a

Neat Import Act would be introduced to protect consumers and producers.

The Meat Import Act, Bill C—46, was introduced by the Minister

of Agriculture and given first reading on 24 November 1980. On 10 April 1981,

the Bill was debated on second reading and referred to the Standing Committee

on Agriculture.

Hearings on Bill C—46 commenced on 2 June 1981. The Standing

Committee on Agriculture received briefs and evidence from several Canadian

organizations and also from the Australian Meat and Live—stock Corporation and

the New Zealand Meat Producers Board. The main comments on the bill were

concerned with modification of the formula particularly to eliminate forward

forecasting of consumption and marketings and with restrictions on the degree

of ministerial discretion to alter import quotas. In addition, the Canadian

Meat Council stated that the announcement of next year’s quotas by October 1st

would better accommodate the timing of trading and shipping arrangements from

Oceanic countries. The Canada Sheep Council requested the inclusion of mutton

in Bill C—46, parallel to the U.S. legislation of P.L. 96—177 and to indicate

the government’s intent to monitor imports of lamb and mutton. In opposition

to the legislation, the Oceanic exporters questioned the rationale of the

countercyclical theory, the choice of countercyclical components in the

formula to adequately reflect domestic beef production and the forward

forecasting of those important components. However, the Guaranteed Minimum

Access may negate countercyclical import levels during the l9SOs. Finally,

they submitted that such legislation would contravene the General Agreement on

Tariffs and Trade.


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On 26 November 1981, Bill C—46 was reported to the House of

Commons with amendments. A substantial amendment eliminated forward

forecasting of consumption and marketings from the formula enacted as follows.

The import level for the next year is equal to the five—year average of beef

or veal imports (tariff item 701—1) during 1971—75 multiplied by the ratio of

a three—year average of domestic disappearance (current year and preceding two

years) to the five—year average of domestic disappearance during 1971—75, and

also multiplied by a countercyclical factor which is the ratio of the

five—year average (current and preceding four years) of domestic cow and

heifer marketings to the two—year average (current and preceding year) of

domestic cow and heifer marketings. The import quota determined by this

formula cannot be less than the continually increasing guaranteed minimum

access level based on 139.2 million pounds in 1980, raised annually in

proportion to the increase in population. The discretionary powers of the

Minister of Agriculture to change the quota indicated by the formula remain

unchanged. The only other amendment enables the Minister to appoint temporary

substitute members to his advisory committee.

The bill as amended by the Committee passed third reading in

the House of Commons on 11 December 1981. It passed third reading in the

Senate, with some comment on ministerial powers and the omission of live

cattle, and received Royal Assent on 18 December 1981.

CHRONOLOGY

1969 — Since 1969 Canada has been a net importer of beef.Imports of beef from Australia and New Zealand increasedgreatly in 1969 and subsequent years.

1969—1976 — The beef production cycles in major trading countries(notably Australia, New Zealand, the United States andCanada) became more closely synchronized, therebyincreasing the potential for greater market instability.

21 September 1973 — To discourage excessive imports of slaughter cattle andbeef from the United States in their price controlsperiod, the Canadian Government reimposed an import tariffof 14 per pound on live cattle and 34 per pound ondressed beef.


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October 1973— — The conjuncture of balance of payments problems caused byJanuary 1974 the tremendous increase in the price of oil from the

Middle East and of imminent recession in the developedcountries, together with an excess supply of beef in theEEC, led to severe import restrictions on beef by somecountries and to the premature collapse of the world beefcycle.

2 November 1973 — Because of rapidly increasing imports of American cattle,the Canadian Government applied an import surtax of 34 perpound on live cattle and 64 per pound on dressed beef.

February 1974 — Japan slashed its beef import quota for the first sixmonths of the year by over 50%, then embargoed all beefimports until June 1975.

10 February 1974 — The Canadian surtax on live cattle and beef was eliminatedafter staged reductions from mid—January.

July 1974 — The European Economic Community embargoed the importationof beef, veal and live cattle. This ban remained ineffect until June 1975. From 1 June 1975 until 1 April1977, the importation of beef was resumed on a verylimited basis.

2 August 1974 — The Canadian Government announced a Beef StabilizationProgram to commence 12 August 1974 under the AgriculturalStabilization Act. At the same time, global import quotasof 82,835 head of live beef cattle and 125.8 millionpounds of fresh and frozen beef and veal, which were equi-valent to the preceding five—year average of imports, wereannounced effective for one year from 12 August.

8 August 1974 — Live slaughter cattle over 700 pounds and beef and veal infresh and frozen form were added to the Import ControlList under the Export and Import Permits Act.

16 November 1974 — The United States Government announced import quotas of17,000 head on Canadian live cattle, 50,000 head on livehogs, 17 million pounds on beef and veal, and 36 millionpounds of pork, to be effective for one year from 12August 1974.

March 1975 — The Canadian Commission of Inquiry into the Marketing ofBeef and Veal commenced public hearings into the organiza-tion and operation of the marketing system for thesecommodities.

7 August 1975 — The Canadian Government removed import controls on liveslaughter cattle.

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7 August 1975 — The United States Government removed import quotas onCanadian live cattle, hogs and pork.

11 August 1975 — The Canadian Government revised the import quota on beefto 48.6 million pounds from all countries for the remain-der of the year. It was allocated as follows: Australia,18.1 million pounds; New Zealand, 23.5 million pounds;United States, 7.0 million pounds.

31 December 1975 — Canada and the United States removed their respectiveimport quotas on dressed beef and veal. Imports of beeffrom Canada into the United States remained subject to the

Meat Import Law.

13 April 1976 — The Commission of Inquiry into the Marketing of Beef andVeal issued its report. Among other recommendations, itstated that the Export and Import Permits Act providedsufficient protection from undue supply and demand forcesor sudden policy changes in other countries.

July—September — While Canadian beef production was reaching peak levels1976 and Canadian cow prices were already depressed, imports of

Australian boneless beef reached record levels of 44,173thousand pounds in the third quarter and 102,627 thousandpounds during the calendar year, or about 70% over thepreceding year. More significantly, the f.o.b. price ofAustralian beef at Eastern Canadian ports was lower thanat New York and also lower than the Montreal wholesaleprice for Canadian cow carcasses.

7 July 1976 — The Canadian Government announced a price agreement withthe Governments of Australia and New Zealand related toshipments of beef and veal into Canada. Contractsconcluded after 11 June (Australia) and 18 June (NewZealand) were written at prices c.i.f. Canadian port notmore than 64 U.S. per pound below the c.i.f. price at U.S.ports. Shipments of beef and veal already loaded aboardocean vessels as of midnight 16 July were not affected.

9 October 1976 — The United States Government, under the Meat Import Law,limited the total quantity of fresh, chilled, or frozenmeat that may be imported into the United States duringcalendar year 1976 to 1.23 billion pounds. A total annualquota of 86 million pounds was allocated to Canada, theUnited Kingdom, Ireland and Belize collectively.

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18 October 1976 — The Canadian Government announced an import permit planapplied to all countries to limit the quantity of beef andveal imports, from 17 October 1976 to year end, to 17.5million pounds. Of this total, Australia was allowed 8.2million pounds, New Zealand 4.8 million pounds and theUnited States 4.5 million pounds. Once a country reachedits quota, any remaining product bona fide in transit asof 17 October 1976 was permitted entry into bonded ware-houses.

16 December 1976 — The Standing Senate Committee on Agriculture commencedhearings into the desirability of long—term stabilizationin the Canadian beef industry. In the course of a wide—ranging inquiry, opinions on international trade andlegislation to regulate beef imports were heard.

23 December 1976 — The Canadian Government announced import restrictions onfresh, chilled and frozen beef and veal from the UnitedStates, Australia and New Zealand of 144.75 million poundsin 1977. Allotments were: 24.75 million pounds from theUnited States, 59.35 million pounds from Australia and60.65 million pounds from New Zealand. These levelsincluded products held in storage in Canada as a result ofover—quota shipments which were in transit from~ Australiaand New Zealand on 18 October 1976.

23 December 1976 — The Canadian Government announced export restrictions ofbeef and veal to the United States at a level of 75million pounds in 1977.

14 October 1977 — The Standing Senate Committee on Agriculture published aninterim report entitled “Recognizing the Realities: ABeef Import Policy for Canada’t. It recommended thatParliament enact legislation to regulate the importationof beef, veal and live slaughter cattle and outlined some

of the main provisions of such legislation.

30 March 1978 — The Minister of Agriculture and the Minister of Industry,Trade and Commerce announced that, for the next threeyears, quotas would be set under the Export and ImportPermits Act in relation to the average level of beef andveal imports between 1971 and 1975, adjusted for changesin domestic beef consumption since the base period.

20 February 1979 — Bill 5—13, entitled the Beef Import Act, was given firstreading in the Senate.

14 March 1979 — The Standing Senate Committee on Agriculture commencedhearings on Bill S—li. Dissolution of Parliament occurredprior to completion of these hearings and a Committeereport.


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July 1979 — In the Tokyo Round of the Multilateral Trade Negotiationsfor the General Agreement on Tariffs and Trade (GATT), theCanadian Government made a firm commitment for aguaranteed minimum access of 139.2 million pounds of beefimported from all countries in 1980 and for an automaticannual increase in this minimum import quota based onpopulation growth. In addition, Canadian tariffs on beefand live cattle will be reduced.

17 August 1979 — The Minister of Agriculture announced the establishment ofa Beef Import Consultative Committee to meet with allsectors of the beef industry and consumers.

19—21 September — The Beef Import Consultative Committee held public hear—1979 ings in Ottawa on beef import legislation.

31 December 1979 — Pending the enactment off legislation on beef imports, theMinister of Agriculture and the Minister of Industry,Trade and Commerce announced that the maximum level ofbeef and veal imports into Canada in 1980, subject toagreement on voluntary restraint by the exportingcountries, will be 171.7 million pounds.

14 April 1980 — The Throne Speech specifically promised the introductionof a Meat Import Act.

24 November 1980 — The Meat Import Act, Bill C—46, received first reading inthe Rouse of Commons.

31 December 1980 — The Minister of Agriculture and the Minister of Industry,Trade and Commerce announced that, subject to furtherreview, there will be no restrictions on beef and vealimports into Canada during 1981.

10 April 1981 — The Meat Import Act, Bill C—46, received second readingand was referred to the Standing Committee on Agriculture.

2 June 1981 — Hearings on Bill C—46 commenced before the House ofCommons Standing Committee on Agriculture.

26 November 1981 — The bill was reported to the House of Commons withamendments.

11 December 1981 — Bill C—46 passed third reading in the Rouse of Commons.

18 December 1981 — Bill C—46 passed third reading in the Senate and receivedRoyal Assent.

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SELECTED REFERENCES

(1) “Are new beef import rules an honest Tory mistake?’~, Leader Post(Saskatoon), 8 August 1979. (Library of Parliament Vertical File)

(2) Bryant, L.I., “Implications to N.Z. of changes to U.S. beef importregulations”, The New Zealand Meat Producer, Vol. 7, No. 7, June 1979,p. 4—6. (An argument against countercyclical quotas)

(3) Canada, Agriculture Canada, Beef and Veal Imports for 1981, NewsRelease, Ottawa, 31 December 1980.

(4) Canada, Commission of Inquiry into the Marketing of Beef and Veal,Report, Minister of Supply & Services, Ottawa, 1976, p. 137—140.(Library of Parliament +HD/9433/C22/A51l975/Al2)

(5) Canada, Rouse of Commons, Debates, 5 March 1979, p. 3820—3827.

(6) Canada, Senate, Standing Committee on Agriculture, Minutes of Proceed-ings and Evidence, 2nd Session, 30th Parliament, 16 December 1976—23June 1977, Issue Nos. 1—10, 15—18, 20.

(7) Canada, Senate, Standing Committee on Agriculture, Recognizing theRealities: A Beef Import Policy for Canada, Interim Report of theInquiry into the Desirability of Long—Term Stabilization in the CanadianBeef Industry, 2nd Session, 30th Parliament, 14 October 1977. (Libraryof Parliament J/103/H7/1976—77/A32/A122)

(8) Canada, Senate, Debates, 22 February 1979—1 March 1979.

(9) Canada, Senate, Standing Committee on Agriculture, Minutes ofProceedings and Evidence [on Bill 5—13], 4th Session, 30th ~artiament,14 March 1979—22 March 1979, Issue Nos. 3—6.

(10) Dodds, Harold, “Let’s have a maximum to go with the minimum”, Cattlemen,Vol. 42, No. 8, August 1979, p. 6. (Library of Parliament NC)

(11) Rockaday, Terry, “The Real Cost of Oceanic Imports”, Cattlemen,Vol. 40, No. 12, December 1977, p. 12. (Library of °ariiament NC)

(12) Marshall, R.G., An Assessment of Demand, Supply and Trade RelationshipsAffecting Cattle, Beef, Hogs and Pork Prices in Canada, Food PricesReview Board, Ottawa, 1974. (Library of Parliament H13/235/C2/A197/B4/M37)

(13) “What the Parties Say about Beef”, Cattlemen, Vol. 42, No. 5, May 1979,p. 34—36. (Library of Parliament NC)

(14) Canada, Beef Import Consultative Committee, Briefs Received andTranscript of Public Proceedings, Ottawa, September 1979, 405 p.(Library of Parliament HD19433/C22/A51l979/Al)

Documents

Current Issue Review - Library of Parliament · 79-14E Current Issue Review BEEF IMPORTS: REGULATION LEONARD A. CaRISTIE CONTROL BY OR LEGISLATION Science and Technology Division