International Trade and the U.S. Cattle Industry Terence P. Stewart Law Offices of Stewart and Stewart R-CALF USA Sixth Annual Convention Denver, Colorado

International Trade and the International Trade and the U.S. Cattle IndustryU.S. Cattle Industry

Terence P. StewartLaw Offices of Stewart and Stewart

R-CALF USA Sixth Annual ConventionDenver, Colorado

January 19 – 21, 2006

Overview

I. Overall Trade Trends in Cattle and Beef

II. Major Issues in 2006• BSE Issues• World Trade Organization• Free Trade Agreements

Overview

• Challenges facing the U.S. cattle industry• International market distortions – the focus of this

presentation• Consumer demand and the sector’s vulnerability to

health and safety concerns• Structure of the domestic market and concentration

• In addition to trade policy, domestic policy solutions are needed

• 2007 Farm Bill will be important opportunity

Overview

• 2007 Farm Bill• Current Farm Bill expires July 2007• Level and type of farm payments may depend on

outcome of the Doha Round at the WTO• Outcome of the Doha Round likely not known until end-

2006 at the earliest

• Groups pushing for one-year extension• American Farm Bureau Federation• National Farmers’ Union

• R-CALF USA position• December 2005 comments• Market competition; health and safety; consumer

information; trade impacts and support for the sector

I. Trade Trends: Overview

• U.S. Trade Deficit in Cattle & Beef

• Global Exporters and Importers

• Global Market Distortions Persist

I. Trade Trends: U.S. Deficit

• U.S Exports• U.S. cattle and beef exports down sharply since

discovery of animal with BSE in December 2003

• U.S. Imports • U.S. cattle imports still below 2002 level• U.S. beef imports steady and rising slightly

• Net U.S. trade deficit in cattle and beef• 2005 projected deficit slightly higher than 2004:

$3.4 Billion

I. Trade Trends: U.S. DeficitOverall U.S. Agriculture Trade

* annualized from Jan. - Oct. data

-20

-10

0

10

20

30

40

50

60

70

80

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

*

Bill

ion

US

$

Exports Imports Balance

Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

I. Trade Trends: U.S. DeficitOverall U.S. Agriculture Trade – Billion US$

1990 1991 1992 1993 1994 1995 1996 1997

Exports 48 48 51 51 55 65 69 65

Imports 29 30 32 32 35 38 41 45

Balance 19 18 20 18 20 28 28 20


1998 1999 2000 2001 2002 2003 2004 2005*

Exports 59 55 59 60 58 65 67 69

Imports 47 49 52 52 55 61 67 73

Balance 12 6 7 8 3 4 0 -7


* 2005 data annualized from Jan. – Oct. data

I. Trade Trends: U.S. DeficitU.S. Trade in Cattle and Beef – Value


-4

-3

-2

-1

0

1

2

3

4

5

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

*

Bill

ion

US

$



I. Trade Trends: U.S. DeficitU.S. Trade in Cattle and Beef – Billion US$

1990 1991 1992 1993 1994 1995 1996 1997

Exports 1.57 1.816 2.12 2.0654 2.4365 2.6782 2.4885 2.6101

Imports 2.643 2.643 2.906 3.0465 2.7171 2.6277 2.2493 2.5347

Balance -1.073 -0.828 -0.786 -0.9811 -0.2805 0.0506 0.2392 0.0754


1998 1999 2000 2001 2002 2003 2004 2005*

Exports 2.4141 2.7707 3.3077 2.82 2.6188 3.1004 0.5124 0.8611

Imports 2.7555 2.9111 3.3629 3.9787 3.9617 3.2308 3.8514 4.3098

Balance -0.3413 -0.1404 -0.0552 -1.1587 -1.3428 -0.1305 -3.3391 -3.4487



I. Trade Trends: U.S. DeficitU.S. Trade in Cattle – Value


-1.5

-1

-0.5

0

0.5

1

1.5

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

*

Bil

lio

n U

S$

Exports

ImportsfromCanada

ImportsfromMexico

Balance


I. Trade Trends: U.S. DeficitU.S. Trade in Cattle – Billion US$

1990 1991 1992 1993 1994 1995 1996 1997

Exports 0.024 0.095 0.122 0.0751 0.1095 0.0555 0.0719 0.1396

Imports Canada

0.555 0.588 0.901 0.91 0.798 0.862 1.000 0.944

Imports Mexico

0.419 0.361 0.341 0.43 0.352 0.546 0.122 0.177

Balance -0.95 -0.854 -1.12 -1.264 -1.041 -1.357 -1.05 -0.986


1998 1999 2000 2001 2002 2003 2004 2005*

Exports 0.1308 0.1558 0.2502 0.2455 0.1088 0.0348 0.0048 0.003

Imports Canada

0.938 0.708 0.746 1.047 1.14 0.392 0.001 0.52

Imports Mexico

0.206 0.293 0.405 0.408 0.301 0.47 0.543 0.507

Balance -1.014 -0.845 -0.901 -1.21 -1.332 -0.828 -0.539 -1.024



I. Trade Trends: U.S. DeficitU.S. Trade in Cattle – Volume


-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

*

Mil

lio

n H

ea

d

Exports

ImportsfromCanada

ImportsfromMexico

Balance


I. Trade Trends: U.S. DeficitU.S. Trade in Cattle – Million Head

1990 1991 1992 1993 1994 1995 1996 1997

Exports 0.065 0.21 0.254 0.112 0.149 0.072 0.131 0.249

Imports Canada

0.871 0.903 1.271 1.201 1.009 1.132 1.509 1.378

Imports Mexico

1.261 1.034 0.982 1.297 1.072 1.652 0.456 0.669

Balance -2.066 -1.727 -1.998 -2.385 -1.933 -2.712 -1.834 -1.799

1998 1999 2000 2001 2002 2003 2004 2005*

Exports 0.257 0.313 0.466 0.66 0.226 0.082 0.029 0.019

Imports Canada

1.313 0.984 0.963 1.3 1.682 0.508 0.003 0.559

Imports Mexico

0.72 0.96 1.222 1.13 0.816 1.239 1.37 1.236

Balance -1.776 -1.63 -1.719 -1.77 -2.272 -1.665 -1.344 -1.776



I. Trade Trends: U.S. DeficitU.S. Trade in Beef – Value


-4

-3

-2

-1

0

1

2

3

4

5

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

*

Bil

lio

n U

S$



I. Trade Trends: U.S. DeficitU.S. Trade in Beef – Billion US$

1990 1991 1992 1993 1994 1995 1996 1997

Exports 1.545 1.721 1.998 1.941 2.251 2.592 2.4473 2.5729

Imports 1.669 1.695 1.664 1.705 1.565 1.214 2.2481 2.5337

Balance -0.123 0.026 0.334 0.236 0.686 1.378 0.1992 0.0392

1998 1999 2000 2001 2002 2003 2004 2005*

Exports 2.3821 2.7526 3.2866 2.7953 2.5972 3.0709 0.5114 0.8573

Imports 2.7523 2.9047 3.3567 3.9696 3.9539 3.2263 3.8513 4.3098

Balance -0.3702 -0.152 -0.0702 -1.1743 -1.3567 -0.1554 -3.3399 -3.4526



I. Trade Trends: U.S. DeficitU.S. Trade in Beef – Volume


-1.5

-1

-0.5

0

0.5

1

1.5

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

*

Mil

lio

n M

T



I. Trade Trends: U.S. DeficitU.S. Trade in Beef – Million MT

1990 1991 1992 1993 1994 1995 1996 1997

Exports 0.34 0.396 0.436 0.411 0.5175 0.5817 0.5969 0.6765

Imports 0.699 0.71 0.729 0.7201 0.7144 0.6419 0.6407 0.7329

Balance -0.359 -0.314 -0.292 -0.3091 -0.1969 -0.0602 -0.0438 -0.0564

1998 1999 2000 2001 2002 2003 2004 2005*

Exports 0.6961 0.7581 0.8586 0.7565 0.8013 0.8222 0.1357 0.2039

Imports 0.8229 0.8806 0.9454 0.9875 0.987 0.8984 1.1056 1.1065

Balance -0.1267 -0.1225 -0.0868 -0.231 -0.1857 -0.0762 -0.9699 -0.9097



I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S.

• 80% of U.S. beef imports from Canada, Australia and New Zealand• Canada has unlimited access under NAFTA• Australia meets or exceeds quota (and pays out of quota tariff

on excess) nearly every year – Australia quota to expand over 18 years with new FTA

• New Zealand meets quota nearly every year

• Beef imports from Uruguay growing rapidly• U.S. market re-opened to Uruguayan exports in June 2003 after

FMD outbreak resolved • Uruguay catching up to New Zealand in 2004 – 2005• Uruguay sent six times its quota allocation in 2004; nine times

in 2005• Paying extra to ship large quantities out of quota

I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S.


0

200

400

600

800

1,000

1,200

2000 2001 2002 2003 2004 2005*

Th

ou

san

d M

T

Total

Uruguay

N Zealand

Australia

Canada


I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. – Thousand MT

2000 2001 2002 2003 2004 2005

Canada 328 351 382 253 355 381

Australia 342 384 378 376 373 318

New Zealand

212 212 200 213 213 187

Uruguay 19 10 4 26 128 186

Total 946 988 991 899 1,106 1,107



I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. – Herd Sizes

0

100

200

300

400

500

600

700

800

900

1000

Australia Canada New Zealand Uruguay

Ex

po

rts

to

US

, th

ou

sa

nd

MT

0

5

10

15

20

25

30

He

rd s

ize

, m

illi

on

he

ad

Beef Exports to U.S. Herd Size

Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats; FAOSTAT

I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. – Herd Size

Australia CanadaNew

ZealandUruguay

2005* Exports of Beef to U.S.

(thousand MT)318 381 187 186

2004 Herd Size (million head)

26.42 14.66 9.54 11.7



I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. - Uruguay

-30

-25

-20

-15

-10

-5

0

5

10

15

20

2002 2003 2004 2005 Jan. - Oct.

Pe

rce

nt

Difference betweenUruguay AUV andWorld AUV withoutduties

Difference betweenUruguay AUV andWorld AUV with duties

Uruguay's Share ofU.S. Imports


I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. – Uruguay

2002 2003 20042005,

Jan.– Oct.

Uruguay’s Share of U.S. Beef Imports

0.00% 2.91% 11.59% 15.90%

Difference between Uruguay AUV and World AUV

without duties- 5.15% - 15.22% - 22.46% - 23.32%

Difference between Uruguay AUV and World AUV

with duties- 4.40% - 9.91% - 9.20% - 9.44%


I. Trade Trends: U.S. DeficitMajor Importers of U.S. Beef

• Total U.S. beef exports down 75% from 2003 to 2005• Two major consumers of U.S. beef exports still fully or partially closed • Together, Japan and Korea consumed 40% of U.S. beef exports in 2003

• Japan• Partial lifting of ban this year, effective late December 2005• U.S. beef from animals 20 months and under allowed

• Korea• Discussions on lifting the ban undertaken in prelude to possible FTA talks• Korea has agreed to open to boneless U.S. beef from animals 30 months

and younger by late March 2006, after import procedures are complete• Bone-in beef, variety meats and offal still banned – accounted for 50% of

U.S. exports to Korea

• Other Key Markets• Hong Kong: beef from animals 30 months and under allowed, December

2005• Taiwan: still closed

I. Trade Trends: U.S. DeficitMajor Importers of U.S. Beef

* annualized from

Jan. - Oct. data

0

50

100

150

200

250

300

Japan Korea Mexico Canada Taiwan HongKong

Th

ou

sa

nd

MT

2003

2005*


I. Trade Trends: U.S. DeficitMajor Importers of U.S. Beef – Thousand MT

U.S. Exports

Japan Korea Mexico Canada TaiwanHong Kong

Total

2003 296 207 192 63 16 15 822

2005* 0 0 145 29 7 0 204



I. Trade Trends: U.S. DeficitMajor Exporters of Cattle to U.S.

• More than 99.99% of U.S. cattle imports are from Canada and Mexico

• Canada• Imports from Canada fall sharply after border closes in

May 2003, stop in 2004, rise after border re-opens in July 2005

• Monthly imports from Canada since July opening still below 2002 levels

• Mexico• Made up somewhat for Canada’s decline

• Grew 68% from 2002 to 2004

• Back down a bit in 2005 as Canada resumes exports to U.S.

I. Trade Trends: U.S. DeficitMajor Exporters of Cattle to U.S.

0

0.5

1

1.5

2

2.5

3

2000 2001 2002 2003 2004 2005*

Mil

lio

n H

ea

d

MexicoCanada


* 2005 data annualized from Jan. – Nov. data

I. Trade Trends: U.S. DeficitMajor Exporters of Cattle to U.S. – Million Head

2000 2001 2002 2003 2004 2005*

Canada 0.963 1.3003 1.6816 0.5081 0.003 0.559

Mexico 1.2222 1.1301 0.8165 1.2392 1.3703 1.236



I. Trade Trends: U.S. DeficitMajor Exporters of Cattle to U.S. – Herd Sizes

0

250

500

750

1,000

1,250

1,500

1,750

Canada Mexico

Ex

po

rts

to

US

, th

ou

sa

nd

he

ad

0

5

10

15

20

25

30

35

He

rd S

ize

, m

illi

on

he

ad

Cattle Exports to U.S. Herd Size


I. Trade Trends: U.S. DeficitMajor Exporters of Cattle to U.S. – Herd Sizes

Canada Mexico

2002 Cattle Exports to U.S. (million head)

1.682 0.817

2004 Herd Size (million head)

14.66 31.477


I. Trade Trends: U.S. DeficitMajor Importers of U.S. Cattle

• Over 98% of U.S. cattle exports are to Canada and Mexico• U.S. cattle exports have always been small in relation to

cattle imports• From 1993 to 2002, U.S. imported 13 animals for each

one exported, on average

• Border closures due to BSE have eliminated U.S. cattle exports• Even as U.S. continues to import cattle from Canada and

Mexico, though at lower levels than before

I. Trade Trends: U.S. DeficitMajor Importers of U.S. Cattle

0

100

200

300

400

500

600

700

2000 2001 2002 2003 2004 2005*

Th

ou

sa

nd

He

ad

MexicoCanada

Source: Dept. of Commerce, Census Bureau, Foreign Trade StatsSource: Dept. of Commerce, Census Bureau, Foreign Trade Stats

* 2005 data annualized from Jan. – Nov. data

I. Trade Trends: U.S. DeficitMajor Importers of U.S. Cattle – Thousand Head

2000 2001 2002 2003 2004 2005*

Canada 348 295 132 66 28 19

Mexico 118 364 94 16 1 0



I. Trade Trends: Global Exporters

• U.S. losing position as global exporter

• Exporters in Latin America & Asia are growing

Export Position

Country

2000 2003 2005

1 Australia Australia Brazil

2 U.S. Brazil Australia

3 E.U. U.S. Argentina

4 Canada New Zealand Canada

5 Brazil India India

6 New Zealand E.U. New Zealand

7 Argentina Argentina Uruguay

8 India Canada E.U.

9 Uruguay Uruguay U.S.

10 Ukraine Ukraine Ukraine

• Many lead exporters are highly export-dependent


20052000

U.S.

Brazil

Australia

Argentina

Canada

India

New Zealand

Uruguay

E.U.

Other

Source: USDA, World Markets and Trade, 2004


CountryGlobal Beef Exports, 1000 MT CWE

2000 2003 2005

Brazil 492 1,175 1,850

Australia 1,338 1,264 1,400

Argentina 357 386 700

Canada 523 384 625

India 349 439 625

New Zealand 485 558 565

Uruguay 236 320 440

E.U. 545 388 300

U.S. 1,120 1,143 290

Ukraine 157 168 90


I. Trade Trends: Global ExportersExport-Orientation of Global Beef Exporters, 2005

0

20

40

60

80

100

NewZealand

Uruguay Australia Canada India Argentina Brazil Ukraine E.U. U.S.

Exp

ort

s a

s a

Pe

rce

nt o

f Pro

du

ctio

n

Source: USDA, Production and Supply Database

I. Trade Trends: Global ExportersExport-Orientation of Global Beef Exporters, 2005

CountryExports as Percent of Production

CountryExports as Percent of Production

New Zealand 84% Argentina 23%

Uruguay 77% Brazil 22%

Australia 67% Ukraine 16%

Canada 40% E.U. 3%

India 28% U.S. 3%

Source: USDA Production and Supply Database

I. Trade Trends: Global ExportersHerd Size and Exports of Global Beef Exporters, 2004/5

0

0.25

0.5

0.75

1

1.25

1.5

1.75

2

New Zealand Uruguay Australia Canada Argentina Brazil U.S.

Glo

ba

l Exp

ort

s, M

illio

n M

T

0

20

40

60

80

100

120

140

160

180

200

He

rd s

ize

, M

illio

n h

ea

d

Global Exports Herd Size

Source: USDA, Production and Supply Database; FAOSTAT

I. Trade Trends: Global ExportersHerd Size and Exports of Global Beef Exporters, 2004/5

New Zealand

Uruguay Australia Canada Argentina Brazil U.S.

2005 Global Beef Exports (million MT)

0.575 0.46 1.47 0.615 0.68 1.8 0.285

2004 Herd Size

(million head)9.54 11.7 26.42 14.66 50.768 192 94.882

Source: USDA, Production and Supply Database; FAOSTAT

I. Trade Trends: Global Importers

• U.S. is top importer, and the U.S. share of world imports is growing

CountryShare of World Beef Imports

2000 2003 2005

U.S. 28% 27% 34%

Russia 8% 14% 15%

EU 7% 9% 11%

Japan 21% 16% 13%

Korea 7% 9% 5%

• Traditional importers such as Japan and Korea have reduced consumption


20052000

U.S.

Japan

Russia

E.U.

MexicoKorea

Egypt

Philippines

Canada

Other



CountryGlobal Beef Imports, 1000 MT CWE

2000 2003 2005

U.S. 1,375 1,363 1,696

Russia 415 720 750

Japan 1,067 810 625

E.U. 368 463 550

Mexico 420 370 320

Korea 324 444 230

Egypt 236 93 155

Philippines 118 120 130

Canada 263 274 100


I. Trade Trends: Global ImportersImport-Dependence of Global Beef Importers, 2005

0

20

40

60

80

100

Taiwan HongKong

Japan Korea Bulgaria Philippines Russia Egypt U.S. E.U.

Imp

ort

s a

s a

Pe

rce

nt o

f Co

nsu

mp

tion

Source: USDA, Production and Supply Database

I. Trade Trends: U.S. DeficitImport-Dependence of Global Beef Importers, 2005

CountryImports as Percent of

ConsumptionCountry

Imports as Percent of

Consumption

Taiwan 95% Philippines 41%

Hong Kong 85% Russia 31%

Japan 59% Egypt 21%

Korea 54% U.S. 13%

Bulgaria 50% E.U. 8%

Source: USDA Production and Supply Database

I. Trade Trends: Global DistortionsHigh Foreign Tariffs; Low U.S. Tariffs

• U.S. tariff rate quotas on beef are generally more generous than other major beef importers

• U.S. import quota is four times bigger than Europe’s and three times bigger than Korea’s

• Japan has no quota, but negotiated a special beef safeguard in return, and imposes high tariffs

Country QuotaOut of Quota Tariff

U.S.

Mexico – No LimitCanada – No Limit

All Other Quotas Combined –

696,621 MT

26.4%

E.U. 140,000 MT 20%

JapanNo quota. General tariff is 38.5%, but it can be raised to 50% with imposition of

Japan’s beef safeguard

Korea 225,000 MT 41.6%

Source: U.S. HTS; WTO

I. Trade Trends: Global DistortionsLarge Foreign Subsidies

• U.S. provides no direct subsidies to cattle and beef aside from disaster relief and conservation incentives

• Other countries provide billions of dollars of subsidies to cattle and beef, undercutting U.S. producers

• Countries with subsidy programs:• Australia, Brazil, Canada, China, the European

Union, Japan, Korea, and more …

I. Trade Trends: Global DistortionsForeign Subsidies – Country Examples

Country Cattle and Beef Subsidies

Argentina- Veal slaughter ban increases beef production and

slaughter weight

Australia- Australian Wheat Board controls most wheat

exports and thus domestic feed prices

Brazil

- $3.6 billion for beef sector in 2004/2005, up 86% from 2003

- Subsidized loans and tax credits for improvements and modernization

- Export credit and promotion programs- Amazonian Development Fund includes

incentives for meat production

I. Trade Trends: Global DistortionsForeign Subsidies – Country Examples, cont.


Canada

Compensation programs during BSE:- Packer incentives to increase capacity- Financial assistance to producers as prices decline- Provincial as well as federal programsCanadian Wheat Board controls most wheat exports and thus domestic feed prices

Colombia

- FINAGRO program provides financial support to re-stock cattle herds

- Entire program gave $346 million in animal purchase credits in Jan. – Aug., 2005

I. Trade Trends: Global DistortionsForeign Subsidies – Country Examples, cont.


E.U.

- Subsidized stores and traders intervene to buy and store beef if prices fall or there is oversupply- Beef subsidies still tied to production after 2003 reforms- Hasn’t reported subsidies to WTO for years after 2002

Japan- Beef buy-back program during BSE outbreak- Deficiency payments, subsidized financing, marketing program

Korea- Government cash premiums for high-quality animals – costing $8 million in 2005- Subsidized loans to upgrade packing facilities

New Zealand

- Research and development grants to Meat New Zealand- Export credit agency support for exports of breeding cattle

I. Trade Trends: Global DistortionsMismatched Health and Safety Standards

• Forty markets remain partially or fully closed to U.S. cattle and beef due to BSE

• Some foreign standards lack sound science or fail to comply with international standards• Countries cited by USTR in the annual report on foreign

trade barriers include Argentina, Brazil, Chile, China, and Taiwan

• U.S. imposes lower standards on imports than some trading partners impose

I. Trade Trends: Global DistortionsRules of Origin, Marking & Labeling

• Many other countries require meat labeling based on animal tracking information for health purposes

• U.S. consumers cannot make informed decisions• Meat of foreign animals is deemed U.S.-origin product• Foreign meat is sold unlabeled once it is inspected, processed• USDA Grade stamp creates further confusion

• Requiring marking of animals not likely to solve current consumer information needs

• Rules of origin can also be relevant to concerns about possible transshipment

I. Trade Trends: Global DistortionsSpecial Rules for Perishable Products

• Regular trade remedies insufficient for producers of perishable and cyclical products• Speed of relief• Burden on producers• Lasting market damage of import surges, price

declines

• U.S. Congress directed USTR to negotiate special rules for these products in new agreements

I. Trade Trends: Global DistortionsSpecial Rules for Perishable Products, cont.

• Special safeguard for cattle and beef• Triggered automatically• Triggered by volume surge or price decline• Triggers based on historical volumes, prices• Ideally would treat cattle and beef as one product

• Version of beef safeguard in U.S. – Australia FTA• R-CALF USA proposed safeguard

• WTO special agriculture safeguard is similar• Applies to U.S. beef imports• On the table in Doha Round (more on this later)

I. Trade Trends: Global DistortionsCurrency Manipulation

• Concerns that foreign countries may undervalue their currency• Makes their exports to U.S. cheaper• Makes imports from U.S. more expensive• Contributes to U.S. trade deficit

• Examples• China

• Studies suggest the Yuan is undervalued by as much as 40%• Goldman Sachs: 10 – 15%• Institute for International Economics: > 25%• Manufacturers Alliance/MAPI: 40%

• There has been some very small upward movement recently• Argentina

• According to USDA, Argentina’s Peso peg deflates export prices by 14%

I. Trade Trends: Global DistortionsR-CALF USA Agenda

• Tariffs: reduce world tariffs to U.S. level

• Subsidies: eliminate trade distorting subsidies, including STEs

• Health and Safety: upward harmonization of standards

I. Trade Trends: Global DistortionsR-CALF USA Agenda, cont.

• Rules of Origin, Marking & Labeling: born, raised, and slaughtered rule and informed consumers

• Special Rules: ensure producers have effective access to effective relief

• Currency: redress currency manipulation

II. 2006 Trade Issues: Overview

• Health and Safety: BSE

• World Trade Organization: The Doha Round

• Free Trade Agreements

II. 2006 Trade Issues: BSEBans on U.S. Exports: Markets Lost Due to BSE

█ Countries with import bans

█ Countries with partial or conditional re-opening

40 Countries remain closed to U.S. beef exports due to BSE

II. 2006 Trade Issues: BSEBans on U.S. Exports: Markets Lost Due to BSE

Japan Korea Other Total

2004 - $1.15 B - $741 m - $633 m - $2.5 B

2005 - $1.15 B - $742 m - $285 m - $2.2 B

Total - $2.3 B - $1.5 B - $918 m - $4.7 B

Decline in U.S. Beef Exports Since 2003

Markets with major losses – Japan and Korea – partially open and set to re-open this year

II. 2006 Trade Issues: BSEMismatched Standards

• Major R-CALF Focus in 2004 and 2005

• U.S. has adopted a standard for imports that allows for more product to enter than other countries’ standards

• U.S. pursuing opening of other countries’ markets bilaterally

• U.S. has accepted trading partners’ opening their markets under more stringent standards than our own

• Result: U.S. import standards different from what U.S. exports face in other countries

II. 2006 Trade Issues: BSEMismatched Standards: Japan

BSE Problems in Sending Country

Import Standards

U.S. imports

from Japan

21 reported cases in Japan.

U.S. allows all imports of boneless cuts from Japan regardless of animal age, though

Canada still subject to 30 month rule.

Japanese imports

from U.S.

2 reportedcases in U.S.

Japan allows imports of boneless cuts from the U.S. only from animals

20 months and younger, consistent with standard

applied to domestic producers.

II. 2006 Trade Issues: BSEHarmonized Standards

• Solution to BSE concerns must be upward harmonization of import standards

• Use OIE to reach agreement on science, update standards as needed – problem is OIE is voluntary

• Establish multilateral agreement – not country by country

II. 2006 Trade Issues: BSEHarmonized Standards: The U.S. Role

R-CALF position on U.S. role:

• Allow voluntary BSE testing by U.S. packers.

• Close loopholes in the U.S. feed ban identified by an international scientific panel convened by the USDA over 18 months ago.

• Adopt the most stringent BSE risk mitigation measures recommended by the OIE for both imports and exports pending an international agreement on BSE standards.

• Bring countries together to harmonize BSE standards to prevent any further global spread of the disease and allow the resumption of trade in safe beef products.

II. 2006 Trade Issues: WTOBackground on the Doha Round

• Launched in Late 2001 in Doha, Qatar

• Covers 149 Countries

• Major Topics: • agriculture, services, non-agricultural market

access, rules, development

II. 2006 Trade Issues: WTOBackground on the Doha Round, cont.

• Impacts of Uruguay Round on Cattle and Beef• Required tariff commitments for 1st time for many countries• Locked in tariffs and quotas• Capped and reduced export subsidies and certain distortive

domestic subsidies• Created agreement to address trade barriers enacted in name of

health and safety• Established special agriculture safeguard for products deemed

import sensitive by members• Governs use of trade remedies• Enforceable dispute settlement

• Doha Round Seeks to Expand on these Rules

II. 2006 Trade Issues: WTOStatus of the Doha Round

Timeline for the Doha Round• November 2001: Launched• September 2003: Failed Cancun Ministerial• August 2004: Framework Agreement• December 2005: Hong Kong Ministerial• By April 30, 2006: Next Ministerial• End of 2006: Target Completion• Early 2007: Target Vote in U.S. Congress• July 1, 2007: TPA Expires

II. 2006 Trade Issues: WTOStatus of the Doha Round, cont.

• Agriculture is Big Stumbling Block

• Key Players in Agriculture Negotiations• U.S.• Europe• G20: Developing countries including Argentina, China, and

Brazil• G10: Net food importers including Japan, Korea, and

Switzerland• Developing country net food importers

• Key Disagreements in Agriculture• Market Access• Export Subsidies• Domestic Support• Special Treatment for Developing Countries

II. 2006 Trade Issues: WTOCattle and Beef in the Doha Round

Cattle and Beef in the Doha Round

1. Market Access

2. Subsidies

3. Special Rules for Perishable and Cyclical Agriculture

4. Rules Negotiations

II. 2006 Trade Issues: WTOCattle and Beef in the Doha Round, cont.

1. Market Access

• Formula Approach to Cut Tariffs• U.S.: most ambitious – top tariffs cut by 90%• E.U.: more conservative – top tariffs cut by 60%

• Sensitive Products Excluded• U.S.: 1 percent• E.U.: 8 percent

• Developing Countries Get Special Treatment


2. Subsidies

• Export Subsidies

• Eliminate by 2013

• With Conditions: Food Aid

• Treatment of STEs


2. Subsidies, cont.

• Domestic Support

• Cattle and Beef Subsidies

• Feed Stuff Subsidies and STEs

• Other sectors of U.S. agriculture


3. Special Rules

• Congressional Negotiating Objectives• Eliminate practices that adversely affect trade in perishable

and cyclical products

• Improve import relief mechanisms to recognize unique characteristics of P & C agriculture

• Ensure import relief mechanisms for P & C are accessible and timely

• Develop a position on the treatment of P & C products before the negotiations

• Develop international consensus on treatment of P & C products in dumping and safeguard investigations


3. Special Rules, cont.

• Special Agriculture Safeguard

• Developed Countries: Eliminated• Developing Countries: Maintained but modified

• Special Rules for perishable and cyclical products need to be created elsewhere

• No U.S. proposal on special rules tabled yet


4. Rules Negotiations

• Phase-Out Periods in Free Trade Agreements

• Australia FTA: 18 year phase-out for beef imports

• New WTO rules may limit phase-outs to 10 years, even for sensitive products

• U.S. needs to make a proposal


4. Rules Negotiations, cont.

• Trade Remedy Laws

• Congressional Negotiating Objective

• “Preserve the ability of the U.S. to enforce rigorously its trade laws”

• More than 200 proposals, many that would weaken effectiveness of U.S. laws

• U.S. needs aggressive strategy


Key Issues for Cattle and Beef not Being Addressed in the Doha Round

• Health and Safety Standards

• Rules of Origin, Marking and Labeling

• Currency Manipulation

… Special Rules remains to be seen


Cattle and Beef in the Doha Round – Next Steps for R-CALF USA

1. Improve Market Access

2. Eliminate Harmful Subsidies

3. Establish Special Rules for Perishable and Cyclical Agriculture

4. Preserve Effective Trade Remedy Laws and Flexibility of FTA Phase-Outs

II. 2006 Trade Issues: FTAsFree Trade Agreement Strategy

• U.S. Strategy• “Competitive Liberalization”• Political Considerations: Build alliances, Build pressure

for Doha Round and FTAA• Develop model for future WTO rules, future FTAs

• R-CALF USA Strategy• Prioritize strategic markets• Maximize benefits for U.S. producers and eliminate

worst global distortions• Develop model for future WTO rules, future FTAs

II. 2006 Trade Issues: FTAsStatus of FTAs

Implemented NAFTA, Jordan, Chile, Singapore, Australia, Morocco

Passed Congress,

Not Implemented

Bahrain, CAFTA

Negotiated, Await Congress

Oman (signed this month)Peru (to be signed in April)

Negotiations On-going

Colombia, Ecuador, Panama, UAE

Negotiations Stalled

Free Trade Area of the Americas,Southern Africa Customs Union, Thailand

Contemplated Egypt, Korea, Malaysia, Switzerland

II. 2006 Trade Issues: FTAsStatus of FTAs

█ Countries with U.S. FTAs

█ Countries negotiating or implementing U.S. FTAs

█ Countries discussing possible U.S. FTAs

█ Countries with which FTA negotiations are stalled

II. 2006 Trade Issues: FTAsTrade Impacts of FTAs

U.S. - Chile FTACattle and Beef Trade

2004 = Implementation DateNote: U.S. opened to Chilean beef imports in Nov., 2005

0

50

100

150

200

250

300

350

2003 2004 2005*

Th

ou

san

d U

S $

ExportsImportsBalance


*2005 figures annualized from Jan. – Oct. data

II. 2006 Trade Issues: FTAsTrade Impacts of FTAs – Chile FTA



Thousand U.S.$

20032004

(implementation date)

2005*

U.S. exports to Chile 298 69 106

U.S. imports from Chile 0 0 0

Trade Balance 298 69 106


U.S. - Singapore FTACattle and Beef Trade

2004 = Implementation DateNote: Singapore exports no beef to U.S., closed to U.S. imports due to BSE

0

1

2

3

4

5

6

7

2003 2004 2005*

Mill

ion

US

$




II. 2006 Trade Issues: FTAsTrade Impacts of FTAs – Singapore FTA



MillionU.S.$

20032004


2005*

U.S. exports to Singapore 6 0.1 0

U.S. imports from

Singapore0 0 0

Trade Balance 6 0.1 0


U.S. - Jordan FTACattle and Beef Trade

2002 = Implementation DateNote: Jordan exports no beef to U.S., closed to U.S. imports due to BSE

0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005*

Th

ou

san

d U

S $




II. 2006 Trade Issues: FTAsTrade Impacts of FTAs – Jordan FTA



ThousandU.S.$

20012002


2003 2004 2005*

U.S. exports to

Jordan177 128 1,207 0 39

U.S. imports

from Jordan

0 0 0 0 0

Trade Balance 177 128 1,207 0 39


U.S. - Australia FTACattle and Beef Trade

2005 = Implementation DateNote: U.S. import quota unchanged in 2005 due to conditional quota increase

-1250

-1000

-750

-500

-250

0

250

500

750

1000

1250

2004 2005*

Mill

ion

US

$




II. 2006 Trade Issues: FTAsTrade Impacts of FTAs – Australia FTA



MillionU.S.$

20042005*


U.S. exports to Australia 0 0

U.S. imports from Australia 1,110 975

Trade Balance -1,110 -975

II. 2006 Trade Issues: FTAsTrade Impacts of NAFTA

Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats*2005 figures annualized from Jan. – Oct. data

NAFTA Cattle & Beef Trade Balance1989 = Canada FTA enters into force

1994 = NAFTA enters into force

-1.8

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

01989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005*

Bill

ion

US

$

II. Trade Issues: FTAsNAFTA Cattle and Beef Trade Balance – Billion US$

1989 1990 1991 1992 1993 1994 1995 1996 1997

Exports 0.231 0.389 0.643 0.658 0.507 0.673 0.478 0.528 0.712

Imports 0.843 1.164 1.137 1.530 1.699 1.521 1.766 1.585 1.731

Balance -0.612 -0.775 -0.495 -0.872 -1.192 -0.848 -1.288 -1.057 -1.019


1998 1999 2000 2001 2002 2003 2004 2005*

Exports 0.768 0.832 1.020 1.004 0.919 0.883 0.431 0.681

Imports 1.874 1.929 2.126 2.554 2.553 1.731 1.761 2.194

Balance -1.106 -1.097 -1.106 -1.550 -1.634 -0.848 -1.331 -1.513



II. 2006 Trade Issues: FTAsFTA Provisions

• Achievements in FTAs• Opening to U.S. cattle and beef

• BSE bans lifted (all or part): Bahrain, Chile, CAFTA, Oman• Increased market access for U.S. beef

• Extended phase-outs on U.S. tariffs and quotas• Australia: 18 Years• CAFTA: 15 Years

• Special Safeguard in Australia FTA

• Growth of U.S. import quota in Australia FTA conditioned on resumption of U.S. exports

II. 2006 Trade Issues: FTAsFTA Provisions

• R-CALF USA Goals in Future FTAs• Ensure beef excluded or subject to extended phase-outs in deals

with large cattle and beef producers and exporters

• Address distortions• Upward harmonization on health and safety

• Elimination of harmful subsidies and STEs

• Address currency manipulation, other distortions

• Special safeguard for cattle and beef• U.S. quota expansion conditioned on resumption of U.S. exports

• Treat cattle and beef as one product

• Born, raised and slaughtered rule of origin

II. 2006 Trade Issues: FTAsStatus of Upcoming FTAs

FTA Status Issues

AndeanPeru: complete, sign in April

Colombia & Ecuador: negotiations on-goingLarge domestic production, transshipment, subsidies

Panama Negotiations on-going Not a major export market, BSE ban

Middle EastOman: complete, sign in January

UAE: negotiations on-goingEgypt: negotiations possible

Not large export markets, but little competing domestic production

ThailandNegotiations being re-evaluated

Target completion in Spring 2006 in doubtU.S. had large share of market before

BSE

Korea Negotiations possible 2nd largest U.S. market before BSE

Malaysia Negotiations possible Not a major export market, BSE ban

Switzerland Negotiations possible Decent market, SPS issues

II. 2006 Trade Issues: FTAsUpcoming FTAs

• Andean FTA• Timeline

• Peru complete, likely to come before Congress after April signing

• Colombia and Ecuador still negotiating

• R-CALF comments to USTR in October 2005

Problem FTA Provisions Needed

Combined herd size: 35 million headExclude beef or ensure extended phase

outs and special safeguard

Transshipment: 250 million head in MERCOSUR region

Born, raised and slaughtered rule of origin with import certification

BSE bans on U.S. exportsFMD and other health problems in region

Upward harmonization of health and safety standards

II. 2006 Trade Issues: FTAsUpcoming FTAs, cont.

• Middle Eastern FTAs• R-CALF supported Bahrain FTA

• Oman complete and likely sent to Congress this year

• UAE negotiating, Egypt negotiations possible

• Small domestic production and imports make up high portion of consumption, but barriers to U.S. access

Middle East Total Beef Imports

Bahrain

Egypt

Oman

UAE

Middle East Beef Imports

0

50

100

150

200

2003 2004

Tho

usan

d M

T

AllImports

Importsfrom U.S.

II. Trade Issues: FTAsUpcoming FTAs – Middle East

Middle East Beef Imports Thousand MT

2003 2004

All Imports

165 176

Imports from U.S.

35 5

Middle East Total Beef Imports – 2004

Bahrain Egypt Oman UAE

ThousandMT

7 134 15 21

% 4 76 8 12


* Note: Includes variety meats


• Thailand FTA• Was targeted for completion in Spring 2006, negotiations being

re-evaluated by USTR• Not a major market, but growing• U.S. had a large share of Thai beef imports before BSE

0

200

400

600

800

2000 2001 2002 2003 2004

Met

ric T

ons

Imports from U.S. All Imports

II. 2006 Trade Issues: FTAsUpcoming FTAs – Thailand


2000 2001 2002 2003 2004

All Imports (MT) 343 369 511 580 712

Imports from U.S. (MT) 149 249 328 316 0

U.S. as % 43 67 64 54 0


• Korea FTA• In preliminary stages, formal negotiations have not begun• Expected to lift ban on U.S. imports by end of March• Second largest consumer of U.S. beef before BSE• Subsidizes domestic cattle production

050

100150200250300350400450

2000 2001 2002 2003 2004

Th

ou

san

d M

etr

ic T

on

s

Imports from U.S. All Imports

II. 2006 Trade Issues: FTAsUpcoming FTAs – Korea


* Note: Includes variety meats

2000 2001 2002 2003 2004

All Imports (Thousand MT)

277 210 372 384 201

Imports from U.S.

(Thousand MT)229 168 279 258 20

U.S. as % 83 80 75 67 10

II. 2006 Trade Issues: FTAsPossible New FTAs as Portion of U.S. Beef Exports

Middle East

Andean

Switzerland

Panama

Thailand

Malaysia

Korea

Rest of World

II. Trade Issues: FTAsPossible New FTAs as Portion of U.S. Beef Exports

Beef Imports from U.S. in 2003

Middle East*

AndeanSwitzer-

landPanama Thailand Malaysia Korea* World

MT 3,236 498 946 174 316 241 206,825 822,217

% of World

0.39 0.06 0.12 0.02 0.04 0.03 25 100


* Note: 2003 U.S. imports less than reported in earlier tables for the Middle East and Korea because variety meats excluded for comparison purposes

Documents

International Trade and the U.S. Cattle Industry Terence P. Stewart Law Offices of Stewart and Stewart R-CALF USA Sixth Annual Convention Denver, Colorado