National Pork Producers Council The Global Voice for the U.S. Pork Industry

Trade Policy ReportJanuary-June 2012

Mid-Year Overview• NPPCwasinstrumentalinremovingatrichinaemitigationrequirement,inhibitingexportsoffresh/chilledpork,priorto

implementationoftheU.S.-ColombiaFreeTradeAgreement. ContinuedonThispage

• TheCodexAlimentariusCommissionadoptedascience-basedstandardforractopamineduringtheirJulymeeting. ContinuedonPage2

• InalettertoAdministrationofficials,NPPCcalledforTaiwantoliftitsbanonractopamine. ContinuedonPage2

• NPPCcontinuestopushfortheentryofJapan,thetopvaluemarketforU.S.porkexports,intoTrans-PacificPartnership(TPP)negotiations.

ContinuedonPage2

• MexicowasinvitedtojointheTrans-PacificPartnershipnegotiationsinJune. ContinuedonPage3

• NPPCurgedtheObamaadministrationtocomplywithaWorldTradeOrganizationdecisionagainsttheU.S.MandatoryCountry-of-OriginLabeling(MCOOL)lawandwillworktopromoteharmonizationoftheNorthAmericanhogmarket.

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• TheU.S.-KoreaFreeTradeAgreemententeredintoforceMarch15,expandingmarketaccessforporkproducts. ContinuedonPage4

• RussiawillbecomeamemberoftheWTOonAugust22.NPPCisconcernedaboutanumberofmattersrelatedtoRussia’sWTOaccessionpackage,primarilyrelatedtonon-science-basedtradebarriers.

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estimates thatafter full implementationtheU.S.porkindustrywillexportanadditional$68.9 million. However, this projectiontook into account the trichinae mitigationmeasuresColombia required theU.S. porkindustrytomeet,whichincludedtestingandfreezingofU.S.pork.SincethereisanegligibleriskfortrichinaeintheU.S.swineherd,this

requirement represented a non-scientificbarriertotradethatinhibitedaccessofU.S.chilled pork exports to Colombia. NPPCworked closely with U.S. and Colombianofficials and was instrumental in removingthe trichinae mitigation requirement priortoimplementationoftheFTA.Inarevised

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Overview

During thefirsthalfof2012,U.S. exportsofporkandporkproductstotaled1,133,550metrictons(MT)valuedat$3.17billion,anincrease of about 5%by volume and 13%byvaluecomparedwiththesameperiodfor2011.

Free Trade AgreementsExports will increase as a result of theimplementation of free trade agreements(FTAs) with South Korea, Colombia andPanama. The Korea and Colombia FTAsenteredintoforceinMarchandMay2012,respectively. The U.S.-Panama FTA isexpectedtoenterintoforceinthelatterhalfof2012.

U.S.-Colombia FTA Update

The U.S.-Colombia FTA will phase outtariffsonmostporkproductsoverthenextfiveyears,andtariffsonbaconandporkskinwereeliminateduponentryintoforce.IowaState University economist Dermot Hayes

Source:USDA

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Country/Region 2011 2012 % Change 2011 2012 % ChangeJapan 249,483.6 231,984.9 -7% 944,321 1,013,548 7%Mexico 260,930.5 294,097.4 13% 485,141 537,473 11%Canada 95,794.7 110,876.1 16% 334,361 402,777 20%China/Hong Kong 173,335.7 221,874.9 28% 260,419 448,605 72%Russia 32,640.4 47,750.5 46% 98,326 138,603 41%South Korea 122,899.0 86,088.4 -30% 301,449 245,771 -18%Australia 36,961.3 36,656.0 -1% 118,275 112,674 -5%ASEAN 28,048.1 22,417.6 -20% 64,173 57,980 -10%Central and South America 18,693.0 21,837.7 17% 86,570 101,624 17%Caribbean 17,580.5 16,554.2 -6% 41,580 41,251 -1%European Union 4,463.2 3,676.7 -18% 17,410 11,735 -33%Taiwan 16,619.9 9,368.7 -44% 28,913 20,950 -28%Other 24,129.7 30,366.4 26% 24,990 32,346 29%World Total 1,081,579.6 1,133,549.5 5% 2,805,928 3,165,337 13%

January-June January-June

U.S. Pork and Pork Variety Meat Exports Volume Value

(Metric Tons) (US $1,000)

analysis, Hayes now forecasts the removalofthetrichinaerestrictionsandabilitytoshipfresh/chilledporkwillallowexportstoreach$225millionfifteenyearsafterimplementation.

Colombia Marketing PlanNPPChas alsobeendevelopingplanswithmembers of the Asociación Colombianade Porcicultores (the Colombian PorkProducersAssociation) forColombia’s localporkmarketing campaign.Though currentdomestic pork consumption in Colombiais low (197,000MT in 2011),Colombianpork producers believe a successful porkmarketing campaign will increase porkconsumption. Increased domestic porkconsumptioninColombiawillbenefitbothdomesticColombianandU.S.producers.

CODEXCodex Approves Standard for RactopamineAt the July meeting of the CodexAlimentarius Commission, the UnitedNationsfoodstandardsbody,ascience-basedstandard was adopted for ractopamine, afeed ingredient used to promote leannessin pork and beef. Ractopamine has beenevaluated and approved by the U.S. Foodand Drug Administration and approvedfor use in pork production in 25 othercountries. A Codex panel of independentinternational scientists, including scientistsfrom the European Union, has confirmedthe safety of ractopamine three times.

Theadoptionofthestandardhadbeenstalledforfouryearsbecauseofunscientificconcernsby several countries, primarily membersof the European Union, which refused toconductariskassessmentonthecompound.

The EU, China, Taiwan andThailand currently ban imports ofpork from pigs fed ractopamine.

NPPC is using the adoption of maximumresidue levels for ractopamine as a pathforwardtoengagewithtradingpartnersthathave food-safetyconcerns related to scienceand to encourage those that have erectedunscientific barriers to remove them basedon yet another scientific based decisionreaffirming the safety of the compound.

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Colombian Pork Market Projection under an FTA with US, Canada, Chile and the EU (No Trichinae Restriction)

Total Imports (1000 MT CWE) Total Dom. Consumption (1000 MT CWE) US Exports

U.S.-Colombia FTA Implemented May 15, 2012

JAPANMarket OverviewIn2011,theUnitedStatesexported493,315MT of pork products to Japan valued at$1.96 billion, making it the highest valuemarketandsecondhighestvolumemarket.

Policy UpdateLastNovember, Japan expressed interest injoining theTrans-Pacific Partnership (TPP)negotiations. The United States and Japanare continuing consultations regardingJapan’sentryintotheTPP.U.S.officialshavehighlighted outstanding issues to Japan’sentry,includingoppositionbytheBigThreeauto manufacturers. Also, Japanese PrimeMinister Yoshihiko Noda faces a volatilepolitical environment and strong domesticoppositionto theTPP, includingenormouspushbackfromJapaneseagriculture.NPPCcontinues to push for Japan’s entry intonegotiationsas soonaspossible.NPPChasbeenactiveontheHillinsupportofJapan,has run several advertisements inRollCalland other publications read widely on theHill, and led a coalition of 64 agricultureand food industry groups in a letter toCongress in support of Japan joining theTPPnegotiations.

Source:DermotHayes,IowaStateUniversity

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TAIWANPolicy UpdateIn July, the Taiwanese legislature passedlegislation that set an MRL for importedbeefmuscle,butdidnotincludebeefoffalsoranyporkproducts.Taiwanhashadazerotolerance policy on ractopamine in porksince2007.

NPPC recently send a letter to theAdministrationexpressingitsobjectiontore-openingTrade and Investment FrameworkAgreement (TIFA) negotiations withTaiwanduetoitsfailuretoremoveabanonractopamine.NPPCalsourgedU.S.officialsto “up the ante” on Taiwan by indicatingthat the United States will not supportTaiwan’sentryintoTrans-PacificPartnershipnegotiations until it drops its ractopaminebanonimportsandbyexploringallpotentialtools, including legal options, to get theTaiwanesetoopentheirmarket.

IfTaiwanremovedtheractopaminebanonpork imports,U.S. exports to that countrywould increase to $417 million within 10years, according to Iowa State UniversityeconomistDermotHayes.

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MEXICOMarket OverviewTherecentescalationincornpricesisexpectedto lead to liquidation inMexico.U.S.hamprices,whichhit a 30-month low inApril,havesinceincreasedbyapproximately40%.ThisrapidincreaseofU.S.hampricescouldrestrainporkexportstoMexicointheshortterm, especially if liquidation drives downthepriceofdomesticpork.

Policy UpdateInJune2012,MexicowasinvitedtojointheTrans-PacificPartnership(TPP)negotiations.

With the support of NPPC, the U.S.Department of Agriculture’s Animal andPlant Health Inspection Service (APHIS)has continued to make sure Mexico hasthe necessary animal health infrastructureand laboratory and disease managementprotocols to declare certainMexican statesfree of classical swine fever (CSF). NPPCsupportsMexico’seffortstoexportporkandpork products to the United States fromregionsthatAPHISdeterminesposenoriskof disease transmission. NPPC supportsthe principle of regionalization as away offacilitatingtradewithareasfreeofcontagiousswinediseasesandwillcontinuetoworkwithAPHIS to address Mexico’s animal healthconcerns.

As part of theNorth American FreeTradeAgreement (NAFTA),Mexican truckswere Source:INEGI

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permitted to haul goods into the UnitedStates.However,U.S.implementationofthisprovisionwasdelayed,resultinginretaliatorytariffs by Mexico against U.S. agriculturalproducts,includingporkin2010.ThetariffswereremovedinOctober2011followingtheissuanceoflong-hauloperatingauthoritytoMexicancarriersaspartofaU.S.Departmentof Transportation (DOT) pilot program.DOTrequiresacertainnumberofcrossingsfor a strong statistical sample to determinetheoverallsafetyofMexicancarriers.

InAugust,Mexicodecided to impose anti-dumpingdutiesonimportsofU.S.chickenlegquarters.

CANADAMarket OverviewCanada’sexportshavebeenstrongbecauseoflargeshipmentstotheUnitedStates,RussiaandChina.

CanadaisnowtheNo.2supplierofporktoRussiaandispursuingfurthergrowth.

The U.S.-Korea FTA will provide anadvantage to U.S. pork that will increasein subsequent years and reduce CanadianexportstoSouthKorea.

Domestically, Canada’s pork productionis forecast slightly higher in 2012, withexpectedsowstocksnearlysteady.

Policy UpdateInJune2012,CanadawasinvitedtojointheTrans-PacificPartnership(TPP)negotiations.

The World Trade Organization (WTO)Appellate Body recently upheld a previousWTO dispute settlement panel ruling thatthe U.S. Mandatory Country of OriginLabeling (MCOOL) law violates U.S.trade obligations. NPPC will urge theObama administration to comply with theWTO decision and will continue to workto promote harmonization of the NorthAmerican hog market. The United Statesrisks retaliation from Canada andMexico,both of which filed complaints with theWTOovertheU.S.labelinglaw,ifitrefusedtocomplywiththeMCOOLruling.NPPC’s

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Source:JapanCustoms

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Other EU Canada US

Source:StatisticsCanada

Source:KoreaCustomsandTradeDevelopmentInstitutionSource:KoreaCustomsandTradeDevelopmentInstitution

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positiononMCOOL is consistentwith itslong-standingsupportforharmonizationofNorthAmericanmeatandlivestockpolicieswithregardtoproductlabeling,foodsafety,animal health and subsidy programs. Onthe latter two issues, NPPC has asked theCanadiangovernmenttorecognizetheU.S.swine herd health status as equivalent toCanada’s–recognitionthatwillfacilitatehogtradebetweenthecountries–andtoreformits hog subsidy programs, which distorttheNorthAmericanhog andporkmarket,limitingthegrowthofU.S.porkproduction,employmentandprofitability.Ontario’sRiskManagement Program, for example, wouldboostCanadianhogproductionbymorethan606,000animals,cutU.S.porkproductionbymorethan430,000hogsworthmorethan$73million and costnearly600U.S.pork

industryjobsoverfiveyears,accordingtoanestimatebyIowaStateUniversityeconomistDermotHayes.

SOUTH KOREAMarket OverviewYear-to-date, U.S. pork exports to SouthKoreawerelowerbyvolumeandvaluethanduringthesametimelastyearwhenaFootand Mouth Disease (FMD) outbreak inthe Asian country led to supply shortagesand resulted in increased pork imports. Asexpected,domesticproductionhasincreasedin the past several months, decreasing thedemandforimportedpork.

TheSouthKoreangovernmentissuedaduty-freeporkquotaof70,000MTfromJanuary1, 2012, through March 31, 2012. Thequotawas for pork bellies and frozen porkfor processing. That quota was limited to20,000MTfortheApril-Juneperiod.

Domestic production is still rebuildingafter last year’sFMDoutbreak.Recovery isoccurringfasterthanexpectedanddomesticproductionisestimatedtoreturnto90-95%ofpre-crisislevelsbytheendof2012.

Policy UpdateThe U.S.-Korea Free Trade Agreement(KORUSFTA)enteredintoforceMarch15,2012.BeforeimplementationoftheKORUSFTA,U.S.porkexportstoSouthKoreaweresubjecttosignificanttariffsof25%onfrozenporkproductsand22.5%onfreshorchilledporkproducts.Undertheagreement,tariffswill be eliminated on all U.S. frozen porkand some processed pork products Jan. 1,2016,andfresh-chilledporkwillbeduty-free10 years after implementation. AccordingtoeconomistDermotHayes, theFTAwithKoreawillincreaseannualU.S.porkexportsby$687millionandadd$10tothepriceforeachhog.NPPCwasinstrumentalingettingtheKoreaFTAapproved.

National Pork Producers Council 122 C Street NW, Suite 875 • Washington, DC 20001

Phone (202) 347-3600

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RUSSIAMarket OverviewPresident Putin has pledged support toproducers, including a recent decision toallocate 6 billion rubles annually (aboutUS$193 million) to subsidize porkprocessinginthenextthreeyears.

Per theWTO accession agreement, Russiawill apply zero tariffs on pork productswithinthetariffratequota.Russia’scurrentappliedtariffontheseproductsis15%.Porkduties above the quota will decline from75%to65%.

USDAestimatesa2.4%increaseinRussianporkproductionin2012,drivenbycheaperfeedpricesandstatesupport.

Brazilian pork exports toRussia have beenseverely affected because of Russian de-listingofBrazilianporkplants.

Policy UpdateRussiawillbecomeamemberoftheWTOon August 22, a move that will compelCongress to vote on extending permanentnormal trade relations (PNTR) status toRussia and on repealing the Jackson-Vanikamendment, which affects U.S. trade withcountriesthatrestrictfreedomofemigrationand that have poor human rights records.NPPC has concerns about a number ofmatters related to Russia’sWTO accessionpackage, primarily related to non-science-based trade barriers that have severelyaffectedexportstoRussia.

In June, 34 senators, led by Sens. ChuckGrassley,R-Iowa,andBenNelson,D-Neb,signedalettertoPresidentObamaaskingtheadministrationtoobtainfirmcommitmentsfrom Russia on outstanding sanitary-phytosanitary issues and guarantees toupholdscience-basedinternationalstandardsfortradeinpork,beefandpoultryproducts.

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Source: Customs Committee of Russia

Source: Customs Committee of Russia

National Pork Producers Council 122 C Street NW, Suite 875 • Washington, DC 20001

Phone (202) 347-3600

YourinputinthefirsteditionofNPPC’sTradePolicyReportwillbeveryhelpfulaswe considerboth theusefulness of theReport aswell as specific changes.PleasepassonanysuggestionstoNPPC’stradepolicyteam.

NicholasGiordanoVicePresidentandCounselInternationalTradePolicygiordann@nppc.org

LaurieHuenekeDirectorofInternationalTradePolicy,Sanitary&TechnicalIssueshuenekel@nppc.org

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Canada Germany Spain Denmark U.S. Brazil Others