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International Trade and the U.S. Cattle Industry

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 January 19 – 21, 2006. Overview. I. Overall Trade Trends in Cattle and Beef II. Major Issues in 2006 BSE Issues

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International Trade and the U.S. Cattle Industry

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  1. 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 January 19 – 21, 2006

  2. Overview I. Overall Trade Trends in Cattle and Beef II. Major Issues in 2006 • BSE Issues • World Trade Organization • Free Trade Agreements

  3. 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

  4. 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

  5. I. Trade Trends: Overview • U.S. Trade Deficit in Cattle & Beef • Global Exporters and Importers • Global Market Distortions Persist

  6. 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

  7. I. Trade Trends: U.S. DeficitOverall U.S. Agriculture Trade Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

  8. I. Trade Trends: U.S. DeficitOverall U.S. Agriculture Trade – Billion US$ Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Oct. data

  9. I. Trade Trends: U.S. DeficitU.S. Trade in Cattle and Beef – Value Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

  10. I. Trade Trends: U.S. DeficitU.S. Trade in Cattle and Beef – Billion US$ Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Oct. data

  11. I. Trade Trends: U.S. DeficitU.S. Trade in Cattle – Value Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

  12. I. Trade Trends: U.S. DeficitU.S. Trade in Cattle – Billion US$ Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Oct. data

  13. I. Trade Trends: U.S. DeficitU.S. Trade in Cattle – Volume Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

  14. I. Trade Trends: U.S. DeficitU.S. Trade in Cattle – Million Head Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Oct. data

  15. I. Trade Trends: U.S. DeficitU.S. Trade in Beef – Value Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

  16. I. Trade Trends: U.S. DeficitU.S. Trade in Beef – Billion US$ Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Oct. data

  17. I. Trade Trends: U.S. DeficitU.S. Trade in Beef – Volume Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

  18. I. Trade Trends: U.S. DeficitU.S. Trade in Beef – Million MT Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Oct. data

  19. 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

  20. I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

  21. I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. – Thousand MT Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Oct. data

  22. I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. – Herd Sizes Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats; FAOSTAT

  23. I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. – Herd Size Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats; FAOSTAT * 2005 data annualized from Jan. – Oct. data

  24. I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. - Uruguay Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

  25. I. Trade Trends: U.S. DeficitMajor Exporters of Beef to U.S. – Uruguay Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

  26. 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

  27. I. Trade Trends: U.S. DeficitMajor Importers of U.S. Beef Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats

  28. I. Trade Trends: U.S. DeficitMajor Importers of U.S. Beef – Thousand MT Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Oct. data

  29. 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.

  30. I. Trade Trends: U.S. DeficitMajor Exporters of Cattle to U.S. Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Nov. data

  31. I. Trade Trends: U.S. DeficitMajor Exporters of Cattle to U.S. – Million Head Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Oct. data

  32. I. Trade Trends: U.S. DeficitMajor Exporters of Cattle to U.S. – Herd Sizes Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats; FAOSTAT

  33. I. Trade Trends: U.S. DeficitMajor Exporters of Cattle to U.S. – Herd Sizes Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats; FAOSTAT

  34. 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

  35. I. Trade Trends: U.S. DeficitMajor Importers of U.S. Cattle Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Nov. data

  36. I. Trade Trends: U.S. DeficitMajor Importers of U.S. Cattle – Thousand Head Source: Dept. of Commerce, Census Bureau, Foreign Trade Stats * 2005 data annualized from Jan. – Oct. data

  37. I. Trade Trends: Global Exporters • U.S. losing position as global exporter • Exporters in Latin America & Asia are growing • Many lead exporters are highly export-dependent

  38. I. Trade Trends: Global Exporters Source: USDA, World Markets and Trade, 2004

  39. I. Trade Trends: Global Exporters Source: USDA, World Markets and Trade, 2004

  40. I. Trade Trends: Global ExportersExport-Orientation of Global Beef Exporters, 2005 Source: USDA, Production and Supply Database

  41. Trade Trends: Global ExportersExport-Orientation of Global Beef Exporters, 2005 Source: USDA Production and Supply Database

  42. I. Trade Trends: Global ExportersHerd Size and Exports of Global Beef Exporters, 2004/5 Source: USDA, Production and Supply Database; FAOSTAT

  43. I. Trade Trends: Global ExportersHerd Size and Exports of Global Beef Exporters, 2004/5 Source: USDA, Production and Supply Database; FAOSTAT

  44. I. Trade Trends: Global Importers • U.S. is top importer, and the U.S. share of world imports is growing •Traditional importers such as Japan and Korea have reduced consumption

  45. I. Trade Trends: Global Importers Source: USDA, World Markets and Trade, 2004

  46. I. Trade Trends: Global Importers Source: USDA, World Markets and Trade, 2004

  47. I. Trade Trends: Global ImportersImport-Dependence of Global Beef Importers, 2005 Source: USDA, Production and Supply Database

  48. I. Trade Trends: U.S. DeficitImport-Dependence of Global Beef Importers, 2005 Source: USDA Production and Supply Database

  49. 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 Source: U.S. HTS; WTO

  50. 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 …

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