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Kay’s Cuts: US pushes for bilateral trade deals

Steve Kay, Cattle Buyers Weekly, 09/02/2017

Steve Kay 1 (2)A monthly column written for Beef Central by US beef industry commentator, Steve Kay, publisher of US Cattle Buyers’ Weekly  

 

 

 

 

 

 

 

 

THE Trans Pacific Partnership is dead, so we must push for live bilateral trade deals. This was the mood in the US agricultural industry after President Trump signed an executive order for the US to withdraw from the TPP recently.

Ag groups expressed dismay at the action, but US participation in the TPP died during the presidential election campaign, as both Trump and Hillary Clinton vowed to withdraw. Trump’s action means the US beef industry will continue to lose an estimated $400,000 in sales per day, notably in Japan.

Of more concern, especially to the US beef industry, is that Trump also affirms another campaign pledge, to renegotiate the North American Free Trade Agreement (NAFTA).

The fear is that anything more than minor changes to the agreement might damage the industry, as it is highly integrated with Canada’s and Mexico’s.

The US beef industry will be hoping that bilateral deals might lead to lower tariffs on its exports to Asia, notably to Japan. Tariffs there remain at 38.5pc. The Trump Administration says it will begin negotiating bilateral trade deals with the countries in the TPP agreement. TPP includes 11 other countries in the Asia-Pacific region.

Groups such as the National Cattlemen’s Beef Association, the North American Meat Institute and the US Meat Export Federation hope this will occur.

USMEF remains fully committed to its valued trading partners in the TPP and NAFTA, says president and CEO Phil Seng. These countries account for more than 60 percent of US red meat exports. In some of these key markets, the US red meat industry will remain at a serious competitive disadvantage unless meaningful market access gains are realised, says Seng.

“Trump’s actions forced beef industry groups to realise the new president might not be as much of a friend to the industry as they had hoped”

Trump’s actions forced beef industry groups to realise the new president might not be as much of a friend to the industry as they had hoped.

NCBA is especially concerned that the Administration is taking these actions without any meaningful alternatives in place that would compensate for the tremendous loss that cattle producers will face without TPP or NAFTA, says president Tracy Brunner.

Sparking a trade war with Canada, Mexico, and Asia will only lead to higher prices for American-produced beef in those markets and put American producers at a much steeper competitive disadvantage, he says.

The fact remains that 96pc of the world’s consumers live outside the US. Expanding access to those consumers is the single best thing the US can do to help cattle-producing families be more successful, he says.

Trade is vital to the economic health of the US meat and poultry sector and the local American communities in which meat and poultry companies operate, says Barry Carpenter, president and CEO of the North American Meat Institute.

“According to USDA, every $1 billion of US agricultural exports in 2015 required 8000 American jobs throughout the economy”

An estimated 24pc of US pork, 14pc of US beef and 20pc of chicken meat are exported. According to USDA, every $1 billion of US agricultural exports in 2015 required approximately 8000 American jobs throughout the economy, he says.

The Canadian Cattlemens Assn also weighed-in on Trump’s trade decisions. The economic benefits of Canada-US agriculture trade are clear, it says. Canada is the largest export customer for almost all large US agricultural producing states, purchasing around US$714 per capita of US agricultural products while the US purchases around US$69 per capita of Canadian agricultural products.

Canada is the US’s top customer for overall trade, purchasing more than China, Japan and the UK combined, and Canada is its closest ally.

As Beef Central readers likely know, the Cattle Council of Australia was cautious in its comments. In fact, it studiously avoided any reference to Australia’s competitiveness advantage in Japan.

Opening up trade pathways and reducing technical trade barriers is key to ensuring Australia’s beef industry remains globally competitive, says president Howard Smith.

The Cattle Council will look to the Australian Government to find a way to move forward. It continues to support the TPP and its principles, as it will deliver improved access conditions to Canada and Mexico for the red meat industry and reduction of tariffs on beef exported to Japan, he says.

Another industry leader to weigh in was James Parsons, chairman of  Beef+Lamb New Zealand. He called the US withdrawal from TPP a significant blow for trade liberalisation in the Asia-Pacific region in the short term.

He especially noted that due to the Japan-Australia Free Trade Agreement, Australian beef entering Japan enjoys a tariff rate that is 10 percentage points lower than that faced by competitors such as NZ and the US. As a direct result, Australian beef exports to Japan in 2015 and 2016 increased by 13pc, while those from NZ and the US fell by 10pc and 11pc respectively, he says.

NCBA president Brunner in his comments bitingly noted that the TPP and NAFTA have long been convenient political punching bags. But the reality is that foreign trade has been one of the greatest success stories in the long history of the US beef industry, he added.

Now it’s up to him and other industry leaders to persuade the Trump Administration to build on rather than further undermine that success.

 

Editor’s note: Since Steve Kay filed this monthly column, the US National Cattlemens Beef Association has urged President Trump to begin negotiations on a ‘free and fair’ trade agreement with Japan.

In a letter to the White House this week, NCBA asked the president to “initiate free trade agreement negotiations with nations in the Asia-Pacific region beginning with Japan. … As you continue to lead America forward, we want to be a resource for your administration for possible strategies in improving existing and future trade agreements for the benefit of our producers.”

Japanese Prime Minister Shinzo Abe makes a state visit to the US starting Friday, where he meets with Trump in Washington on a number of matters, including security challenges and bilateral trade.

“A successful, comprehensive agreement with Japan would result in one of the greatest trade agreements for the U.S. pork and beef industries and for many other sectors,” said NCBA President Craig Uden.

For US beef exports, Japan is the highest value international market. In fiscal 2016, Japanese consumers purchased $1.4 billion of US beef. Demand in the Asian nation for US beef is very strong despite Japanese tariffs and other import measures that limit market access.

 Under terms of the Trans-Pacific Partnership agreement, Japan’s 38.5pc tariff on US fresh and frozen beef would have been cut to 9pc over the agreement’s phase-in period and would have given the US beef industry parity with Australia in the Japanese market.

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