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Bull or bear? Trade under the new administration

Progressive Cattleman Editor Lynn Jaynes Published on 26 September 2017

“If we were any other country, we’d be bankrupt,” said Terence (Terry) Stewart, an attorney with Stewart and Stewart Law in Washington, D.C., referring to the national trade deficit as he presented to the U.S. Cattlemen’s Association at their annual convention in Billings, Montana.

Stewart said the new administration’s key priority is to ensure huge trade deficits do not continue.

Let’s put some numbers to those deficits.

The U.S. total annual trade deficit in goods exceeded $736.8 billion in 2016, a 387 percent increase from the $151.4 billion deficit in 1994. Many of the countries that the U.S. ran a significant overall trade deficit with in 2016 are also major trading partners in beef and cattle, including China, Korea, Japan, Canada, Mexico and the European Union.

The U.S. trade deficit in beef and cattle specifically is relatively small compared with the overall trade deficit. The quantity of U.S. cattle imports declined 18 percent from 2 million head in 1994 to 1.7 million head in 2016; however, the value of imports increased 41 percent from $1.2 billion in 1994 to $1.6 billion in 2016.

At the same time, the quantity of U.S. cattle exports declined by 70 percent from 232,256 head in 1994 to 69,559 head in 2016. The value of exports also declined by 59 percent from $186.6 million in 1994 to $77.4 million in 2016.

What these numbers indicate is this: If we were any other country, we’d be bankrupt.

Export opportunities

Stewart identified trade in beef and live cattle as an area where U.S. trading relationships could be improved and the overall deficit could be reduced in accordance with the goals of the Trump administration. In essence, Stewart said, with regard to beef, “we’re losing the battle of getting our product into other countries” for a variety of reasons. Stewart said globally, beef has the greatest number of trade barriers.


Stewart said, “We have a big upside opportunity with China,” with that market recently opening. How big that opportunity is has yet to be seen. Stewart noted that today relatively few cattle producers comply with the requirements China has imposed.

China was a $2.7 billion import market in 2016. Since the U.S. has not been in the market space for the past 14 years, regaining our market share back will be a process, as during that hiatus China made beef trade agreements with other countries.


The Transpacific Trade Partnership (TTP) would have been important to the Japanese marketplace for U.S. beef. But with the TTP off the negotiating table and Japan’s import peak level below the peak levels in 1995, Japan does not appear to be a strong option for U.S. beef exports. Although the U.S. maintains a trade surplus in beef and cattle with Japan, the surplus has declined 8 percent since 1994 from $1.6 billion to $1.5 billion in 2016. In addition, Australia currently has a trade agreement with Japan. And finally, in July 2017, Japan imposed an automatic safeguard tariff of 50 percent on imports of frozen beef, effective until April 2018. The tariffs will mainly affect U.S. beef, and will likely be advantageous to Australia.


Korea, however, is another bright spot for U.S. beef opportunities, albeit uncertain. The U.S. is about four years ahead of Australia in their respective free trade agreement with Korea. With tariffs on imports on a sliding scale, U.S. rates are coming down ahead of the Australian tariffs and will continue to decline over 15 years, ending with zero tariffs in 2026 on all U.S. beef. The U.S. trade surplus in beef and live cattle with Korea has increased 341 percent since 1994, from $241.5 million in 1994 to $1.1 billion in 2016.

European Union

The EU has been a driver in trade policy for many years. Basically the Europeans shut out U.S. beef on the basis of growth hormones and has maintained a 20-year ban on certain U.S. beef products. Stewart said, “This has been a blight on the relationship in U.S. agriculture for a long time.”

In 1998 the World Trade Organization (WTO) found the EU ban to be inconsistent with the EU’s WTO obligations. And in July 1999, WTO authorized the U.S. to suspend tariff concession to the EU in an amount of $116.8 million per year. The U.S. then imposed a 100 percent duty on selected EU products.

In May 2009, the EU and the U.S. reached a memorandum of understanding, under which the EU would create a new duty-free quota for imports of grain-fed, high-quality beef and the U.S. would eliminate the additional tariffs on EU products.

The quota in recent years has been increasingly filled by non-U.S. suppliers, including Argentina, Australia, Canada, New Zealand and Uruguay. In 2016, the U.S. beef industry requested WTO-authorized trade sanctions against the EU to be reinstated. That decision has not yet been reached.

Stewart said, “The EU is a huge market in which we virtually have no role.” This seesaw of back-and-forth sanctions and tariffs makes the EU a very limited short-term opportunity for U.S. beef.


The U.S. has a significant trade deficit in cattle and beef with Canada and Mexico. NAFTA eliminated import duties and other restrictions on imports of live cattle and beef from Canada and Mexico. At the same time, imports of cattle and beef to the U.S. from Canada and Mexico have increased nearly 52 percent in 2016. Since implementation, the combined U.S. trade deficit in beef and cattle with Canada and Mexico has tripled, from $752.1 million to $2.4 billion.

Canada and Mexico are the only meaningful U.S. trading partners for both exports and imports of live cattle, due to their geographical proximity. U.S. cattle exports have declined 70 percent from 222,158 cattle in 1994 to 66,054 in 2016. Trade in beef has traditionally been more balanced than trade in live cattle.

When the Trump administration announced “throwing out” NAFTA, it received significant pushback from Congress. Agricultural groups, including beef, joined the pushback. Since that time, the administration has toned down the blast on NAFTA and has moved to a more measured approach, calling it a “renegotiation.”

U.S. agricultural objectives for NAFTA renegotiations include:

  • Maintaining existing reciprocal duty-free market access for agricultural goods
  • Expanding competitive market opportunities for U.S. agricultural goods in NAFTA countries, by reducing or eliminating remaining tariffs
  • Eliminating non-tariff barriers to U.S. agricultural exports, including discriminatory barriers, restrictive administration of tariff rate quotas and other unjustified measures that unfairly limit access to markets for U.S. goods, such as cross subsidization, price discrimination and price undercutting
  • Providing reasonable adjustment periods for U.S. import sensitive agricultural products
  • Promoting greater regulatory compatibility to reduce burdens associated with unnecessary differences in regulation, including through regulatory cooperation where appropriate

Opportunities during NAFTA renegotiations

There are several opportunities to remedy trade imbalances with Canada and Mexico, in part through:

  1. Agreement on NAFTA-wide application of country of origin labeling (COOL) requirements
  2. Duty-free access only for meat products 100 percent from animals that have been born, raised and slaughtered in NAFTA countries
  3. Implementation of special provisions for perishable and cyclical products including livestock and beef
  4. Harmonization of subsidy levels provided to NAFTA cattle producers
  5. Elimination of Chapter 19 panel review of anti-dumping and countervailing duties (AD/CVD) decisions

And one last note, Stewart said, is that renegotiation of NAFTA could bring in much of what the TTP had hoped to cover that are not currently covered by NAFTA – things like electronics and dairy products with Canada, for instance.  end mark

Lynn Jaynes
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