The passage of a Free Trade Agreement (FTA) always tends to be a contentious issue, with the industries in each country generally concerned about how they will keep their competitive advantage. The U.S. beef industry is no different, and although many have underscored the importance of opening new avenues of trade with potential consumer countries, at least one group disagrees.

R-CALF USA has pitted itself firmly against the U.S.-Colombia FTA which appears to be on the horizon. The group maintains the U.S. gives away a share of the domestic beef industry as each new FTA is signed, creating a trade deficit in the process.

"The data presented at our convention reveal that the benefits promised to cattle producers have not materialized and, in fact, these FTAs have resulted in a huge deficit for our industry," said R-CALF National Membership Committee Co-Chair Joel Gill. "These FTAs also have distorted incomes in America."

Lori Wallach, Public Citizen’s director of global trade watch, gave a presentation at the recent R-CALF convention claiming that the combined trade in U.S. livestock and meat products with countries who already have an FTA with the U.S. caused a trade deficit of $2 billion in 2007.

"NAFTA (North American Free Trade Agreement) led to a massive increase in our trade deficit, and our deficit with South American countries (such as Chile and Nicaragua) can be explained by the fact that these nations are too poor to be able to buy very many American products," she stated.

R-CALF Region VII Director Eric Nelson said he agrees with Wallach’s conclusion, saying it is irresponsible for Congress to continue signing FTAs.

"The U.S.-Colombia FTA should not be approved at least until the FTA is rewritten to include provisions that would protect U.S. cattle producers from import surges and U.S. consumers from meat produced under substandard conditions," he said.

While R-CALF remains staunchly opposed to the upcoming U.S-Colombia FTA, trade analysts have pointed to data which shifts the argument strongly in favor of opening new markets through FTAs. One of them is Erin Daley, manager of research and analysis for the U.S. Meat Export Federation, who had data supporting the conclusion that FTAs have been extremely beneficial for the U.S.

Daley pointed out that U.S. exports to FTA countries increased 53 percent when comparing 2007 values to 2000, the U.S.’s record year for beef exports. In comparison, she said, exports to the rest of the world during 2007 were 72 percent less than the 2000 export value. She also noted that imports from FTA countries have increased just 20 percent since 2000 while imports from the rest of the world increased 77 percent. The discovery of bovine spongiform encephalopathy (BSE) in 2003 has dramatically changed the dynamics of beef trade parity, noted Daley.

"The U.S. was a net importer of beef products from FTA partners in 2007, with net imports totaling $681 million. However, net imports actually decreased compared to 2000," Daley explained. She added that net imports reached their high point in 2004 due to BSE bans and their limiting effect on exports. "The U.S. beef trade balance has recently been influenced by U.S. market access (BSE restrictions) and the demand for imported beef, which is driven by domestic production and, specifically, cow slaughter."

Daley also stated that it’s important to separate beef trade from live animal trade, which can skew the numbers due to the high number of live cattle which come into the U.S. for feeding or slaughter.

"Where R-CALF does take information out of context is when they include live animal imports, which ignores the impact of BSE-related market closures," said Daley. "Net live cattle imports in 2007 totaled $1.8 billion. Feeder cattle are imported to the U.S. from Mexico and Canada depending on grazing conditions in Mexico, grain prices in Canada, and, of course, currency dynamics."

Daley points out the cost advantage which comes from feeding and sometimes slaughtering foreign cattle in the U.S., and that integration within the North American market allows the U.S. to maximize efficiencies to benefit both producers and consumers.

"It’s important to realize that we’re dealing in a global marketplace, and only looking at trade between the U.S. and our FTA partners is too narrow of a view," Daley continued. "The live cattle we import also translate into beef products for the export market that includes significant consumers who are not FTA partners, Japan and South Korea being prime examples."

Gregg Doud, chief economist for the National Cattleman’s Beef Association, agreed with Daley’s assertion that the FTAs are helpful to the U.S. beef industry, saying that with the U.S.-Colombia FTA, it is unlikely there would be any surge of imports.

"I believe there are only one or two FSIS-inspected (Food Safety and Inspection Service) slaughter plants in Colombia approved for export. These plants are only eligible to export cooked beef due to foot-and-mouth disease," said Doud. "The only cooked beef we have ever imported from Colombia was 9.8 metric tons in 2006, worth just $16,000."

Doud concluded by pointing out the already-established track record of positive beef trade with Colombia.

"In 2007, we exported 408.3 metric tons of variety meats to Colombia plus 9.5 metric tons of beef at a total value of $463,000. Historically, this has been a $0.5-2.75 million market for the U.S. It’s certainly not lopsided in Colombia’s favor on beef trade, nor is it ever likely to be." — Tait Berlier, WLJ Editor