The UK does not get much trade attention from the U.S. beef industry. But it should; the UK imports over half of its food.
“For people in agriculture, it’s important, because there are 66 million people in the UK. Britain is bigger than Korea or Taiwan, and half the size of Japan, but a very important country in terms of population and influence,” says Philip Seng, who has worked with the U.S. Meat Export Federation for more than 40 years.
“When you look at their food supply, however, they import 51 percent of their total caloric intake. More food is imported than is produced in the UK. So, for those of us who have spent our careers in international markets, we would naturally believe that there’s a lot of enticing potential for our food products.”
Yet, of all the UK’s food imports, only 4 percent comes from the U.S. There are many issues we must address, not least of which being that the UK has serious reservations about importing food products from the U.S.
“For instance, they’ll cite serious concerns about chlorinated chickens, or the way our beef or pork are produced, and animal welfare concerns. Looking at a foreign trade agreement with the UK, we’ll be looking not only at meat products but also wines and distilled spirits, marine life, veterinary requirements, and many agricultural issues,” Seng explained. The more we address in a trade agreement that takes all these issues into consideration, the longer it takes to complete it. If we’re trying to see what this means to our ranchers, it means it’s going to be a long pull,” Seng explains.
Previous trade agreements
“There are folks who think we can do a European agreement, and do it on ‘one tank of gas’ (a quote from our previous administration) but it was anything but that. The idea of the U.S., Europe and the UK having trade agreements is complicated,” explained Seng.
“After NAFTA (North American Free Trade Agreement), there was a call for TAFTA (Trans-Atlantic Free Trade Agreement). NAFTA was completed in 1994 and by 1997 the Europeans had come forward and wanted to do a TAFTA,” he says.
After TAFTA the next big thing was the TPP (Trans-Pacific Partnership) in Asia, which was being negotiated during the Obama administration, and we were also negotiating TTIP (Trans-Atlantic Trade and Investment Partnership) which was the European agreement. Then we pulled out of both of those agreements after five years of negotiations.
“Now we are starting all over again with Japan and starting all over again with Europe. People don’t remember the European agreement as much, because we didn’t do as much business in Europe, and it didn’t bite us as much. Now with Japan, we are seeing Australia with a 12-14 percent increase in what they are sending to Japan, and less duty to pay than we have to pay, which made them much more competitive,” says Seng.
“Today, talking with the EU, the Europeans have showed interest in new trade agreements, but neither the EU or the UK want to include agriculture—which is another big bogey for us, as we try to move forward,” says Seng.
Trade competition and quotas
The potential in the UK and in Europe for meat trade are quite high; these countries import a tremendous amount of meat. Australia is one of their primary suppliers. Ireland provides about 60-70 percent of the meat coming into the UK, with Australia making up the next largest portion, along with some other sources like South America. The U.S. therefore has some strongly-entrenched competition, especially where Ireland is so close. As Seng points out, having Ireland next door would be like living right next to a state like Nebraska that produces a lot of fed beef.
“On the other hand, as we’ve been moving toward some kind of individual, bilateral agreement with the UK, the Australians have become very aggressive,” says Seng. “They’ve had three sets of talks already with the EU; they recognize the EU as their natural trading partner,” he explains.
“Even though the U.S. is talking about doing an agreement, the Aussies are already in line for this. The competitive factor is formidable. We must become very aware of the competitive factor, and competitive forces in these markets. We cannot underestimate Australia when 80 percent of their market for beef is exports. This is where their best people are working because this is where their national interests are. Here in the U.S. we export a much smaller percentage of our meat and Americans don’t look at the international market with the same intensity and purpose as they do in a country like Australia where their beef industry completely depends upon it,” said Seng.
“Many of our competitors look at the international market first and then at their own domestic market. So, our competitors often adopt the cuts, the nomenclature, etc., to meet the needs of the international market. In the U.S. we always look at the domestic market first and the international market second. When you go to committee meetings or to the NCBA, it’s all about domestic markets but if you go to an Australian beef meeting, they talk about international and very little about domestic. That’s a huge advantage if you are an exporter because they put that first on the agenda,” he explained.
“Some of the issues in dealing with the EU and the UK are the beef quotas. The EU said they would probably allot the UK about 19 metric tons, which is only one container under the Hilton quota for High Quality beef. There are domestic beef subsidies in the UK for their own producers, so we’d also be looking at domestic supports in a U.S-UK trade agreement,” he says.
The way the quota system is set up, with licenses and the way we sell our product every quarter (with quarterly allotments for beef), the Europeans have made it very costly for us with their NHTC (non-hormone treated cattle) program.
“The beef we send to Europe is the most costly beef we send anywhere in the world. Meeting all of their regulatory requirements have made our beef extremely expensive,” said Seng.
In the U.S. we look at end-product testing.
“If the product is tested by the inspectors to receive approval from the FDA, then that means it is safe. In Europe they do process testing; they look at the whole process—from the cow-calf, all the way through the processing plant. So you must have producers who are part of the NHTC program. From the time the calf is born, it must be identified, and you can’t treat it with certain drugs or compounds. Then all the way through the life of that calf, it has to be identified and monitored. So all of this costs money, and when our product goes to Europe today it is the most expensive meat we send anywhere in the world—because of all the regulatory rigmarole we have to go through,” he said.
“When we enter these negotiations, it’s not just about removing the quotas, but also removing all these other regulatory hoops. Most of the negotiators in Washington are good lawyers but they don’t fully understand how it really works from the ground (on the farm) all the way to the market,” he said. — Heather Smith Thomas, WLJ correspondent
