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2017-12-07

Worldwide customers add value to U.S. Beef

By Kelley Sullivan, TSCRA Director, Crockett

Over the years, U.S. exports have become critical to the U.S. beef industry and the rural economy. In 2016, we sold more than $6.3 billion worth of beef products through exports to other countries. This accounts for a value of $290 per head, even for those not directly involved in the international market. It is safe to say that this value will increase if the U.S. beef industry is able to respond to the growth in demand for our beef in other countries.
Texas and Southwestern Cattle Raisers Association (TSCRA) members are clear in their expectation that the U.S. trade negotiators and government do everything necessary to secure and maintain strong access to international markets.
In May, I was fortunate to personally visit some of our beef customers in Korea and Japan and observe, first-hand, the strong demand for U.S. beef.
Our perspective on international trade stems from a basic premise. If we’re going to raise cattle and produce beef, we need competitive access to consumers who are willing to pay for our product.
For many years, Americans have been the primary focus of U.S. beef marketing efforts. Americans prefer ribeyes, tenderloins and hamburger and are willing to pay a higher price. Other beef cuts such as short ribs, tongue and livers fetch a lower price on the domestic market, but actually, yield great premiums in the international market. For this reason, we are increasingly looking beyond our borders for opportunities to maximize sales.
Asia is a prime target. As more Asian consumers join the economic middle class, they are adding protein like beef to their diet. Trade allows us to capitalize on dietary differences and preferences to capture value for beef that would not exist if we sold in only the domestic market.
Today the success or failure of the U.S. beef industry depends on our level of access to global consumers. Our top six export markets are Japan, Korea, Mexico, Canada, Hong Kong and Taiwan. In 2016, 84 percent of our export sales came from these 6 markets. Threats to international market access get the attention and concern of cattle raisers across the country.
We encourage the U.S. government to aggressively pursue opportunities to remove tariff and non-tariff barriers around the world. The U.S. beef industry has reaped the benefits of trade policies such as the implementation of the North American Free Trade Agreement (NAFTA) and the Korea-U.S. (KORUS) Free Trade Agreement.
Our success hinges on our ability to avoid the mistakes of the past and take an aggressive posture in support of trade liberalization. We are very excited that after 14 years in exile, U.S. beef access has been restored to China. While previous administrations worked diligently to address China’s concerns and negotiate terms, it was the Trump Administration that closed the deal and restored U.S. beef access to China this summer.
Our negotiators worked hard to secure market access terms that are superior to the terms under which our competitors export to China. We view China as an important investment for the future of our industry. While we’re excited about the opportunities China holds, we’re very concerned with statements from our government that may put our success under KORUS in jeopardy.
We have nothing to gain by walking away from a free-trade agreement between Korea and the U.S. Despite criticism from anti-trade groups and some leaders within our government, the U.S. beef industry has thrived under KORUS. Korea is our second largest export market accounting for more than $1 billion in annual sales.
Annual U.S. beef sales have increased 82 percent during KORUS. If we dissolve this agreement, Korea will undoubtedly reinstate a 40 percent tariff on U.S. beef and we will lose our competitive advantage over Australia and other countries.
Japan is the top export market for U.S. beef. In 2016, Japanese consumers purchased $1.5 billion of U.S. beef, even with a 38.5 percent tariff in place. 2017 has been a record year for U.S. beef in Japan, reaching nearly $1.1 billion in sales just through July. Due to that success, however, Japan triggered a snap-back tariff of 50 percent on frozen beef.
The tariff went from 38.5 percent to 50 percent, overnight. Without a free-trade agreement in place, U.S. frozen beef will continue facing the 50 percent tariff until April 2018, and without a trade agreement, we could face higher tariffs again.
In contrast, Australian beef imports are not subject to the 50 percent snap-back tariff because they have a trade agreement with Japan. Australia enjoys a stable 27 percent tariff rate.
We support trade agreements like the Trans-Pacific Partnership (TPP) because it would have lowered the tariff on U.S. beef from 38.5 percent to 9 percent in 16 years.
Unfortunately, the decision to remove the U.S. from TPP puts us at a significant disadvantage. We ask U.S. negotiators to focus on securing new market access for U.S. beef exports starting with making up the ground we lost walking away.
Closer to home, we are keeping a careful eye on the North American Free Trade Agreement (NAFTA). In 2016, U.S. beef exports to Mexico accounted for a value of almost $1 billion.
Texas' trade partnership with Mexico is one of the strongest in the country. Mexico is one of the top buyers of U.S. beef, and Texas and Mexican ranchers have been buying and selling cattle with one another for generations.
NAFTA has been beneficial to U.S. cattle raisers and beef producers, creating two markets, each with an annual value of $1 billion in exports of U.S. beef to Canada and Mexico. Since NAFTA was implemented, exports of U.S.-produced beef to Mexico have grown by more than 750 percent.
We urge the U.S. government to do no harm to international trade for U.S. beef, and believe it is time that our policy makers use all necessary resources to secure and maintain strong market access for U.S. beef producers.