Global Export Markets- Global Competition?

April 27, 2003

Phil SengPresident, International Meat Secretariat

President and CEO,U.S. Meat Export Federation

2

IMS

3

USMEF Structure

Public-private sector cooperation Multi-species

– Beef– Pork– Lamb

Multi-segment– Producers & producer checkoffs/groups– Packers/processors– Purveyors/traders

4

USMEF Strategy

Putting U.S. Meat On The World’s Tables, through:– Market Access– Market Presence– Buyer Education & Loyalty– Trade Support– Total Carcass Utilization– Industry/Product Image– Food Safety

5

USMEF Worldwide

Denver

Mexico City

Sao Paulo

MoscowLondon

Beirut OsakaTokyo

ShanghaiTaipei

Seoul

Singapore

Guangzhou

Monterrey

St. Petersburg

Caracas Hong Kong

6

Presentation Overview

Macro trends in the global meat sector

Prospects for the WTO Negotiations New Trade Barriers New Problems, New Solutions

7

World Population GrowthWorld Population Growth

0

2

4

6

8

10

bill

ion

peop

le

'50 '60 '70 '80 '90 '00 '10 '20 '30 '40 '50

Source: FAO

8

Average Per Capita Average Per Capita GDP (World)GDP (World)

$4,000

$5,000

$6,000

$7,000

US$

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

Source: WEFA/DRI

9

U.S. Meat Consumption

0

10

20

30

40

50

60

70

1960 1970 1980 1990 2000

kg/c

apit

a

BeefPorkPoultry

Source: FAO

10

World Beef Production

0

10

20

30

40

50

60

70

80

Beef

Mil

lion

Met

ric

Ton

s

19701980199020002010

Source: FAO

11

Major Beef Producers 2002

EU15%

Brazil14%

China12%

Aust/NZ5%

USA24%

Other30%

Source: USDA

12

Global Beef Consumption

0

10

20

30

40

50

60

70

1960 1970 1980 1990 2000

Mil

lion

Met

ric

Ton

s

Source: FAO

13

World Beef Trade

Source: FAO

0

1

2

3

4

5

6

7

8

9

10

Beef

Mill

ion

Met

ric

Ton

s

19701980199020002010

14

Major Beef Exporters 2001

Other13%

EU7%

India4%

NZ7%

BZ/AG13%

Canada9%

Aust21%

USA26%

Source: WTA/FAO

15

World Trade in Beef as a Percent of Production

Source: FAO

0%

2%

4%

6%

8%

10%

12%

14%

Beef

Per

cen

t of

Pro

du

ctio

n E

xpor

ted

1970198019902000

16

WTO Negotiations: US Proposal

Export Competition– Eliminate export subsidies and STE

Market Access– Reduce average agricultural tariff to 15%

with no tariff exceeding 25%– Increase Tariff Rate Quotas by 20%

Domestic Support– Limit trade-distorting support to 5% of the

value of agriculture production

17

Proposed Tariff Reductions

0

20

40

60

80

100

120

Final Bound Swiss25

US EU Japan Korea India

18

Proposed Domestic Support Reductions

0

10

20

30

40

50

60

70

Current Ceiling U.S. Proposal

Billio

n U

S$

EU

Japan

US

19

Export Subsidies

2%2%

4%

1%

EU91%

Rest of WorldU.S.SwitzerlandNorway

Source: OECD

20

The Impact of EU Export Subsidies

0%

10%

20%

30%

40%

50%

60%

1997 1998 1999 2000

BeefPork

EU Market Share in the Philippines

Source: World Trade Atlas

21

Tariffs Hinder Market Access

Japan: Largest market for U.S. beef– Beef tariff equals 38.5%– Japan Safeguard will raise tariff to 50%– USMEF estimates that U.S. beef exports

to Japan grew 3% for every 1% drop in the tariff (1995-2000)

Korea: #3 Beef market– Beef tariff exceeds 40%

22

Domestic Farm Subsidies

9%

5%

17%

16%

50%

90% 56%

0

10

20

30

40

50

60

70

80

NewZealand

Australia Canada USA EU Japan Korea

1986-882001p

Source: OECD

Producer Subsidy Equivalent by Country, 1986-88 vs. 2001p

Label indicates percent decrease from ‘86-’88 to 2001p

23

WTO Agriculture Chairman Harbinson’s Proposal

Export Competition– Calls for the eventual elimination of export

subsidies. Real debate is over how quickly Market Access

– Calls for a minimum 45 percent cut for tariffs over 90 percent- far short of the US proposal

Domestic Support– Fails to rectify the imbalance. It would bring

total U.S. support down to just over $12 billion while the EU would be allowed to spend at least $32 billion

24

Magellan Project:The Gains from Beef Trade

Estimates of Annual Producer Gains from Various Trade Scenarios– Free Trade: $4 billion– Cairns Proposal: $3 billion– US Proposal: $2.3 billion– EU Proposal: $1 billion

25

New Trade Barriers

As traditional methods of protection fall, countries find other ways to protect their domestic industries– Unscientific sanitary standards

Hormone ban, disease restrictions, zero tolerance, residue testing

26

Hormone Bans in 1990

27

Hormone Bans in 2002:In Place or Potential

Countries represent 40% of global beef eating population

28

New Trade Barriers

– Technical barriers Burdensome paperwork, slow approvals,

plant inspections, COOL

– Anti-dumping measures Traditionally used by developed countries Developing countries starting to use

29

As Tariffs Fall…Other Measures Rise

0%

5%

10%

15%

20%

25%

30%

'87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99

Av

era

ge

Ta

riff

ra

te

0

50

100

150

200

250

300

350

400

450

500

Nu

mb

er

of

AD

Me

as

ure

s in

Pla

ce

Avg. Tariffs

Measures in Force

Source: Cato Institute

Average Tariffs and Antidumping Measures(nontraditional users, 1987-1999)

30

New Trade Barriers

– “Positive” Discrimination Capitalizing on food safety fears

31

Korea: Beef “Safe-to-Eat” Ratings

1

2

3

4

5

US Beef

Domestic

Australia

19992001

Scale is 1 to 5 with 5 being the highest

32

BSE Reaction in Japan

According to a Fall 2002 survey of Japanese consumers, the primary consideration for purchasing beef is that it be domestic

33

New Trade Barriers

– “Positive” Discrimination Capitalizing on food safety fears

– Consumers tend to believe the worst about imported food

Competing on food safety harms all exporters

34

Low Beef Demand in Taiwan

Beef Consumption in Taiwan is very low– 2.75 kg/person in 2001– 1/3 of consumers do not eat beef

0

2

4

6

8

10

kg/p

erso

n

HK JP SK SG

PRCTW

Source: USMEF Research

35

A New Approach

“Coopetition”– Cooperating to create a bigger pie,

while competing to divide it up.

36

Taiwan Beef Alliance: “Coopetition”

Goal: to increase overall beef consumption– “Rising tide raises all ships”

Joint effort with Australia and New Zealand Campaign focused on nutrition in Kaohsiung

37

Beef Alliance Logo & Slogan

Focus on Nutrition: According to a 2001 USMEF Beef Consumer Survey, 93% consumers interviewed agree beef is “Healthy and Nutritious”.

Slogan: Easily supplement iron starting with beef!!!

38

Taiwan Beef Alliance

Campaign resulted in increased awareness of the nutritional benefits of beef

Partners expanding campaign in Phase II Canada added as a partner country

39

Concluding Thoughts

The world market for our products is growing

We have cooperated in opening these markets for half a century

We should continue to cooperate in non-traditional ways to “raise all ships”

40

Concluding Thoughts

Consumer pressure to show livestock/meat produced/processed in a safe and hygienic manner

Consumers want judicious use of compounds, responsible application, Good Production Practices (GPP) and Good Manufacturing Practices (GMP)

Proof through traceability

41

Australian FTA:U.S. Points of Contention

Debate surrounds Australian SPS measures– Beef not allowed for import until 30

days after slaughter– U.S. uncooked pork banned due to

presence of PRRS in U.S. herd despite lack of scientific evidence to support the ban

– Other U.S. agricultural products lack access

– Prolonged risk assessments

42

Australian FTA:Aussie Points of Contention

Australian beef exports to the U.S. constrained by tariff rate quota– Australia has filled TRQ last two years

Australian Feeder Cattle Imports Country of Origin legislation

43

Resolutions/Positive Outcomes

Science-based SPS measures

Elimination of U.S. Beef TRQ– Cairns/US proposals only call for increasing

TRQs with eventual elimination– Eliminating U.S. TRQ would result in

dramatic increase of market access for South American beef

– Non-Oceanic countries account for less than 10% of U.S. beef TRQ

44

U.S. Imports of Australian Lamb

0

10,000

20,000

30,000

40,000

50,000

60,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Met

ric

Ton

s

45

U.S. Imports of Australian Beef

0

50,000100,000

150,000200,000

250,000300,000

350,000400,000

450,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Met

ric

Ton

s

46

U.S. Exports of Red Meat to Australia

0

1,000

2,000

3,000

4,000

5,000

6,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Met

ric

Ton

s

PorkBeef

47

Thank You

U.S. Meat Export Federation www.usmef.org