An all-or-nothing approach to reopening global markets for U.S. beef has lost the industry tens of millions of dollars in the past few years. Thank goodness a more pragmatic approach now prevails, because exports are more vital than ever to the industry's profitability.
The “all-or-nothing” approach dominated efforts to try and persuade the European Union (EU) to lift its 1986 ban on the use of implants. The U.S. this May finally admitted defeat and acknowledged that the EU would rather pay penalties on exports to the U.S. than lift the ban because there is no support in Europe for rescinding it.
It's unfortunate it took the U.S. so long to recognize the obvious. I worked in Europe from 1978 to 1986 and closely followed the campaign to get implants banned. From sensational stories in the Italian press about adolescent boys growing breasts (blamed on use of DES) to stories about the illegal use of implants such as clenbuterol, consumer concerns heavily fueled the campaign.
Throw in a growing beef mountain in Europe (there were one million tons of beef in cold storage at one point) and a ban was inevitable. It was implemented to assuage consumer concerns, to prevent illegal usage and to reduce beef production.
I began writing about the U.S. beef industry in 1987 and offered the observation that the EU would fight every effort to overturn the ban because of the points just noted. So it proved to be. The U.S. and Canada eventually filed a complaint with the World Trade Organization and won their case. It didn't matter one iota to the EU, which continued to find ways to keep its ban. As noted, it even agreed to tariffs on food exports to the U.S.
Nothing might have changed had not the Bush Administration in its last days threatened to “carousel” the tariffs (revolve them through a new set of products). That got the EU back to the negotiating table to offer a 20,000 metric ton, tariff-free quota for each of the next three years and a larger quota in Year 4.
But the EU refused to budge on the hormone ban and insisted that U.S. packers not use carcass rinses. Science is firmly on our side on the use of implants and rinses. But the Obama Administration's pragmatic approach to resolving trade issues led to an agreement. It accepts that the EU will never lift its hormone ban and that the U.S. at least has more market access.
I'm also hopeful a more pragmatic approach will prevail in encouraging Japan to lift its restrictions on U.S. beef. Japan since July 2006 has accepted only beef (bone-in and boneless) from cattle under 21 months of age. This means that U.S. exports of beef cuts and beef by-products in 2008 were only 20% of the volume exported in 2003.
However, Japan in May gained BSE “controlled risk” status from the World Organization for Animal Health (OIE). This means Japan is now officially in the international fold on animal health. Acknowledging the OIE in this way gives Japan a context in which to lift its restriction on U.S. beef.
Japan will first raise the age of its own cattle that it requires be tested for BSE. All cattle 21 months and older must currently be tested. Japan will likely lift this to 30 months and older. This will allow it to move to accepting U.S. beef from cattle under 30 months of age.
Just as important, the U.S. industry has pretty much convinced the Administration to accept this rather than hold out for a removal of all age limits. It's incredible to recall that Japan offered an under-30 age limit in December 2007, only for the U.S. to reject it because it wanted a complete removal. Imagine how much more beef we would be selling to Japan had the U.S. agreed.
Steve Kay is editor and publisher of Cattle Buyers Weekly. See his weekly cattle market roundup each Friday afternoon at beefmagazine.com.