What Have We Learned From Cattle/Beef Disputes?

What Have We Learned From Cattle/Beef Disputes?

R.M.A. LoynsLinda M. YoungColin A. Carter

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Cattle and Beef Trade Issues and Incidents

TRADE ISSUES• Level of imports• Input subsidies (feed, grazing)• Grade equivalence• Animal drug use/testing• Data availability• Trade remedy laws• Sanitary requirements

TRADE INCIDENTS• 1998 northern tier states blockade• Occassional border protests• R-CALF

RESOLUTION• Record of understanding (Dec 98) - animal drug use/testing; data availability• Restricted feeder cattle project - sanitary requirements• R-CALF (CVD)• R-CALF (AD)

NO RESOLUTION• Grade equivalence• Further policy harmonization for inputs• Level of imports• Trade remedy laws


Value of U.S. Imports and Exports

00.5

11.5

22.5

33.5

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998

Bill

ion

dolla

rs

Value of imports Value of exports


Net Imports from Canada and Mexico, Cattle and Beef Pounds as % of U.S. Beef Supplies

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998-1

0

1

2

3

4

5

6

Percent Canada Percent Mexico


U.S.-Canadian Trade in Live Cattle

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 19990.00.10.20.30.40.50.60.70.80.91.01.11.21.31.41.51.6

U.S. Imports from CanadaCanadian Imports from U.S.

Tarrif Rate:$0.022/K

Tarrif Rate:$0.004/K

Tarrif Rate:Free

Note: January–November 1999.


U.S.- Canadian Trade in Boxed Beef

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 19990

0.2

0.4

0.6

0.8

1

Beef Imports Beef Exports

Note: U.S. Imports from Canada, January–November 1999.


U.S.-Canadian Slaughter Prices, 1980-1998

1980 1982 1984 1986 1988 1990 1992 1994 1996-20

0

20

40

60

80

100

120


U.S. Cattle Trade with Mexico, 1988-1998

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 19980

0.5

1

1.5

2

Imports from Mexico Exports to Mexico


U.S. Boxed Beef Exports to Mexico, 1988-1998

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 19980

0.1

0.2

0.3

0.4

0.5


US Trade Remedy Legislation

• Section 701 Subsidization/CVD• Section 731 Dumping/ADD

– USDOC/ITA– USITC


Duty Imposition

• Finding of subsidization or• Finding of dumping plus • Injury

– volume of imports– effects on U.S. prices– effects on domestic producers


The R-CALF Dispute

• Petitions filed November 12, 1998– Canada subsidizing cattle exports– Canada dumping cattle– Mexico dumping cattle

• Investigations initiated December 1998


R-CALF

• Ranchers - Cattlemen Action Legal Foundation• “A grassroots non-profit corporation to initiate

actions in retaliation to U.S. Trade Regulations and Trade Relief Laws”

• Issues– depressed prices– imports– dissatisfaction with several groups and institutions


Investigations

• Live cattle for slaughter• October 1997 - September 1998• Alberta, Saskatoon, Manitoba, Ontario• 30 Federal/provincial programs including CWB


Mexican Action

• Terminated January 1999


Dumping Margins, June 30 and October 12

Weighted Average Percent Margin

Exporter/ProducerPreliminary 6/30

Effective 7/1Final 10/12

Retroactive 7/8

Cor Van Raay Ltd. and ButteGrain Merchants Ltd.

4.49 4.53

Groenenboom Farms Ltd. 3.9 3.86

Jameson, Gilroy and B & LLivestock Ltd.

3.94 5.10

Pound-Maker Adventures Ltd. 0.18 (de minimus) no duty required

Riverside Feeders Ltd. andGrandview Feeders Ltd.

6.81 5.34

Shaus Land and Cattle Co. 5.43 15.69

All Others 4.73 5.63

Source: USITC # 3255 November 1999: Live Cattle From Canada (Final) and 64 FR 56739 October 22, 1999.


Countervail Action on Canada

• January: Probable injury• May: (0.389) subsidies de minimis• October: (0.77%) subsidies de minimis• CWB not subsidizing• Terminated• Costs


AD Action on Canada

• January: Probable injury• March/May: Costs/revenues analysis• June: Dumping margin• October 12: Revised• November 19: Final Determination


Decision Wording• …that an industry in the United States is not materially injured or

threatened with injury, and the establishment of an industry in the United States is not materially retarded, by reason of imports from Canada of live cattle,….., that have been found by the Department of Commerce to be sold in the United States at less than fair value (LTFV). (USITC, Determination and Views of the Commission. Investigation #731-TA-812 (Final))

• ….I find that the domestic industry would not have increased its prices or its output and sales, and therefore its revenues, significantly, had the subject imports been fairly traded. Therefore, I find that the domestic industry would not have been materially better off if the subject imports had not been dumped. (Commissioner Crawford)


Evidence on 701/731 Application

• Schmitz, et. al, AJAE 1981– tomatoes

• Stiglitz, 1997. “Since it is relatively easy to show that a foreign firm has been subsidized in some way, the countervailing duty laws have become a populist sibling to antidumping laws.”

• Bovard, 1991. “If the same antidumping laws applied to U.S. companies, every after-Christmas sale in the United States would be banned.”


Evidence on 701/731 Application (continued)

• Coughlin, 1991. “Overall, the evidence is that trade-remedy laws hinder rather than facilitate free trade. U.S. fair trade laws can be more accurately characterized as the bedrock for protectionism rather than the bedrock for free trade. As such, trade remedy laws need to be remedied by eliminating the bias toward protection of domestic producers.”


Some Considerations• A well-functioning, open market was found to have generated

unfair trade• R-CALF was played outside of NAFTA influences• Apriori economic evidence

– USITC, 1993 and 1997– Holder, USDA, August 1998– Mintert, KSU, August 1998– Brester and Marsh, MSU 1999

• U.S. producers were selling below cost• NCBA, reluctant, did not support cvd


Further Considerations

• CWB controversy: subsidy??– who? timing?

• Subsidization and the feeder market• Process costs• Market costs• Relations/trade harmony


Conclusions

United States Canada

C.V. A.D. C.V. A.D.

Imports 0 0 0 0

Producer price impact 0 0 - - -

Packer impacts - - + +

Consumer price impact 0 0 +?? +??

Dispute costs - - - - - - - -

Producer grouprelations

- - - - - - - -

Short-run traderelations

- - - - - - - -

Long-run harmony ? ? ? ?

Notes: + indicates probable favourable outcome in relation to the factor.- indicates probable unfavourable outcome.0 indicates no perceptible impact.


Achieving Trade Harmony

• Trade Remedy Laws vs. Harmony• NAFTA first action protocol• Economic Science Based Rules• TR Laws, last resort• Do we need

– protocol against frivolous and harassment actions– liability for market losses and process costs– more cross-border organizations and communication

What Have We Learned From Cattle/Beef Disputes?

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