Statement of Timothy J. Galvin
Administrator, Foreign Agricultural Service
U.S. Department of Agriculture
Before the Subcommittee on Forestry, Conservation and Rural
Senate Committee on Agriculture, Nutrition and Forestry
September 25, 2000
Overview of EU Beef Hormone Ban
In 1989, when the EU banned the import of beef from cattle treated with growth promotants, U.S. cattle producers lost a market valued then at about $100 million annually. The EUís ban ignores a body of scientific evidence showing that the growth promotants in question are safe when used in accordance with good animal husbandry practices. Their safety has been confirmed by the Codex Alimentarius Commission (a food standards body sponsored jointly by the World Health Organization and Food and Agriculture Organization), as well as by the EUís own scientists -- both the Lamming Committee, convened in 1982, and the EUís Scientific Conference on Growth Promotion in Meat Production in late 1995.
The EU plans to maintain the ban on Estradiol, and convert the current ban on five other hormones to provisional bans.
After years of negotiations, in 1996, the United States presented its case against the EUís hormone ban to the World Trade Organization (WTO), where we were joined by Canada, Australia, and New Zealand. After a thorough review of the scientific evidence, the WTO Panel upheld the U.S. position and ruled that there was no scientific basis for the EUís hormone ban.
On three separate occasions Ė once in 1997 and twice in 1998 Ė the WTO ruled that the EUís ban on the use of certain hormones to promote the growth of cattle violated the WTO Sanitary and Phytosanitary (SPS) Agreement. In each of its decisions, the WTO found that the EU beef hormone ban is not supported by an adequate risk analysis nor is there credible evidence to indicate that there are health risks associated with hormone-treated beef.
For the past two years, the debate has been over the EUís compliance with the WTO rulings and honoring its obligations under international agreements. During the Uruguay Round negotiations, the EU committed to uphold the principles of the WTO. In maintaining its unscientific ban, the EU does nothing to further the objective of protecting public health, but instead undermines the WTO Sanitary and Phytosanitary Agreement and invites other countries to renege on their international obligations.
When the EU chose not to comply with the WTO ruling to lift its hormone ban, the United States suspended concessions on a list of EU products in July 1999 to encourage the EU to find a resolution to the problem. The WTO arbitrator had previously determined that the trade damage to U.S. beef from the EUís hormone ban was $116.8 million annually. We also explored with the EU the option of labeling beef as a product of the United States, in conjunction with a lifting of the ban. Most of our producers and packers are proud to make that claim. Unfortunately, the EU has not taken us up on this offer.
The purpose of the retaliatory duties is relevant with regard to the intent of S. 2709, the "Trade Injury Compensation Act of 2000," introduced by Senator Baucus and others. As we understand that legislation, it would establish a fund, appropriated at an equivalent amount to the additional duties imposed under the beef hormone retaliation list, to be used to provide assistance to the U.S. beef industry for market development, consumer education, promotion in overseas markets, and beef quality improvement.
While we can certainly understand the impetus for the legislation, the purpose of the retaliatory duties is to bring about WTO compliance by making trade in the sanctioned items prohibitive. In other words, the 100 percent duties commonly imposed in these cases are intended to be so onerous as to prevent trade from occurring and, thereby encourage the losing party either to eliminate its offending practices or to offer compensation in some other fashion. If the duties have the intended effect, then the items would not be imported and thus no duty would be collected. Therefore, a fund established on the premise that such duties would be collected would likely earn very little revenue.
U.S. Beef Exports Are Rising
While this scientifically unjustified ban has gone on far too long, the U.S. livestock industry has not been sitting still. Working in partnership with the U.S. Department of Agriculture (USDA), American livestock producers have used all the tools at their disposal to open and develop new market opportunities. As a result, U.S. beef exports represent one of the true success stories in our agricultural trade.
For as far back as our statistics go, the United States has been the largest beef importer in the world. Not until 1981 did we export even one-tenth the amount of beef that we imported. However, in the decade of the 1990s, U.S. beef exports really took off. Today export sales account for more than 9 percent of U.S. beef production and constitute an integral part of the income of U.S. ranchers. We now export, on a volume basis, more than 80 percent of what we import and our trade surplus in beef exceeds $1 billion annually.
We can point to three key elements for this successful export strategy.
1. The U.S. beef industryís commitment to exports and servicing overseas customers;
2. The successful public-private partnership between USDA with its export programs and the beef industry, most especially the industryís export arm, the U.S. Meat Export Federation (USMEF); and
3. The governmentís success in opening up new market opportunities through trade negotiations and its diligent enforcement of these agreements.
Let me expand upon each of these factors in turn.
It was not so long ago that we heard as a common refrain that U.S. companies were interested only in our domestic market and perceived foreign markets only as outlets for surplus disposal. While perhaps once true, that cannot be said today of the U.S. beef industry. The beef industry, from producer to processor, has proven itself a sophisticated player in the global marketplace and a leader in processing innovation and product development. It is committed to both quality products and quality service. This is proven by the export numbers and by the industryís actions.
For example, when the Mexican peso collapsed in 1994 and U.S. beef sales plummeted 60 percent, the U.S. beef industry took a long-run view and worked creatively with its customers to maintain business relationships until Mexicoís economic fortunes improved. Mexicoís economy recovered quickly, and in two years U.S. beef exports were back on track and running at record levels. By maintaining a visible market presence and not losing sight of their customersí changed needs, the U.S. beef industry was able to engender goodwill and product loyalty. And, the dividends continue to pay off handsomely. Today, Mexico is the Number 2 market for U.S. beef, after Japan, with sales valued at over $450 million last year, and this year exports are up 20 percent over last year.
Central to the beef industryís ability to exploit market opportunities when they arise or to weather the downside of foreign market developments is the close cooperative relationship that exists between the industry and USDA. Our relationship with the beef industryís export arm, the USMEF, dates back to 1973. Along with significant funding provided by industry to develop overseas markets, USMEF also receives Foreign Market Development (FMD) funds and Market Access Program (MAP) funds, both administered by USDAís Foreign Agricultural Service (FAS). FAS and USMEF have worked hand-in-hand from the very beginning to increase U.S. beef exports, with FAS taking the lead in negotiating improved market access and USMEF spearheading the promotional efforts to take advantage of market liberalization as it occurred.
This partnership was instrumental in developing the Japanese market, which has grown during the past 20 years from a $200 million market for U.S. beef producers to a $1.7 billion market. Other examples of this successful partnership include introduction of the successful American Beef Club in Poland, headway in introducing new beef cuts into China, and the opening of meat training schools in Singapore and Korea for butchers and chefs throughout Asia.
Our partnership with the industry to promote U.S. beef exports extends beyond market promotion funding to include the myriad export programs operated by USDA, such as the export credit guarantee program. Export credit guarantees were absolutely critical to maintaining market share in important beef markets such as Korea during the stormy days of the Asian financial crisis.
As I mentioned, our partnership with industry is predicated upon each of us doing what we do best. For those of us in the Executive Branch, that means opening doors to new markets and keeping those doors open. The hard work, in fact, takes place not just at the negotiating table but also in the implementation phase, often outside the limelight.
In this difficult task we rely on our global network of agricultural counselors and attaches stationed in key markets around the world who serve as the Departmentís eyes and ears. For example, our office in Seoul, Korea, together with our analysts in Washington, DC, identified early on Koreaís failure to live up to its commitments under the U.S.-Korea beef agreement. This early warning allowed us to be proactive in dealings with the Koreans and ensure that when Korea fully liberalizes its beef market at the end of the year it will do so in the most trade-enhancing way possible.
ConclusionMr. Chairman, there are over 800,000 beef cow operations in the United States today and thousands of additional cattle feeders. Increased market access, reduced trade barriers and high-quality U.S. products continue to make the livestock sector one of the shining performers in the overall U.S. agricultural export picture.
We appreciate the Committeeís efforts to address the frustrations of our livestock producers as we continue to work to resolve the hormone issue with the EU. When the EU and its member states signed on to become WTO members they agreed to abide by all WTO rules. It is time for the EU to honor its commitments under international agreements. From this side of the Atlantic, it appears that the EU leadership has painted itself into the proverbial corner. Rather than exercise leadership and responsibility for food safety issues, EU leaders have chosen to ignore sound science and instead have chosen political expediency -- not just on the hormone issue, but on other issues such as agricultural biotechnology. We must move these bilateral trade issues out of the realm of politics and back to the realm of sound science where they belong.
We would be happy to work with the Committee to explore these issues further and talk about appropriate ways to compensate our cattle ranchers. In the meantime, we will continue to use all available trade policy and market development tools at our disposal to ensure the best outcome for the American livestock sector.
That concludes my statement, Mr. Chairman. I will be pleased to answer any questions.