If you want to succeed as the spokesperson for some industry group, the most important thing is that you have to lose all sense of shame immediately.
That may be harsh, but it is the reaction I had on reading about two agricultural trade disputes between United States and major trading partners. In both cases, the protests industry reps are making run highly counter to positions they took in the past when the shoe was on the other foot.
Beyond any hypocrisy, however, these disputes are interesting because both affect Minnesota agriculture and because they illustrate broader issues in the knotty area of rules for international trade.
The first involves U.S. exports of pork to China. As Chinese incomes have increased, these exports have become important to U.S. hog producers. They quadrupled from 2005 to 2010 and now approach $900 million a year. And, since imported U.S. pork accounts for only about 3 percent of total Chinese consumption, there is great potential for growth.
However, China has been making noise about trace residue of ractopamine hydrochloride in pork imported from here. This is a drug to improve the ratio of lean meat to fat and is approved as a feed additive in our country but banned in China, the European Union and some other countries. It is sold by Elanco, the ag division of Eli Lilly, under the brand name Paylean.
U.S. exporters claim they are sending only Paylean-free pork to China. Chinese officials claim they have found traces of the banned drugs in shipments and may demand third-party verification that shipments are residue-free as of March 1. This follows on the heels of Russian limits on imports of U.S. pork and turkey imposed this month for the same reason. The Russian trade is about $550 million per year.
Representatives of U.S. hog producers and meat processors reacted immediately with statements accusing the Chinese of disguised protectionism. They said the same things in reaction to Russia’s ban, and said the accusation was evidence of Russian President Vladimir Putin playing hardball with our country over other issues. In both cases, they may be right.
The irony is that this sort of thing has a decades-long history. The United States has long been more tolerant of drugs and hormones as feed additives than most other countries, especially those in Europe. The current dispute mimics a long one we had with the European Union about residues of diethylstilbestrol and other growth-promoting hormones in U.S. beef exports.
Rather than simply giving our customers the product they wanted, we wrangled for 30 years over whether the EU ban was legal under international trade law.
All of this would not be so cynicism-inducing if we had not had an identical trade dispute with Canada over their live hog exports to the U.S. back in the 1980s. Canada, which often is closer to U.S. than to E.U. policy in terms of feed additives, permitted the feeding of chloramphenicol, a growth-promoting antibiotic, to hogs. The U.S., while allowing such “sub-therapeutic” use of numerous other antibiotics on farms here, did not permit chloramphenicol.
Facing growing numbers of semis full of Canadian hogs barreling down Interstate 29 from Manitoba, U.S. hog producers threw a hissy fit about the threat to public health from this pharmaceutical menace. Terry Branstad, then as now the governor of Iowa, imposed a ban on slaughter of Canadian hogs. South Dakota Gov. Bill Janklow, a past master of showboating for political gain, ordered his state troopers to seize any trucks of Canadian hogs.
The emerging ethanol dispute with the EU is somewhat simpler in that it does not involve some sort of health standard. The European Union simply imposed a tariff on imports of fuel ethanol from the United States in response to alleged subsidies to U.S. producers. Such anti-dumping duties are legal under international trade law, and our country has been fairly liberal in imposing them. Tariffs on steel in the George W. Bush administration and on low-end tires under Obama are recent examples.
However, there is always an argument over whether specific actions by government that favor its domestic industry really constitute illegal subsidies under international law. U.S. producers argue they have not gotten such subsidies but the U.S. ethanol industry has benefited from a variety of government policies.
There is considerable cynicism in the pious statements of industry officials however. It is only 13 months since our own long-standing 54-cent-per-gallon tariff on ethanol imports finally ended. This largely affected ethanol from Brazil, whose cane-based industry has substantial cost advantages over U.S. corn ethanol producers.
What can we learn from this? First, health and safety standards can serve legitimate purposes, and they can be abused as non-tariff trade barriers. But the confrontational approach the U.S. usually takes is not wise. It violates the old adage that the customer is always right. The U.S. meat industry often takes the alternative tack of lecturing its customers on what they ought to want instead of what they do want.
A better response might have been to quickly endorse the Chinese call for third-party certification and throw the ball back in their court. If the product actually is residue free and that is what the Chinese want, let’s go ahead.
The ethanol dispute illustrates that while illegal subsidies can similarly function as a non-tariff barrier, the legality of various explicit or implicit subsidies is very much in the eye of the beholder. The about-face of U.S. ethanol producers is just another case of something that has happened again and again with other products. We have better trade dispute settlement procedures than we did 20 years ago, but this is an area that still needs work.