USMEF Monthly Column
In mid-2009, the U.S. and the European Union (EU) struck an agreement that defused the tension over beef from cattle raised with growth promotants, an issue that had plagued our trade relationship for 20 years. In exchange for a U.S. commitment to eliminate retaliatory tariffs on imports of certain EU products, the EU agreed – for the first time ever – to create a duty-free quota for imports of high-quality beef.
The reasoning behind this agreement was that if the U.S. beef industry was going to endure a growth-promotant ban that had failed to pass muster with the World Trade Organization (WTO), the EU must provide tariff relief in order to compensate for lost exports and higher production costs resulting from its WTO-inconsistent policy.
Expectations were somewhat modest when the quota first opened in August 2009. Since the hormone ban was imposed in 1999, it was a market that had offered little opportunity for promotion and marketing of U.S. beef. In addition, a process-verified program needed to be created in order to establish a supply of eligible cattle.
For the first full quota year of export activity (July 1, 2010 through June 30, 2011) the U.S. Meat Export Federation (USMEF) projected the volume of high-quality U.S. beef exports would be roughly 13,000 metric tons (mt). But based on the current subscription of import licenses for May and June, U.S. beef shipments should reach 16,500 mt.
“The export figures to the EU are fantastic,” says John Brook, USMEF regional director for Europe, Russia and the Middle East. “We are well ahead – in fact, about one full year ahead – of where we thought we were going to be in terms of trade.”
Brook says these results are particularly impressive because they come at a time when consumption of “medium-quality” domestic beef has been sharply declining in Europe.
“It’s very, very encouraging that despite ‘damp’ demand in Europe for beef in the middle of the quality range, we are seeing an increase in demand at the top of the market,” he explains. “The niche is small, but it is very high in value and it’s growing quite well.”
With the U.S. export volume approaching 16,500 mt, Australia shipping roughly 3,000 mt and Canada adding small volumes, the 20,000-mt quota will be nearly fully utilized this year. While this is positive news in terms of trade activity, it illustrates the urgency of negotiating an expansion of the duty-free quota to allow for further growth.
“Now the main objective is to enable the U.S. and EU to move to the second phase of the agreement and get that duty-free quota increased from 20,000 mt to 45,000 mt,” Brook says. “We're doing everything we can to make this happen, hopefully by August 2012. Otherwise, we’ll effectively have a ceiling that prevents further growth.”
Brook notes that additional exports of high-quality beef to Europe are possible, but very difficult to achieve in the current economic climate.
“There is still the old Hilton quota available, which is the 11,500-mt beef quota subject to a 20% duty,” he says. “But with the high prices we are seeing in today’s market, it would be very ambitious for importers to try to use that quota.”