Some of Dave Price's message in his October commentary, “Let's really look at free trade” (page 47), demands a response.
Despite a closed border, the U.S. is importing more Canadian beef than before BSE was found in Canada. Is the U.S. required to import all the beef Canada can't export elsewhere?
The U.S. doesn't have BSE and yet, due to our trade in beef with Canada, our export market is gone. Canada is sending us more beef than ever while the U.S. is basically exporting zero beef, and we should be afraid of trade sanctions from Canada?
The U.S. has a trade deficit of $500-$600 billion/year. It appears free trade means the U.S. exports its dollars and imports goods and services, while other countries import our dollars and export their goods and services. No country can continue such a trade imbalance forever without sliding into insolvency.
We have U.S. packers that own feedlots and cattle, just like in Mexico. I don't know what this situation is called in Mexico, but here the packers, NCBA, trade publications and nutritionists call it “vertical integration.” Anyone of intellect calls it “a monopoly.”
R-CALF looks down the road and sees the beef industry heading down the same path as the chicken and pork industries, where everyone involved is basically a contract producer for a few major players. R-CALF is attempting to stop this, and it also promotes fair trade, where imports and exports balance out sometimes.
Dave Price responds:
The reader addresses four issues: trade with Canada, “fair” vs. “free” trade, the U.S. trade deficit and packer concentration. His statement that the U.S. isn't exporting any beef is incorrect. Though down by 80% for 2004 compared to 2003, the U.S. exported more than 250,000 metric tons. His statement the U.S. is importing more meat than ever from Canada is misleading in that the extra meat coming in used to arrive as cattle (see Fig. 1).
“Fair vs. free trade” is a cliche used by protectionists around the world. Japanese cattle feeders say it isn't “fair” for “cheap” U.S. beef to enter their market, as do South Koreans, Europeans and most Mexicans. When protectionists obtain enough political clout, they create barriers against foreign competition.
Europe has been successful in keeping out U.S. beef, and our response has been classic — we've placed heavy tariffs on European wine and cheese.
As discussed in my article, there is no such thing as unilateral action. Everything is interrelated. The greatest cattle market crash occurred in the 1930s as a result of a chain reaction of trade sanctions originally aimed at foreign textiles.
The reader says we have nothing to fear from Canadians. Actually, Canada is in the process of expanding its packing industry to compete with the U.S. in the world market (see “Canada Beefs Up” on page 64).
Once that expansion is realized, it will mean closure for Tyson's Pasco, WA, plant, which used to harvest Canadian cattle along with cattle from Washington, Oregon and Idaho. American workers will lose their jobs, Northwest feedlots will lose their principal packer and Northwest calves will be discounted. Everyone loses.
This is the vicious cycle of protectionism. Angry, tunnel-visioned people set out to create barriers to protect their interests, which creates anger and retaliation by other countries. The end result is reduced trade in a variety of goods and negatively impacted economies.
Our trade deficit is a function of duty-free status for China; the impact of Canadian meat is miniscule. As discussed in my article, China has moved from Cold War adversary to trading partner. This is a monumentally good change. As China develops, more U.S. goods (including beef) will be imported and our trade deficit should narrow.
Packer concentration has nothing to do with free trade. The situation is not a monopoly, but an oligopoly. I stand by my statement that suing the packers accomplished nothing. The packers are not our enemy.
This isn't to say we don't have a marketing problem, but the problem is an antiquated U.S. grading system that implies beef is a generic commodity. This forces packers to compete on price rather than quality.
If we want to increase the price of fed cattle, invest in scientists (not lawyers) to develop a U.S. grading system that identifies tenderness. This would greatly increase the value of tender carcasses and demand in general.
Finally I must comment on the statement, “Canada has BSE and we don't.” Credible scientists are of the opinion that mineral imbalances can result in spontaneous cases of BSE. If you test enough cows, eventually a sporadic case will be found. When it does, the proper response is to react in an objective manner, not exploit the situation for selfish reasons.
Anti-beef characterization unfair
I want to answer your challenge for comments concerning the October article, “Anti-beef? You decide,” page 28.
My family business consists of a medium-sized Angus seedstock operation, a 300-head commercial cow-calf unit and a small feedlot. I'm very concerned with the well-being of the beef industry and its perception by the consuming public.
Our U.S. industry has many business divisions from genetics to retail. The action of each reflects on the well-being of others as those actions can influence how consumers perceive our industry.
Should R-CALF point out questions concerning the handling of the BSE situation by USDA? Yes, most definitely. Consumer groups have also expressed concern with this issue. Does it affect them? Yes. What's the problem?
Maintaining a dialogue with groups that voice concerns is a positive step. At least there can be an understanding as to what should be done to make beef a better product. We can't afford to be perceived as hiding things under the rug.
Standing up for R-CALF
I'm writing in regard to articles in the August issue of BEEF. In “Cattle Economics,” page 6, you write: “The point is that cow-calf enterprises aren't profitable enough to keep plenty from exiting the business.” Page 50, “News Closeout” includes a chart showing farmers and ranchers at the top of a list of occupations facing the largest projected decline. Then on page 10, a reader criticizes R-CALF for joining with some consumer groups.
R-CALF is working to stop the decline in the farm population. With less than 2% of the U.S. population engaged in ag, we need consumer groups on our side.
We take for granted that the next generation will always be willing to stay on the farm and make a career in production ag. Yet the security and dependability of the American food supply depends on a U.S. producer being able to financially stay on the land.
R-CALF is just a group of honest, hard-working farmers and ranchers working to keep the U.S. producer in business.