The Ranchers-Cattlemen Action Legal Fund (R-CALF) is a non-profit association of U.S. cattle producers with membership in 32 states. R-CALF has local and state affiliates including Farm Bureaus, Farmers Unions, and stockgrower organizations and associate membership from many main street businesses. R-CALF monitors international trade issues that affect U.S. cattle producers. R-CALF supports efforts to liberalize international trade as long as such efforts benefit all participating countries and agricultural sectors.

R-CALF notes that the health of the U.S. cattle industry has a substantial effect on the overall rural economy of the United States. The cattle industry is the single largest component of U.S. agriculture with more than one million cattle operators who generate over $30 million in agricultural revenues annually. For most of this past decade, this vitally important industry has been in a state of significant decline.

The United States has among the most open markets in the world for imports of live cattle and beef. Unfortunately, while recent trade agreements have opened the United States even further to imports, the barriers to entry into the markets of too many of our trading partners remain relatively closed, or off limits altogether, to U.S. cattle and beef. In upcoming trade negotiations, R-CALF suggests that the United States advance policies that will maintain and strengthen fair trading rules, eliminate distortions in the marketplace, and maintain market stability. Also, given recent cattle disease outbreaks around the world, R-CALF strongly urges that the United States not act too hastily in permitting imports of cattle and beef from areas in which debilitating cattle diseases may be present.

Tariff negotiations must distinguish between tariffs on cattle and on beef and beef products. U.S. tariffs on imports are either "free," e.g., for purebred breeding cattle and cows imported for dairy purposes, or 1.4 cents per kilogram, e.g., for live cattle for slaughter.¹ R-CALF endorses expedited duty reductions to zero for imports of live cattle as long as such duty reductions are simultaneous with those of our trading partners, so, consequently, already low U.S. tariffs will not be reduced to zero before those of other countries.

With respect to beef, both in-quota and out-quota U.S. tariffs are low, especially when compared to tariffs of some of our major trading partners. For example, Brazil, which like the United States is both a major producer and consumer of beef, has a bound rate for fresh and frozen beef of 55 percent.² In contrast, the U.S. in-quota rates are 4.4 cents/kg., or 4 to 10 percent ad valorem, depending upon the specific item, and 27.2 percent for out-quota product.³

R-CALF requests that the United States not agree to lower U.S. tariffs on either cattle or beef unless our trading partners also lower their tariffs to the same levels simultaneously.

The impact of state trading enterprises (STEs) such as the Canadian Wheat Board (CWB) is not limited to the commodity markets in which they specifically operate, but also other markets for which these commodities are an input. For example, the CWB's export restrictions on feed barley distort conditions of trade in cattle; Canadian ranchers and feedlots effectively receive a subsidy for feeding their cattle. Ideally, R-CALF would like to see STEs eliminated. If this is not possible, R-CALF would like, at a minimum, for international trade negotiations to develop disciplines for the operation of STEs.

R-CALF is concerned about subsidies provided to cattle and beef producers by foreign governments. R-CALF asks that trade distorting subsidies that harm the cattle industry be eliminated, including subsidies currently permitted under the World Trade Organization (WTO). R-CALF suggests that U.S. negotiators refer to the Subsidies Enforcement Annual Report to the Congress, which was last issued by the Office of the U.S. Trade Representative and the Department of Commerce in February 2001, for guidance when preparing for negotiations. This report discusses subsidies for cattle and beef producers provided by some of our major trading partners and competitors.

R-CALF requests that the United States advocate in trade negotiations that the country of origin of cattle be the country in which the cattle were born. Likewise, the country of origin of beef should be the country of birth of the cattle from which the beef was derived.

The U.S. cattle industry has relatively few mechanisms in place to help it weather periods of economic difficulty. One such mechanism is a system of tariff rate quotas (TRQs) which became operative upon the implementation of the Uruguay Round Agreements Act of 1995.

As imports from other countries might grow as a result of trade negotiations, the importance of TRQs in promoting stability in the price sensitive beef sector will be heightened. Thus, a major goal of the United States in trade negotiations should be to maintain the right of the United States to impose TRQs. Given the supply-price sensitivity of the cattle industry, the November 1999 report by then Chairman of the International Trade Commission Lynn Bragg that packers can and do use imports to suppress domestic cattle prices, and the length of the expansion phase of the recent cattle cycle which in part has been due to increasing imports, R-CALF finds it imperative that TRQs be maintained.

A second mechanism of the United States to address periods of difficulty in the cattle sector is a special safeguard provision for imports of certain beef products, which went into effect in 1995 and operates in accord with Article 5 of the WTO Agreement on Agriculture. Namely, Article 5 of the WTO Agreement on Agriculture includes a special safeguard provision that permits countries to resort to additional duties in the event that the volume of imports of a particular product exceeds a threshold or "trigger" level, or if the price of those imports falls below a trigger price level. The special safeguard provision provides an important remedy in the event of a sudden surge in imports of beef. The United States should ensure that the special safeguard mechanism for beef remains intact.

R-CALF strongly supports the continued availability of antidumping and countervailing duty laws as internationally recognized trade remedies to economic harm caused by unfairly priced or subsidized imports. It is important to recognize that new trade agreements will not necessarily eliminate opportunities and incentives for producers in certain countries to dump their products or to obtain unfair subsidies. Therefore, antidumping and countervailing laws must be maintained and strengthened.

Also, antidumping and countervailing duty investigations are historically too often conducted "after the fact," and in many cases irreparable damage has already been done. A more accelerated process is needed.

R-CALF believes that the sanitary standards of countries must be based upon science. Accordingly, R-CALF supports the intent of the Sanitary and Phytosanitary Agreement of the WTO, to require that sanitary and phytosanitary measures have a scientific basis.

R-CALF is concerned, however, that the U.S. Department of Agriculture (USDA) may be too willing to open the U.S. market to imported cattle and beef in instances in which evidence of the lack of threat of imported products is far from clear. As demonstrated by recent outbreaks of foot and mouth disease (FMD) in the United Kingdom, Argentina, and other countries, as well as the continuing bovine spongiform encephalopathy (BSE) crisis in Europe, diseased imported cattle can pose a very real threat to the United States.

R-CALF believes that the United States acted imprudently in delaying the implementation of a policy to ban, temporarily, the importation of beef from Argentina due to the presence of FMD in that country. The U.S. Department of Agriculture has announced that it will prohibit the importation of Argentinean beef products processed on or after February 19, 2001. However, reports of the presence of FMD in Argentina surfaced during the summer of 2000. The U.S. Department of Agriculture acted too late in addressing this very real threat to U.S. agriculture. In addition, given the presence of FMD in Argentina well before February 19, R-CALF questions whether this policy might still threaten health of U.S. cattle herds. Given the grave threat that FMD poses to the U.S. cattle industry, as well as to other livestock producers, R-CALF would like to emphasize strongly to Ways and Means Committee members its concerns with the U.S. Department of Agriculture's policy.

Also, with the accelerated expansion of FMD, and based on the recurrence of FMD in countries or regions in the process of being certified as "FMD-free" or already certified, R-CALF requests that following certification countries maintain a "disease-free" status for a minimum of three to five years before imports are accepted into the United States.

As a general matter, R-CALF would like to see strong rules implemented by the United States that would ensure the continued FMD-free status of the United States.

In an issue related to rules of origin, R-CALF strongly supports country of origin labeling of meat. Consumers have the right to know from where the beef they consume was derived. R-CALF believes that beef labeled as a product of the United States should be beef from cattle born, raised, and slaughtered in the United States.

Again, the current international spread of cattle diseases has only heightened the need for country of origin labeling and tracking.

Also, it is important to note that U.S. cattle producers since 1987 have been mandated by the federal government to contribute nearly $1 billion for research and promotion. Yet they have been unable as an industry to differentiate their product from imported product for the U.S. consumer.

R-CALF remains concerned about the refusal of the European Union to open its market to beef derived from cattle treated with growth promoting hormones. The outcome of the beef hormone dispute at the WTO has resulted in U.S. cattle producers having limited faith in the ability of the WTO dispute settlement process to open foreign markets to U.S. products. R-CALF encourages the United States to continue to attempt to open the European market to American beef.

Due to the peculiar nature of the agricultural industry and the small amount of revenue that is returned to producers, it is critical that ranchers have some ability to maintain minimum prices and be able to control the quality and quantity of their products in the market. For most of this century, the U.S. government has provided such mechanisms to U.S. farmers. These mechanisms have lessened the impact of adverse temporary market conditions that would otherwise have driven producers out of business.

Recognizing the special circumstances faced by the agricultural sector, the United States provides a limited antitrust exemption for agricultural cooperatives, including cooperatives composed of ranchers, from antitrust laws. Courts have held that cooperatives may set minimum floor prices for agricultural products under this law.⁴ The United States should work in international trade negotiations to extend the coverage of Capper-Volstead to include international cooperatives composed of agricultural producers.

Likewise, U.S. laws permits certain groups of agricultural producers to set quality and grade standards through marketing orders. These measures can be used to promote stability in the marketplace. R-CALF suggests that the United States advocate in international trade negotiations the development of international instruments that will function in the same manner as marketing orders.

In 1999, the United States passed legislation providing for the mandatory reporting of prices paid by packers for cattle. Such legislation allows producers access to the data needed to compare quickly and easily bids from different packers and to negotiate the best possible price for their livestock. R-CALF encourages the United States to encourage our trading partners to enact or strengthen laws on mandatory price reporting. Such laws would benefit U.S. producers when selling in foreign markets.

Currency exchange rates can have major impacts on trade flows, including the trade flows of agricultural products. Indeed, some countries have used exchange rate controls as a method of altering trade flows in agricultural products. Such manipulations can create serious harm in the international marketplace. R-CALF urges the United States to consider this problem and to attempt to craft a proposal to address it through international negotiations. Indeed, R-CALF proposes that international trade rules prohibit such manipulations.

Price Collapses

            Various commodities, including cattle, have experienced major international price collapses during the past decade.  These price collapses have adversely impacted not only individual producers, but also rural economies throughout the world.  R-CALF requests that the United States work with our trading partners to develop a mechanism to remedy the devastating effects of collapses in commodity prices.

            Further, on a subject not directly linked to the activities of the Ways and Means Committee, R-CALF is concerned that recent price collapses for cattle have been caused in large part by concentration in the U.S. meatpacking industry.  R-CALF supports legislation that would advocate more effective enforcement of U.S. laws addressing concentration in agriculture.  R-CALF also supports legislation that would prohibit packer ownership of cattle. 

Conclusion

            R-CALF appreciates the opportunity to provide comments for the Ways and Means Committee's hearing on President George W. Bush's trade agenda. 

R-CALF will continue to monitor trade negotiations closely.  R-CALF would be pleased to provide further information to Ways and Means Committee members upon request concerning R-CALF's views on trade negotiations.