Pork producers seek fair market access across the world for U.S. pork.

The world sits like an empty plate before U.S. pork producers. But world trade politics, high tariffs and quotas tie the hands of the U.S. pork industry. The industry faces many battles trying to fill that plate.

"Pork, more than any other agricultural product, is very protected because it is produced in most countries," explains Nick Giordano, assistant vice president of foreign trade with the National Pork Producers Council (NPPC). "Pork is by far the world's meat of choice. Well over 45% of meat protein consumed in the world is pork."

Giordano calls this a double-edged sword. On one hand, a lot of the world loves pork. On the other hand, many farmers produce it. This creates a political problem for foreign governments who don't want to hurt their farmers. "It is often a delicate and difficult matter to get them to open their market," Giordano says.

"Everybody is trying to keep out the 10,000-lb. gorilla because they're afraid we're going to put them out of business," he adds.

The inability to access these global pork markets is unsettling to U.S. producers with low domestic hog prices and continued growth in U.S. production. Stronger pork exports could pull up sagging prices.

Denmark continues to be the world's largest pork exporter. But the U.S. is a close second. In 1998, USDA projects Denmark's exports at 485,000 MT (metric tons). U.S. exports are projected at 449,000 MT. (A metric ton is 2,424 lb.)

"Most projections say we will surpass Denmark in a couple of years," Giordano says.

NAFTA Success Today, the pork industry is involved in trade negotiations around the world that could have a major impact on U.S. exports. Giordano hopes the results of these negotiations will be as positive as the results of NAFTA (North American Free Trade Agreement).

"The U.S. pork industry could make the best poster child for NAFTA," Giordano says. "Between 1989-97, the export value of pork exports increased by over 208%. NAFTA is a key reason exports skyrocketed. It has opened up previously closed markets for U.S. agriculture."

Another trade success was the Uruguay Round Agreement in the GATT talks reached in 1994. The U.S. successfully negotiated more market access with countries like Japan. U.S. pork exports grew 85% in value since the agreement went into effect.

Both NAFTA and the Uruguay Round helped U.S. pork exports finally outpace pork imports. USDA projects U.S. exports to reach 6.5% of total U.S. production this year. Just a couple of years ago, the U.S. still imported more pork than was exported.

While U.S. pork exports grew substantially the last few years, the Asian financial crisis is expected to affect that in the short-term. Giordano notes USDA originally forecast U.S. exports to drop by 5% in 1998. But exports during the first quarter exceeded USDA's projections and now may exceed 1997 export levels.

NPPC is committed to building the U.S. pork export industry. "We are now the world's lowest-cost producer of pork," Giordano says. "We think we produce the world's safest meat protein. Without question, we're a force to be reckoned with."

Asian Potential Giordano hopes the weight of the U.S. pork industry will be felt when the U. S. enters the upcoming World Trade Organization (WTO) agriculture agreement negotiations. Recently, John Hardin, Jr., a Danville, IN, producer presented testimony at a hearing concerning agricultural trade with Asia and the Pacific to a U.S. House Committee on Agriculture. The testimony is in preparation for the WTO negotiations.

In the testimony, Hardin stressed the importance of the Asian markets to the U.S. pork industry. "Five of the top 10 export markets for U.S. pork were in Asia," he stated. "Notwithstanding, the uncertainty caused by the current economic crisis in Asia, for pork, the Asia-Pacific region has tremendous long-term potential."

Hardin asked for help in negotiating fair market access to countries like China, South Korea, Vietnam, Thailand and Australia.

The outcome of the WTO negotiations could make a big difference in hog prices down the road. Following is a look at the countries around the world holding great potential for U.S. pork exports.

China "Right now, the highest priority on our agenda, by far, is China," Hardin reported in his testimony. "China is the world's largest pork-consuming nation, accounting for approximately 50% of the total pork consumed annually in the world."

Hardin went on to state that the level of market access given to U.S. pork exports is "unacceptable." The Chinese level high tariffs and value-added taxes on U.S. pork, virtually eliminating trade. Plus, China imposes a "complicated licensing regime" that further limits access.

The U.S. government has been negotiating with China to lower some of these trade barriers. China lowered pork tariffs and allowed U.S. meat processors to export to two Chinese importers. But Hardin stated these reforms are not working and have allowed only a minimum amount of trade.

"We'd like to have major access tomorrow," Giordano adds. "But that will be difficult because China does not seem to be in any rush to join the WTO. If we can get tariffs down and get legitimate access, there is incredible potential."

Japan "Japan continues to be our largest export market," Giordano says. "And, we continue to be bullish on that market. We'll export a lot of product there in 1998."

The U.S. has the largest share of the Japanese fresh chilled market, which is a high-value market.

Exports to Japan last year were not up as high as projected following the Foot-and-Mouth-Disease (FMD) outbreak in Taiwan. Giordano says the lower levels occurred because Japan had more product in cold storage waiting to clear customs at the time of the outbreak than anyone anticipated. And, the U.S. had a price disadvantage because domestic prices were high. Finally, the U.S. dollar appreciated more in value against the yen than the Danish kroner and Canadian dollar, which also hurt U.S. exports.

The ability of U.S. exporters to meet Japanese pork specifications will help secure this market, though. Giordano says the quality of pork going into Japan is very good.

But Denmark continues to dominate the frozen product market.

Canada "Canada is a big export market for us and we are their biggest export market, " Giordano says. "That is fine. That's what open borders and free trade are all about."

Canada is expected to export nearly 30% of their production this year, half of it to the U.S. That makes them the third largest pork exporter in the world.

Mexico Mexico is one market that opened up after NAFTA. By last year, Mexico was the U.S. pork industry's second largest market in terms of export value after Japan.

"Mexico is a treasure chest," Giordano says. "It is one of the most dynamic economies in the world. They are going to be a force to be reckoned with in the next century because they're making all the right economic decisions. They have an extremely hard-working and competitive workforce.

"By sheer demographics, they will be eating more pork," he adds. "Their per capita consumption went down in the late 1980s and early 1990s, due to a number of factors like a hog cholera outbreak, anti-import policy, and a recession. If we got only half of that decline back (in U.S. pork exports), it would be the equivalent to almost all of our exports. It is a fantastic market."

Taiwan A recent bilateral agreement with Taiwan has opened up its market for U.S. pork. The agreement also includes Taiwan making a "down payment" on the pork exports. The U.S. will begin shipping pork this summer before any other country.

Taiwan's devastating FMD outbreak has totally changed its hog industry. Prior to the outbreak, Taiwan enjoyed an export relationship with Japan that circumvented theusual duties and gate prices for pork. That is gone now.

Giordano says he doesn't believe Taiwan's hog industry will ever reach the size it was prior to the outbreak. The tiny, mountainous island experienced water quality problems, blamed on the large hog industry. The government had been trying to reduce the size of the industry. The outbreak accelerated that effort.

"I think some Taiwan producers will come back and try to make it in the export market," Giordano says. "But I think it is likely they will be a shadow of their former self."

European Union The European Union remains the pie in the sky that U.S. producers cannot reach. "We would love to have this market," Giordano says. "If we could ever compete fairly, we would own this market. The EU is a high-cost producer for agricultural products. They have a totally, artificially managed production environment."

The struggle to fairly compete in the European countries started two decades ago. The most recent problem with gaining access deals with a Veterinary Equivalence Agreement (VEA). This agreement would recognize other meat inspection systems as basically equivalent. In other words, the U.S. meat inspection system would be considered equal to systems in the EU. Then U.S. companies could export to the EU.

Right now, the EU claims U.S. packing plants are not up to their standards, and, they will not allow product imported from all but a few of these plants.

On the other hand, the EU generally is free to ship pork to the U.S. from most of their plants.

Giordano says a protectionist attitude and politics have kept the EU from abiding by a VEA. Now, animal welfare, environmental and food safety issues have entered the foray. "The government has used food safety and other issues to promote their protectionist agenda," he claims. "And it is not driven by science, but by perception."

The EU agreed to put a VEA into effect last October, but failed to implement it, Giordano says.

Now, the dispute enters a new level. If a VEA is not implemented, NPPC is asking FSIS (Food Safety and Inspection Service) to conduct a complete audit of all the EU meat inspection systems. This would force the EU to precisely meet the same regulations U.S. plants meet.

Many EU plants are not expected to meet those requirements, and therefore, would be prohibited from shipping imports into the U.S. As Giordano says, the EU can't expect to sell pork in the U.S. if they won't allow the U.S. to sell to them.

"If they walk away from the VEA, they have to understand that the U.S. pork industry will continue to try to level the playing field," Giordano adds. "All we've ever been after is fair market access."

World USDA 1998 Projections Production 83,384,000 MT Slaughter 1,063,173,000 head Exports 2,374,000 MT Imports 2,081,000 MT Consumption 82,897,000 MT % production exported 2.85%

United States USDA 1998 Projections Production 8,609,000 MT Slaughter 100,525,000 head Exports 449,000 MT Imports 261,000 MT Consumption 8,393,000 MT Per capita consumption 67.54 lb./person % production exported 6.5%

China USDA 1998 Projections Production 44,000,000 MT Slaughter 580,000,000 head Exports 90,000 MT Imports 3,000 MT Consumption 43,913,000 MT Per capita consumption 77 lb./person % production exported 0.20%

Japan USDA 1998 Projections Production 1,280,000 MT Slaughter 17,080,000 head Exports N/A Imports 740,000 MT Consumption 2,073,000 MT Per capita consumption 36.3 lb./person % production exported N/A

Canada USDA 1998 Projections Production 1,305,000 MT Slaughter 16,100,000 head Exports 390,000 MT Imports 50,000 MT Consumption 960,000 MT Per capita consumption 69.96 lb./person

Mexico USDA 1998 Projections Production 950,000 MT Slaughter 13,020,000 head Exports 21,000 MT Imports 47,000 MT Consumption 976,000 MT Per capita consumption 22 lb./person % production exported 2.21%

Taiwan USDA 1998 Projections Production 930,000 MT Slaughter 10,500,000 head Exports 50,000 MT Imports 5,000 MT Consumption 915,000 MT Per capita consumption 90.42 lb./person % production exported 5.38%

European Union USDA 1998 Projections (13 member countries) Production 16,483,000 MT Slaughter 191,933,000 head Exports 861,000 MT Imports 45,000 MT Consumption 15,420,000 MT Per capita consumption N/A % production exported 5.22%