Thursday, July 31, 2014

Oh, Canada, US Beef? Just Chill

A bipartisan group of 140 US Congresspersons sent a letter to President Obama urging him “to pursue the TPP negotiations without any country, including Japan, Canada, or others, that proves unwilling to open its market in accordance with these high standards” with regard to agricultural products. This is a pre-election bluff of sorts. At the end of the day, the agricultural interests will accept what will be a significant improvement over the status quo; to do otherwise will put them at a competitive disadvantage against Australia and other agricultural exporters who sign FTAs with Japan. The key sentence here is: “We owe our farmers and ranchers the best deal possible.”

But before I go on, let me take note of the fact that this must the first time in human history that Japan and Canada has been mentioned in the same side of the same sentence in an agricultural conflict. Now back to the story…

Caveat, I only researched beef, but here’s what happened there. US beef had dominated the chilled beef import market, while Australia had to settle largely for the less lucrative frozen beef market. That all changed when the mad cow disease scare closed the Japanese market to US beef. Australian (and to a lesser extent New Zealand) beef quickly filled that vacuum until US beef was allowed back in (if I remember correctly) two stages. Australia quickly lost ground, and has continued to see modest slippage. The EPS deal that PMs Abe and Abbot struck essentially puts a floor under Australian beef (chilled being the more important) trade as the moving average for the three preceding years (if I remember correctly). That tariff quota is going to be used in combination with chilled beef coming in under higher tariffs (there’s a formula) to undercut US and others competitors. Australia essentially has a fallback position if the TPP negotiations collapse (or, unlikely though it seems, conclude in a deal without Japan) where it will be at a significant competitive advantage against the United States. Does that sound like “the best deal possible” for US “farmers and ranchers”? I didn’t think so.

The bottom line? A better deal than the Australians got. Don’t worry, Aussies, there must be an unwritten MFN clause written into that Abe-Abbot deal. And the Kiwis (and Mexicans) will be the collateral beneficiaries.

If anyone wants me to write a real report, you know where to find me.

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