World Trade Outlook and Food Safety Linkages October 2, 2002

1
World Trade Outlook and Food Safety Linkages
October 2, 2002

• Michael Zerr
• Trade Analyst
• U.S. Meat Export Federation

2
USMEF Structure

• Public-private sector cooperation
• Multi-species
• Beef
• Pork
• Lamb
• Multi-segment
• Producers producer checkoffs/groups
• Packers/processors
• Purveyors/traders

3
USMEF Strategy

• Putting U.S. Meat On The Worlds Tables, through
• Market Access
• Market Presence
• Buyer Education Loyalty
• Trade Support
• Total Carcass Utilization
• Industry/Product Image
• Food Safety

4
USMEF Worldwide
St. Petersburg
London
Denver
Moscow
Tokyo
Seoul
Osaka
Beirut
Monterrey
Mexico City
Shanghai
Taipei
Guangzhou
Caracas
Hong Kong
Singapore
Sao Paulo
5
Presentation Overview

• World Meat Market Situation and Outlook
• New Trade Barriers
• New Problems, New Solutions

6
World Meat Market Situation and Outlook
7
World Meat Production
Source FAO
8
Major Meat Producers 2002
Beef
Pork
Poultry
Ovine
Source USDA
9
World Meat Trade
Source FAO
10
Major Beef Markets

• Japan
• BSE outbreak lowered consumption
• Imports decreased 40 in 1st half
• Normal trade by 2004
• Korea
• Liberalization-induced herd contraction lowered
  domestic supplies
• Strong economic growth
• Imports increase 60 in 2002
• Russia
• Stable economy steady growth

11
Global Market Share in Beef and BVM Exports
Source WTA/FAO
12
Major Pork Markets

• Mexico
• Consumption is outpacing production
• Japan
• Without lowered tariffs, imports grow slowly as
  herd contraction slows
• Hong Kong/China
• Mainland is a major offal market
• Growth contingent on market access and continued
  economic growth
• Russia
• Stable economy has lead to increased imports
• Brazilian shipments leading all suppliers

13
Global Market Share in Pork and PVM Exports
Source WTA/FAO
14
Major Poultry and Ovine Exporters 2001
Poultry
Ovine
Source WTA/USDA
15
Why is trade increasing?
16
Average Per Capita GDP (World)
Source WEFA/DRI
17
Income and PCC of MeatLog Scale
Estimate 1 increase in PCI increases PCC 0.6
Source FAO
18
U.S. Carcass Weights
Source USDA
19
U.S. Beef and Pork Prices (real US)
Source USDA
20
The Impact of Trade Liberalization
(1,000 MT)
U.S. Beef Exports 1970-2000
China PNTR (00)
Uruguay Round (95)
Canadian Free Trade Agreement (89)
Japan Beef-Citrus Agreement (88)
Tokyo Round (78)
Korea Beef Agreement (93)
North American Free Trade Agreement (94)
Japan SPS Agreement (84)
21
World Trade in Meat

• Per capita incomes are rising and people are
  consuming more meat
• Increased efficiency is lowering the cost of meat
• Trade liberalization is allowing the
  globalization of the meat industry

22
World Trade in Meat as a Percent of Production
Source FAO
23
The Trade Dilemma

• "Opening of trade always hurts some small number
  of people, and hurts them appreciably. It
  benefits the whole population, but each of them
  by a relatively small amount. Added up, over the
  total, it is very large, as history has always
  shown. The benefits to American workers, however,
  will, over the long term, far outweigh the
  initial drawbacks.
• Dr. Robert Solow, Emeritus Professor of Economics
  at MIT, on the pros and cons of trade with China

24
New Trade Barriers
25
New Trade Barriers

• As traditional methods of protection fall,
  countries find other ways to protect their
  domestic industries
• Unscientific sanitary standards
• Hormone ban, disease restrictions, zero tolerance

26
Hormone Bans in 1990
27
Hormone Bans in 2002In Place or Potential
Countries represent 40 of global beef eating
population
28
New Trade Barriers

• Technical barriers
• Burdensome paperwork, slow approvals
• Anti-dumping measures
• Traditionally used by developed countries
• Developing countries starting to use

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As Tariffs FallOther Measures Rise
Average Tariffs and Anti-dumping
Measures (nontraditional users, 1987-1999)
Source Cato Institute
30
New Trade Barriers

• Positive Discrimination
• Capitalizing on food safety fears

31
Korea Beef Safe-to-Eat Ratings
Scale is 1 to 5 with 5 being the highest
32
BSE Reaction in Japan

• Despite BSE in the Japanese herd
• Japanese consumers prefer domestic beef over
  imported beef 51 vs. 21 before the outbreak
• While consumption fell 20 in the 1st half of
  2002, imports fell 40

33
Japanese Beef ConsumptionImport vs. Domestic
BSE Outbreak
34
Japanese Beef ConsumptionImport vs. Domestic
BSE Outbreak
35
New Trade Barriers

• Positive Discrimination
• Capitalizing on food safety fears
• Consumers tend to believe the worst about
  imported food
• Competing on food safety harms all exporters

36
New Problems, New Solutions
37
Low Beef Demand in Taiwan

• Beef Consumption in Taiwan is very low
• 2.75 kg/person in 2001
• 1/3 of consumers do not eat beef

Source USMEF Research
38
A New Approach

• Co-opetition
• Cooperating to create a bigger pie, while
  competing to divide it up.

39
Taiwan Beef Alliance Co-opetition

• Goal to increase overall beef consumption
• Rising tide raises all ships
• Joint effort with Australia and New Zealand
• Campaign focused on nutrition
• Slogan Easily supplement iron with beef!!!

40
Taiwan Beef Alliance

• Post-campaign survey results
• 29 of survey respondents has seen or heard the
  advertisements.
• 62 of those that saw the ads recalled a
  nutrition message with the ads.
• 88 said they intended to buy beef after
  seeing/hearing the ads.

41
Benefits of Co-opetition

• Pooled resources allow for greater exposure
• Eliminate the free-rider problem
• Unified message increases consumer acceptance

42
Adapting Co-opetition for Food Safety

• Same three benefits
• Pooled resources
• Eliminate free riders
• Unified message
• Frees resources for delivering other shared food
  safety messages

43
Concluding Thoughts

• The world market for meat products is growing
• Exporters have cooperated in opening markets for
  half a century
• Exporters should continue to cooperate in
  non-traditional ways to raise all ships