CANADIAN CATTLE PRODUCERS DISAPPOINTED WITH PRELIMINARY U.S. TRADE RULING
July 1 /99
Canadian CattlemenUs Association press release
While cattle producers are disappointed with a decision by the U.S.
Department of Commerce to apply anti-dumping duties against Canadian
exports of live cattle, the clearing of one respondent and a low rate for
the remaining five sends a positive signal that the Canadian industry is
trading fairly and will ultimately be exonerated.
The Department of Commerce (DOC) ruled that some Canadian live cattle
sales to the U.S. were made below the "cost of production" (as derived by
the DOC) and were therefore illegal under anti-dumping rules. Duties of
4.73% of value will be collected from cattle exporters beginning in
approximately one week. The DOC reached this decision by examining cost of
production and sales records of six Canadian cattle exporters. The duty
now applied against the industry is an average of the duty applied against
five of those exporters.
Ben Thorlakson, President of the Canadian Cattlemen's Association, says
his organization is frustrated with the U.S. decision. "It is our view
that we are trading fairly but the rules applied in anti-dumping cases
make it very difficult for exporters to defend themselves. Canadian cattle
producers sell their cattle competitively to the highest bidder and find
it incomprehensible that they are at any fault when they are simply
accepting the best price for their product."
Thorlakson, who operates a feedlot near Calgary, says even though the
duties are only a preliminary decision by the DOC they will have an impact
on Canadian live cattle prices and affect Canadian producers in all parts
of the country.
Neil Jahnke, CCA Foreign Trade Committee Chairman and cow-calf producer,
points out the case is far from over. The CCA, through its legal counsel
in Washington D.C., will immediately challenge the way in which the U.S.
Government calculated these duties and will work to have the rates reduced
or eliminated at the final determination this fall.
After final determination the case goes back to the International Trade
Commission (ITC) where CCA will present final arguments that Canadian live
cattle imports are not injuring the U.S. industry. "We believe Canada has
a strong case and we will present compelling reasons for the ITC to rule
in Canada's favour at this time," says Jahnke.
The preliminary anti-dumping duties applied by the U.S. will be collected
on all exports of Canadian live cattle excluding breeding cattle. They
will be collected in the form of a deposit from the importer of record and
may be refunded depending on the eventual outcome of the case. The CCA
views the stance taken by the U.S. Government in this case to have
implications that reach far beyond the cattle industry. The well-respected
publication "The Economist" has pointed out that protectionist trade
measures were a direct cause of the Depression of the 1930's and states in
an editorial, "Anti-dumping is a particularly pernicious form of
protection, because it lurks beneath a veneer of respectability." (Nov. 7,
1998 edition) The CCA has urged the Canadian Government to negotiate with
the World Trade Organization for revised anti-dumping regulations and
elimination of other non-tariff trade barriers.
Issue Backgrounder
Canada-U.S. Cattle and Beef Trade
The U.S. is Canada's largest export market for live cattle. In 1998 total
number of head exported from Canada to the U.S. was 1.3 million - between
3 and 4% of U.S. cattle production. Value of Canadian live cattle exports
to the U.S. in 1998 was $1.4 billion.
The Canadian cattle industry is approximately one-tenth the size of the
U.S. industry.
Canada is the third largest export market for U.S. beef.
Who Is R-CALF?
The Ranchers-Cattlemen Action Legal Fund (R-CALF) is a U.S. producer group
formed for the purpose of launching a trade action against the Canadian
cattle industry. It is not the official representative of U.S. cattle
producers. (The National Cattlemen's Beef Association - NCBA - officially
represents U.S. producers. The NCBA did not take part in the trade
actions.)
In 1998 prices for finished cattle in both the U.S. and Canada were lower
than many in the cattle industry had anticipated. Some cattle producers in
the north-western United States blamed Canadian cattle imports for their
plight. They formed the R-CALF organization and launched anti-dumping and
countervailing duty cases against the Canadian industry.
What Did Cause Lower Prices In 1998?
Low feed costs, relatively high replacement prices and a bullish futures
market encouraged feedlot operators to feed cattle to heavier than normal
weights, increasing total U.S. beef supplies by approx. 1 billion pounds,
or the equivalent of 1.4 million extra slaughter cattle. Pork production
in the U.S. rose by 9%, or 1.6 billion pounds over 1997, further impacting
total meat supplies.
The Asian financial crisis lowered the value of U.S. fed cattle by approx.
$30.00 per head as Asia is a major market for U.S. hides and offal.
Timeline of Trade Challenges
October 1, 1998 R-CALF first files petitions with U.S. Department of
Commerce (DOC) requesting anti-dumping and countervailing duty trade
investigations.
December 2, 1998 Canadian government representatives, Canadian
Cattlemen's Association and legal counsel present Canada's case before the
U.S. International Trade Commission (ITC) in Washington D.C. December 22,
1998 DOC rules that R-CALF represents sufficient U.S. cattle
production for cases to proceed (DOC normally requires that 25% of an
industry, and 50% of an industry that is taking a position, are in support
of a petition; this decision may be challenged once the cases reach
completion.)
January 20, 1999 ITC votes 4 to 2 to continue the investigations
against Canadian live cattle.
May 4, 1999 DOC decides not to apply preliminary countervailing duties
on Canadian exports of live cattle, as impacts from Canadian subsidies are
too low to affect the U.S. market.
July 1, 1999 DOC votes to apply preliminary anti-dumping duties of
4.73% of value of live cattle exported to the U.S. The DOC reached this
decision by examining cost of production and sales records of six Canadian
exporters;
5 had low individual rates applied and one was exonerated. The industry
duty
is an average of the 5 individual rates.
What Happens Next?
Fall, 1999 DOC will publish its final determination in both the
anti-dumping and countervail cases.
Winter, 1999 If one or both cases proceed this far, the ITC will hold
Final Injury Determination. Canada will again have opportunity to present
its case. Even if the DOC previously applied duties, Canada can still win
at this stage. The ITC takes into consideration such factors as what
percentage imports are of U.S. production, what losses are considered
normal marketing practices as opposed to dumping, and how natural industry
cycles affect profit and loss.
If Canada wins at this stage, those who previously paid duties can apply
to have them refunded.
If Canada loses at this stage, an appeal can be made through the North
American Free Trade Agreement (NAFTA).
PRELIMINARY RULING: U.S. IMPOSES CATTLE TARIFFS CHARGES CANADIAN PRICES
UNFAIRLY LOW
July 2 /99
Globe and Mail/ CP/National Post
Canadian cattle are, according to these stories, being exported to the
United States at unfairly low prices and should be subjected to duties,
the U.S. Commerce Department said yesterday in a preliminary finding that
won the support of U.S. ranchers but drew heavy criticism from Canadian
officials. The Commerce probe found, these stories say, that between Oct.
1, 1997, and Sept. 30, 1998, Canadian producers charged American buyers
less than it cost to produce the cattle. The United States will begin
collecting a provisional duty averaging 4.73 per cent (about $50 a head
for steer) next week. The Commerce Department was cited as saying that
cattle were being sold in the United States by up to 6.81% below the cost
of production, equal to the duty the department set today for the imports.
That's far less than the duties of up to 100%, that U.S. ranchers had
sought when they filed the case last November.
John Lockie, a former U.S. rancher and chief executive of the
Rancher-Cattlemen Action Legal Fund, in Columbus, Mont., was quoted as
saying, "This is a ruling we've been waiting for for a long time."
Sergio Marchi, Minister of International Trade, was quoted as saying,
"Canada is clearly disappointed with this preliminary ruling. This is an
important trade issue for Canada and the government is working closely
with the industry to ensure that the U.S. investigation is conducted
according to international trade rules. Canada is keeping all options open
for possible responses including challenges under the North American Free
Trade Agreement or the World Trade Organization.."
Lyle Vanclief, the Agriculture and Agri-Food Minister was quoted as
saying, "All the U.S. process has found is that North American cattle
prices last year were not covering costs of production, which is no
surprise to cattle producers on both sides of the border. It is ludicrous
to allege that Canadian cattle are responsible for low prices in the U.S.
when the U.S. industry is eight times larger than ours."
Ben Thorlakson, president of the Canadian Cattlemen's Association, was
cited as calling the ruling a blow for producers, saying the dumping
complaint by American producers was just a manoeuvre and a trade barrier.
The United States imported 417 million kilograms of live cattle from
Canada in 1998, down from 435 million kg the year before, and valued at
$510 million (US).
The Commerce Department will release its final ruling on Sept. 13. If the
ruling stands, the issue will go to the U.S. International Trade
Commission, likely in late November or early December. The United States
will begin collecting provisional duties and hold the money in trust
pending the final ruling. It will be up to the International Trade
Commission, a U.S. government agency that monitors the effect of trade on
U.S. industries, to decide whether the imports are damaging the country's
cattle producers. A negative ruling by the ITC would block the duties and
enable Canada's cattle industry to bypass several more years of trade
litigation.
Curt Cultice, a spokesman from the International Trade Administration in
Washington, D.C., was quoted as saying, "[The finding] is one step in the
investigative process and is based principally upon information provided
by Canadian producers. Commerce will examine the data for accuracy and
completeness, and consider arguments and issues raised by both Canadian
and U.S. producers."