AFF Sentinel Vol.5#17

South Korea Agrees to Timeline, USTR Emphasizes "All Beef."

The news that U.S. and South Korean negotiators had reached a beef agreement in Seoul broke Friday morning, just prior to South Korean President Lee Myung-bak's meetings with President Bush this weekend at Camp David.

The agreement specifies resumption of the crucial bone-in, under-30-month beef trade by mid-May and steps for resuming trade in beef from cattle of all ages. The step from boneless to bone-in is critical because a key driver in South Korea's former ranking as America's number three customer was South Koreans' preference for short ribs. Now they're back. USMEF's Phil Seng noted that the U.S. exported over half a billion pounds of beef and beef variety meats to South Korea in 2003, worth $815 billion (USTR).

Not only is the reopening of the South Korean market very important itself, it is hoped the reopening will induce other Asian countries to follow suit. International trade observers had expected the reverse of the normal pattern, in which Japan moves first and South Korea follows suit, partially because South Korea has a new government championing trade liberalization. Political turmoil, especially in Japan's agricultural ministry, has made negotiations there problematic.

"I hope South Korea's leadership ... will convince leaders in Japan, Taiwan, China and other markets still maintaining, unscientific, unreasonable restrictions on U.S. beef and beef products to take a hard look at this issue, consider the benefits for their consumers and follow South Korea's lead in reopening their markets based on internationally recognized scientific guidelines and standards," U.S. Trade Representative Susan C. Schwab said.

Schwab was very specific that the agreement reopened South Korea to "all U.S. beef and beef products, from cattle of all ages." The protocol is fully consistent with OIE guidelines and other international standards, she added. But as USMEF noted, the agreement's second phase, adding beef from cattle of all ages, will be triggered by U.S. announcements of "enhancements to the U.S. livestock feed ban." Enhancement details are not available yet.

The agreement removes one obstacle to Congressional approval of the South Korean Free Trade Agreement (FTA). Cattlemen's groups like NCBA and senators from beef states had said a beef agreement needed to be completed before they could support FTA approval. The FTA, which requires approval by lawmakers in both countries, could boost total trade from today's $78 billion annually by another $20 billion, according to Reuters and the International Herald Tribune. The Lee administration campaigned on a pledge to boost South Korea's economy and hopes to get the FTA approved in an April-May parliamentary session.

How strong beef exports to South Korea revive will partially depend on the reception from their consumers, who previously avid consumers of U. S. beef, have been surveyed indicating beef safety concerns. Such concerns are hard to evaluate, as domestic farmers and/or political opposition can distort consumer sentiment during international negotiations and political campaigns. Trade experts have told us Asian consumers, with strong national loyalties to their governments and a more conformist philosophical outlook, will accept their government's pronouncements that U.S. beef is safe and resume buying.

Australian producers, having benefited from no U.S. competition, will fight for their increased market share. Their tactics remain to be seen. Severe drought and high grain prices are hurting their industry and even the short-term feeding sometimes done there has decreased significantly. But while Australian beef made significant inroads in Asia during American beef's absence, it never achieved the acceptance and tonnage levels with Asian consumers that U.S. beef held before December 2003.

Cattlemen have President Bush, his USTR office, USDA and NCBA to thank for constant diligence on this agreement. USMEF has new public relations and education tools ready to help American beef blossom quickly in Asia. This, while R-CALF and the LAG* have been consorting with labor unions, activists, etc. trying to poison the atmosphere for any trade deals useful to cattlemen and the economy.

It remains to be seen what tonnage levels U.S. beef can achieve if the rest of Asia's markets can be reopened. Hopes are high among U.S. cattlemen, USMEF and American packers that today's even higher quality beef and more assiduous marketing and matching can eventually achieve record tonnage levels. Nothing spurs better care and feeding of a market than the memory of having lost it. Cattlemen would love to capture some of the same global economic growth that has driven demand for oil, grains and other commodities to record levels for their beef.