U.S. chicken meat exporters have a double challenge because two major importing countries, Russia and China, have restricted imports from the U.S. While the underlying reasons for the market restrictions are different, they point out that the U.S. must have a positive trade policy agenda to deal with policy differences.

In 2009 U.S. chicken meat exports were 6.8 billion pounds, 19.4 percent of U.S. production of 35.1 billion pounds. Exports are projected by the World Agricultural Outlook Board of USDA to be down sharply in 2010 at 5.8 billion pounds, 16.4 percent of domestic production. On a dollar value basis, Russia was the largest U.S. market for chicken meat in 2009 at $748 million, 23.9 percent of U.S. chicken meat exports, and China was number two at $370 million and 11.8 percent of U.S. exports. NAFTA partners Canada and Mexico combined accounted for $555 million of sales of chicken meat, 17.7 percent of exports. Another 118 countries accounted for the remaining 46.6 percent of chicken meat exports. The U.S. export market is broad, but not deep enough to avoid the 14 percent reduction in exports estimated by USDA. In 2009 China also purchased $300 million of chicken feet for human consumption because strong demand exceeds domestic supply.

The Russian market was closed January 1 over the use of a chlorine rinse to control pathogens on U.S. chickens. The use of chlorine is a standard practice in the U.S. and is considered safe under international standards. Russian regulations were changed in June of 2008 and implementation was delayed until January 2010. The U.S. has had a similar twelve-year dispute with the EU on pathogen reduction treatments (PRTs) over the potential to develop anti-microbial resistance. The European Food Safety Commission reviewed the use of these PRTs and found no published data to conclude there may be a resistance problem, but the chief veterinary officers and agriculture ministers of the EU member countries continue to oppose the PRTs. In January of 2009 the U.S. filed a WTO case against the EU.

China has imposed tariffs up to 105.4 percent because U.S. chicken meat has been “dumped” into the Chinese market at unfair prices and hurt domestic producers. The duty went into effect on February 13th and poultry companies have 20 days to appeal the decision. Some companies face a lower tariff because China asked for specific cost of production data; the Pilgrim’s Pride tariff is 80.5 percent, Keystone Foods 44.0 percent and Tyson Foods 43.1 percent. From a trade policy point of view, chicken feet that are sold for far more money in China than the rendering value in U.S. cannot be “dumped” into the Chinese market. A final decision on the tariffs will be made in four months, but tariffs will remain in place in the interim.

Both of these “trade disputes” have nothing to do with producers in the U.S. and consumers in Russia and China engaging in exchange that leaves buyers and sellers better off. The Russia government, which is not a member of the WTO, has been uncomfortable with chicken imports from the U.S. since they began in the early 1990s after the dissolution of the old Soviet Union resulted in the new Russia having financial difficulties. Dark chicken meat, referred to as Bush legs after the U.S. president, filled an important market niche. U.S. exports peaked at 1.1 million metric tons in 2001. Russia has negotiated agreements every few years with the U.S. and other meat importers to reduce import quotas. The U.S. poultry meat quota was 750,000 metric tons in 2009, about 20 percent of the market, and is 600,000 metric tons for 2010. Russia has made several efforts to become self sufficient in all meats; the latest plan is to be 85 percent self sufficient in all meats in a few years. Producers are being provided subsidized loans to help achieve that goal. Higher market prices will likely be needed in 2010 to force consumers to live without imports from the U.S. Negotiations are continuing and the most likely outcome is a temporary delay in enforcement of regulations while further talks are held on processing alternatives.

The anti-dumping tariffs by China are thought to be direct retaliation for the U.S. Congress in recent years prohibiting government funds from being used to establish regulations for importing cooked chicken meat from China. That prohibition was removed effective October 1, but before that President Obama had imposed a 35 percent import tariff for three years on Chinese tires. Shortly after that, China began the anti-dumping investigation on U.S. chicken meat imports. The Obama Administration followed up with tariffs on Chinese steel pipe. China’s government is facing more domestic pressure to further retaliate against U.S. actions on tariffs. The President’s trade enforcement strategy has precipitated the back and forth trade protectionism that many trade analysts had feared.

These situations show what can happen when trade policy is mostly defensive. U.S.-Russian trade relations were a problem long before President Obama took office. The Bush Administration and its allies in Western Europe tried to entice Russia to join the WTO even as the government became more trade protectionist. That signaled to the Russian government that they did not have to make internal financial and market changes to facilitate trade or worry about science-based import regulations. Now that the policy pattern has been set, Russia will not likely reform its trade policy until it needs help on some issue.

U.S.-China relations are much more hopeful; two-way trade is vital for both countries on issues much larger than chicken meat. The Obama Administration needs to move away from its trade enforcement strategy at the WTO and recognize that other countries can find plenty of excuses to pursue that same strategy on the U.S. and both sides are losers. Trade policy negotiations must be the primary way to work out differences with WTO enforcement actions saved for the most egregious failures to meet commitments.

These two situations point up the value of the WTO and multilateral and bilateral trade agreements. With no trade agreements in force all countries are free to abdicate trade policy to the noisiest domestic interest groups. With trade agreements, countries have a framework for working out trade differences that can minimize the economic losses on all sides.