The chicken issue began in September of 2009 when the U.S. imposed a 35 percent anti-dumping tariff on Chinese automobile tires. Two days later the Chinese government announced an investigation on the dumping of U.S. chicken meat and feet which totaled $670million of imports in 2009. Later in September China also announced an investigation of subsidies for U.S. poultry production. Total U.S. agricultural exports to China in 2009 were $14.3 billion, but most purchases were bulk commodities of $10.3 billion, including soybeans at $9.2 billion and cotton at $862 million. Putting a tariff on those items would have hurt intermediate Chinese producer and consumers much more than chicken tariffs. The investigation was also good in-country politics because the Chinese Animal Agriculture Association had filed a petition asking for an investigation on imports of chicken meat and feet.
In February of this year the Chinese government announced preliminary anti-dumping tariffs ranging from 43.1 percent to 105.4 percent, with lower tariffs for companies that cooperated with the investigation. The original petition requested actions against three firms – Tyson Foods, Pilgrim’s Pride and Keystone Foods. Thirty five companies cooperated with the investigation and will have final tariffs ranging from 50.3 percent to 53.4 percent; all others will have 104.4 percent.
In April the Chinese government determined that U.S. corn and soybean production are subsidized and give U.S. chicken meat exporters an unfair advantage. Temporary tariffs of 3.8-31.4 percent were imposed and final tariffs of 4.0-30.3 percent were announced in late August. That line of argument is hard to defend, particularly when China imported 23 million tons of soybeans from the U.S. in 2009 and Chinese poultry producers benefit from the supposed production subsidies.
The anti-dumping tariff concept in the WTO is in need of reform, particularly for processed agricultural products. Some raw commodities like corn or wheat are produced and marketed unprocessed. Allocating expenses and income are relatively easy. Chicken meat and by-products are all produced from the same chicken, but have many different values in the U.S. market and internationally. All chicken meat imports by China are cut-up, not whole chickens. Consumer demand driving import volumes at market prices is the key factor.
Chicken breast meat is the product in most demand in the U.S. and normally carries the highest price in the market. Chicken wings have found a niche domestic market as a barbeque product, with some product moving to export markets. Dark meat has the lowest value and moves into export markets for price conscious consumers. Chicken feet usually have no market value among U.S. consumers and are sold for a few cents per pound as by-products for feed. In China, demand for chicken feet, called chicken paws, exceeds supplies and the U.S. product commands a premium price of up to $0.60 to $0.80 per pound.
According to the U.S. Agricultural Attaché in Beijing, China’s chicken meat imports in 2009 were 401,394 metric tons, with the U.S. accounting for 80 percent of imports and South America nearly the entire remaining amount. Including chicken paws, Chinese imports of poultry products reached 917,622 metric tons, with shipments from the U.S. accounting for 79 percent of the chicken paw imports. Despite the tariff on U.S. product, the U.S. Attaché expects imports of chicken meat to increase in 2010 with South America filling much of the gap.
The pricing situation is not unique to U.S. chicken; the same is true of beef and pork. Some cuts of pork and beef are in high demand in the U.S. and virtually all stay in the U.S., while other products move to international markets. The U.S. imports hamburger beef from some countries while selling higher priced beef cuts to other countries. This is international trade at its best as consumer preferences can be met at the lowest cost while providing the highest income for animal raisers and meat processors. Trade rules should encourage this activity not discourage it.
As trade continues to expand, applying concepts like anti-dumping will become increasingly fraught with problems. The demand for anti-dumping calculations will continue to be strong as groups like the Chinese Animal Agriculture Association seek to protect domestic market from increased competition. Every national government with open markets contends with the same type of protectionist pressures; the U.S. and Chinese governments are not the only ones.
U.S. poultry representatives have generally said that China’s final ruling on anti-dumping and anti-subsidy tariffs will not affect current trade because they have been in place since February and April, respectively. According to USDA data, for the first seven months of 2010 (January-July) chicken meat exports to China from the U.S. are down 83.8 percent in volume and 82.0 percent in value from 2009. Miscellaneous poultry is down 88.9 percent in volume and 69.4 percent in value. The tariffs are hurting the U.S. poultry industry at a time when it is still recovering from lost Russian sales.
Trade relations with China are likely to get worse before they get better. Earlier this month U.S. Trade Representative Ron Kirk announced the filing of two more cases against China at the WTO. One requested dispute consultations regarding China’s imposition of antidumping and countervailing tariffs on imports of flat-rolled electrical steel from the U.S. The other case requests consultations regarding China’s discrimination against U.S. suppliers of electronic payment services. If history is a guide, China will respond in kind on other products. The only way out of this is a new round of post-Doha negotiations that sweep up the trade policy debris that as accumulated over the past 15 years and set a new policy path.