Anderson, David P.

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Research Papers in Economics

Industry Experience
LIVESTOCK  ECONOMIST
David Anderson, Texas  A&M University
Producer  groups  can  work  toward  forestalling  or  avoiding  trade  disputes
being  elevated  to  court  cases  by  building  ties  between  industry  groups  in  each
country.  These  relationships  require  hard  work  and  the  ability  to  listen  to  a
counterpart's  opinion.  There  has been a strong working  affiliation built up among
cattle  organizations in Canada, Mexico and the United States.  Over the years, there
has been a lot of contact among personnel from the three countries.  It has been very
helpful, overall, as they know their counterparts  and where they stand on the issues.
But, while helpful these relationships  are difficult to maintain because producers  in
each  country  do  take  opposing  positions on  imports  and  exports.  Unfortunately
these  relationships  can  break  down  as  trade  disputes  heat  up.  My  following
comments are directed at one such case in point.
A VOCAL  MINORITY
A  U.S.  organization,  the  Ranchers-Cattlemen  Action  Legal  Foundation
(R-CALF) filed suits in late  1998 before  the Department  of Commerce and  the U.S.
International Trade Commission (ITC) related to alleged subsidized cattle in Canada
and dumping into the United States.  R-CALF is comprised of a group of producers,
mainly,  in the Northern  Plains states  of Montana  and the Dakotas.  Since  1994, the
cattle  market  has  had  large  beef  production  with  low  prices.  The  members  of
R-CALF were looking for someone  to blame for low prices and the easiest scapegoat
was Canada  and free  trade.  The  issues  of Mexico and  Mexican  cattle  entering the
United  States  was  an afterthought,  but  attracted  the attention  of  and  appealed  to
producers in the Southwest.
This  dispute  wrecked  two years  of hard  work and credibility  that had been
built  up  between  the  National  Cattlemen's  Beef  Association  (NCBA),  CNG  in
Mexico,  and the  Canadian  Cattlemen's  Association.  These  organizations  had been
working  towards  forestalling  and heading  off even  more  heated disputes,  such as
U.S. beef exports to Mexico.
R-CALF  is  made  up  of  cattle  producers  who  are  members  of  National
Cattelmens  Beef  Association  (NCBA)  and  other  producer  organizations,  such  as
Farm Bureau.  As  a producer organization, NCBA has many producers who see free
and more  open trade  as  the answer  to finding  more  markets  and expanding  beef
consumption  and  demand.  These  producers  see  expanded  trade  as  an  avenue
toward increased profitability  for the industry.  There  are also members who are in
difficult  financial  straits  and have  been hurt by low  calf and  cattle prices  and  seePolicy Harmonization
foreign competition  as the culprit.  The R-CALF  members have been able to raise the
Canadian  imports  of  live  cattle  issue  to  the  level  of  a  trade  investigation  (and a
preliminary  finding  of  dumping).  NCBA  found  themselves  in  a  situation  where
members  of their group were initiating an action, but the board took the decision to
ignore  the  R-CALF  action  and  to provide  no  support for  it.  This  position risked
losing credibility  as the producer organization representing the beef cattle industry in
the United  States.  Ultimately,  the vocal minority forced the organization (NCBA) to
move in the direction of some partial support for the ITC suits.
It  is important  to remember  that the producers involved in the  R-CALF  ITC
suits have been impacted by difficult times and low prices in agriculture.  They have
actively looked  for reasons for low cattle prices and believe live cattle and beef from
Canada are the cause.  However,  they do not believe many of the economic  reasons
for trade between  the  U.S.  and Canada.  They also do not believe much of USDA's
data, especially the parts that do not support their position, that we as economists use
in analyzing trade issues.  As  a result, it has been very difficult to communicate and
educate effectively on these economic issues.
THE  NEED  FOR CONTINUING  EDUCATION
I believe that we have done a reasonably good job of educating producers and
the  general  public  about  the  benefits of free  trade.  There  has probably  not been a
good enough education job and transition  programs developed  for those who will
lose from free trade.  We in university and industry are all convinced that free trade is
a positive overall goal and are working toward a more free trade environment.  There
are, however,  many people  who  do not  appear  to share this view  and represent  a
large  enough  group  to  be  able  to  affect  what  happens  in  trade  disputes  and  in
government  policy.  I  would  suggest  that  producer  groups,  extension  educators,
university people and government people need to continue those educational efforts
with people that continue to oppose freer trade.  I think that the difficulty of passing
additional Fast Track legislation to continue to negotiate free trade has been a victory
to those groups  of people.  In  R-CALF, there is  a minority  group which is big and
vocal enough to force that change.  Also, the opportunity is available for groups to try
to discourage  or limit trade by the imposition of tariffs through the ITC.  This process,
even  if  not  successful,  requires  considerable  time  and  expense  on  the  part  of
producers in other countries to defend themselves.
Regardless,  NCBA  and  other  producer  groups  must  still  continue  to work
toward fostering  a dialogue among the national organizations in the hemisphere.  To
that end, there was a five-nation meeting of cattle producers held in Calgary Alberta
in July  1999.  There  have  also  been several  meetings  between  states  and  provincial
representatives,  including producers, throughout the last half of 1999. The hard work
of maintaining the dialogue must still go on.
172Anderson *  Rice ' Dolynchuke Peterson  173
EPILOGUE
The  ITC  suits  were  made  up  of  three  parts:  a  dumping  suit,  request  for
countervailing  duty vs. Canada to offset beef industry subsidies, and a dumping suit
against  Mexico.  The  dumping  suit  against Mexico  was  not  deemed  sufficient  to
pursue  by  the  ITC.  Canadian  subsidies  were  ruled  de  minimis  by  the  ITC  and
therefore  no  offsetting  action was  taken or deemed  necessary.  The  ITC ruled  that
there was reasonable  indication that imports of live cattle had materially injured the
U.S. industry and that duties would be imposed.
CANADIAN  PORK COUNCIL
Martin  Rice
Pursuing a trade dispute offers industry associations a potentially high-return,
low-risk means of demonstrating their own worth to their membership.  If the action
is  successful,  the  association  can  point  to  this  as  evidence  of  its  usefulness  to
members.  If  unsuccessful,  it  can  point  to  the  inadequacy  of  the  country's  trade
legislation or the ineptitude of domestic bureaucrats  or foreign review bodies. In fact,
there is a much greater risk for the industry association to not pursue a trade dispute
action.  Rank-and-file  members  often are not responsive  to leaders'  suggestions  that
they need to respect trade rules, or to explanations of why imports are actually being
fairly  traded.  Lack  of action  by  associations  can  be  interpreted  as weakness,  and
elected leaders can be voted out when they come up for re-election.
Canadian  Experience
The  Canadian  pork  industry  has  been  involved  in  many  different  trade
disputes.  The  first major one was a  U.S. countervailing  duty investigation  in 1985,
against  Canadian  hogs and  pork.  Within the  past ten  years  we  have experienced
another  U.S. pork investigation as well as countervail proceedings  initiated by New
Zealand  and  Australia.  The  latter  case  also  included  dumping  charges.  We  were
among the first to have utilized the binational panel review provisions introduced  in
the  Canada-United  States  Trade Agreement,  later  NAFTA,  and  have been party  to
several panels since. When one adds in a safeguard investigation recently completed
by Australia, plus a variety of disputes over such technical issues as disease, labelling
and veterinary  products,  it can be said with some authority  that the Canadian  hog
and pork sectors have experienced trade tensions and actions.
Trade  disputes  almost always  occur  during periods  of low prices,  when the
mood of industry in both the importing and exporting countries is best described  as
irritated  and intolerant.  This  generally  is the worst time  to try to deal with a trade
dispute  through  dialogue.  Under  these  conditions  associations  are  least  able  to
Anderson *  Rice * Dolynchuk *  Peterson 173

INDUSTRY EXPERIENCE: LIVESTOCK ECONOMIST

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