7/13/2006

R-CALF: ITC Testimony to Focus on Import Regulations
United Stockgrowers of America

(Billings, Mont.) – R-CALF USA International Trade Committee Co-Chair Doug Zalesky testified today in Washington, D.C., before the International Trade Commission (ITC) regarding the ITC’s Fifth Update of “The Economic Effects of Significant U.S. Import Restraints (Inv. No. 332-325).”

“In developing this particular update, the ITC is charged with assessing the impact of those restraints on U.S. consumers and firms, on the income and employment of U.S. workers, and on the net economic welfare of the United States,” Zalesky explained. “In previous investigations, the ITC has regularly assessed the impact of liberalizing U.S. restraints on imports of fresh, chilled or frozen beef.

“R-CALF believes there are a number of important factors affecting the U.S. cattle industry that haven’t received extensive analysis in previous ITC investigations, but we hope these factors will come under serious scrutiny during this year’s review,” Zalesky noted.

R-CALF USA is urging the ITC to weigh the following in assessing the economic effects to the U.S. cattle industry of liberalizing, or lowering, U.S. import restraints on beef:

* The adequacy of traditional economic modeling in predicting the likely effect of liberalization in beef trade, particularly the impact on cattle producers;

* External barriers to U.S. exports that have resulted in a large U.S. trade deficit in fresh, chilled and frozen beef since 2003;

* The demonstrated ability of certain large producers to export to the U.S. in excess of quota levels despite out-of-quota tariffs;

* And, the cumulative impact of bilateral and regional Free Trade Agreements that liberalize trade in beef.

“Back in 1995, the ITC decided that the sector that would be most dramatically impacted by meat-trade liberalization would be the live-animal sector, but in its last update, the ITC provided no analysis of the impact of beef import liberalization on cattle producers,” Zalesky noted. “For this latest update, the ITC should expand on its earlier practice and analyze how cattle producers will be affected.

“Previously, the ITC noted than an analysis from the perspective of cattle producers would likely be more useful and relevant than an analysis of trade impacts from the perspective of the meatpacking industry,” Zalesky continued. “In its study of the Australian Free Trade Agreement, the ITC also noted the high sensitivity of cattle prices to increases in beef supply and stated that each percentage point of increase in beef supply was likely to translate into a decrease in live cattle prices of 2 percent.

“In particular, the ITC should follow the recommendations of the Government Accountability Office (GAO) when it suggested that ITC consider how to account for the particular structure of the domestic cattle and beef markets in its analysis because previous ITC economic models didn’t explicitly account for concentration, marketing agreements and forward contracts,” urged Zalesky. “These factors are important because they determine how direct impacts of imports on the meatpacking industry will be passed on not only to cattle producers, but consumers as well.

“ITC officials also have previously acknowledged that the increased leverage of the meatpacking industry over cattle prices because of increased concentration, and the structure of the meatpacking industry will affect whether, and to what extent, lower beef prices due to increased imports will be passed on to consumers,” explained Zalesky. “Market concentration and contracting practices in the meatpacking industry can prevent lower cattle prices from automatically translating into lower beef prices for consumers, and this ‘disconnect’ between the financial returns to producers and prices paid by consumers is reflected in producers’ declining share of each retail dollar spent on beef.

“R-CALF hopes the ITC will also take into account the perishable and cyclical nature of cattle and beef in order to generate more reliable results in its next update,” Zalesky commented. “In essence, cattle producers are the ones most likely to continue to experience income, output and employment losses due to beef import liberalizations.”

Please visit the “International Trade” link at www.r-calfusa.com  to view R-CALF USA’s June 16, 2006, correspondence to ITC Secretary Marilyn Abbott. More information will become available after Zalesky testifies.

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R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) represents thousands of U.S. cattle producers on domestic and international trade and marketing issues. R-CALF USA, a national, non-profit organization, is dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. R-CALF USA’s membership consists primarily of cow/calf operators, cattle backgrounders, and feedlot owners. Its members – over 18,000 strong – are located in 47 states, and the organization has over 60 local and state association affiliates, from both cattle and farm organizations. Various main street businesses are associate members of R-CALF USA. For more information, visit www.r-calfusa.com or, call 406-252-2516.