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October 29, 2020 Mr. Edward Gresser Chair, Trade Policy Staff Committee

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October 29, 2020 Mr. Edward Gresser Chair, Trade Policy Staff Committee October 29, 2020 Mr. Edward Gresser Chair, Trade Policy Staff Committee Office of the United State Trade Representative 600 17th Street, N.W. Washington, D.C. 20508 Re: Docket Number: USTR 2020-0034 Comments by the U.S. Meat Export Federation Regarding Foreign Trade Barriers to U.S. Exports The U.S. Meat Export Federation (USMEF) appreciates the opportunity to submit comments concerning trade barriers, with an emphasis on unwarranted sanitary measures. USMEF is a non-profit trade association that represents the export interests of the U.S. beef, pork, and lamb industries through its network of offices and representatives in foreign markets. USMEF’s membership includes a broad cross-section of American agriculture and includes farmers; meat packers, processors, purveyors and traders; agribusinesses with an interest in U.S. meat exports; and other agricultural organizations. In addition, USMEF also works closely with the United States Department of Agriculture and is a long-standing partner of the Foreign Agricultural Service through the Foreign Market Development and Market Access programs and more recently the Agricultural Trade Promotion Program. Last year, our comments focused on the need for an agreement with China, as the top priority since the agreement with Japan had been reached and the USMCA was completed. The announcement of the China Phase 1 agreement in January and implementation in March, following the implementation of the Japan-U.S. Trade Agreement on January 1, brought critical growth opportunities for U.S. beef and pork exports. These market access gains have had heightened importance in the year of the global pandemic. The Phase 1 agreement with China included exceptional market access gains for U.S. beef, including adoption of Codex MRLs for growth promoting hormones, acceptance of the U.S. traceability system, expanded eligibility for nearly all U.S. beef cuts from cattle of all ages, expanded the list of eligible beef and pork plants, and provided eligibility for further processed products. These are tremendous market access gains and have already translated into record-breaking U.S. red meat exports to China. The agreement was well- timed because China has continued to face a shortage of red meat due to African Swine Fever. China’s economy and foodservice industry is also rebounding strongly ahead of the rest of the world as they were the first to get through the COVID-19 impacts. China’s exemption process for Section 301 retaliatory duties in early March also helped underpin growth in U.S. beef and pork exports this year. Unfortunately, the Section 232 steel and aluminum retaliatory duties of 25% remain for U.S. pork and pork variety meats, keeping us at a disadvantage to the rest of China’s pork suppliers. The retaliatory duty in China also means our exports of certain cuts, including hams and picnics which are heavily exported, trade at a discount to our competitors and translate into lower prices for U.S. producers. USMEF expects U.S. pork and beef exports to China and Hong Kong to reach at least $3.5 billion in 2020 The announcement of a completed USMCA in 2018 and subsequent entry into force on July 1, 2020 was welcome news for the red meat industry as it maintained tariff-free and quota-free trade on meat and livestock. The lifting of the Section 232 steel and aluminum tariffs and the corresponding return to duty-free U.S. pork exports to Mexico and U.S. beef exports to Canada, effective May 20, 2019, were also of critical importance. Upon implementation on January 1, the U.S.-Japan Trade Agreement stimulated significant growth in U.S. beef and pork exports to Japan, the highest value market for U.S. beef and pork globally (until China overtook it for pork in 2020). With a level playing field and benefiting from Japan’s tariff reductions, USMEF’s forecast for 2020 is for U.S. beef and pork exports to Japan to reach $2.01 billion and $1.56 billion, respectively. Export volumes are projected to be roughly 320,000 metric tons for beef and 376,000 metric tons for pork. Export growth was less than initially forecast but mainly because of the COVID-19 impacts on the U.S. supply chain in April and May and the lingering impacts of limited labor availability and other COVID-19 related restrictions complicating the production of variety meats and value-added, boneless and trimmed products preferred by the Japanese market. As anticipated, there has been a tremendous increase in U.S. exports of ground seasoned pork, with the tariff reducing from 20% to 10% and corresponding increase in U.S. export value of 48% or an increase of $71 million to $220 million through August. USMEF projects that by 2025 U.S. red meat exports to Japan could approach $4.3 billion – roughly $2.4 billion for U.S. beef and $1.9 billion for U.S. pork – as consumption of U.S. red meat increases due to greater access for Japanese consumers and the U.S. gains import market share. The main limitation to further growth in U.S. beef exports to Japan is the new annual safeguard for U.S. beef, which USMEF expects to be triggered in February 2021 and will result in a snapback to 38.5% duty, up from the current 25.8%, in place for 45 days. As written in the agreement, the safeguard will be triggered every year as it only grows 1 to 2 percent per year and the base rate is less than current trade volumes. The disadvantage will be unique to the U.S., as the CPTPP and EU safeguards will not be triggered. The impact will be especially challenging for chilled exports and at a time of strong spring demand ahead of May Golden Week holidays. USTR’s 2018 notification to Congress on its intent to negotiate trade agreements with the EU and the UK was also welcome news. Through a combination of high tariffs, restrictive quotas and sanitary measures, the European market remains largely closed to U.S. red meat. We remain hopeful that an agreement can be reached with the UK and possibly someday with the EU. However, besides the potential opportunities in future trade negotiations, USMEF greatly appreciates the deal reached between the U.S. and the EU on allocating the U.S. a country-specific share of the duty-free High-Quality Beef (HQB) Quota in 2019 and successfully implemented on Jan. 1, 2020. The U.S. utilized 90% of the quarterly allocation in January through March, prior to the European foodservice industry succumbing to COVID-19 in the second quarter. U.S. exports rebounded strongly in the third quarter (79% utilization) and were off to another positive start in the fourth, although COVID-19's resurgence has started to impact the business again in October, with restaurants closing again in Germany and France as of October 28. Still USMEF estimates that U.S. beef exports to the EU could double within the first few years following implementation of the agreement and could potentially grow from 2019 value of $173 million to near $500 million by the end of the seven-year phase-in. There is great uncertainty around Brexit, but USMEF also appreciates USTR’s ongoing efforts to negotiate an FTA with the UK even as parallel talks continue between the UK and the EU. The structure of the agreement between the UK and the EU remains unknown, and it will have a tremendous impact on the UK’s demand for red meat from the rest of the world. There are certainly opportunities for U.S. beef and pork in the UK market if access can be improved from the current situation of high tariffs, restrictive quotas and various sanitary barriers. We also appreciate USTR’s efforts to prevent the EU and UK from apportioning WTO tariff rate quotas in a way that threatens U.S. beef and pork access to both the EU and the UK. Finally, USMEF appreciates the efforts of the administration to aggressively pursue new markets for agriculture exports and identify opportunities for bilateral trade agreements in developing markets around the world. Ongoing efforts to secure a bilateral trade agreement with Kenya is a key example of these efforts and will pave the way for similar opportunities in other markets in Africa. While not currently a market for U.S. red meat exports, we see Kenya as providing good opportunities for U.S. exporters in the future. If duties were eliminated and market access barriers were minimized through a trade agreement, USMEF sees potential for frozen U.S. beef cuts across several categories, including at high-end retail, hotels and restaurants. There could also be demand for U.S. beef variety meats, including liver, similar to South Africa and elsewhere in the continent. Various U.S. pork products could potentially be utilized for further processed products produced in Kenya, particularly for use at quick service and other restaurants as well as hotels, modern retail and ecommerce, realizing price and thus seasonality will be important. Although niche, there could also be opportunities for further processed U.S. red meat products, including sausages, particularly for sale through ecommerce. Looking beyond the trade agreements, the export potential of the U.S. red meat industry is limited by a range of unwarranted sanitary measures maintained by countries around the world. We believe the most effective means of overcoming these barriers is through a highly focused partnership between the U.S. government and the red meat industry, dedicated to keeping markets open. USMEF and its members have made it a top priority to work with the U.S.
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