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Market Access Challenges for U.S. Pork

Market Access Challenges for U.S. Pork

The U.S. pork industry exports more than one-fourth of its total production, and has a customer base throughout the world that appreciates the quality and consistency of U.S. pork. U.S. exports now exceed $6 billion annually, nearly quadrupling in value over the past 10 years. In order to maintain and build further on this success, U.S. pork needs a competitive, level playing field. This is why market access issues are such an important focus for the U.S. Meat Export Federation (USMEF) and its industry partners.

Tariffs, import quotas and other economic barriers are still an issue in many markets, although the United States has made considerable strides in reducing these obstacles in recent years through World Trade Organization (WTO) proceedings and free trade agreements. Without the North American Free Trade Agreement (NAFTA), the U.S. industry certainly could not have built Mexico into a $1.2 billion market for U.S. pork. Exports to Canada grew from $300 million in 2004 to almost $850 million last year, despite increases in Canadian pork production and declining per capita consumption.

The U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) also lowered barriers for U.S. pork in the Western Hemisphere. That helped the industry develop Honduras into a top 10 market for U.S. pork and push exports to Central America and the Dominican Republic to $180 million in 2013. This was a four-fold increase since 2006. Pork exports to Panama (which was not included in CAFTA-DR) and Colombia have also grown substantially since the United States entered trade agreements with those two countries in 2011. In fact, Colombia was the leading market for U.S. pork in the Central-South America region in 2013. At $88 million, it was the eighth-largest global market for U.S. pork last year.

Tariff reductions under the Korea-U.S. Free Trade Agreement (KORUS) have also been very important to the U.S. industry. South Korea undertook a large culling of its swine herd just before KORUS took effect, due to an outbreak of foot-and-mouth disease (FMD). So in 2011, Korea’s pork imports from all suppliers were up nearly 70% year over year, and U.S. exports to Korea more than doubled. As Korea’s herd rebuilding efforts have taken hold, its need for imports in the past two years has declined accordingly. But that doesn’t mean the United States isn’t benefiting from KORUS tariff reductions, as they have been absolutely necessary for keeping U.S. pork competitive in Korea. U.S. market share grew from 33% in 2012 to 35% in 2013.

For example, Jan. 1 marked the 10th anniversary of the Chile-South Korea Free Trade Agreement entering into force, which means Chilean pork became eligible to enter Korea duty-free. For U.S. pork, duties on frozen bellies, other bone-in frozen cuts and most offal and processed products also went to zero at that same time. But “frozen other” — the category covering picnics and butts and making up the largest share of U.S. exports to Korea — does not reach duty-free status until Jan. 1, 2016. Duties on these items were reduced to 8% this year. Canada, which concluded FTA negotiations with Korea in early March but won’t have an FTA in effect until at least 2015, is paying 25%.

Korea’s duty rate on U.S. sausages is 7.2% this year and will go to zero in 2016. Duties on U.S. boneless chilled pork are on a 10-year phase-out, paying 15.75% this year and reaching duty-free status in 2021. Without these rate reductions, the U.S. would be at a severe price disadvantage compared to domestic and duty-free Chilean pork. Pork from the European Union is also subject to declining tariff rates as a result of an FTA reached with Korea in mid-2012.

While the gains achieved through these agreements are considerable, the United States still has a long way to go in eliminating market access barriers. Japan’s gate price system inflates the cost of imported pork and distorts the product mix entering Japan. Eliminating the gate price system is one of the U.S. pork industry’s primary goals of the Trans-Pacific Partnership (TPP) negotiations, and represents the industry’s biggest potential gain under the TPP.

“Even with the gate price system in place, the U.S. industry managed to build Japan into nearly a $2 billion-per-year market for U.S. pork,” said Philip Seng, USMEF president and CEO. “But competition in this market has intensified greatly, the purchasing power of the Japanese yen has weakened recently, and Japan’s national consumption tax is scheduled to increase (from 5% to 8%) in April. So it is more important than ever that we gain tariff relief if we are going to achieve continued volume growth in Japan. While TPP negotiations on this issue have proven difficult, this still represents our best opportunity to address the gate price system.”

Other TPP participants are Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Among these countries, the best opportunity for market access gains under the TPP rests with Vietnam — which currently imposes duties of 25% on chilled pork, 15% on frozen pork and 10% on pork offal. (Separate from the TPP, Vietnam recently expanded its list of eligible products to include most pork offal items. Prior to this expansion, only hearts, livers and kidneys were permitted by Vietnam.)

The other major trade agreement for which the U.S. is currently engaged in negotiations is the Transatlantic Trade and Investment Partnership (T-TIP), which would cover trade between the United States and the 28 member states of the European Union. The EU is self-sufficient in pork production, and some of its member states are significant pork exporters. Aggregate exports from EU member states were larger than total U.S. exports in 2013, but EU pork production is also double that of the United States. The EU’s self-sufficiency in pork is also galvanized by a complex import quota system, however, and high duty rates that limit access for non-EU suppliers. In the case of U.S. pork, market access is also limited by production and processing restrictions that are not required by most other trading partners. Exporters must meet these requirements through the Pork for the European Union (PFEU) program, which is administered by the USDA Agricultural Marketing Service (AMS). The PFEU program, which has been in place since 1999, provides some opportunity for U.S. suppliers to serve this market. But because meeting the program’s regulatory requirements adds heavily to production and processing costs, participation in the PFEU program is limited. For comparison, EU imports of U.S. pork were valued at $9 million while U.S. imports of pork from the EU were worth $385 million in 2013.

If the United States is to make tangible gains in market access for U.S. pork through T-TIP, the agreement must do more than eliminate quotas and tariffs. As John Brook, USMEF regional director for Europe, Russia and the Middle East, noted at a stakeholder meeting held in conjunction with the most recent round of T-TIP negotiations, “The T-TIP presents a unique opportunity for the U.S. and EU to bridge their differences on science, food production and processing technologies. Market management objectives must not be allowed to be disguised as food safety issues.”

Ractopamine issues

One aspect of the PFEU program is that pork must be derived from hogs that have not been fed beta-agonists — specifically, the commonly used feed additive ractopamine. But the EU is not the only market in which the use of ractopamine is an obstacle; it has also become a thorny issue with several other U.S. trading partners.

For background purposes, it is important to note that much of the information found in the news media about ractopamine is simply not accurate. Opponents of ractopamine use are often quoted as saying that ractopamine is “banned in nearly 200 countries” or “banned in most countries around the world.” In fact, though, most of these countries have not banned ractopamine; they simply never approved ractopamine for domestic use and have not had occasion to take a formal position on the compound.

In only two cases — the EU and the People’s Republic of China — has ractopamine use been specifically banned. But some other U.S. trading partners, most notably Russia and Taiwan, impose a zero-tolerance policy on ractopamine residues in domestic and imported pork, because use of the product has never been approved for domestic production.

Ractopamine is approved for use in U.S. pork production by the Food and Drug Administration (FDA). Many trading partners clear incoming shipments of U.S. pork under maximum residue levels (MRLs) for ractopamine residues, which helps ensure that hogs from which the pork was derived were not fed ractopamine at excessive levels.

In 2012, the United States led an effort to support the Codex Alimentarius Commission (Codex) of global food safety standards in setting an MRL for ractopamine. Codex member states adopted MRLs for pig and cattle muscle, fat, liver and kidney tissues, as well as an acceptable daily intake (ADI) standard. The outcome of the Codex vote was a positive development that validated the science supporting the safety of ractopamine. But the reaction in the global marketplace has been mixed, with some key trading partners holding to their zero-tolerance policies and showing no inclination to adopt the Codex MRLs.

Though not created solely for international marketing purposes, the obstacles ractopamine faces in certain destinations were a factor in the development of the AMS Never Fed Beta Agonist Quality System Verification Program (QSVP). The program allows for verification that hogs (or cattle) have never been fed beta-agonists through criteria established and overseen by AMS. Shortly after its implementation, the QSVP served as the foundation for some long-awaited progress in breaking Russia’s ban on imports of U.S. pork.

Russia’s zero-tolerance standard for ractopamine residues came to a head in February 2013, when Russia closed its market to all U.S. pork (as well as U.S. beef and turkey) regardless of the production methods used. After more than a year, the blanket ban on U.S. pork was finally lifted on March 7, 2014, when the Food Safety and Inspection Service (FSIS) Export Library was updated, outlining a new set of requirements for U.S. pork destined for Russia. In addition to meeting all requirements of the QSVP, Russia also requires monthly laboratory testing for ractopamine that is conducted under FSIS supervision. So while any establishment producing under the QSVP must develop an AMS-approved verification testing regime that tests samples at least once per quarter, the monthly testing under FSIS supervision is an additional requirement that is unique to the Russian market.

Also on March 7, the eligible pork plant list for Russia was updated to include two of the three U.S. plants currently approved under the QSVP. The fact that Russia agreed to restore plant eligibility based on participation in the QSVP and other guarantees provided by FSIS is a positive development. However, no cold storage facilities have yet been reinstated to the eligible plant list.

This raises questions about product movement, because all pork exports to Russia must undergo a freezing treatment for trichinae at an approved cold storage facility. So the market access situation with Russia remains rather fragile and uncertain, but at least there has been some movement away from the blanket ban on U.S. pork. This development is timely, because Russia is in need of pork suppliers, having recently suspended imports from the EU due to findings of African swine fever (ASF) in the EU member states of Lithuania and Poland.

In March 2013, China began requiring all pork imports from the United States to be accompanied by a laboratory certificate certifying that the product is free of ractopamine residues. This new requirement contributed to a decline in U.S. exports to China in the first half of last year, but exports regained momentum in the summer months and finished the year only slightly below 2012 levels.

In January, China notified USDA that all pork exports would need to be certified by FSIS as free of ractopamine residues. FSIS submitted two options for meeting this requirement, and exports continue under the previous certificate, pending approval by China of FSIS’ proposed new certification requirements. 

As for Taiwan, U.S. pork continues to enter the market under a zero-tolerance policy for ractopamine residues. Although Taiwan adopted MRLs for ractopamine residues in domestic and imported beef, there has been no such movement toward a parallel policy for pork. U.S. pork exports to Taiwan got off to a very slow start in 2014, but may pick up in coming weeks due to a domestic supply crunch and measures being taken by the government to accommodate more imports. It is important to note that Canada was the leading supplier to Taiwan in 2013 (also producing under ractopamine-free programs), followed by the U.S.; the EU was a distant third.

PRRS limits market access

Porcine respiratory and reproductive syndrome (PRRS) is another issue that limits access for U.S. pork in certain markets, especially in the Southern Hemisphere. Australia allows no imports of fresh or frozen U.S. pork unless it is shipped directly to a designated cooking facility in Australia for processing.

New Zealand’s policy used to mirror Australia’s, but recently the New Zealand Supreme Court upheld regulations that will allow some fresh imports of U.S. pork. When implemented, the new import regulations will allow U.S. chilled and frozen pork to enter New Zealand in retail-ready packages of 3 kilograms or less. These regulations had been the subject of an ongoing court challenge filed by the domestic pork industry trade association, NZ Pork, which wanted to keep existing import restrictions in place. 

South Africa also imposes, among other barriers, a PRRS-related import ban on U.S. pork. It is proposing to allow only processed products, along with fresh pork that is shipped directly to a processing facility in South Africa. Bilateral negotiations to regain access for U.S. pork in South Africa are ongoing.

Porcine epidemic diarrhea virus (PEDV) was identified in the United States last year for the first time. Since PEDV is present in many countries and poses no food safety risk, it has rarely been cited as a reason for restricting pork imports.

At least so far, PEDV has not led to new restrictions on U.S. pork exports in any major markets. Uzbekistan has temporarily suspended imports of U.S. pork due to PEDV, and Costa Rica has banned imports of U.S. pork casings, but these measures should have very little trade impact. USMEF is monitoring the situation carefully to ensure that other countries do not impose PEDV-related restrictions.

In addition to these ongoing market access issues, U.S. pork also frequently faces obstacles that surface for any number of reasons — often due to pressure from domestic pork producers.

One example occurred last year in Chile, where local producers requested that a Chilean trade commission impose an import safeguard that would have assessed an additional 14.3% duty on imported pork. Fortunately, the commission found that the producers seeking the safeguard failed to show that increased imports had caused economic harm to domestic pork production. The commission also determined that Chile’s pork imports are still relatively low compared to domestic production volume and Chile’s growing pork exports.

In fact, the commission noted that given Chile’s pork consumption trends and the export strategy employed by the Chilean pork industry, imports are needed in order to meet domestic demand.

Pork exports to Ecuador also encountered obstacles in 2013, when agricultural officials required importers of certain products — including pork and pork offal — produced outside the Andean region to submit import plans to the Ministry of Agriculture for review. As a result, importers of U.S. pork reported delays and difficulties obtaining approval. U.S. officials raised the issue with the WTO Committee on Import Licensing, and exports to Ecuador recovered to finish 2013 higher than the previous year in both volume (2,954 metric tons, up 29%) and value ($7.42 million, up 36%). But product movement to Ecuador remains problematic, and the U.S. government continues to monitor the situation carefully.

Even a trading partner’s tax system can sometimes be used to slow trade. The government of Honduras is currently considering repeal of a number of consumption tax exemptions, including the exemption for frozen — but not fresh — pork. Not surprisingly, the vast majority of frozen pork is imported, while fresh pork is almost entirely domestically produced. If frozen pork is subjected to Honduras’ 15% value-added tax, imports will be at a decided disadvantage compared to domestic pork.

The U.S. government has been working on this issue for some time in an effort to register its concerns with the Honduran government. Honduras was the 10th-largest destination for U.S. pork and pork variety-meat exports last year in both volume (22,492 metric tons) and value ($52.8 million).

COOL concerns

Finally, U.S. pork could face steeper terrain in two of its largest destinations if the WTO finds that USDA’s country-of-origin labeling (COOL) requirements are not in compliance with WTO obligations. The COOL regulations are being challenged by Canada and Mexico through the WTO compliance review process. A final ruling by the compliance panel is not expected until midsummer, but an unfavorable decision would have severe consequences for the pork industry if it leads Canada and Mexico to implement retaliatory tariffs on imports of U.S. pork.

In 2013, U.S. pork and pork variety-meat exports to Canada and Mexico totaled 852,848 metric tons valued at $2.07 billion — about 40% of the U.S. industry’s worldwide export volume and 34% of the export value.

Despite numerous market access challenges discussed here, the significant strides that have been made in liberalizing trade have helped U.S. pork grow in popularity across the globe.

The industry must remain diligent, however, in working to maintain and improve market access, and to expand international marketing opportunities for U.S. pork. For more information on these efforts, visit


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