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Trade wars cost U.S. producers $27 billion in trade losses

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Legislative Watch: Soybeans, sorghum and pork impacted most; Antitrust hearing focuses on competition, food supply; Nigeria opens for U.S. sausage.

President Donald Trump in 2018 imposed Section 232 (national security) tariffs on steel and aluminum with major U.S. trading partners. In addition, he placed Section 301 tariffs on a number of  imported Chinese goods. This resulted in a trade war, with Canada, China, the European Union, India, Mexico and Turkey retaliating by imposing retaliatory tariffs on a number of U.S. exports, including agricultural and food products. Tariff increases ranged from 2 to 140% on individual products.

The USDA's Economic Research Service in a report, "The Economic Impacts of Retaliatory Tariffs on U.S. Agriculture," found that these retaliatory tariffs led to a reduction in U.S. agricultural exports by more than $27 billion during 2018 through the end of 2019. China accounted for 95% of the losses ($25.7 billion), followed by the EU, Mexico, Canada, Turkey and India. 

On a commodity basis, soybeans were impacted the most, accounting for nearly 71% of the losses ($9.4 billion of annualized losses), followed by sorghum ($854 million in annualized losses), and pork ($646 million in annualized losses).   

The Midwest was impacted the most. The states impacted the most were Iowa ($1.46 billion in annualized losses), Illinois ($1.41 billion in annualized losses) and Kansas ($955 million in annualized losses).   

The study found that U.S. agricultural exports to China rebounded after the signing of the Phase One Agreement in January 2020 and China announcing tariff exemptions for various products in March of 2020. Some of the increase was related to African swine fever. However, the U.S. market share has not reached pre-retaliatory levels. 

Antitrust hearing focuses on competition and food supply
There were divergent views at the House Judiciary Antitrust subcommittee's hearing on why meat prices are high. Democratic members continued the administration line of blaming market consolidation, especially the meat packing industry. Republicans said it was because of President Biden's failed policies, pandemic-spending and regulations.  

Representative David Cicilline (D-RI), chair of the subcommitte said, "While prices are rising, corporations are seeing record profits — demonstrating that they are not absorbing the supply shocks exacerbated by the pandemic. Instead, they are taking advantage of the American people to line their pockets in the midst of this crisis.

"We need to create choice for consumers, an even playing field for independent businesses, safe workplaces for essential workers and protect the livelihoods of farmers by breaking up monopolized sectors of the food system.
"We need to pursue criminal charges of corporate executives who engage in cartel activity, such as price fixing and other forms of criminally anticompetitive conduct."

Representative Ken Buck (R-OR) said "To suggest that changes in antitrust law would heal what ails our economy at this moment is disconnected from reality."  

Peter St. Onge of the Heritage Foundation stated before the committee "the data strongly suggest that food production, in particular meatpacking, is among the most competitive and efficient industries in America — indeed, in the world."

Julie Anna Potts, President and CEO of the North American Meat Institute, in testimony filed with the subcommittee reminded the members that the level of concentration in the beef industry has remained fairly constant for nearly three decades. Potts said, "The four-firm packer concentration ratio for fed cattle slaughter has not changed appreciably in more than 25 years. According to the USDA, the four firm concentration ratio was 82% in 1994; today it is 85%." 

Potts also said, "Looking for a scapegoat for economy-wide inflation, the Biden administration has alleged that meat and poultry industry concentration is to blame for rising consumer prices. The truth is not so convenient.”

"The administration will be surprised to learn that economic fundamentals have led to inflation. Labor shortages. Transportation and supply chain challenges. Regulatory policies. And all of those input challenges were coupled with record meat demand. Collectively, these factors drove up prices for wholesale and retail beef."

Rob Larew, President of the National Farmers Union, filed comments in which he said, "Concentrated markets increase opportunities for market manipulation and coordinated behavior. There has been a spate of price fixing litigation brought against major livestock industry companies since 2016, with multiple indictments and guilty pleas. Other symptoms of heavily concentrated markets include supply chain disruptions, which have been particularly disruptive during the COVID-19 pandemic, but also had significant impacts prior (e.g., the fire that shuttered the Tyson Foods Holcomb, Kansas beef processing plant for several months). The pandemic and other disruptions have highlighted how large, seemingly efficient systems of production can falter when there are shocks."

Some recent polling shows that inflation is at the top of the list of consumers concerns.  

Nigeria opens for U.S. sausage
Nigeria has opened for U.S. sausage and similar products. All raw beef, pork and poultry products continue to remain ineligible for export to Nigeria.  

National Pork Producers Council President Jen Sorenson said in a press release, "Nigeria has the largest GDP of any African country, with a population of just over 211 million, [and] we are excited to be the first U.S. protein to be allowed access to the Nigerian market. NPPC thanks the USDA and the government of the Federal Republic of Nigeria for their efforts to reach an agreement."

According to the Department of Commerce, U.S. food and agricultural exports to Nigeria was $489 million in 2020. Nigeria is the fifth largest export market for U.S. wheat. Other agricultural products exported are soybeans, intermediate food products (especially vegetable oils and animal fats), consumer-oriented food products (e.g., condiments and sauces, processed vegetables, wine, prepared food, dairy products and non-beverage ethanol) and fish products.

Source: P. Scott Shearer, who is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. The opinions of this writer are not necessarily those of Farm Progress/Informa.


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