Beef for Chicken: USA and China Sign Groundbreaking Trade Agreement

  •   14 Jun 2017
  •    Giacomo Colaci Cirillo
  • 258

meatBackground

The States used to be one of China’s biggest beef suppliers, but increased incidence of BSE (mad cow disease) and the human variant CJD (linked to consumption of infected beef) circa 2003, precipitated a blanket ban on importation of American beef. After years of negotiations, in May 12th the two countries finally signed a highly anticipated beef agreement.

In terms of the food sector the most significant proposition relates to a bilateral trade agreement involving the removal of the ban on beef exports to China and the accession of some Chinese cooked poultry products to US markets. The contents of the new agreement also include stipulations which could indirectly affect the food sector such as permitting foreign financial companies to provide credit ratings in China, mutual bond and commodity futures settlements, as well as the accession of both countries’ electronic payment services to their counterparts’ markets..

This is seen by both parties as the first step of a long journey that will hopefully bring more US shale gas (subject to anti-dumping duties since 2010) to China and deepen the penetration of Chinese banks into the American financial market, eventually bringing down the longstanding trade deficit.

China’s beef market

China is among the biggest markets for US exports, and there is no reason to doubt that it could become a valuable one for beef as well, especially frozen.
At the moment, China’s beef imports (mostly Australian and South American ones) are generally high-end, niche products; therefore, domestic producers have not been subject to excessive competition or pricing pressures.

The removal of the ban has the potential to disrupt Chinese ranchers and traders, who fear they will be swept away by a tsunami of low price US steaks and burgers. It is expected that American beef will be likely on the cheap side because of a fundamental difference between animal husbandry in China and the US. In China most cattle are raised outdoors, while intensive farming is the norm in the US. Overall the corn fed, factory farming system used in the US increases yields, productivity and profitability while reducing overheads all of which combine to provide a considerable competitive advantage versus Chinese produce. Nonetheless, some question this scenario, estimating that US beef will not necessarily be low-cost because in the short term, American traders will need to invest in establishing distribution, marketing and retail channels.

Overview of Regulatory Framework

Going into more depth about official regulations, the requirements for USA beef have already been published by USDA Food Safety and Inspection Service and include:

  1. First of all, the only beef products allowed to be exported to China are frozen or chilled “deboned beef including kidney, liver, omasum,  tendons, outside skirt, inside skirt, hanging tender, oxtails, beef bones, feet, cheek meat, head meat, oxlips, backstrap, tunic tissue, ground beef” and tongue derived from cattle less than 30 months old.
  1. Processed beef products, “mechanically separated beef, minced meat, sweetbreads, aorta, rumen, the reticulum, the abomasum, pizzle, small intestine, large intestine, tallow” and beef products not mentioned in the “Eligible Section” are forbidden to be exported to China.
     
  2. In addition, “beef products […] should not contain growth promoters (hormones, excessive veterinary medicines such as antibiotics), feed additives and other chemical compounds including ractopamine”, and “beef shipments detected with prohibited substance or compounds at the port of entry will be rejected, returned to the US or destroyed”.
  1. All establishments willing to export to China are required to participate in USDA  AMS Export Verification Program for Bovine for the PRC, a traceability program

Please, have a look at “Export Requirements for The People's Republic of China” issued by USDA’s FSIS and to Agricultural Marketing Service’s “Beef Exports to the People’s Republic of China” for requirements, procedures, the list of eligible establishments and other useful information.

You can find a summary of the trade agreement here (English version) and here (Chinese version).

We still don’t know up to what extent will US beef influence China’s food sector, but we will keep you updated on the future developments of bilateral trade regulations.

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Comments

I guess the Australian beef shall get the price down to compete with US beef...
I still trust the quality of Australian beef...