IV. MEAT POLICY DEVELOPMENTS

The context of the world meat economy in 2001 and 2002 was considerably different to that prevailing at the end of the last decade. The proliferation of animal disease outbreaks dominated policy responses around the globe, the main thrusts of which were to impose import bans, tighten sanitary border control measures, and strengthen domestic regulations, in order to protect animal health and food safety.

Production Policies

Widespread outbreaks of animal diseases in 2000 and 2001 represented major challenges for many countries, and public expenditure in the livestock sectors expanded in many meat exporting countries to meet the cost of disease containment and eradication. Japan and the EU implemented compulsory testing of all slaughtered livestock and provided compensation packages for producers of disease-affected animals which included outright or partial payment for withdrawal/purchasing of animals at risk, and expenditures for the disposal of meat and bone meal. Japan introduced a BSE (Bovine Spongiform Encephalopathy) programme for the financial year starting in April 2002 of 206.5 billion yen (US$ 1.7 billion). These subsidies include minimum prices for carcases, income guarantees for feedlotters, including the labour cost of families, profit guarantees for feedlotters, and minimum prices for the sale of calves. More than 85 percent of the subsidies focus on income stabilisation for farmers and industry.

Many other countries, particularly in Eastern Europe, have introduced full disease screening for BSE and traceability schemes. In South America, vaccination and surveillance programmes were set up for Foot and Mouth Disease (FMD). Most governments in developing countries are intensifying mechanisms aimed at the control and eradication of livestock diseases, with the promotion of livestock extension systems complemented by efforts to improve the safety of feeding. However, this has been accompanied in many countries by the implementation of institutional reforms focusing on increasing the privatisation (deregulation) of services to the livestock sector.

In some European countries, animal disease outbreaks prompted policies to encourage a transition to more extensive agricultural production systems. In the EU, this was implemented through policies reducing stocking densities, compulsory per head limits, a reduction in the Beef Special Premiums, new requirements for the Suckler Cow Premium, and an increase in the beef intervention ceiling. In addition, the Commission extended the beef special purchase scheme^[37] until March 31, 2002. This BSE-induced scheme allowed Member States to buy and put in storage up to 40 000 tonnes of cow beef from animals over 30 months old that have tested negative for BSE. In the Slovak Republic, support for extensively raised beef cows was increased in 2001. Quality bonuses for animals of certain specifications was also provided while the Government, citing the low price of imported pigs in 2002, introduced a measure to grant meat processing companies bonuses for the purchase of domestic pigmeat.

Some progress was made in moving away from price support toward direct payments. The sheepmeat regime in the EU was reformed in 2002 through the introduction of a flat rate annual premium which will replace the variable deficiency payment used previously. The level of premium was fixed at euros 21/animal (US$ 21), which is based on the average of the premia from 1993 to 2000. In addition, a supplemental premium of euro 7/animal (US$ 7) is available to producers in areas where sheep and goat production constitutes a traditional activity or contributes significantly to the rural economy. Provision was made also that each member state has a national allocation for sheep, capped in aggregate at Euro 71 million (US$ 71 million), to pay for discretionary extra schemes, such as extensification programmes. Member states may decide to supplement the national allocation by reducing the ewe premium by up to one euro; however, payments under this category cannot be linked to fluctuations in market prices.

The level of premium was fixed at euros 21/animal (US$ 21), which is based on the average of the premia from 1993 to 2000. In addition, a supplemental premium of euro 7/animal (US$ 7) is available to producers in areas where sheep and goat production constitutes a traditional activity or contributes significantly to the rural economy. Provision was made also that each member state has a national allocation for sheep, capped in aggregate at Euro 71 million (US$ 71 million), to pay for discretionary extra schemes, such as extensification programmes. Member states may decide to supplement the national allocation by reducing the ewe premium by up to one euro; however, payments under this category cannot be linked to fluctuations in market prices.

Increased integration of markets in Europe has prompted regulatory reforms and legislative changes. Restructuring of the animal sector in Eastern Europe is continuing, prompted and accelerated by prospects for EU integration. Adherence to EU hygiene standards is necessitating reconstruction of many slaughterhouses throughout the region. Registration of farm animals is being implemented in numerous countries while the movement toward production-decoupled forms of support to harmonize policies with the CAP is accelerating. The Czech Republic introduced per head payments for sheep and beef cattle in 2000, and support doubled in 2001.

In Romania, the Government introduced support of around US$ 41 million to the livestock sector in 2002, providing direct payments to cattle, pig and poultry producers, as well as slaughterhouses. There are two categories of subsidies in place:

1) marketing payments of around US$ 17.2 million with amounts budgeted to cover government procurement of 45 600 tonnes of beef and 160 000 tonnes of pigmeat respectively. Producers received direct payments of around US$ 118/tonnes live weight for live bovine and swine of specific weights, and; 2) support measure of approximately US$ 24.2 million to promote sector productivity. The poultry sector benefited from approximately US$ 8.6 million which were allocated for direct payments of 100,000 tonnes of broiler meat delivered to authorized slaughterhouses.

Price supports and production quotas continue to be used in Hungary. However, in 2001, beef payments remained stable and are scheduled to be reduced in 2002. Meanwhile, members of the Poultry Council established a production quota for the first quarter of 2002 with a fee imposed on those exceeding the limits. In the pig industry, the elimination of export subsidies for Hungarian pigmeat depressed domestic prices in 2002, leading to increased support to the sector through higher guaranteed prices for pigmeat. In Poland, the Agricultural Market Agency (APR) in 2002 was allocated nearly US$ 200 million for the purchase of 140 000 tonnes of pigmeat. Purchases in 2003 are estimated at 150 000 tonnes. Market support to the livestock sector in other countries also increased in 2000 and 2001. The Ukraine has introduced a bonus scheme which cost approximately US$ 22 million in 2001 and is reported at US$ 14 million for 2002, to encourage cattle producers to slaughter cattle at weights higher than 375kg. Payments to producers are US$ 0.14/kg of live weight for dairy and dual-purpose cattle and US$ 0.17/kg of beef cattle

In Asia, the Government of the Republic of Korea in 2000 initiated a programme to stabilise calf prices which provides producers with 20-percent higher market prices. This was continued into 2002 with US$ 51 million allocated to the programme, which establishes market floor prices through the provision of up to 250,000 won (US$ 208)/calf. In addition, the Government established a calf production base (US$ 4.8 million) to encourage development of larger farms devoted to cow/calf operations. Israel, which supports the extensive raising of beef cattle through per head payments, will shift to direct area payments as of 2003.

In the United States, in compensation for the 2001 elimination of tariff-rate quotas (TRQs) for lamb imports, the Government extended the Lamb Meat Adjustment Program through August 2003, adding US$ 40 million in subsidies to the US$ 100 million already available. Of this amount, US$ 26 million will be allocated to the Ewe Lamb Expansion Programme, with payments for retaining or purchasing qualifying ewe lambs at US$ 18/ewe lamb. This is accompanied by a new lamb levy programme under which assessments of one-half cent a pound on sales of live lambs will be charged and an additional US$ 0.30/head paid by packers for lambs for slaughter. Support for livestock producers in the United States will be provided through US$ 752 million in immediate assistance under a new programme, the Livestock Compensation Programme. Recipients will be producers residing in primary disaster areas due to drought and the payment rate is US$ 18 per animal consuming unit. This programme is in addition to other programmes available to eligible producers that total US$ 1.3 billion; these programmes include a US$ 150 million feed assistance program for cow-calf operators and emergency haying and grazing on Conservation Reserve Programme, valued at US$ 100 million.

Investments in livestock productivity expanded over the period, facilitated by improvements in livestock genetics, management practices and infrastructure. The Republic of Korea announced in April 2001 a new multi-year US$ 1.8 billion programme which focuses on the improved quality of Hanwoo beef, accompanied by a US$ 322 million project aimed at increasing self-sufficiency in poultry products. For 2002 the Hanwoo beef programme budget is approximately US$ 20.7 million with another US$ 14.1 million providing support toward the castration of Hanwoo bulls.

Romania has received grants to enhance meat quality while it also disbursed US$ 25 million to support the animal breeding sector. In Africa, limited financial resources have constrained government investments in the livestock sector; however, governments are taking initiatives to obtain funding for breeding facilities and disease eradication programmes. Benin, Burkina Faso, Cameroon, Côte d'Ivoire and Togo are among many of the African countries privatising veterinary services while assisting in the provision of veterinary medicines.

The Numerous countries have moved to take action to enhance feed quality. To prevent cattle exposure to contaminated feed, Canada's principal feed trade organization, the Animal Nutrition Association of Canada, developed a voluntary Hazard Analysis at Critical Control Points (HACCP)-based Feed Safety Program and began in early 2000 to provide HACCP Certification to individual feed manufacturers. The Kenyan government is formulating a feed bill to regulate this sector, while reducing the VAT on inputs into the feed industry, such as oilmeals and maize germ, from 15 percent to 5 percent. A decline in tariffs on imported feed inputs was reported by Nigeria. Moving to help cattle breeders during a drought, Tunisia introduced in 2002 an emergency plan, including feed barley subsidies and duty-free feedstuffs. As European protein prices adjust to the impact of the BSE crisis, the French Government has announced that aid to renderers for production of animal fat will stop with effect from October 1, 2002. This will reduce compensation from 150 euro per tonne (US$ 150) for fats to zero.

Meanwhile the EU Commission in late 2001 published two directives on animal welfare, laying down minimum standards for the protection of pigs. From January 2003 for new farms and January 2013 for existing holdings, minimum surface requirements for different categories of pigs have been set up. The Commission is also expected to tighten the rules on animal welfare during transportation.

Countries increasingly are using conversion programmes to protect a wide range of resources. he 2002 Farm Act of the United States, under the Environmental Quality Incentives Program (EQIP) provides technical assistance, cost-share payments and incentive payment to assist crop and livestock producers with environmental and conservation improvement on the farm. Sixty percent of annual programme funding of US$ 1.3 billion is targeted at livestock producers for the construction of animal waste management facilities.

Domestic Marketing and Consumption Policies

During the review period, many countries, including developing countries, have instituted measures related to both meat quality and traceability with the aim of ensuring food safety/quality of meat products. New laws and standards were established with Poland implementing a law to safeguard against the recurrence of Classical Swine Fever, while China issued National Standards for poultry products and the Republic of South Africa introduced a Meat Safety Act. The United States, in January 2002, allocated an additional US$ 15 million for increased meat inspection activities. Indonesia and Hong Kong SAR set new standards for veterinary drug usage and maximum residue limits. In June 2002, the Japanese government decreed the establishment of a Food Safety Commission.

Major advances were made by Australia, New Zealand, Namibia, and the Czech Republic in the establishment of system of identification and certification of cattle. In early 2002, the Brazilian Government created the Brazilian System of Identification and Certification of Bovine and Buffalo Origin. The cost, per animal, is estimated at US$ 2.5, which implies total costs of approximately US$ 400 million to implement by 2007. The Australian Government also announced a substantial upgrading of quarantine protection against animal disease risks, with US$ 593 million provided over the next 5 years. The 2002 Farm Act in the United States requires retailers to inform consumers of the country of origin for selected commodities which include muscle cuts of beef, lamb, and pork. A US retailer may only use a country of origin label if the product is from an animal that was exclusively born, raised, and slaughtered in that country. Voluntary labelling is allowed until September 30, 2004 at which time labelling will become mandatory. Meanwhile, in other countries, such as Japan, the EU and the Czech Republic, among others, compulsory labelling was strengthened or introduced.

There have been some changes in the statutory boards regulating meat policies. In Australia, effective July 2001, the Australian Pork Corporation, the Pig Research and Development Corporation and the Pork Council of Australia were abolished and replaced with a new producer-owned corporation, Australian Pork Limited. The Canadian government announced in late 2001 the creation of the Canadian Beef Cattle Research, Market Development and Promotion Agency which will be funded through the proceeds of a national producer levy on beef cattle, including beef and cattle imports.

International Trade Policies

Import Measures

Unlike the 1998-2000 period when countries revealed their tendency to impose market restrictions as a means of protecting producers in the context of low prices, the 2001-2002 period was characterised by a proliferation of import bans and stricter border sanitary requirements in response to the recurring incidence of animal diseases. Additionally, non-disease related food safety issues, such as microbiological contamination of meat or use of antibiotics in feed, led to numerous import bans. The consequential price shocks and trade diversion led some countries to re-evaluate the means of protecting their markets against low-priced imported products, ranging from import licenses to packaging requirements.

Meat markets in 2001 and 2002 witnessed some cases of increased market access. An expansion of tariff concessions and quota levels was reported in the EU through the granting of a Hilton (high-quality beef) quota to Paraguay while a one-year provisional additional 10,000 tonne quota was allocated to Argentina. In addition, duty-free access to Eastern European pigmeat and poultry was expanded to include beef (approximately 145,000 tonnes) under the Double-Zero Agreement. The Double-Zero Agreement allows for increased bilateral trade flows between the EU and eastern European countries, especially for pork products, through higher quotas and zero in-quota tariffs, and eliminates the use of export subsidies between participating countries. Romania reduced duties on pigmeat and beef from 40-45 to 20 percent in August 2001 and these levels were subsequently extended through 2002. Similarly, Israel has progressively reduced its import tariffs for imported cattle for slaughter, down from US$ 1.6/kilo in 1999 to an estimated US$ 1/kilo in 2003.

The United States, in November 2001, complied with a WTO ruling and removed the tariff-rate quotas (TRQs) on lamb imports. The beef market in the Republic of Korea was liberalised in early 2001, quotas replacing tariffs, and the Government eliminated a decade-old requirement for separate storage and sale of imported beef. Regulatory changes were applied as of September 10, 2001 which removed the requirement for separate distribution systems for imported and domestic beef. Meanwhile, the Government changed its "rule of origin" definition on imported cattle.

Upon WTO accession, in addition to wide-ranging tariff reduction and further relaxation of import controls, the Taiwan Province of China transformed the pre-accession global quotas for pork bellies, pork offal, and poultry into TRQ's. Poultry quotas of 19 613 tonnes were opened on a "first come, first served" basis; this quota volume will expand to 32 577 tonnes in 2003 and 45 990 tonnes in 2004. After 2004, quota restrictions on pork meat, pork offal and poultry will end and tariffs of 12.5 percent, 15 percent, and 20 percent will be applied respectively to these products. Its WTO agreements permit the imposition of Special Safeguard (SSG) tariffs on chicken legs/wings and poultry offal. Meanwhile, imports of beef offals were fully liberalized and tariffs for all qualities of beef were lowered with the intent of equalising tariffs for different types of beef by 2004.

China's accession to the WTO on January 1, 2002 was accompanied by tariff reductions for all meats. Particularly significant was the drop in the tariff for beef muscle products, from 39 percent to 25.2 percent in 2002. At the same time, pork, pork offal and beef offal tariffs all fell from 20 to 15.2 percent in 2002 and sheep and goat meat tariffs dropped from a range of 22-23 percent to 16.4-18.2 percent, depending on the cut. In addition, the Government lowered 2002 VAT rates for pork, beef, and sheepmeat from 17 percent to 13 percent. The tariff rate on frozen chicken was scheduled to drop from 20 to 10 percent. The tariff on chicken products is assessed on a per kilogram basis with tariffs dropping from 1.2-2.7 rmb/kg (US cents 15-33/kg) to 1.0-1.5 rmb/kg (US cents 12-18/kg), depending on the product. While the tariff rate on some products, such as broiler cuts dropped by 44 percent, that on frozen whole broiler was kept the same. While tariffs are reported down between 17-50 percent depending on the product, increased regulations, related to the timely issuance of import inspection permits, may be limiting trade flows.

Over the period, some countries resorted to increased protection of domestic markets through higher tariffs, the imposition of safeguard measures, and countervailing duties. In 2001, Argentina raised import tariffs on ham products originating from countries outside the Mercosur trading area. In addition, in 2000, anti-dumping duties were imposed on chicken imports from Brazil. In response, Brazil requested consultations with Argentina under the auspices of the WTO in November 2001; lack of a mutually agreed upon solution led Brazil to request, in April 2002, that a WTO Dispute Panel review the legality of the establishment of minimum import prices for Brazilian poultry exports to Argentina. In July 2002, the Japanese Government announced the implementation, in response to a sharp rise in imports of pork and pork products, of safeguard duties which raise the minimum import prices by 20 percent. This policy was effective August 2002 to the end of March 2003.

A Special Safeguard Measures Act was finalized in the Philippines for livestock and poultry imports and in September 2002 price-based special safeguard duties were imposed on imports of chicken meat and parts. In Jamaica, poultry tariffs increased from 60 percent to 100 percent. Meanwhile, the Republic of South Africa made permanent in late 2001 anti-dumping duties on chicken parts from the United States, as well as raising the minimum tariff on imported beef and sheepmeat. Tariffs are now the greater of 40 percent of the value of the products, or Rand 2.00/kg (US$ 192/tonne) and Rand 2.4/kg (US$ 230/tonne) respectively for ovine and beef products. Nigeria increased tariff rates for certain livestock products, such as turkey parts and dressed chicken, from 25 percent to 75 percent. The Double-Zero Agreement between certain countries of Eastern Europe and the EU leading to lower tariffs and increased market access, was extended in 2002 to beef and sheepmeat.

Countries have increasingly restricted import access for food safety or other consumer concerns. Indonesia implemented a ban on chicken part imports in September 2000, because of Halal slaughter concerns; meanwhile a 10 percent value-added tax was placed on all imported products. Citing violations of a 1996 poultry protocol, the Russian Federation banned imports of chicken from the United States in March 2002. Other CIS countries, as well as Saudi Arabia, also imposed bans on imported poultry, citing concerns about the use of antibiotics and/or hormones in feed. Romania, in 2001, passed regulations forbidding the use of artificial growth promoters by domestic livestock breeders. They also are enforcing measure for comprehensive surveillance and examination for residues in meat and products of animal origin. Both of these restrictions limit access for imported product.

Export Measures

Rising meat prices in 2001 initially led to general reduction in the use of export subsidies while regional agreements, such as the Double-Zero Agreement between the EU and candidate countries for accession, fostered a reduction in inter-regional use of export subsidies for pig and poultry meat. In 2000/2001 (July-June), EU subsidies on meat dropped nearly 50 percent from the previous year, (Table VI-1) with aggregate shipments of subsidised products reaching only 60 percent of WTO export subsidy commitment levels. For 2001/02, EU subsidised exports of beef, pigmeat, and poultry are expected to cover 59 percent, 17 percent and 80 percent, respectively, of their WTO allowed volume ceiling. In late 2001, relatively high pigmeat prices in the EU led to a reduction in pigmeat export refunds on all processed pork products by 5 percent and a further reduction of 10 percent in early 2002. However, in late 2001, in an attempt to provide more market balance to the disease-disrupted EU beef industry, export refunds for beef from other than male bovine animals were raised by more than 40 percent. Meanwhile, heightened competition in international poultry markets in 2002 led to a doubling of the EU whole chicken subsidies in 2002, with restitutions for The Russian Federation reaching Euro 590/tonne (US$ 590) in September and restitutions to the Middle East reaching Euro 440/tonne; in addition, in October 2002 subsidies of Euro 50/tonne were re-introduced for cut-up chicken.

Table IV-1: Export subsidy commitment levels and use by product group

Source: WTO
^1/ Estimates

Shipments of subsidized poultry meat from the United States in the 2000/2001 year (October-September) under the Export Enhancement Programme (EEP) reached 11 524 tonnes, only one half of the total allocation but up 50 percent from the previous year. The EEP was not announced in 2001/02, thus precluding any subsidized exports. Meanwhile, expenditures on meat under the US Export Credit Guarantee Programme (GSM 102/103) and the Supply Credit Guarantee Programme (SCGP) declined 10 percent in 2000/2001 from the previous year. While expenditures to promote meat exports under GSM-102/103 programmes declined by nearly one-third to US$ 124 million, support for meat exports under the SCGP nearly doubled to US$ 53 million, covering 13 countries, and accounting for nearly 25 percent of total expenditures under this programme.

The Hungarian Government, after suspending export subsidies in July 2000, temporarily reinstated them in March 2001 for countries other than the EU, with the intention that those for pigmeat would be eliminated in 2002. However, under an aid package announced in August 2002, a total of US$ 3.2 million is allocated to subsidise the export of some 180,000 live pigs (or 20 370 tonnes of pigmeat). The support is approximately US$ 0.11/kg on exports to any country excluding the EU, Czech Republic and the Slovak Republic. An additional US$ 8.8 million will be paid by the Government and the Hungarian Pork Council to boost premium quality exports and cover the direct cost of export operations. In the Czech Republic, expenditures on export subsidies for pork products/live pigs were eliminated in 2001; however, those for slaughter cattle jumped dramatically in both 2001 and 2002. In the Slovak Republic both export subsidies and direct payments to beef processors increased in 2001. The Agricultural Market Agency (AMA) in Poland is responsible for the allocation of export subsidies worth approximately US$ 40 million for pork exports in 2002; these are the first such export subsidies since 1999 in the aftermath of the collapse of the Russian Federation's market.

Viet Nam, as of June 2001, issued a decree authorising export subsidies for pork, amounting to 2.6 percent and 5.9 percent for every US$ 1 value of export earnings from frozen suckling piglets and pork, respectively. Transport subsidies for poultry products destined for export have been proposed by India in the Five Year Export/Import Policy announced in late March 2002. In Australia, in an attempt to avoid the activation of the US beef quota, the Government initiated management controls on the export of beef to the United States via quotas to exporters based on historical shipments.

In a move to rebuild its cattle herd and control domestic prices, Colombia prohibited the export of live bovine animals for a six-month period starting July 2001. Meanwhile, in a move which will facilitate meat product movement to Hong Kong SAR, the Chinese Government, in January 2002, phased out export quotas on all meats to Hong Kong SAR, while eliminating the requirement that exporters negotiate product movement through one specific export agent.

Export promotion programmes are being expanded and several countries are looking for strategic alliances to harmonise regional policies. In Brazil, in addition to allocations of US$ 2.1 million for the market promotion programme for Brazilian beef in 2001, a promotion programme for pork exports, valued at US$ 3 million, was initiated. Pork producers, traders and associations in Mexico are jointly participating in a programme to promote pork and swine exports. In Central America, under the auspices of the Central American Farm Council, initiatives are being taken to harmonise regional meat trade policies.

Bilateral and Multilateral Trading Arrangements

New Zealand and the Islamic Republic of Iran signed a memorandum of understanding in October 2001 which simplifies access for NZ imports of meat, dairy products, fish, wool, and hides and skins. In West Africa, the harmonisation of tariffs and value-added taxes under the West African Economic and Monetary Union (UEMOA) is changing the relative competitiveness of individual countries' livestock industries. Within this context, in Côte d'Ivoire, the imposition of a 20-percent VAT on previously exempt feed ingredients led to market disruptions, necessitating suspension of the change. Thailand, in early 2002, agreed to allow unlimited imports of soymeal from ASEAN countries at a tariff rate of 5 percent, compared to the 6 percent, plus a special surcharge of 2 519 baht/tonne (US$ 60/tonne), paid by other suppliers. Meanwhile, negotiations on veterinary agreements between the EU and accession countries are on-going. These agreements, which only three countries - Slovenia, Hungary and Estonia - have finalised, focus on the adoption, by all accession countries, of EU legislation of food safety and animal health.

Conclusions and Issues

The general trend towards reduced market intervention in livestock and meat markets which characterised the 1995-1998 period has been increasingly disrupted, first by low meat prices over the 1998-2000 period and most recently by animal disease outbreaks and food safety concerns. Market intervention, in the context of recent market shocks, has increased, despite the general tendency to replace price supports with less production-distorting income payments.

Repeated occurrence of animal diseases and meat-related health scares which dominated the meat economies around the world in the 2000-2002 period resulted in escalating support to disease-afflicted industries in major meat exporting countries. Policy responses by importing countries focused on restricting market access to products from these countries with the goals of protecting human and animal health.

There has been increasing resort to tariff hikes, countervailing duties/antidumping and special safeguard provisions, with the goal of stabilising domestic markets. Although the Uruguay Round Agreement on Agriculture (URA) and regional trading arrangements have led, over the past few years, to increases in tariff quotas for meat products and a noticeable reduction in the volume of subsidized exports, several countries have heightened their reliance on trade policy measures to restrict general market access.