Cattle and Beef: Impact of the NAFTA and 

Uruguay Round Agreements on U.S. Trade 

Investigation No. 332-371 

Publication 3048 July 1997 

U.S. International Trade Commission 

Washington, DC 20436 
U.S. International Trade Commission 

COMMISSIONERS 

Marcia E. Miller, Chairman 

Lynn M. Bragg, Vice Chairman 

Don E. Newquist 

Carol T. Crawford 

Robert A. Rogowsky 

Director of Operations 

Vern Simpson 

Director of Industries 

This report was prepared principally by: 

David E. Ludwick, Project Leader 

Ludwick@USITC.gov 

Rose M. Steller, Assistant Project Leader 

Jonathan R. Coleman 

Office of Industries 

with assistance from: 

John Reeder, Chris Twarok, Janice Wayne, and Brenda Young 

Office of Industries 

under the supervision of: 

William A. Lipovsky, Chief, Animal and Forest Products Branch 

Cathy Jabara, Chief, Agriculture and Forest Products Division 

Address all communications to 

Secretary to the Commission 

United States International Trade Commission 

Washington, DC 20436 
U.S. International Trade Commission 

Washington, DC 20436 

Cattle and Beef: Impact of the NAFTA and 

Uruguay Round Agreements on U.S. Trade 

Publication 3048 July 1997 

CONTENTS 

Page 

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiu 

Chapter 1. Introduction . .. .. .. .. . . .. .. .. .. .. .. .. .. . . . . .. . 1-1 

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1 

Purpose of the report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2 

Scope of the investigation: 

URA and theNAFTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3 

Industry and markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-4 

Overview and approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-4 

Orgamzation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5 

Chapter 2. U.S. Industry and Markets 2-1 

U.S. live cattle and beef sectors: 

Description and uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1 

Number and distribution of producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3 

Industry concentration: 

Cow-calf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5 

Feedlot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5 

Dairy cattle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5 

Slaughter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6 

U.S. cattle cycle and cattle inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7 

U.S. grading system for cattle and beef. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8 

Sanitary and phytosanitary measures: 

Live animals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8 

Meat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-9 

Import levels, trends, and sources: 

Live cattle and calves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-11 

Destination ofU.S. imports oflive cattle for slaughter, by region . . . . . . . . . . . . . 2-13 

U.S. imports of live cattle and calves from Canada in relation to U.S. 

production and consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-13 

Imports of beef and veal...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-14 

U.S. production, domestic consumption, exports, and prices: 

Production and consumption of live cattle and beef . . . . . . . . . . . . . . . . . . . 2-14 

U.S. exports oflive cattle and calves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-15 

U.S. exports of beef and veal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-15 

U.S. exports of beef and veal offal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-15 

Cattle prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-16 

Beef prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-17 
CONTENTS--Continued 

Page 

Chapter 2. U.S. Industry and Markets--Continued 

U.S. feed grain markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-17 

U.S. trade and tariff measures: 

Tariff measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-20 

The Meat Import Act of 1979 and section 204 of the Agricultural 

Act of 1956 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-20 

Chapter 3. Foreign Industries and Markets 3-1 

Mexican cattle and beef sectors: 

Description and uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1 

Number and distribution of producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-3 

Mexican cattle inventories, calf crop, and apparent consumption . . . . . . . . . . . . . 3-3 

Mexican grading system, sanitary and phytosanitary measures . . . . . . . . . . . . . . . 3-4 

Mexican trade in live cattle and beef. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-4 

Mexican production, domestic consumption, and prices . . . . . . . . . . . . . . . . . . . . 3-6 

Mexican trade measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-6 

Canadian cattle and beef sectors: 

Structure of the Canadian cattle and beef sectors . . . . . . . . . . . . . . . . . . . . . . . . . 3-7 

Canadian cattle cycle and cattle inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-8 

Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-8 

Canadian trade and tariff measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-9 

Tariffs and tariff-rate quotas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-9 

Countervailing duties applicable to beef originating in the EU . . . . . . . . . . . . . 3-10 

Safeguard action applicable to beef from non-NAFTA countries . . . . . . . . . . . 3-10 

Central American live cattle and beef sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-11 

Costa Rica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-11 

Nicaragua . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-12 

Honduras . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-12 

Guatemala . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-13 

Dominican Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-14 

Uruguayan and Argentine cattle and beef sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-15 

Uruguay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-15 

Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-15 

Japanese cattle and beef sectors and markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-16 

Korean cattle and beef sectors and markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-17 

11 
CONTENTS--Continued 

Page 

Chapter 4. Impact of the NAFTA on U.S. Trade in 

Cattle for Slaughter and Beef...... . . . . . . . . . . . . . . . . . . . . . . 4-1 

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1 

NAFTA impacts: Summary: 

Beef. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1 

Cattle for slaughter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-2 

NAFTA commitments and actions concerning cattle and beef: 

Description of tariff concessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-3 

Magnitude of tariff concessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-3 

Actions concerning quantitative limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5 

U.S. imports from Canada and Mexico after concessions: 

Cattle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5 

Beef........................................................ 4-6 

U.S. exports to Canada and Mexico after concessions: 

Cattle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-6 

Beef........................................................ 4-8 

NAFTA grain commitment effects on cattle markets . . . . . . . . . . . . . . . . . . . . . . . . . 4-8 

NAFTA implementation issues ............ ·. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-9 

Mexican antidumping actions against U.S. beef and edible beef offal . . . . . . . . . . 4-9 

Mexican state beef-grading systems and regulations . . . . . . . . . . . . . . . . . . . . . . . 4-11 

U.S. and Canadian quality grade issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-11 

USDA quality grading of cattle imported for immediate slaughter and 

of imported beef. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-12 

Canadian grading system and labeling of imported beef . . . . . . . . . . . . . . . . . . . . 4-13 

USDA and AAFC quality grade equivalency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-14 

Sanitary and phytosanitary inspection issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-14 

Background ofU.S.-Canadian import inspection process for beef 

relating to the NAFTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-15 

Current U.S.-Canadian inspection systems for Canadian beef . . . . . . . . . . . . . . . . 4-17 

Canadian import regulations applicable to bluetongue disease . . . . . . . . . . . . . . . . . . 4-19 

Lack of access to USDA sanitary and phytosanitary inspection and 

quality grading outside the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-20 

U.S. Government implementation of cost recovery for import and 

export inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-21 

U.S. Department of Labor NAFTA Transitional Adjustment Assistance . . . . . . . . . . . 4-22 

111 
CONTENTS--Continued 

Chapter 4. Impact of the NAFTA on U.S. Trade in 

Cattle for Slaughter and Beef--Continued 

Page 

Peso devaluation and Mexican beef import demand . . . . . . . . . . . . . . . . . . . . . . . . . . 4-22 

Empirical analysis of the impact of the NAFTA on Mexican imports of U.S. beef. . . . 4-25 

Approach.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-25 

Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-29 

Empirical analysis of Canadian exports of live cattle for slaughter to 

the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-29 

Chapter 5. Transshipment Issues . . . . . . . . . . . . . . . . . . . . . . . 5-1 

U.S. Customs Service action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-1 

USDA action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-1 

Interested parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-2 

Oceania beef transshipped through Canada. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-3 

Measures taken by U.S. Customs to prevent transshipments of cattle 

and fresh, chilled, or frozen beef from Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-5 

Chapter 6. Impact of the URA on U.S. Trade in 

Cattle for Slaughter and Beef.. .. .. .. . . . . . .. .. .. .. . . .. .. . 6-1 

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-1 

URA impacts: Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-1 

URA commitments and actions concerning cattle and beef: 

Repeal of the Meat Import Act of 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-2 

Side agreements with Uruguay and Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-4 

Tariff-rate quota reallocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-5 

Repeal of Canada's Meat Import Act and implementation of a 

tariff-rate quota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-6 

Record of Understanding between the United States and the Republic 

of Korea on agricultural market access in the URA . . . . . . . . . . . . . . . . . . . . . 6-7 

Japanese duty reductions applicable to beef . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7 

Sanitary and phytosanitary agreement and U.S.-EU dispute concerning 

beef from animals receiving growth hormones . . . . . . . . . . . . . . . . . . . . . . . . 6-8 

U.S. export incentive commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-9 

EU export incentive commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-10 

URA dairy commitments on cattle and beef trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-11 

lV 
CONTENTS--Continued 

Chapter 6. Impact of the URA on U.S. Trade in 

Cattle for Slaughter and Beef--Continued 

URA grain commitment: 

Page 

Canada. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-12 

Background of the WGTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-12 

Impact of the elimination of the WGTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-13 

EU............................................................ 6-14 

Appendices 

A. Section 58 of the Miscellaneous Trade and Technical Corrections Act 

of 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1 

B. Commission's notice of investigation and hearing . . . . . . . . . . . . . . . . . . . . . . . . . B-1 

C. Impact of the URA on U.S. cattle and beeftrade--review of literature . . . . . . . . . C-1 

D. Statistical tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1 

E. U.S. imports of live cattle and calves, by state, as reported by "Quarterly 

Recap oflmport Animals Inspected" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1 

F. Cattle and meat of cattle: U.S. rates of duty, by HTS heading and 

relevant legal notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1 

G. Actions under the Meat Import Act of 1979, and Section 204 of 

the Agricultural Act of 1956 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1 

H. Selected portions of the Canadian tariff schedules . . . . . . . . . . . . . . . . . . . . . . . . H-1 

I. An empirical analysis of the impact ofNAFTA on Mexican beef 

imports from the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1 

J. Canadian bluetongue testing requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-1 

K. Analysis of Canadian exports of live cattle for slaughter to the United 

States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . K-1 

L. Letter from the U.S. Commissioner of Customs regarding 

transshipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . L-1 

M. Letter from the Secretary of Agriculture regarding transshipments . . . . . . . . . . . . M-1 

N. URA side agreements between the United States and Uruguay; and 

between the United States and Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . N-1 

0. Record of Understanding between the Republic of Korea and the 

United States on beefmarket access in the Uruguay Round . . . . . . . . . . . . . . 0-1 

v 
CONTENTS--Continued 

Page 

Figures 

2-1. Regional distribution of U.S. cattle operations and cattle 

inventory, Jan. 1, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-4 

2-2. Frozen boneless manufacturing beef: Comparative average U.S., 

Canadian, and other import prices, 65 percent chemical lean, 

by quarters, Jan. 1993-Dec.1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-18 

4-1. U.S. exports of live cattle for immediate slaughter to Mexico, by 

quarter, Jan. 1992-Dec. 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-7 

4-2. Mexican beef imports and peso/dollar exchange rate, by month, Jan. 

1994-Dec. 1996 .............................................. , 4-23 

4-3. Impact of NAFT A and peso devaluation on Mexican beef imports 

from the United States, by month, Jan. 1993-Dec. 1996 . . . . . . . . . . . . . . . 4-26 

Tables 

A. Cattle for slaughter and fresh, chilled, or frozen beef: Selected market, 

trade, and tariff information, 1992-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix 

D-1. U.S. operations with cattle and number of cattle and calves as of 

Jan. 1, by region, 1992-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-2 

D-2. Cattle on feed: Number of feedlots and marketings, by size of feedlot 

capacities, in the five major feeding Corn Belt States and the eight 

major feeding Western Rangelands States, 1992-95 . . . . . . . . . . . . . . . . . . D-3 

D-3. Cattle on feed: Number of feedlots and marketings, by size of feedlot 

capacities, in cattle-feeding Corn Belt States and cattle-feeding 

Western Rangelands States, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-4 

D-4. Cattle: Number of Federally inspected slaughter plants, by sizes, number 

of cattle slaughtered in such plants, and shares of total commercial 

slaughter accounted for, 1992-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-4 

D-5. Calves: Number of Federally inspected slaughter plants, by sizes, 

number of calves slaughtered in such plants, and shares of total 

commercial slaughter accounted for, 1992-96 . . . . . . . . . . . . . . . . . . . . . . D-5 

D-6. Number of U.S. firms slaughtering cattle and calves by type of 

cattle, 1991-94 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-5 

D-7. Dairy cows: Inventories by size of operation, production, and milk 

production per cow, by region, 1993 and 1996 . . . . . . . . . . . . . . . . . . . . . . D-6 

D-8. Cattle and calves: Share of slaughter accounted for by 4, 8, and 

20 largest firms, by type and years, 1990-94 . . . . . . . . . . . . . . . . . . . . . . . . D-7 

D-9. Cattle: U.S. cattle inventories, by type, Jan. 1, 1992-97 . . . . . . . . . . . . . . . . . D-7 

Vl 
CONTENTS--Continued 

Page 

Tables--Continued 

D-10. Cattle prices: U.S. auction prices, by types, by quarters and annual 

average, 1992:96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-8 

D-11. Live cattle and calves: U.S. imports for immediate slaughter from 

Canada, Mexico, and all other sources, 1992-96 . . . . . . . . . . . . . . . . . . . . . D-9 

D-12. Cattle destined for immediate slaughter: U.S. imports from Canada, 

by type, 1992-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-9 

D-13. Cattle for slaughter: U.S. imports from Canada, monthly, 1992-96 . . . . . . . . . D-10 

D-14. Live cattle and calves: U.S. production, imports for immediate slaughter 

from Canada, Mexico, and total, consumption, and imports for 

immediate slaughter as a share of consumption, 1992-96 . . . . . . . . . . . . . . D-10 

D-15. Calves: U.S. commercial slaughter, imports for consumption from 

Canada, and imports for consumption from Canada as a share of U.S. 

commercial slaughter, 1992-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-11 

D-16. Fresh, chilled, or frozen beef and veal: U.S. imports for consumption, 

carcass weight equivalent, by major sources, 1992-96 . . . . . . . . . . . . . . . . D-12 

D-17. Beef: U.S. imports ofbeefand veal from Canadian live cattle and 

calves, beef and veal from Canada, total imports, U.S. beef and 

veal production from U.S. cattle and calves, and ratio of imports 

from Canada to U.S. production, 1992-96 . . . . . . . . . . . . . . . . . . . . . . . . . D-13 

D-18. Beef and veal: U.S. production, imports for consumption from Canada 

and all other sources, exports of domestic merchandise, apparent 

consumption, and imports as a share of consumption and 

production, 1992-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-14 

D-19. Cattle: Commercial slaughter, by classes of cattle, 1992-96 . . . . . . . . . . . . . . D-15 

D-20. Fresh, chilled, or frozen beef and veal: U.S. exports, by 

principal markets, 1992-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-15 

D-21. Edible beef and veal offal: U.S. exports to selected markets, 1992-96 . . . . . . . D-16 

D-22. Frozen boneless manufacturing beef: Comparative average U.S., 

Canadian, and other imported prices, 65 CL (percent chemical lean), 

by quarters and annual average, 1993-96 . . . . . . . . . . . . . . . . . . . . . . . . . . D-17 

D-23. Boxed beef: Wholesale price, cut-out value, by quarters and 

years, 1992-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-18 

D-24. Feed grain: Domestic use in feed and residual uses, by principal 

grains, crop years 1992/93 to 1996/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-18 

D-25. Livestock: U.S. grain-consuming animal units, by type, and U.S. 

feed consumption, crop years 1992/93 to 1996/97 . . . . . . . . . . . . . . . . . . . D-19 

Vll 
CONTENTS--Continued 

Tables--Continued 

D-26. Feed grains (except wheat): U.S. production, imports, exports, 

domestic consumption, ending stock, and average farm price, 

crop years 1992/93 to 1996/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 

D-27. Live cattle and calves: Mexican inventories, production, 

imports, exports, and apparent consumption, 1992-97 . . . . . . . . . . . . . . . . 

D-28. Mexican cattle inventories: Reporting Mexican States and dates of 

the inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

D-29. Beef and veal: Mexican production, imports, exports, and 

apparent consumption, 1992-97 ................................ . 

D-30. Live steers: Average prices in the Federal District of Mexico, 

by quarter, 1992-96 ......................................... . 

D-31. Wholesale beef: Average prices in the Federal District ofMexico, 

by quarter, 1992-96 ......................................... . 

D-32. Cattle and calf inventories in Canada, by Provinces and regions, 

Jan. 1993-97 .............................................. . 

D-33. Cattle: Slaughter, in Canada, by Provinces and regions, 1992-95 ......... . 

D-34. Distribution of Canadian cattle inventories, by Provinces and regions, 

Jan. 1, 1993-97 ............................................ . 

D-35. Distribution of beef cows in Canada, by Provinces and regions, 

Jan. 1, 1993-97 .................................... · ........ . 

D-36. Beef cow inventories in Canada, by Provinces and regions, 

Jan. 1993-97 .............................................. . 

D-37. Cattle: Distribution of cattle slaughter in Canada, by Provinces 

and regions, 1992-95 . . . . . . . . . . . . ........................... . 

D-38. Beef and veal: Canadian production, imports, exports, and apparent 

consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

D-39. Live cattle and calves: Canadian inventories, production, imports, 

exports, and apparent consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . .. 

D-40. Slaughter cows: Prices in Alberta, by quarter, 1992-96 ................. . 

D-41. Steers: Direct sales prices in Alberta, by quarter, 1992-96 .............. . 

D-42. Costa Rica: Cattle inventories, beef and veal production, exports, 

and apparent consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

D-43. Nicaragua: Cattle inventories, beef and veal production, exports, 

and apparent consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 

D-44. Honduras: Cattle inventories, beef and veal production, exports, 

and apparent consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

D-45. Guatemala: Cattle inventories, beef and veal production, exports, 

and apparent consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Vlll 

Page 

D-19 

D-20 

D-20 

D-21 

D-21 

D-21. 

D-22 

D-22 

D-23 

D-23 

D-24 

D-24 

D-25 

D-25 

D-26 

D-26 

D-26 

D-27 

D-27 

D-28 
CONTENTS--Continued 

Page 

Tables--Continued 

D-46. Dominican Republic: Cattle inventories, beef and veal production, 

exports, and apparent consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . . . D-28 

D-47. Uruguay: Cattle inventories, beef and veal production, exports, 

and apparent consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-29 

D-48. Argentina: Cattle inventories, beef and veal production, imports, 

exports, and apparent consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . . . D-29 

D-49. Japan: Cattle inventories, beef and veal production, imports, and 

apparent consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-30 

D-50. Republic of Korea: Cattle inventories, beef and veal production, 

imports, and apparent consumption, 1992-97 . . . . . . . . . . . . . . . . . . . . . . . D-30 

D-51. Canadian beef: Estimated quantity graded under USDA quality 

grading standards and subject imports as a share of U.S. beef 

production, 1992-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-31 

D-52. Beef and veal: Tariff rate in-quota quantity, imports of tariff rate 

quota type beef, and ratio, 1995-96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-31 

• 

lX 

List of Frequently Used Abbreviations and Acronyms 

AAFC 

ACFA 

Act 

AFBF 

AUS 

AMEG 

AMLC 

AMS 

AP HIS 

BSE 

CCA 

CFTA 

CITT 

CNG 

Customs 

CVD 

DEIP 

E.coli 0157:H7 

ERS 

EU 

FAS 

FBMB 

FMD 

F.R. 

FSIS 

GAO 

GATT 

GRIP 

HRI 

HTS 

Korea 

LCFS 

LPMO 

MICA 

MOU 

MPPD 

NAFTA 

NAFTA-TAA 

NASS 

NCA 

NCBA 

NZMPB 

ROU 

Agriculture and Agri-Food Canada 

Arizona Cattle Feeders Association 

Section 58 of the Miscellaneous Trade and Technical Corrections 

Act of 1996 

American Farm Bureau Federation 

USDA Automated Import Inspection System 

Asociacion Mexicana de Engordadores de Ganado Bovino, A.C. 

Australian Meat and Live-stock Corporation 

USDA Agricultural Marketing Service 

USDA Animal and Plant Health Inspection Service 

Bovine Spongiform Encephalopathy or "mad cow disease" 

Canadian Cattlemen's Association 

United States-Canada Free-Trade Agreement 

Canadian International Trade Tribunal 

Confederacion N acional Ganadera 

U.S. Customs Service 

countervailing duties 

Dairy Export Incentive Program 

Escherichia coli 0157:H7 

USDA Economic Research Service 

European Union 

USDA Foreign Agricultural Service 

Frozen boneless manufacturing beef 

foot-and-mouth disease 

Federal Register 

USDA Food Safety and Inspection Service 

General Accounting Office 

General Agreement on Tariffs and Trade 

Gross Revenue Insurance Program 

Hotel, restaurant, and institution 

Harmonized Tariff Schedule of the United States 

Republic of Korea 

Live cattle for slaughter 

Livestock Products Marketing Organization 

Meat Importers Council of America 

Memorandum of Understanding 

Meat & Poultry Products Division Agriculture and Agri-Food 

Canada 

North American Free Trade Agreement 

NAFTA Transitional Adjustment Assistance 

USDA National Agricultural Statistics Service 

National Cattlemen's Association 

National Cattlemen's Beef Association 

New Zealand Meat Producers Board 

Record of Understanding 

X1 
List of Frequently Used Abbreviations and Acronyms 

--Continued 

SECOFI 

SPS Agreement 

Task Force 

TEP 

TIF 

URA 

USDA 

USMEF 

VRAs 

WGTA 

WTO 

Secretariat of Commerce and Industrial Promotion 

Application of Sanitary and Phytosanitary Measures 

Imperial Valley Cattle Feeders Beef Plant Task Force 

National Trade Enforcement Plan 

Plants of Federal Inspection Type 

Uruguay Round Agreements 

U.S. Department of Agriculture 

U.S. Meat Export Federation 

Voluntary Restraint Agreements 

Western Grain Transportation Act 

World Trade Organization 

• 

xii 
EXECUTIVE SUMMARY1 

This report was prepared in response to section 5 8 of the Miscellaneous Trade and Technical 

Corrections Act of 1996, which required the Commission to conduct a study under section 3 32 

of the Tariff Act of 1930 (19 U.S.C. 1332) and to submit a report to the House Committee on 

Ways and Means and the Senate Committee on Finance, with respect to--

The inipact of the North American Free Trade Agreement (NAFTA) and the 

Uruguay Round Agreements (URA) on United States imports and exports of 

live cattle for slaughter and fresh, chilled, or frozen beef; and 

The steps that have been taken by the United States, since the enactment of the 

NAFTA, to prevent the transshipment of live cattle and fresh, chilled, or 

frozen beef through Mexico and Canada for importation into the United 

States. 

The Commission was directed to furnish its report not later than 270 days after the date of 

enactment, that is, by July 7, 1997. 

Primarily as a result of close geographic proximity and relatively open border policies, the U.S., 

Canadian, and to a lesser extent Mexican, cattle and beef markets are highly interrelated.. Since 

1993, the United States implemented the NAFTA and the URA,2 pursuant to which the United 

States has reduced tariffs and trade barriers on a wide range of products, including cattle and 

beef. 3 Trade within North America in live cattle and beef has risen in recent years, particularly 

between the United States and Canada, with U.S. imports of cattle for slaughter from Canada 

increasing by about a third since 1994. Selected market, trade, and tariff information relating 

to cattle and beef are provided in table A at the end of this summary. 

This is the third fact-finding investigation that the Commission has conducted in the last 10 

years with respect to beef and cattle. In 1987 and 1993, the Commission, at the request of 

Congress, conducted fact-finding investigations concerning the competitive conditions relating 

to the U.S. and Canadian cattle and beef industries. 

Industry Background 

• Cattle are one of the leading agricultural products in the United States. Cash receipts 

from sales amounted to an estimated $35 billion in 1996. Cattle are raised throughout 

the United States but are concentrated in the Western Rangelands, the Com Belt, and 

the Southeastern States. 

1 The information and analysis in this report are for the purpose of this report only. Nothing in this 

report should be construed to indicate how the Commission would find in an investigation conducted 

under other statutory authority. 2 These agreements, other than the "side agreements" discussed later in this report, are annexes to 

the Agreement Establishing the World Trade Organization (WTO) and, therefore, are now more 

commonly referred to as the "WTO Agreements." 3 The NAFTA entered into force on January 1, 1994, and the URA, or WTO Agreements, entered 

into force on January 1, 1995. 

Xlll 
• During 1992-96, the number of operations with cattle in the United States declined by 

3 percent to 1.2 million, continuing a long-term trend reflecting a long-term trend 

toward consolidation. However, the number of cattle on U.S. farms has remained 

rather stable. 

• Feedlots are con~entrated in the Com Belt and Western Rangelands States. In 1996, 

Com Belt and Western Rangeland feedlots with a capacity of 1,000 or more cattle 

accounted for about 7 4 percent of all U.S. fed cattle marketed. 

• The slaughter sector is the most concentrated of the U.S. cattle and beef sectors. 

Concentration is most intense in firms that slaughter steers and heifers, and these firms 

tend to locate near large feedlots. Indeed, the four largest firms accounted for 81 

percent of steer and heifer slaughter in 1994. The number of federally-inspected cattleslaughtering plants declined from 971 plants in 1992 to 812 plants in 1996. 

• Feeder cattle prices declined by 39 percent from $96.13 per hundredweight in the 

second quarter of 1993, to $58.81 per hundredweight in the second quarter of 1996. 

Cull cow prices declined by 41 percent from $44.91 in the first quarter of 1992 to a low 

of $26.68 per hundredweight by the fourth quarter of 1996. 

• Changes in cattle inventories followed a cyclical pattern traditionally referred to as the 

"cattle cycle." The cattle cycle is characterized by the accumulation and liquidation of 

cattle inventories, generally occurring in response to changes, or anticipated changes, 

in profits, i.e., prices received for cattle and prices paid for feed. 

• As a result of declining cattle prices and profitability, the liquidation phase of the U.S. 

cattle cycle intensified in 1995-96. By January 1, 1997, cattle inventories, at 101.2 

million animals, were 2 percent below year earlier levels of 103.8 million animals, and 

beef cow inventories, at 34 .3 million animals, were 3 percent below year earlier levels 

of35.3 million animals. 

• International trade in cattle and beef has become increasingly important to U.S. 

producers. U.S. exports of beef increased from $2 billion in 1992 to $2.4 billion in 

1996, and the quantity exported in 1996 was equivalent to nearly 7 percent of 1996 

production. Beef imports, while generally declining in recent years, were valued at $1.1 

billion in 1996, and accounted for nearly 7 percent of the quantity of consumption. 

• U.S. imports of cattle for slaughter from Canada increased from fewer than 1 million 

animals annually during 1992-94 to a record 1.3 million animals in 1996. However, 

monthly imports declined during the last quarter of 1996. U.S. imports of fresh, 

chilled, or frozen beef from Canada increased from 329 million pounds in 1992 to 580 

million pounds in 1996. 

• U.S.-Mexican trade in cattle for slaughter is relatively small; during 1992-96 U.S. 

imports of such cattle were equivalent to less than 0.5 percent of slaughter annually. 

U.S. imports of cattle from Mexico consist mostly of feeder animals. U.S. imports of 

beef from Mexico are also relatively small, and in 1996 accounted for less than I 

percent of U.S. beef imports. 

XlV 
Impact of the NAFTA 

Trade with Mexico 

• Prior to the NAFTA, imports of live cattle for slaughter entering Mexico from the 

United States and Canada were dutiable at 15 percent ad valorem; imports of fresh or 

chilled beef were dutiable at 20 percent ad valorem; and imports of frozen beef were 

dutiable at 25 percent ad valorem. 

• Under the NAFTA, Mexican imports and exports of live cattle and most fresh, chilled, 

or frozen beefreceived a tariff rate of"Free" effective January 1, 1994, with both of 

the NAFTA partners. 

• Notwithstanding the reduction in the rate of duty applicable to Mexican imports of live 

cattle from the United States such trade has remained relatively limited. 

• Mexican imports of beef from the United States were volatile during 1993-96, 

increasing from 104 million pounds in 1993 to 201 million pounds in 1994, the first 

year of the NAFTA, then declining to 85 million pounds in 1995, but rising to 164 

million pounds in 1996. During 1993-96 about 70 percent of beef exports were fresh 

or chilled and about 3 0 percent were frozen. 

• The Commission's staff undertook an empirical analysis to determine the impact of the 

NAFTA on Mexican imports of beef from the United States. The analysis indicates 

non-NAFTA events had a more important effect on the level of Mexican imports of 

U.S. beefthan did the NAFTA. Commission staff analysis indicates that the decline 

in Mexican imports of U.S. beef in 1995-96 relative to 1994 was not the result of 

NAFTA provisions, but due largely to the devaluation of the peso. 

• The value of the Mexican peso declined in relation to the U.S. dollar beginning in late 

1994. The devaluation of the peso led to inflation, sharply rising interest rates, a drop 

in gross domestic product, and a decline in real consumer expenditure per capita in 

Mexico. 

• The analysis, however, indicates that the NAFTA has enhanced U.S. exports of beef 

to Mexico primarily as a result of the preferential tariff treatment enjoyed by the United 

States under the NAFT A. Since the NAFTA was enacted the United States has 

supplied almost all the beef imported into Mexico. 

• Under the NAFTA the United States exempted imports of fresh, chilled, or frozen beef 

from Mexico from quantitative restrictions under the Meat Import Act of 1979. 

However, such beef imports from Mexico have remained small (7 million pounds, 

product weight) in relation to other suppliers (815 million pounds, product weight) in 

1996. 

xv 
Trade with Canada 

• U.S. cattle imports from, and exports to, Canada have received a rate of duty of"Free" 

since January 1, 1993 as a result of an accelerated duty elimination agreement 

negotiated under the United States-Canada Free-Trade Agreement (CFTA). By July 

1993 most U.S. fresh, chilled, or frozen beef imports from, and exports to Canada 

received a tariff rate of "Free" as the result of accelerated duty elimination agreements. 

The pt:e-CFTA rates of duty were relatively low. Consequently, the NAFTA did not 

result in any duty reduction on U.S. imports oflive cattle or fresh, chilled, or frozen 

beef from Canada. 

• The CFTA, which entered into force on January 1, 1989, prohibited the United States 

from introducing, maintaining, or seeking a quantitative restriction on meat imports 

from Canada. Therefore, U.S. imports of fresh, chilled, or frozen beef from Canada 

were not subject to quantitative restrictions imposed under the Meat Import Act of 

1979. Imports from Canada increased irregularly from 131 million pounds (product 

weight equivalent) in 1988 to 448 million pounds in 1994, the last year the Meat 

Import Act was in effect for other countries. 

• Primarily as a result of trade liberalization associated with the CFTA, the NAFTA does 

not appear to have resulted in measurable changes in U.S. -Canadian trade in live cattle 

or beef. 

Transshipment Issues 

• The Commission was directed to report on the steps that have been taken by the United 

States, since enactment of the NAFTA, to prevent the transshipment of live cattle and 

fresh, chilled, or frozen beef through Mexico and Canada for importation into the 

United States. 

• The NAFTA implementing legislation required the U.S. Customs Service (Customs) 

to develop a methodology for estimating compliance with laws that it administers to be 

presented in an annual report to the Congress. As a result of this legislation a Customs 

Compliance Measurement Program, with a NAFTA component, was implemented in 

an effort to ensure a high level of compliance and enforcement. 

• Customs reported that in 1995 the Office of Regulatory Audit performed ten NAFTA 

verification audits on producers of beef products in Canada and Mexico and no 

transshipment was detected. 

• The NAFTA implementation legislation requires the Secretary of Agriculture to submit 

an annual report to Congress on the inspection of food and agricultural products 

imported into the United States in commercially significant quantities from Mexico and 

Canada. The Secretary reported that in 1995, the latest year for which data are 

available, USDA was not aware of any incidence of transshipment of live animals. 

XVl 
Impact of the Uruguay Round Agreements 

• To date, the URA have not had a significant impact on U.S. trade in cattle for slaughter 

or beef. However, a number of URA provisions may impact such trade in the future. 

Canada's Western Grain Transportation Act 

• The action taken as a result of the URA that is expected to have the most significant 

effect on U.S. trade in cattle for slaughter and beef is the elimination by Canada of 

transportation incentives for grain under the Western Grain Transportation Act 

(WGTA). The WGTA was eliminated July 1, 1995, but high grain prices in Canada 

and worldwide have delayed the effects of higher transportation rates on Canadian 

grain producers. The elimination of the WGTA incentives may result in some grain 

producers shifting from grain to cattle growing and feeding in the provinces of 

Manitoba, Saskatchewan, and Alberta. 

SPS Agreement 

• The WTO Agreement on the Application of Sanitary and Phytosanitary Measures 

(SPS Agreement), requires that sanitary and phytosanitary measures have a scientific 

basis, and may assist U.S. exporters in gaining increased access to foreign markets 

restricted as a result of arbitrary measures or measures lacking a scientific basis. A 

recent U.S. -EU trade dispute that resulted from the EU' s prohibition on the importation 

of meat from countries where the use of certain growth-promoting hormones is 

permitted is being considered by a WTO dispute settlement panel. 

• On June 30, 19976, the panel released its fmal report to the parties. The panel's final 

report was in favor of the United States and found the EU's ban to be inconsistent with 

obligations under the SPS Agreement. On July 1, 1997, EU representatives announced 

their intention to bring the matter before the Appellate Body of the WTO. 

Tariff-Rate Quotas 

• As a result of Uruguay Round commitments, the United States repealed the Meat 

Import Act of 1979 and replaced the import quota system in effect under that Act with 

a tariff-rate quota system applicable to imports of most fresh, chilled, or frozen beef. 

However, there is no limit to the quantities of the subject meats that may enter from 

Canada and Mexico and receive a rate of duty of "Free." The United States committed 

to a tariff-rate quota of 656,621 metric tons (l.4 billion pounds, product weight). The 

tariff-rate quota quantity is not scheduled to change except pursuant to side agreements 

with Uruguay and Argentina described below. Country allocations were made for 

imports from Australia, New Zealand, Japan, Uruguay, and Argentina. A provision for 

"other countries or areas" established a within-quota quantity of 64,805 metric tons 

(143 million pounds) for imports from other countries. 

XVll 
• U.S. imports of tariff-rate quota-type meats from all sources, including Canada and 

Mexico, during 1995and1996 were less than the imports of meats of the type subject 

to the Meat Import Act of 1979 during the 5 years prior to its repeal. 

Side Agreements 

• Under the side agreements entered into during the Uruguay Round negotiations, the 

United States committed to increase the in-quota quantity of the tariff-rate quota for 

beef to provide Argentina and Uruguay with 20,000 metric tons ( 44 million pounds) 

each of access to the United States, provided that the U.S. Secretary of Agriculture 

determined that these countries or areas of these countries are free of rinderpest and 

foot-and-mouth diseases (FMD). In mid-November 1995, the Secretary determined 

that Uruguay was free of the diseases. On June 26, 1997, USDA announced that 

Argentina had been found to be free of FMD and rinderpest diseases and under certain 

conditions would be authorized to ship fresh, chilled, or frozen beef to the United States 

effective August 25, 1997. Imports from Uruguay were 0.3 million pounds in 1995 but 

in 1996 were very near to the maximum allowable quantity of 44 million pounds. 

• In December 1993, during the Uruguay Round negotiations, the United States and the 

Republic of Korea (Korea) entered into a Record of Understanding (ROU) concerning, 

among other things, global market access to the Korean market for beef. The ROU 

includes an immediate increase in Korea's global beef import quota and elimination of 

the quota by the year 2001. 

• U.S. exports of beef to Korea rose from 112 million pounds, valued at $151 million, 

in 1993 to 265 million pounds, valued at $319 million, in 1995. Such exports declined 

to 196 million pounds, valued at $243 million in 1996. 

Export Incentive Agreements 

• Under the URA the EU and the United States agreed to limit export assistance for beef. 

This agreement is reflected in the WTO Agreement on Agriculture. The EU agreed to 

reduce exports eligible for assistance from 2.5 billion pounds, valued at 1.9 billion 

ECUs (US$2.5 billion) in 1995 to 1.8 billion pounds, valued at 1.3 billion ECUs in the 

year 2000. Although the Agreement on Agriculture requires the United States to 

reduce beef export incentives, U.S. beef export incentives have not been used in recent 

years. Were the United States to provide such assistance, the maximum allowable U.S. 

assisted exports would decline from 21 million pounds, and $33 .5 million, in 1995 to 

18 million pounds, and $22.8 million, in the year 2000.• 

XVlll 
~. 

i>< 

Table A 

Cattle for slaughter and fresh, chilled, or frozen beef: Selected market, trade, and tariff information, 1992-96 

Cattle Beef 

Item 1992 I 1993 I 1994 I 1995 I 1996 1992 I 1993 I 1994 I 1995 I 1996 

-----------------1, 000 animals------------- I -------------Million pounds--------------

U.S. production .................... . 

U.S. consumption .................. . 

U.S. exports: 

Total ........................... . 

Mexico ......................... . 

Canada ........................ . 

All other ........................ . 

U.S. imports: 

Total ........................... . 

Mexico ......................... . 

Canada ........................ . 

All other ........................ . 

38,933 

34,245 

224 

168 

56 

(1) 

963 

3 

960 

(1) 

39,448 

34,520 

149 

83 

66 

(1) 

927 

2 

926 

(1) 

40,059 40,211 

35,467 37,070 

185 69 

99 6 

86 63 

(1) (1) 

910 

3 

908 

(1) 

1,123 

67 

1,055 

(1) 

39,586 

38,352 

47 

10 

37 

(1) 

1,298 

2 

1,296 

(1) 

23,396 

24,572 

1,277 

185 

229 

863 

2,136 

1 

329 

1,806 

23,334 

24,292 

1,219 

104 

220 

895 

2,102 

3 

397 

1,702 

24,679 

25,414 

1,547 

201 

259 

1,087 

2,068 

3 

447 

1,618 

25,541 

25,853 

1,736 

85 

283 

1,368 

1,839 

6 

439 

1,394 

26,066 

26,324 

1,742 

164 

264 

1,314 

1,808 

10 

580 

1,218 

------------Percentage------------------------- I ------------------Percentage---------------------

U.S. imports market share: 

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . (2) 

Canada . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 

All other . . . . . . . . . . . . . . . . . . . . . . . . . (2) 

See footnotes at end of table. 

2.7 

(2) 

2.7 

(2) 

2.6 

(2) 

2.6 

(2) 

3.0 

0.2 

2.8 

(2) 

3.4 

(2) 

3.4 

(2) 

8.7 

(2) 

1.3 

7.4 

8.7 

(2) 

1.6 

7.0 

8.1 

(2) 

1.8 

6.4 

7.1 

(2) 

1.7 

5.4 

6.9 

(2) 

2.2 

4.7 
~ 

Table A-Continued 

Cattle for slauahter and fresh chilled. or f beef: Selected 

Item 

U.S. tariff for: 

Canada ...................... 

Mexico ....................... 

Mexican tariff for : 

United States and Canada ....... 

Canadian tariff for: 

United States ................. 

Mexico ....................... 

1 Fewer than 500 animals. 2 Less than 0.05 percent. 

1992 

0.4¢/kg. 

2.2¢/kg. 

(6) 

0.4¢/kg. 

2.2¢/kg. 

Cattle 

11993 I 1994 

Free Free 

2.2¢/kg. Free 

15% ad Free 

val. 

Free Free 

2.2¢/kg. Free 

ket. trad d tariff inf 

I 1995 I 1996 

Free Free 

Free Free 

Free Free 

Free Free 

Free Free 

3 Rates ranged from "Free" to 2.6¢ per kilogram with most imports receiving a rate of "Free." 4 Rates ranged from "Free" to 2.2¢ per kilogram with most imports receiving a rate of "Free." 

1992-96 

Beef 

1992 I 1993 I 1994 I 1995 

(3) (4) Free Free 

(5) (5) Free Free 

(7) 20%-25% Free ,_ 

Free 

{8) (9) Free Free 

4.41/kg 4.41/kg. Free Free 

5 Rates ranged from 4 percent ad valorem; 4.4¢ per kilogram; to 10 percent ad valorem with most imports being dutiable at 4.4¢ kg. 6 The Mexican tariff rate was raised from "Free" to 15 percent ad valorem effective Nov. 12, 1992. 

I 1996 

Free 

Free 

Free 

Free 

Free 

7 The Mexican tariff rate was raised from "Free" to 20 percent ad valorem for fresh beef and from "Free" to 25 percent ad valorem for frozen beef 

effective Nov. 12, 1992. 8 Rates ranged from "Free" to Can. 2.6¢ per kilogram with most imports receiving a rate of "Free." 9 Rates ranged from "Free" to Can. 2.2¢ per kilogram with most imports receiving a rate of "Free." 

Source: U.S. production, consumption, exports, and imports derived from tables D-14, D-16, D-18, and D-20. U.S., Mexican, and Canadian tariffs 

derived from respective harmonized tariff schedules. 
CHAPTERl 

INTRODUCTION 

Background 

Primarily as a result of close geographic proximity and relatively open border policies, cattle and 

beef markets in the United States, Canada, and, to a lesser extent, Mexico are highly 

interrelated. In recent years, trade within North America in live cattle and beef has increased, 

particularly between the United States and Canada. The Commission, at the request of the 

Congress, conducted fact-finding investigations in 1987 and 1993 concerning the competitive 

conditions relating to the U.S. and Canadian cattle and beef industries. 1 Since 1993, the United 

States has implemented the North American Free Trade Agreement (NAFTA) and the Uruguay 

Round Agreements (URA), both of which required the United States to further reduce tariffs 

and trade barriers relating to cattle and beef trade. This investigation and report are concerned 

with the impact of the NAFTA and the URA on U.S. trade in cattle for slaughter2 and fresh, 

chilled, or frozen beef; and the steps the United States has taken since enactment of the NAFTA 

to prevent the transshipment of live cattle and fresh, chilled, or frozen beef through Canada and 

Mexico for importation into the United States. 

Since the NAFTA was implemented on January 1, 1994, and the URA was implemented, on 

January 1, 1995, the impact of these agreements on the U.S. live cattle and beef sectors has been 

a concern. Subsequent to implementation of these agreements, U.S. cattle prices began to 

decline and generally remained low relative to earlier periods, throughout 1996. Feed grain 

prices, which are a major cost to cattlemen, rose as well, resulting in lower profits. During this 

period some U.S. cattlemen raised concerns about increasing imports of live cattle for slaughter 

from Canada. Some domestic interests also expressed concern that Canadian sanitary and 

phytosanitarymeasures were adversely affecting U.S. exports to Canada while at the same time 

U.S. measures were too lenient and were not adequately enforced. In addition, U.S. exports of 

beef to Mexico rose in 1994, after the NAFTA implementation, but declined in .1995 following 

devaluation of the peso. Certain U.S. interests also believed that the United States was not 

taking adequate steps to prevent the transshipment of beef from Australia and New Zealand 

through Canada and live cattle from Central America through Mexico for importation into the 

United States. 

1 USITC, The Competitive Position of Canadian Live Cattle and Beef in U.S. Markets, 

investigation No. 332-241, USITC publication 1996, July 1987. USITC, Live Cattle and Beef U.S. 

and Canadian Industry Profiles, Trade, and Factors of Competition, investigation No. 332-328, 

USITC publication 2591, Jan. 1993. 2 For purposes of this report, the phrases cattle for immediate slaughter, cattle for slaughter, and 

slaughter cattle are used interchangeably. The USITC recognizes that virtually all cattle ultimately 

will be slaughtered for meat. For this report, U.S. imports of cattle for "immediate slaughter" refers 

to cattle that will be slaughtered within 2 weeks of entry into the United States conforming to USDA 

regulations as described in chapter 2 in the Sanitary and Phytosanitary Measures section. 

1-1 
Cattle are one of the leading agricultural products of the United States. Cash receipts from 

sales amounted to an estimated $35 billion in 1996. In addition domestic producers received 

$20 billion from sales of dairy products in 1996. Cattle are raised throughout the United States 

on more than 1 million operations and for some producers, typically in the Western States, cattle 

account for all or nearly all of their income. The U.S. cattle population of over 100 million 

animals, including about 35 million beef cows and about 9 million dairy cows, was valued at 

$64 billion in 1995. 

International trade in cattle and beef has become increasingly important to U.S. producers in 

recent years. U.S. exports of beef increased from $2 billion in 1992 to $2.4 billion in 1996, 

equivalent to nearly 7 percent of the quantity of production. Beef imports, while generally 

declining in recent years, were valued at $1.1 billion in 1996, and accounted for nearly 7 percent 

of the quantity of consumption. U.S. imports of cattle for slaughter from Canada increased 

from fewer than 1 million animals annually during 1992-94 to 1.1millionin1995 and 1.3 

million in 1996. U.S.-Mexican trade in cattle for slaughter is relatively small; during 1992-96 

U.S. imports of such cattle were equivalent to less than 0.5 percent of slaughter annually. U.S. 

imports of cattle from Mexico consist mostly of feeder animals. Canada and Mexico are 

important markets for U.S. beef, and in 1996 accounted for 15 percent and 9 percent, 

respectively, of total U.S. beef exports. Canada is also a significant supplier of beef to the U.S. 

market, and in 1996 accounted for nearly one-third of total U.S. imports, while U.S. imports of 

beef from Mexico were less than l percent of total 1996 imports. 

Purpose of the Report 

Section 58 of the Miscellaneous Trade and Technical Corrections Act of 1996 (Act), (Pub.L. 

No. 104-295, 110 Stat. 3514, 3557,(1996)),3 required the Commission to conduct a study under 

section 332 of the Tariff Act of 1930 (19 U.S.C. 1332) and to submit a report to the House 

Committee on Ways and Means and Senate Committee on Finance concerning--

1. The impact of the North American Free Trade Agreement (NAFTA) and 

the Uruguay Round Agreements (URA) on United States imports and 

exports of live cattle for slaughter and fresh, chilled, or frozen beef; and 

2. The steps that have been taken by the United States, since the enactment 

of the NAFTA, to prevent the transshipment of live cattle and fresh, 

chilled, or frozen beef through Mexico and Canada for importation into 

the United States. 

The Act required the Commission to transmit its report to the Committees no later than 270 

days after the date of enactment, or by July 7, 1997. 

Following enactment of section 58 of the Act, the Commission instituted investigation No. 332-

371, Cattle and Beef Impact of the NAFTA and Uruguay Round Agreements on U.S. Trade, 

under section 332(g) of the Tariff Act of 1930 on October 28, 1996. A public hearing in 

connection with this investigation was held on March 20, 1997, in Washington, DC. Public 

3 A copy of section 5 8 of the Act is included in appendix A 

1-2 
notice of the investigation and hearing was given by posting copies of the notice at the Office 

of the Secretaiy, U.S. International Trade Commission, Washington, DC, and by publishing the 

notice in the Federal Register of November 6, 1996 (61 F.R. 57451).4 

Scope of the Investigation 

URA and the NAFTA 

The URA are the result of multilateral negotiations conducted under the auspices of the General 

Agreement on Tariffs and Trade (GATT) during the period 1986-1993. The agreements consist 

of the Agreement Establishing the World Trade Organization (WTO) and a series of multilateral 

and plurilateral agreements and understandings set forth in annexes to the WTO Agreement that 

concern trade in goods, trade in services, intellectual property rights, and dispute settlement. 

The agreements entered into force on January 1, 1995, with respect to the countries that had 

submitted appropriate ratification documents as of that date. The WTO, the successor to the 

GATT organization and a permanent forum for member governments to address multilateral 

trade issues as well as to oversee implementation of the URA, also came into being on that date. 

As of January 1, 1997, 129 countries had become WTO members. 

Several of the WTO agreements concern trade in agricultural products, including the Agreement 

on Agriculture and the Agreement on the Application of Sanitary and Phytosanitary Measures 

(SPS Agreement), which are binding on all WTO members; and the International Dairy 

Agreement and the International Bovine Meat Agreement, which are plurilateral agreements 

binding only upon countries that have signed those specific agreements. The Agreement on 

Agriculture is the principal WTO agreement that concerns trade in agricultural products. It was 

the first broad agreement negotiated under GATT auspices to address trade in agricultural 

goods, and was also one of the most difficult of the WTO agreements to negotiate. It provides 

multilaterally agreed rules and disciplines to agricultural trade in three principal areas: market 

access, domestic support measures, and export incentives. In general, WTO members are 

required to implement their commitments over a 6-year period beginning in 1995, and 

developing country members were given up to 10 years. The Agreement on Agriculture also 

affirmed the commitment ofWTO members to give effect to the WTO SPS Agreement.5 The 

United States is a signatory to the International Bovine Meat Agreement, but not to the 

International Dairy Agreement. The International Bovine Meat Agreement covers live cattle, 

meat, and offal (byproducts), and carried forward without substantive modification the 

Arrangement Regarding Bovine Meat, which was concluded during the Tokyo Round of trade 

negotiations. 

The NAFTA was implemented by the United States, Canada, and Mexico on January 1, 1994.6 

Major objectives of the NAFTA included the elimination of tariffs and other barriers to trade 

4 A copy of the notice of the Commission's investigation and hearing is included in appendix B. 5 For an overview of the Agreement on Agriculture, see the Uruguay Round Agreements Act 

Statement of Administration Action, published in House Doc. 103-316, 103d Cong., 2d Sess., at 

709-26. 6 The NAFTA incorporated most of the provisions of the U.S.-Canada Free-Trade Agreement and 

in many instances expanded upon the earlier ( 1987) agreement. 

1-3 
in, and facilitation of cross border movement of, goods and services; the liberalization of rules 

for investment; protection and enforcement of intellectual property rights; and the creation of 

a dispute settlement mechanism. The NAFTA phases out tariffs on most qualifying industrial 

goods and agricultural products over a 10-year period, with some tariffs and nontariff barriers 

to be phased out over 15 years. 

Industry and Markets 

The U.S. live cattle and beef industries consist of several distinct production sectors. In this 

report we have analyzed the cow-calf, stocker-yearling, dairy cattle, feedlot, and the slaughter 

sector. U.S. imports of live cattle are primarily from Mexico and Canada. Australia, New 

Zealand, and Canada are generally the main sources of U.S. beef and veal imports. Mexico and 

Canada have been the primary markets for U.S. exports of live cattle, while Japan, Canada, 

Mexico, and the Republic of Korea (Korea) have generally been the largest-volume export 

markets for U.S. beef and veal. 

Overview and Approach 

This study identifies and describes the provisions in the NAFTA and the URA that affect 

imports and exports of live cattle and beef, and attempts to ascertain the impact of these 

agreements on live cattle and beef trade. In regards to the NAFTA, the report focuses on 

various duty reductions and sanitary and phytosanitary measures. In regard to the URA, the 

report focuses on the Agreement on Agriculture and the SPS Agreement, the replacement of the 

U.S. Meat Import Act of 1979 with a tariff-rate quota, the commitments made by the United 

States and the European Union (EU) to reduce the quantity and value of government-assisted 

beef exports, and U.S. trading partner market access liberalization for beef. 

The report also discusses measures taken by the United States to prevent the transshipment of 

beef through Canada and Mexico to the United States. This investigation also examines and 

describes the live cattle and beef industries of the United States, Canada, and Mexico. The 

report includes information on imports, exports, production, consumption, prices, and other 

significant factors affecting supply and demand for live cattle and beef. The Commission used 

various statistical and time-series econometric methods to obtain evidence on the factors 

important to the competitiveness of the U.S. cattle and beef industries. 

The information in this report is from written submissions and testimony presented at the 

Commission's public hearing, domestic and foreign fieldwork, and interviews with producers, 

processors, purchasers, importers, exporters, and associations. Additional information was 

obtained from a review of published literature, U.S. Department of Agriculture (USDA) and 

State Department telegrams, U.S. and foreign academic institutions, and previous Commission 

studies. Fieldwork took place in Colorado, Kansas, and Texas and Mexico. Appendix C 

contains a review ofliterature on the impact of the NAFTA and the URA on U.S. trade in cattle 

and beef. 

1-4 
Organization 

Chapter 2 describes the U.S. cattle and beef sectors. Chapter 3 includes overviews of the cattle 

and beef sectors for other countries, including Mexico, Canada, Central American countries, the 

Dominican Republic, Uruguay, Argentina, Japan, and Korea. Chapter 4 provides a description 

and analysis of commitments and actions taken under the NAFT A An econometric analysis 

of the NAFTA on Mexican imports of U.S. beef is also provided in this chapter, as well as an 

empirical analysis of Canadian exports of live cattle for slaughter to the United States. 

Chapter 5 describes steps that have been taken by the United States since the enactment of the 

NAFTA to prevent the transshipment into the United States of live cattle and fresh, chilled, or 

frozen beef through Mexico and Canada. Chapter 6 describes the commitments made by the 

United States and its major trading partners concerning the live cattle and beef sectors as part 

of the URA. In addition, the impact of the NAFTA on the U.S. live cattle and beef sectors is 

discussed and analyzed qualitatively and econometrically. Statistical tables are presented in 

appendixD.• 

1-5 

CHAPTER2 

U.S. INDUSTRY AND MARKETS 

This chapter provides a description of the U.S. live cattle and beef industries including the 

products involved and the production processes. It also provides information on the number, 

geographic distribution, and concentration of industry sectors; the U.S. cattle cycle; sanitary and 

phytosanitary measures; U.S. trade and tariff measures; and the U.S. market. 

U.S. Live Cattle and Beef Sectors 

Description and Uses 

In the United States, most cattle are beef-type animals kept for the production of meat. The 

remainder are dairy-type animals kept for the production of milk for human consumption; dairy 

cows accounted for 9 percent of the U.S. inventory of all cattle as of January 1, 1997 .

1 Beef 

cows accounted for 34 percent and the rest of the inventory consisted of bulls, steers, 2 heifers, 3 

and calves. When cattle are no longer efficient in the production of calves or milk, they are 

slaughtered for beef; such animals are referred to as cull cattle. 4 

The U.S. live cattle and beef industries consist of several distinct production sectors. In this 

report we have analyzed the cow-calf, stocker-yearling, feedlot, dairy cattle, and the slaughter 

sector. There is little integration between these sectors. 5 Cow-calf operators include two types 

--purebred and commercial. Purebred breeders are specialized and primarily produce cattle for 

breeding purposes and semen. The commercial cow-calf operators raise steers and heifers 

which ultimately are slaughtered for meat except for some bulls and heifers kept for breeding 

purposes. Calves, which are born after a 9 to 10 month gestation period, are typically raised 

with their mothers until they are weaned at 6 to 10 months of age, and weigh between 3 00 and 

600 pounds. Most of the cow-calf operations are in the Plains and Com Belt areas where forage 

is abundant. 6 

Stocker-yearling operators feed weaned calves on available forage and high-value roughage 

feeds (such as sugar beet tops and com stalks), or graze them on wheat pasture and silage. Such 

animals will ultimately be placed in feedlots. 

1 USDA, NASS, Cattle, Jan. 31, 1997, p. 1. 2 Arthur L. Anderson and James J. Kiser, Introductory Animal Science (NY: Macmillan Pub. Co., 

1967), defines a steer as a male bovine that was castrated when young and before his secondary sex 

characteristics had developed. 3 Robert E. Taylor, Scientific Farm Animal Production, (NY: Macmillan Pub. Co., 1992), defines 

a heifer as a young female bovine cow before the time that she has produced her first calf. 4 U.S. International Trade Commission, The Competitive Position of Canadian Live Cattle and 

Beef in U.S. Markets, investigation No. 332-241, USITC publication 1996, July 1987, p. 1. 5 Scientific Farm Animal Production, pp. 29 -35. 6 Ibid., p. 31. 

2-1 
In cattle feedlots animals are kept in confined areas and are fed on high-energy rations, typically 

com and protein supplements, and some roughage for about 6 months at which time the animals 

weigh between 900 and 1,300 pounds and are about 15 to 24 months old. 7 Such animals are 

then ready for slaughter, inasmuch as they have reached muscular maturity, and additional 

weight gains will consist of fat. Feedlot operations are concentrated in the Com Belt8 and in the 

Western Rangelands.9 Most cattle raised for beef in the United States are placed in feedlots for 

finishing, with only about 10 to 15 percent of the slaughter steers and heifers finished on 

pasture. Such cattle are referred to as "nonfed" cattle as they go to slaughter with little or no 

grain or concentrate feeds. 10 

The dairy cattle sector comprises animals kept for milk production for human consumption. 

Dairy cows are typically less heavily muscled than beef cattle and are less blocky in 

conformation. At maturity, dairy cows typically weigh from 1,000 to 1,500 pounds and begin 

to produce milk when they are about 2 years of age, after the birth of their first calf.11 They are 

usually kept for milk production for about 3-4 years, and then slaughtered for beef. 12 Female 

calves (heifers) are kept until they reach maturity, are bred, and milked to replace cows that 

leave the herd because of such factors as reproductive failure, low milk yield, or death. Some 

bull dairy calves are slaughtered for veal when they are a few days old, and others are castrated 

(steers) and raised to maturity for the production ofbeef.13 

The slaughter sector (also known as meatpackers) purchases slaughter or fed cattle and kills and 

butchers the animals to produce beef. Slaughter as defined by the USDA is the killing and 

butchering of animals primarily for food. 14 A slaughter plant is an establishment where animals 

are killed and butchered.15 Typically, the animals are rendered unconscious, bled, skinned, 

eviscerated, and decapitated. The carcasses are generally split down the center of the backbone, 

washed, and placed in a cooler to chill. 16 Beef may be sold to warehouses or processors for 

further processing into retail cuts. In recent years, meatpackers have shipped a large share of 

beef processed as boxed beef. 17 

Beef may be considered as consisting of table beef or manufacturing beef. For purposes of this 

study, table beef is defined as the meat of cattle that is ready, except for division into cuts, for 

cooking and consumption without further preparation or preservation. Examples of table beef 

7 Ibid., p. 29. 8 The Com Belt is associated with the States of Illinois, Indiana, Iowa, Kansas, Michigan, 

Minnesota, Missouri, Nebraska, Ohio, and Wisconsin. 9 The Western Rangelands are associated with the States of Arizona, California, Colorado, Idaho, 

Montana, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, 

Washington, and Wyoming. 10 Scientific Farm Animal Production, p. 33. 11 Ibid., p. 403. 12 Ibid., p. 391. 13 Ibid. 

14 USDA, NASS, Livestock Slaughter, Jan. 1996, p. 23. 

15 Ibid. 

16 Scientific Farm Animal Production, p. 58. 17 Boxed beef involves the division of the carcass into primal or subprimal cuts and coarse grinding 

the trimmings (for final use as hamburger) at the meatpacking plant and packaging the cuts and 

grindings in plastic-lined paperboard boxes for shipping to retailers. 

2-2 
include steaks and roasts. Manufacturing beef is defined as meats to be further processed into 

such products as sausages, hamburger, and ground beef. 

Number and Distribution of Producers 

There were a total of 1,194,390 operations18 with cattle in the United States in 1996. As shown 

in the following tabulation, the number of operations with cattle declined by 3 percent during 

1992-96, contiJiuing a long-term downward trend: 

Year 

1992 ............ . 

1993 ............ . 

1994 ............ . 

1995 ............ . 

1996 ............ . 

Number of 

operations 

with cattle 

1,226,860 

1,229,740 

1,213,690 

1,212,110 

1,194,390 

Many factors contributed to the long term decline in the number of operations including 

unacceptable ·levels of profitability, urbanization, and the consolidation of all farming 

operations, including beef and dairy. 19 

The regional distribution of U.S. operations with cattle and calves for 1996 is shown in figure 

2-1 and table D-1. 2

° Cattle raising is concentrated in the Western Rangelands, the Com Belt, 

and the Southeastern States. 21 Over 7 5 percent of the cattle inventory is in the Com Belt and 

the Western Rangeland States.22 

The number offeedlots in the 13 major cattle-feeding States23 declined steadily from 46,446 in 

1992to41,365in1995, or by 11 percent (table D-2). The number of cattle marketed by these 

feedlots increased from 22.0 million animals in 1992 to 23.4 million animals in 1995, or by 

6 percent. In 1996, the procedures for reporting of cattle on feed changed, thus comparable data 

for earlier years are not available. However, in 1996 there were 1,770 feedlots that marketed 

about 74 percent of the fed cattle (table D-3). 

18 The USDA defines an operation with cattle as an operation having 1 or more animals on hand at 

any time during the year. 19 HD. Ritchie, J.L. Orth, J.N. Ferns, T .R. Pierson, J.H. Hilker, and J.R. Black, "Time is now for 

beef industry to consider change," Feedstuffs, Vol. 69, No. 5, Feb. 3, 1997, p. 1. 20 Statistical tables are in appendix D. 21 The Southeastern States are associated with Alabama, Arkansas, Florida, Georgia, Kentucky, 

Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia. 22 The regions are described in USITC's The Competitive Position of Canadian Live Cattle and 

Beef in U.S. Markets, publication 1996, July 1987, pp. 18-24. 23 Western Rangeland States of Arizona, California, Colorado, Idaho, Oklahoma, South Dakota, 

Texas, and Washington; and the Corn Belt States of Illinois, Iowa, Kansas, Minnesota, and Nebraska. 

2-3 
N 

I 

+::. 

Figure 2-1 

Regional distribution of U.S. cattle operations and cattle inventory, Jan. 1, 1996 

We~tern 

Rangelands 

Cattle operations 

Southeastern 

Other 

Percentage 

Western 

Rangelands 

Source: USDA, NASS, Cattle Final Estimates, 1989-93, and Cattle, Feb. 1996-Jan. 1997. 

Cattle inventorv 
The number of Federally inspected cattle slaughter plants declined by 16 percent during 1992-

96. Plants slaughtering less than 10,000 animals per year accounted for most of the decline as 

plants slaughtering at least 500,000 animals per year increased from 20 plants to 23 (table D-4). 

The number of calf slaughtering plants totaled 380 in 1996, down 11 percent from 1992 (table 

D-5). 

Cattlemen in the United States have traditionally expressed concern about packer concentration 

and have noted that two large U.S. meatpacking companies have expanded cattle-slaughtering 

facilities in AUierta, Canada. The expansion is discussed in chapter 3. During 1991-94, the 

number of U.S. firms slaughtering cattle fell 26 percent to 239 in 1994 (latest year available) 

and the number of firms slaughtering calves fell by 22 percent to 108 (table D-6). Some firms 

operate more than one plant. The decline in the number of firms slaughtering cattle reflects a 

decline in the number of single-plant firms as the number of multi-plant firms increased from 

19 in 1991to27 in 1994.24 The number of multi-plant firms slaughtering calves also increased 

from 8 to 17 during the period. 

Industry Concentration 

Cow-calf 

The cow-calf sector is the least concentrated of the U.S. cattle and beef sectors. There were 

nearly 1.2 million operations with cattle in the United States in 1996. Many of these operations 

are family owned and operated. In the Midwest, East, and South, the cattle are often part of a 

diversified farming operation; however, in the West, cattle frequently account for all or nearly 

all, of the farmers' incomes. 

Feedlot 

Table D-2 shows the number of feedlots and marketings by size of feedlot capacity, in cattlefeeding Corn Belt States and cattle-feeding Western Rangelands States for 1992-95. The 

feedlot sector is more concentrated than the cow-calf sector, but less concentrated than the 

slaughter sector. Feedlots in the Corn Belt and Western Rangeland States accounted for about 

83 percent of the 27.3 million fed cattle marketed annually during 1992-95. In 1996, Corn Belt 

and Western Rangeland feedlots with a capacity of 1,000 or more cattle accounted for about 74 

percent of all U.S. fed cattle marketed. 

Dairy Cattle 

Dairy farms and processors are located throughout the United States. However, the Upper 

Midwest, Northeast, and West produce 75 percent of the nation's milk supply, and hold 

approximately the same percentage of dairy cow inventories (table D-7). In 1996, Wisconsin 

had the most dairy cows with about 1.5 million.animals, followed by California (1.3 million 

animals) and New York (700,000 animals). There has been a slow trend in milk production 

away from the upper Midwest and Northeast towards the West, particularly California. 

California was the largest milk producer in 1996 with almost 26 billion pounds, followed by 

24 USDA, Packers and Stockyards Statistical Report, 1991-94 Reporting Years, Oct. 1996, p. 14. 

2-5 
Wisconsin with 22 billion pounds. California became the leading milk-producing State in 1994 

following recent rapid growth in productivity (production per cow increased 8 percent between 

1993 and 1996 (table D-7)). Technological advances for milking and feeding have generally 

increased the minimwn economically feasible size of operation, increased production efficiency, 

and encouraged specialization. This has particularly benefitted the large dairies in California, 

as well as those in Arizona, New Mexico, and Florida. 25 Factors that have contributed to this 

geographical shift in production include population movements to the South and Southwest, as 

well as the lower land and facilities costs of the region, favorable climate, ample supplies of 

high-quality hay and forage, and availability of labor. 26 

In addition to regional differences in dairy production and cow inventories, there are also 

differences in the size distribution of dairy farms. In 1996, for example, over 95 percent of 

dairy cows in California were on operations with 200 animals or more. In contrast, Wisconsin 

had only 7 percent of its dairy cows on operations of such size, with over one-third of cows 

being on operations with less than 50 animals. A comparison of the size distribution of dairy 

operations between 1993 and 1996 shows that herd sizes are increasing over time, particularly 

in the Upper Midwest and Central regions. This trend towards larger operations can be 

associated with technological advances for milking and feeding that have generally increased 

the minimwn economic feasible size of operation.27 

Slaughter 

The slaughter sector is the most concentrated of the cattle and beef sectors. In 1992, 20 plants 

each slaughtering 500,000 or more cattle annually, handled 19.2 million cattle, or 58 percent 

of commercial slaughter (table D-4). In 1996, 23 plants slaughtering 500,000 or more handled 

22.9 million cattle, or 63 percent of commercial slaughter. As concentration increased in cattle 

slaughtering during 1992-96, the nwnber of Federally inspected plants declined from 971 to 

812, or by 16 percent. 

Calf slaughter is even more concentrated than cattle slaughter. In 1996, 3 7 plants representing 

10 percent of the nwnber of Federally inspected plants, handled 1. 6 million calves, or 89 percent 

of commercial slaughter (table D-5). The nwnber of Federally inspected slaughter plants for 

calves declined from 427 plants in 1992 to 343 plants in 1995, then rose to 380. plants in 1996. 

As many large firms own and/or control more than one slaughtering plant, the number of firms 

involved in cattle and calf slaughter in the United States is smaller than the number of plants. 

Concentration that increased during 1990-94 (the latest years for which data are available), 

largely reflects mergers and acquisitions within the industry. In 1990, for example, the four 

largest-volwne firms accounted for 59 percent of total U.S. commercial slaughter; by 1994, the 

four largest-volwne firms accounted for 68 percent of such slaughter (table D-8). 

25 USDA, ERS, "Dairy Policy to Build on Market Orientation," Agricultural Outlook, July, 1995, 

pp. 13-15. 

26 Ibid., p. 14. 27 Ibid. 

2-6 
Concentration is higher in those firms that slaughter steers and heifers. These firms tend to 

locate plants near large feedlot operations. Concentration is lower among firms slaughtering 

cows and bulls, reflecting the widely dispersed cow-calf herds throughout the United States. 

U.S. Cattle Cycle and Cattle Inventory 

Changes in cattle inventories have followed a cyclical pattern traditionally referred to as the 

"cattle cycle." Jhe cattle cycle28 is characterized by the accumulation and liquidation of cattle 

inventories, generally occurring in response to changes, or anticipated changes, in profits, i.e., 

prices received for cattle and prices paid for feed. 

The number of cattle on U.S. farms as measured by the January 1 inventory reported by the 

USDA increased from 97.6 million animals in 1992 to 103.8 million in 1996 (table D-9).29 

Likewise, thenumberofbeefcows increased from 33.8 million animals in 1992 to 35.3 million 

in 1996.30 The number of cattle on farms declined to 101.2 million animals as of January 1, 

1997, and the number of beef cows fell to 34.3 million. 

Declining prices and increases in slaughter suggest that the liquidation phase of the most recent 

cattle cycle may have begun in the fall of 1994. Cull cattle prices at $36. 68 per hundred weight 

(cwt) during the fourth quarter of 1994 were 16 percent below the corresponding quarter of 

1993 (table D-10). Cull cattle prices declined irregularly during 1995-96 to a low of $26.68 in 

the fourth quarter of 1996 (42 percent below the second quarter of 1994). Similarly, feeder 

cattle prices began to decline after the second quarter of 1993. Feeder cattle prices continued 

to declined irregularly to a low of $58.81 per cwt during the second quarter of 1996. 

The liquidation phase of the cattle cycle intensified in 1996, reflecting in part, high grain prices, 

an increase in the number of cattle sold for slaughter, adverse weather, and unfavorable feedlot 

returns. A reduced grain crop in 1995-96 led to record high grain prices. For example, the farm 

price of com averaged above $4 per bushel in the second and third quarters of 1996, up from 

an average of $2.50 per bushel in 1995. In addition, drought in much of the Central Plains and 

Southwestern United States and unusually wet weather in the Northern States sharply reduced 

demand for a larger supply of feeder cattle, lowering prices.31 The American Farm Bureau 

Federation (AFBF) stated that the reduction in total cattle numbers is likely to continue at least 

another year or two and that it could be the year 2000 before the U.S. cattle inventory shows an 

expansion of the cattle herd. 32 

28 For a detailed description of the cattle cycle, see USITC, The Competitive Position of Canadian 

Live Cattle and Beef in U.S. Markets, publication 1996, July 1987, pp. 35-39. 29 USDA, NASS, Statistical Highlights of U.S. Agriculture, 1995196, 

[http ://www.usda.gov/nass/pubs/stathigh/cover.htm]. 

30 Ibid. 

31 USDA, ERS, Livestock, Dairy, and Poultry Monthly, LDP-M-38, Feb. 20, 1997, p. 1. 32 Posthearing brief of the American Farm Bureau Federation (AFBF) to the USITC regarding 

"Cattle and Beef: Impacts of the NAFTA and Uruguay Round Agreements on U.S. Trade," Apr. 3, 

1997,p.7. 

2-7 
U.S. Grading System for Cattle and Beef 

The USDA grading system for cattle and beef is voluntary and provided on request, typically 

from packers, on a fee-for-service basis, unlike sanitary and phytosanitary regulations which are 

mandatory. 33 In 1996, 60 percent of the beef graded by USDA received a grade of Choice, 3 7 

percent received a grade of Select, and 2 percent received a grade of Prime. 34 

- Sanitary and Phytosanitary Measures 

Live Animals 

The Animal and Plant Health Inspection Service (APHIS) of the USDA is responsible for 

guarding U.S. borders against the entry of foreign agricultural pests and disease. 35 In general, 

all U.S. imports of live cattle are inspected at the port of entry to be sure they are not carrying 

any diseases. APHIS regulations specify that U.S. cattle imports from countries other than 

those of Central America and the West Indies, Canada and Mexico be quarantined for not less 

than 3 0 days from the date of arrival at the port of entry. 36 All animals found to be free from 

communicable disease and not to have been exposed thereto within 60 days prior to their 

exportation to the United States are admitted. 37 

U.S. imports oflive cattle for immediate slaughter from Canada receive a visual inspection at 

the port of entry. Inspectors look for physical characteristics of respiratory illnesses, such as 

runny noses and eyes. 38 If the cattle pass inspection they are consigned directly to a recognized 

slaughtering establishment. Slaughter must occur within 2 weeks from the date of entry. 39 

Less than 1 percent of live cattle offered for importation into the United States from Canada 

during the last half of 1992 through 1996 was refused entry by APHIS. 40 The total number of 

Canadian cattle and the number of cattle for slaughter rejected in each year is shown in the 

following tabulation: 

33 For a description of the grading system see USITC Live Cattle and Beef U.S. and Canadian 

Industry Profiles, Trade, and Factors of Competition, investigation No. 332-328, publication 2591, 

January 1993, p. 2-7. 34 Facsimile from USDA, Agricultural Marketing Service (AMS), "National Summary ofMeats 

Graded," Feb. 20, 1997. 35 9 CFR §92.408, p. 373 (1996Ed.), and61F.R.17239, (Apr. 19, 1996). 36 9 CFR §92.411, p. 374 (1996 Ed.), and 61 F.R. 17238 (Apr. 19, 1996). 37 Ibid. 

38 USITC staff interview with Dr. Roger Perkins, staff veterinarian, USDA, APHIS, July 1, 1997. 39 9 CFR §92.420, p. 379. 40 Data for the last half of 1992 and for 1993 were compiled from USDA, APHIS, Quarterly 

Recap of Import Animals Inspected, various issues; data for 1994-96 compiled from an APHIS 

facsimile to the USITC, May 9, 1997. 

2-8 
All cattle rejected 

19921 ..... . 

1993 

1994 

1995 

1996 

1 July-Dec. 

831 

466 

238 

579 

1,383 

Slaughter cattle rejected 

19921 . . .. .. . .. .. 69 

1993 . . . . . . . . . . . 21 

1994 . . . . . . . . . . . 124 

1995 . . . . . . . . . . . 267 

1996 . . . . . . . . . . . 899 

U.S. imports of cattle for slaughter from Mexico must be accompanied by a certificate issued 

by a salaried veterinarian of the Government of Mexico, or issued by a veterinarian accredited 

by the National Government of Mexico and endorsed by a full-time salaried veterinary officer 

of the National Government ofMexico.41 The certificate must state that the veterinarian who 

issued the certificate has inspected the animals in the herd from which the animals will be 

imported and found them free of evidence of communicable disease, and that, so far as it has 

been possible to determine, they have not been exposed to any such disease common to animals 

of their kind during the preceding 60 days. If the cattle are shipped by rail or truck, the 

certificate must further specify that the animals were loaded into clean and disinfected railcars 

or trucks for transportation directly to the port of entry. Such animals must be consigned from 

the port of entry to a recognized slaughtering establishment and slaughtered there within 

2 weeks from the date of entry. Such animals must be moved from the port of entry in 

conveyances sealed with seals of the U.S. Government. 42 

Meat 

The Food Safety and Inspection Service (FSIS) of the USDA administers a comprehensive 

system of inspection laws, including meat offered for importation, under the Federal Meat 

Inspection Act, the Poultry Products Inspection Act, and the Egg Products Inspection Act. 43 

Meat and meat products prepared or produced in foreign countries may only be imported into 

the United States if the exporting countries enforce inspection and other requirements that are 

at least equal to those applied at U.S. Federally-inspected establishments.44 During 1995, 7.6 

million pounds (or roughly 0 .5 percent) of the fresh, chilled, or frozen beef and veal offered for 

entry to the United States from all sources, was condemned or refused entry. 45 

The share of fresh, chilled, or frozen beef and veal offered but refused entry46 into the United 

States from Canada is shown in the following tabulation: 

41 9 CFR §92.429, p. 386 and 61 F.R. 17239 (Apr. 19, 1996). 42 Ibid. 43 USDA, Food Safety and Inspection Service (FSIS),Meat and Poultry Inspection, 1995 Report 

of the Secretary of Agriculture to the U.S. Congress, Jan. 1997. 44 For a detailed description of the sanitary and phytosanitary inspection system, see USITC Live 

Cattle and Beef' U.S. and Canadian Industry Profiles, Trade, and Factors of Competition, 

investigation No. 332-328, publication 2591, Jan. 1993, p. 2-18. 45 Ibid., pp. 54-66. 46 Compiled from statistics reported in USDA, FSIS, Meat and Poultry Inspection, Report of the 

Secretary of Agriculture to the U.S. Congress, annual issues. 

2-9 
Year Percent 

1987 ........... 1.1 

1988 ........... 1.0 

1989 ........... 1.5 

1990 ........... 2.2 

1991 ........... 0.8 

1992 ........... 0.5 

1993 ........... 1.3 

1994 ........... 0.7 

1995 ........... 0.6 

The share (percent) of beef offered for importation into Canada from the United States but 

refused entry is as follows: 1994-1.5 percent; 1995-1.3 percent; 1996-1.2 percent.47 The share 

refused entry for importation into the United States from Canada was less than one-half the rate 

ofU.S. beef and beef products refused entry into Canada in 1994 and 1995, the only years for 

which such comparisons are available. 

The share of fresh, chilled, or frozen beef and veal offered but refused entry48 into the United 

States from Mexico ranged from 0 to 12 percent49 during 1987-95 as shown in the following 

tabulation: 

Year 

1987 

1988 

1989 

1990 

1991 

1992 

1993 

1994 

1995 

Percent 

(1) 

(1) 

0.0 

12.2 

0.3 

4.7 

2.2 

1.5 

6.0 

1 No plants authorized to 

export products to the United 

States during this period. 

For meat imported from all countries, FSIS relies on its Automated Import Information System 

(AIIS) to automatically assign the type ofreinspection that an FSIS inspector will perform on 

a shipment offered for importation into the United States.5° FSIS reports that the term 

"reinspection" is used because the products have already passed an inspection in the originating 

47 Facsimile from Agriculture and Agri-Food Canada, Apr. 28, 1997. 48 Compiled from statistics reported in USDA, FSIS, Meat and Poultry Inspection, Report of the 

Secretary of Agriculture to the U.S. Congress, annual issues. 49 Because of the relatively small quantity of total shipments from Mexico, any shipment rejected 

could comprise a substantial portion of the total offered for entry. 50 Adapted from USDA, FSIS, Import Reinspection Between USDA and Agriculture Canada, 

found at web site http://www.usda.gov/agency/fsis/bkcanada.htm, Feb. 1997, unless otherwise noted. 

2-10 
country, and each export shipment is accompanied by a health certificate indicating the 

wholesomeness of the product.51 When shipments arrive at a U.S. port of entry from any 

country except Canada,52 a description of the shipment is entered into the automated system and 

the type of reinspection is automatically assigned. 

Three types of reinspection assignments are possible: 

Reinspection,assignments: 

Approximately 70 percent of Approximately 30 percent of shipments in 1996 shipments in 1996 

"Skip" "Inspect" "Intensified Inspection" 

Inspector checks all Transportation vehicle is Occurs after a shipment from a 

necessary documents, unloaded, inspector reviews plant has been rejected. The 

assures that the shipping all necessary documents, next 10 to 15 shipments from 

container label is accurate, checks products for that plant automatically receive 

and checks the general contamination and sometimes an "inspect" assignment. The 

condition of products in back takes samples for laboratory entire shipment is unloaded so 

of transport vehicle-- tests. Products such as the inspector can randomly 

shipment may be unloaded ground meat are subject to select samples and perform 

and inspected if inspector microbiological tests for E. coli tests. 

notices anything wrong. 0157:H7. 

The proportion of "skip" assignments and "inspect" assignments will vary with the product 

type, country of origin, and meat producer. 

The inspector randomly chooses samples from throughout the shipment to conduct the 

reinspection. A sufficient number of samples is selected for reinspection to provide a picture 

of the condition of the entire shipment. If the shipment passes reinspection, the documents are 

stamped and the vehicle moves inland. If examination of the samples results in a rejection, the 

entire shipment is rejected. 

Import Levels, Trends, and Sources 

Live Cattle and Calves 

The quantity of U.S. imports of live cattle for immediate slaughter declined from about 963,000 

animals in 1992 to 910,000animalsin1994 (table D-11). The value of such imports remained 

fairly constant averaging $730 million annually over this period. U.S. slaughter cattle imports 

rose steadily during 1995-96, totaling 1.3 million animals, valued at $896 million in 1996. 

Canada accounted for virtually all U.S. imports of slaughter cattle during 1992-94, and 1996. 

In 1995, Canada supplied about 94 percent of U.S. imports of cattle for immediate slaughter 

and Mexico supplied the remainder. 

51 USDA, FSIS, Import Reinspection Between USDA and Agriculture Canada, background 

papers, Feb. 1997. 52 The procedures applicable to Canada are described in chapter 4 ofthis report in the section 

entitled Sanitary and Phytosanitary Inspection Issues. 

2-11 
U.S. imports of cattle for immediate slaughter from Canada include steers and heifers (fed 

cattle), bulls and cows (cull cattle), and veal calves (cattle weighing less than 90 kilograms (kg) 

each or about 200 pounds) (table D-12). During 1992-94, U.S. imports of slaughter cattle from 

Canada declined steadily totaling 908,000 animals, valued at $727 million in 1994. Since 1994, 

the quantity of such imports rose by 43 percent, totaling 1.3 million animals, valued at $895 

million in 1996. The decline in U.S. imports during 1992-94, reflects a decline in imports of 

cull cattle and veal calves as U.S. imports of fed cattle increased steadily (table D-12). 

Fed cattle imports from Canada increased by 57 percent during 1992-96, totaling 901,000 

animals in 1996 (table D-12). The estimated share of slaughter cattle imports from Canada 

accounted for by fed cattle rose from 60 percent in 1992 to 70 percent in 1996. During 1992-

94, U.S. imports of cull cattle from Canada declined 26 percent to 255,000 animals, then rose 

by 49 percent to 379,000 animals in 1996. The share of imports accounted for by cull cattle 

declined from 36 percent in 1992 to 29 percent in 1996. U.S. imports of veal calves from 

Canada declined steadily from 39,000 animals, valued at $6 million in 1992 to 17,000 animals, 

valued at $2 million in 1996 (table D-12) and accounted for between 1 and 4 percent of 

slaughter cattle imports from Canada. 

Table D-13 shows U.S. imports of slaughter cattle and calves from Canada, by month, from 

January 1992 to December 1996. Imports ranged from 40,000 animals in January 1994 to 

141,000 animals in May 1996. During spring 1996, the contraction phase of the Canadian 

cattle cycle intensified, in part, because of adverse weather contributing to the increase in 

exports during April-October. 53 Such imports declined during the last 2 months of 1996 as two 

major cattle slaughtering plants in Alberta, Canada reportedly expanded their capacity and 

capacity utilization. 54 

U.S. imports of cattle from Mexico consist primarily of feeder cattle.55 U.S. imports from 

Mexico of calves weighing less than 90 kg each are reportedly feeder cattle rather than veal 

calves. 56 During 1992-96, U.S. imports from Mexico of feeder. cattle fluctuated as shown in the 

following tabulation (compiled from official statistics of the U.S. Department of Commerce): 

Year 

Number of 

feeder cattle 

1992 . . . . . . . . . . . . 548,725 

1993 . . . . . . . . . . . . 1,285,992 

1994 . . . . . . . . . . . . 1,066,758 

1995 . . . . . . . . . . . . 1,563,249 

1996 . . . . . . . . . . . . 439,577 

53 USDA, FAS, Livestock Annual, CA6040, Aug. 2, 1996, p. 3. 54 CA6040, p. 3. 55 USITC staff interview with Dr. Gary W. Williams, professor and Texas A&M Research Center 

(TAMRC), director, et.al., Texas A&M University, College Station, TX, Feb. 13, 1997. 56 USITC staff interview with Dr. Bill Brown, Texas Animal Health Commission, Feb. 5, 1997. 

2-12 
With the exception of 1995, U.S. imports of slaughter cattle from Mexico averaged 2,500 

animals yearly. In 1995, drought in the northern regions of Mexico caused Mexican cattlemen 

to market an unusually large number of animals, straining plant capacity. This situation 

contributed to the export of 67,000 slaughter animals to the United States57 (table D-11). 

AFBF states that increased cattle imports have probably contributed to lower prices for both fed 

cattle and calves in the United States. 58 However, they further suggest that "losses" of feeder 

calf sellers tend to be the "gain" of feeder calfbuyers.59 

Destination of U.S. Imports of Live Cattle 

for Slaughter, by Region 

Data on the destination of U.S. imports of cattle by state are available from the USDA, APHIS 

"Quarterly Recap of Import Animals Inspected"60 and are reported in appendix E. 61 Primary 

destinations include the leading cattle-slaughtering States. The share of imports accounted for 

by the leading States in 1995 and 1996, are shown in the following tabulation (in percent): 

State 1995 1996 

Washington • 0 ••••••••• 28 26 

Colorado ............. 10 14 

Utah ................. 16 12 

Minnesota ............ 10 10 

Nebraska ............. 9 10 

North Dakota .......... 6 6 

Pennsylvania .......... 6 7 

All other .............. _li _li 

Total .............. 100 100 

U.S. Imports of Live Cattle and Calves from Canada in 

Relation to U.S. Production and Consumption 

U.S. imports of cattle and calves for slaughter from Canada increased from 2.8 percent of 

consumption (commercial slaughter) in 1992 to 3.4 percent in 1996 (table D-14). U.S. imports 

of calves for immediate slaughter declined from 2.8 percent of commercial calf slaughter in 

1992 to 1.0 percent in 1996 (table D-15). 

57 USITC staff interview with an official ofUSDA, FAS, Mexico City, Feb. 11, 1997. 58 PosthearingbriefofAFBF,Apr. 3, 1997,p. 7. 

59 Ibid. 

6

° For a description of the "Quarterly Recap of Import Animals Inspected" see USITC, The 

Competitive Position of Canadian Live Cattle and Beef in U.S. Markets, investigation No. 332-241, 

USITC publication 1996, July 1987, appendix H. 61 Data are not available for all ports of entry, thus the data reported in appendix E are not 

necessarily comparable with other data in this report. 

2-13 
Imports of Beef and Veal 

The bulk of U.S. beef imports consists oflean manufacturing-type beefthat is typically mixed 

with domestic fat trimmings and used in the formulation of products such as beef patties. 62 

Import interests contend that such imports rarely compete with U.S. grain-fed beef.63 U.S. 

imports of fresh, chilled, or frozen beef and veal declined steadily from 2.1 billion pounds 

(carcass weight equivalent), valued at $1. 7 billion in 1992 to 1.8 billion pounds, valued at $1.1 

billion in 1996 (table D-16). Canada increased its share throughout the period from 15 percent 

in 1992 to 24 percent in 1995, while Australia's share steadily declined from 47 percent to 36 

percent. These trends continued through 1996. Canada accounted for 32 percent of total U.S. 

imports in 1996, becoming the number one supplier of beef and veal. Australia accounted for 

30 percent and New Zealand accounted for 28 percent of total beef and veal imports in 1996. 

Mexico was the eighth largest supplier of fresh, chilled, or frozen beef and veal during 1996, 

supplying less than 1 percent. U.S. imports of fresh, chilled, or frozen beef are further discussed 

in chapter 4 of this report. 

In examining beef and veal imports from Canada it is also possible to estimate the quantity of 

beef and veal derived from cattle and calves imported for immediate slaughter. Table D-17 

shows the estimated carcass-weight equivalent of meat obtained from such cattle and calves, 

U.S. imports of beef and veal from Canada, U.S. production of beef and veal from U.S. cattle 

and calves, and the total U.S. imports from Canada as a percent of U.S. production. The ratio 

of imports from Canada to U.S. beef and veal production rose steadily from 4 .5 percent in 1992 

to 6.3 percent in 1996. 

U.S. Production, Domestic Consumption, 

Exports, and Prices 

Production and Consumption of Live Cattle and Beef 

Production of live cattle and beef and veal is largely determined by the stock of cattle on hand, 

or the cattle inventory. Production of beef and veal is equal to cattle and calf slaughter times 

the average slaughter weights. Although supply response lags due to biological constraints, beef 

and veal production ultimately reflects demand for beef and veal in both foreign and domestic 

markets. 

During 1992-96, U.S. production of live cattle, as measured by the annual calf crop,64 rose from 

38.9 million animals in 1992, to 40.2 million animals in 1995, then declined slightly to 39.6 

million animals in 1996 (table D-14). U.S. beef and veal production (carcass weight equivalent) 

increased from 23 .4 billion pounds in 1992 to 26.1 billion pounds in 1996 (table D-18). This 

increase in production reflects the 12-percent increase in the number of animals slaughtered 

(cattle consumption) from 34.2 million animals in 1992 to 38.3 million animals in 1996 (table 

62 Prehearing brief of New Zealand Meat Producers Board (NZMPB), Mar. 10, 1997, p. 4. 63 Prehearing briefofNZMPB, Mar. 10, 1997, p. 4. 64 The number of calves born in a year. 

2-14 
D-14). Beef and veal consumption rose from 24.3 billion pounds in 1993 to 26.3 billion 

pounds in 1996. 

Fed cattle account for the bulk of U.S. commercial slaughter, averaging 77 percent annually 

during 1992-96 (table D-19). Cull animals accounted for about 19 percent of U.S. commercial 

slaughter and veal calves accounted for about 4 percent. 

. U.S. Exports of Live Cattle and Calves 

U.S. exports of live cattle and calves (except purebred animals for breeding purposes) accounted 

for less than 1 percent ofU.S. production annually during 1992-96. Such exports could include 

animals for breeding purposes that are not purebred, feeders, dairy cows, and cattle and calves 

for immediate slaughter. Mexico and Canada accounted for virtually all such exports. U.S. 

cattle exports to Mexico and Canada are discussed in chapter 4. 

U.S. Exports of Beef and Veal 

U.S. exports of fresh, chilled, or frozen beef and veal (carcass weight equivalent) increased from 

1.3 billion pounds, valued at $2. 0 billion in 1992 to 1. 7 billion pounds, valued at $2.4 billion 

in 1996, or by 36 percent in quantity (table D-20). The largest U.S. export markets for beef 

include Japan, Canada, Republic of Korea (Korea), and Mexico. Further integration of the US.-

Canadian cattle and beef sectors and increased access to the Korean, Japanese, and Mexican 

markets contributed to the increase in U.S. exports. Further discussion of U.S. exports to 

Canada and Mexico are provided in chapter 4, information on other important U.S. export 

markets are discussed in chapter 3. 

U.S. Exports of Beef and Veal Offal 

Edible beef and veal offal are byproducts of the beef industry and often referred to as variety 

meats. Tongues, livers, hearts, kidneys, brains, and other products for human consumption are 

among the byproducts included in variety meats. A 1, 100 pound slaughter steer produces about 

34 pounds of variety meats. 65 Per capita consumption of variety meats in the United States is 

about 9 pounds annually; thus, most edible beef and veal offal are exported. Major export 

markets include Japan, Russia, and Mexico. 

Mexico was the third-largest market for edible beef and veal offal in 1996. Such exports were 

valued at $35 million in 1996 (table D-21), and accounted for 13 percent (by quantity) of U.S. 

exports during 1992-96. U.S. exports of beef and veal offal to Canada, the eighth-largest 

market, were valued at $9 million in 1996, and accounted for about 4 percent of the total 

annually. 

65 Robert E. Taylor, Beef Production and Management Decisions [Department of Animal 

Sciences, Colorado State Univ., Fort Collins, CO] (NY: Macmillan Pub. Co., 1994), p. 36. 

2-15 
Cattle Prices 

In the United States, most cattle are sold at auction and the prices are widely published. The 

following section examines auction prices for feeder cattle, 66 slaughter cattle, 67 cull cattle, 68 and 

veal calves. 69 Changes in cattle prices are a function of many variables. The AFBF contends 

that imports and exports are but two factors affecting the beef and cattle market, along with 

retail, wholesale, feedlot, and ranch gate prices, changing marketing systems, captive supplies, 

packer concentqttion, stagnant domestic beef markets, and aggressive marketing of competing 

meats.70 

Annual prices received at auction for cattle and calves peaked during 1993 then declined steadily 

through 1996 (table D-10). During 1993-96, annual average prices for U.S. slaughter cattle 

declined by 15 percent; prices for feeder cattle declined 3 3 percent; and cull cattle prices 

declined 36 percent. Many factors contributed to the decline in slaughter cattle prices including 

increases in beef production (larger slaughter levels and heavier slaughter weights) and record 

high red meat and poultry supplies (growing supplies of competitive meats). High grain prices 

and other marketing costs contributed to the decline in feeder cattle prices. In general, increases 

in the price of feed leads to downward pressure in the price of feeder cattle. This is because as 

the cost offeeding cattle increases, feedlot operations become less profitable and producers tend 

to respond by reducing production. As production is lowered the demand for feeder animals 

declines, putting downward pressure on their prices. In addition, large supplies of beef put 

downward price pressure on feeder cattle sales. 

Average prices received for feeder cattle declined significantly during 1993-96. Feeder cattle 

brought $58.81 per hundred weight (cwt) during the second quarter of 1996, a decline of 39 

percent from the $96.13 per cwt in the second quarter of 1993 (table D-10). Large supplies of 

U.S. feeder cattle coupled with increased imports of feeder cattle from Mexico during 1995 

contributed to the decline in feeder cattle prices. 71 

Auction prices for U.S. slaughter cattle declined irregularly from $80.65 per cwt in the first 

quarter of 1993 to $60.26 per cwt in the second quarter of 1996, or by 25 percent (table D-10). 

By the fourth quarter of 1996, the average auction price increased by 17 percent to $70.39 per 

cwt. 

The price for cull cattle declined from $47.52 per cwt in 1993 to $30.33 per cwt in 1996 (table 

D-10). Cull cattle prices fell from $49.29 per cwt in the third quarter of 1993 to $26.68 per cwt 

in the fourth quarter of 1996. Veal calf prices declined from $92.92 per cwt in the second 

quarter of 1993 to $82.98 per cwt in the first quarter of 1995.72 

66 U.S. prices based on sales of No. 1 feeder steers, Oklahoma City, medium frame, 600-650 

pounds. 67 U.S. prices based on sales of slaughter cattle, steers, Nebraska direct, Choice Nos. 2-4, 1,100 to 

1,300 pounds. 68 U.S. prices based on sales of cows, boning utility, Sioux Falls. 69 U.S. prices based on sales ofvealers, Choice, Albany, NY. 70 USDA,NASS,Cattle,Jan. 31, 1997,p. 1. 71 USDA, ERS, Cattle and Sheep Outlook, LDP-CS-6, May 15, 1995. 72 USDA stopped collecting the price series on vealers after the first quarter of 1995. 

2-16 
Beef Prices 

Commercial meat-processing companies purchase a wide range of products from slaughter 

houses. A large share of imported and domestic beef (manufacturing beet) is used for 

processing into products such as hamburger, sausages, and ground beef.73 One reporting 

service, The Meat Sheet, provides frozen boneless manufacturing beef prices that are analyzed 

below. In addition, the wholesale boxed beef price as reported by USDA reports the average 

price of primal.and subprimal cuts from the meatpacker to the retailer. 

Boneless manufacturing beef may be purchased on a fresh or frozen basis, and on the share 

(percent) of lean meat contained in the purchased product. For this study, prices74 were 

compared for 65 CL (percent chemical lean) frozen boneless manufacturing beef (fbmb) from 

U.S., Canadian, and other import sources (Australia and New Zealand).75 

Prices for 65 CL from U.S. sources (delivered to Chicago) fell sharply from $0.82 per pound 

in 1993 to $0.61 per pound in 1995, then rebounded slightly to $0.62 per pound in 1996 (table 

D-22, figure 2-2). Such prices rose to $0.66 per pound during October-December 1996. Prices 

for Canadian product (delivered to Chicago) also declined from $0.87 per pound in 1993 to 

$0.62 per pound in 1995, then rose to $0.64 per pound in 1996. The fourth quarter 1996 price 

rose to $0. 70 per pound. Australia and New Zealand fbmb prices also closely tracked those of 

the U.S. product. 

Table D-22 and figure 2-2 show that U.S. and imported fbmb prices are typically very close and 

tend to move together. The chart also suggests that subsequent to July 1, 1993, when US.-

Canadian trade in frozen boneless beef received a rate of duty of "Free" as part of accelerated 

staged duty eliminations, the price of Canadian fbmb in the U.S. market became even closer to 

its U.S. counterpart. 

Wholesale boxed beef76 prices increasedfrom$116.73 per cwt in 1992 to $118.74 cwt in 1993, 

then declined steadily to $103.09 per cwt in 1996 (table D-23). The price decline reflects in 

part, large supplies of beef as well as large supplies of other red meats and poultry that acted 

to depress prices. 

U.S. Feed Grain Markets 

Livestock and grain markets worldwide are highly interdependent as grain provides a sizable 

portion of animal feed, or grain can be milled and consumed directly as a food in place of meat. 

For cattle, pasture and forage offer additional feed not efficiently used by poultry or swine. 

73 Prehearing briefofthe NZMPB, Mar. 10, 1997, p. 13. 74 Derived from daily price quotations of representative market prices as reported in The Meat 

Sheet, Chicago, IL 75 USITC staff telephone conversation with Bill Albanos of The Meat Sheet, Chicago, IL, Nov. 26, 

1996. 76 Boxed beef involves the division of the carcass into primal or subprimal cuts and coarse grinding 

the trimmings (for final use as hamburger) at the meatpacking plant and packaging the cuts and 

grindings in plastic-lined paperboard boxes for shipping to retailers. 

2-17 
N 

I 

,_. 

00 

Figure 2-2 

Frozen boneless manufacturing beef: Comparative average U.S., Canadian, and other imported prices, 65 CL (percent chemical 

lean), by quarters, Jan. 1993-Dec. 1996 

Cents per pound 

110 

100 

90 

80 

70 

60 

50 

40 

~- ~· 

..._c!!J-· b~ p/ '),~ 

~· 

nj.b 

~· ~· ~· 

~ ..._c!!J-· "v~b 

..._o.,cY 

~· 

nj.b ~ ~· ~· 

.... Cj 

!!..°' ;<;:ob ~· 

g,<t:I '"P 

~· 

nj.b 

..._o.,°-' 

+United States 

HCanada 

..._qs 

wOther imports (Australia and New Zealand) 

~· ~· 

~ ..._c!!J-· 

oS~ " 

~· ~· ~· b b°' ~ '),~ n§ ~ 

Source: Derived from daily price quotations of representative market prices as reported in The Meat Sheet, Chicago, IL. 
However, in the United States and Canada, as many as two-thirds of beef cattle are grain-fed 

for a substantial portion of their growth cycle, according to industry sources, and even for dairy 

cattle, grain accounts for a sizable portion of their ration. The principal grain fed to cattle in the 

United States is corn, accounting for over 83 percent of the grain volume fed in the 5 most 

recent years (table D-24); the other four grains, sorghum, feed wheat, barley, and oats, provided 

the remaining 17 percent of grain feed consumption. 

As grain prices rise or fall, livestock feeders may adjust the types and volume of grain used, 

although this adjustment can take months or even years before its full effects are felt in the beef 

market. After this adjustment period or lag, the supply of U.S. and Canadian beef has been 

found to be inelastic with regard to changes in corn prices; typically, a 10-percent rise in corn 

prices reduces the volume of beef supplied by as little as 1 percent to as much as 3 percent. 77 

Historically as grain prices rise, feedlot operators reduce their placements of feeder cattle and 

seek ways to reduce their use of grain, using forage or nongrain feed stuffs, and by marketing 

the fed cattle at lighter weights. 78 Typically, higher grain prices initially reduce the feedlots' 

demand for feeder cattle (calves and yearlings), and thus lower spot prices for feeder cattle.79 

In the United States, the annual number of cattle on feed fluctuated little during 1992/93 to 

I 996/97, averaging about 19.6 million animals annually, whereas the volume of feed 

consumption fluctuated by as much as 15 percent annually (table D-25). Despite a stable 

number of cattle, U.S. beef production rose steadily by about 2.5 percent annually to 26.1 billion 

pounds in 1996, according to USDA;80 improved genetics and management increased beef 

productivity (beef production per cow) and feed efficiency.81 The amount of grain fed per 

animal unit (a composite index that includes cattle, swine, and poultry)82 generally declined from 

about 1.93 metric tons per animal unit in 1993/93 to 1.66 tons per unit in 1995/96, and then 

recovered to 1. 79 tons per unit in 1996/97 (table D-25). 

During 1992/93 through 1996/97, the price of corn, the principal feedgrain, rose from about 

$2.07 per bushel to a peak of $3.24 per bushel in 1995/96, then declined moderately to a 

projected $2.65 per bushel in crop year 1996/97 (table D-26). The 43-percent rise in U.S. com 

prices from 1994/95 to a record $3.24 per bushel in 1995/96 was a major influence in the 16-

percent drop offeedgrain per animal unit during those 2 years. Lower U.S. feedgrain production 

particularly in 1993/94 and 1995/96 sharply lowered U.S. stocks, and boosted prices during 

77 Walter Gardiner, Vernon Roningen, and Karen Liu, Elasticities in the Trade Liberalization 

Database, USDA, May 1989, p. 5, found a price elasticity of supply ofbeefrelative to com prices 

ranging from -0.32 to -0.20 in the United States, and from -0.12 to -0.20 in Canada. 78 Higher priced grain generally does not affect the feeding of cattle already in a particular feedlot 

since changing the composition of a feed ration can lead to loss of feeding efficiency and stress. 79 For example, one-half of the 45-percent decline in the price offeeder calves during May 1993 

through May 1996 was attributed to higher com prices, and about half to increased poultry and meat 

supplies in a Michigan State University study. HD. Ritchie, J.L. Orth, et al., "Time is now for beef 

industry to consider change," Feedstuffs, Feb. 3, 1997, p. 1. 80 U.S. beef production rose from 23.4 billion pounds in 1992 to 26. l billion pounds in 1996, 

according to USDA data (Agricultural Outlook, various issues). 81 John Marsh, "Domestic and Foreign Trade Factors in the 1994-96 Cattle Price Decline," 

Montana State University, Department of Agricultural Economics, special report No. 19, Aug. 1996, 

p. 2. 

82 USDA does not report the amount of feed grain used by cattle on feed. 

2-19 
these years. The much tighter domestic feedgrain market also coincided with tight world grain 

markets that affected livestock feeders in the United States, Canada, and elsewhere. 

U.S. Trade and Tariff Measures 

Tariff Measures 

U.S. imports of cattle and calves for immediate slaughter, and fresh, chilled, or frozen beef are 

subject to import duties (tariffs) as provided for under the Harmonized Tariff Schedule of the 

United States (HTS). Live cattle for immediate slaughter and fresh, chilled, or frozen beefthe 

subject of this investigation are provided for in chapters 1 and 2 of the HTS, which are 

reproduced in appendix F. Duties applicable to imports from Canada and Mexico are discussed 

in chapter 4, Impact of the NAFTA on U.S. Trade of Cattle for Slaughter and Beef Eligible 

U.S. imports from Israel and countries designated under the Caribbean Basin Economic 

Recovery Act, and the Andean Trade Preference Act receive a rate of duty of "Free." The 

general rate of duty applicable to U.S. imports of cattle for immediate slaughter is L6¢ per 

kilogram. 

U.S. imports of fresh, chilled, or frozen beef (except from Canada and Mexico) are subject to 

a tariff-rate quota of 696,621 metric tons (tons) (1.5 billion pounds). For countries receiving 

the general rate of duty, the in-quota tariff rates for beef carcasses and half carcasses are 4 .4¢ 

per kilogram; 4 percent ad valorem for high-quality beef cuts;83 and 10 percent ad valorem for 

other processed beef The ad valorem equivalent of the 4.4¢ per kilogram rate of duty in 1996 

ranged from 0.58 percent to 2. 78 percent. The over-quota tariff rate was 31.1 percent for fresh, 

chilled, or frozen beef and the bound rate at year 2000 is 26.4 percent for countries receiving 

the general rate of duty. The rate for 1997 is 28. 8 percent. The quantity of beef imported 

within the tariff-rate quota level remains fixed, as the in-quota duty rates. 84 

The Meat Import Act of 1979 and Section 204 

of the Agricultural Act of 1956 

Prior to 1995, U.S. imports of certain meats were subject to import quotas under the Meat 

Import Act of 1979 and section 204 of the Agricultural Act of 1956.85 Under the Meat Import 

Act, the Secretary of Agriculture was required to publish in the Federal Register the estimated 

quantity of beef and veal that would "trigger" the imposition of quotas under the law, and each 

quarter, the quantity of meat that, but for the law, would enter the United States in such calendar 

year. During 1980-94, the ''trigger" level ranged from a high of 1,667 .6 million pounds in 1980 

to a low of 1,228. 7 million pounds in 1984. The Meat Import Act was repealed by the Uruguay 

83 See app. F, pertinent parts of the HTS--Cattle and Meat of Cattle: U.S. rates of duty, by HTS 

subheading, "Additional U.S. Notes" for definition of high-quality beef cuts. 84 Marilyn Moore, Agricultural Sector, USTR, telephone interview with USITC staff, Sept. 6, 

1996. 85 The Meat Import Act and section 204 of the Agricultural Act of 1956 were described in detail in 

the USITC report entitled The Competitive Position of Canadian Live Cattle and Beef in U.S. 

Markets, investigation No. 332-241, publication 1996, July 1987, and were reproduced as appendix 

· Mand 0, respectively, of that report. 

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Round Agreements Act,86 effective January 1, 1995, and replaced with a tariff-rate quota 

system. 87 • 

86 Public Law 103-465, 108 Stat. 4809 (1994). 87 Uruguay Round Trade Agreements, Texts of Agreements, Implementing Bill, Statement of 

Administrative Action, and Required Supporting Statements (Statement of Administrative Action), 

Message from The President of the United States, GPO, Wash., DC, 1994, p. 73. The tariff-rate 

quota system involved a two-tier tariff, with "in-quota" imports subject to a lower tariff, and "overquota" imports subject to a higher tariff. 

2-21 

CHAPTER3 

FOREIGN INDUSTRIES AND MARKETS 

Canada has accounted for the bulk of U.S. imports of cattle for slaughter and Mexico has 

accounted for nearly all of the remainder. Canada has been a leading and growing supplier of 

U.S. beef imports and is a leading U.S. export market for beef. Mexico has also been an 

important U.S. export market for beef and cattle for slaughter and is the largest supplier of U.S. 

imports of feeder cattle. 

This chapter also discusses the cattle and beef sectors of other producing countries, including 

those in Central and South America, Japan and the Republic of Korea (Korea). 

Mexican Cattle and Beef Sectors 

Description and Uses 

The physical environment in which the cattle sector of the Northern Mexican States1 exists has 

many similarities with that of the contiguous regions of the United States. For example, rainfall 

in East Texas and the contiguous areas of Mexico averages 20 to 40 inches per year whereas 

West Texas, Arizona, and contiguous areas of Mexico average 10 to 20 inches. Similarly, July 

temperatures average 68 to 86 degrees in much of the Southwest United States as well as the 

contiguous regions of Mexico. However, because of the existence of the Sierra Madre Oriental 

range, parts of central Mexico are generally more mountainous than contiguous regions of the 

United States.2 The Northern Mexican States are of particular interest to U.S. cattle producers 

because of their physical proximity and because they are estimated to account for most of the 

U.S. imports of cattle from Mexico.3 

A large share of the cattle in Mexico and contiguous parts of the United States are Zebu (Bos 

indicus) or part Zebu cattle. In the United States, the most common Zebu breed is the 

Brahman. Zebu cattle have a characteristic hump over the top of the shoulder and most Zebu 

breeds have large, drooping ears and excess skin in the throat and dewlap. 4 Zebu breeds and 

Zebu crosses are more heat-tolerant and insect-resistant than other breeds (Bos taurus) and 

hence their productivity is much higher in the southern and Gulf regions of the United States5 

and contiguous regions of Mexico. 

Cattle in Mexico include beef, dairy, and dual purpose types. 6 Beef types are kept primarily 

for the production of meat or calves to be exported to the United States. Dairy types are kept 

1 For purposes of this report the Northern Mexican States are Baja California Norte, Baja 

California Sur, Coahuila, Chihuahua, Durango, Nuevo Leon, San Luis Potosi, Sonora, and Zacatecas. 2 Hammond Ambassador World Atlas, pp. 147-148. 3 USITC staff interview with Dr. Bill Brown, Texas Animal Health Commission, Jan. 30, 1997. 4 Robert E. Taylor, Scientific Farm Animal Production, (NY: Macrnillian Pub. Co., 1992), p. 353. 5 Ibid, p. 364. 6 USITC staff interview with an official of USDA, FAS, Mexico City, Feb. 10, 1997. 

3-1 
primarily for the production of milk, although they are slaughtered for beef when they are no 

longer suitable for the production of milk. Dual purpose types are kept for the production of 

both meat and milk. 

The most popular beef type cattle breeds in Mexico include those developed in Europe and the 

United States including Brangus, Hereford, Beefmaster, Bradford, and Angus although the 

Charolais has become more popular in recent years. The popularity of European and U. S.-

developed breeds reflects, in part, the demand and higher prices for feeder calves of such breeds 

in the U.S. matket. 7 Feeder cattle and calves in Mexico are graded on the basis of breeds and 

animal health. Feeder animals of European and U.S. breeds that are of good health constitute 

export grade 1 and are typically higher priced than other grades. In addition to European and 

U.S. breeds, beeftype cattle include crosses of European and U.S. developed breeds with Zebu 

that do not have a hump; such animals constitute export grade 2. Crosses that do have humps 

constitute export grade 3 and, export grade 3 includes dairy animals and indigenous breeds 

called Criollo. Beeftype cattle are mostly in the Northern States ofMexico.8 

In general, the beef-type cattle in the Northern Mexican States are similar to cattle raised in the 

Southwestern United States.9 Feeder animals imported from Mexico are typically pastured on 

grass or winter wheat, as described later in this chapter, and thereafter are reportedly highly 

substitutable for Southwestern feeder animals. They are reportedly less similar and less 

substitutable for cattle raised in other parts of the United States. 

Dairy type cattle include highly productive animals that are kept in modem confinement 

facilities. Such animals account for a limited share (about 14 percent in 1992) of the dairy 

animal inventory but more than half of Mexican cow milk production. The most common 

breeds of dairy type cattle in confinement facilities are the Holstein, which accounted for 95 

percent in 1992 and Brown Swiss, which accounted for 4 percent. Dairy confinement facilities 

are mostly in Northern and Central Mexican States.10 

Dual purpose types include indigenous breeds and crosses on indigenous breeds with either beef 

breeds or dairy breeds. Holstein and Brown Swiss dairy type cattle are typically crossed with 

indigenous breeds to improve milk production whereas Simmenthal and Simbrah are typically 

crossed with indigenous breeds to improve beef production. Dual purpose breeds are typical 

kept in the Southern and tropical States of Mexico. 11 

7 USDA, FAS, Livestock Annual, (MX2185), Aug. 10, 1992, p. 8. 8 Ibid, p. 2. 9 USITC staff interview with Jim Gill, marketing director, Texas Cattlefeeder' s Association, July 1, 

1997. 10 USDA, FAS, Dairy Annual Report, 1992. 11 Op. cit, pp. 2-3. 

3-2 
Number and Distribution of Producers 

The following tabulation indicates the importance of the Northern Mexican States as a source 

of U.S. imports of beef from Mexico. As of January 31, 1996, the most recent period for which 

data are available, there were 27 Mexican plants approved by the USDA to ship meat to the 

United States and 19 of the plants were in Northern States.12 The distribution of these plants 

is shown in the following tabulation: 13 

Northern Other 

States Plants States Plants 

NuevoLeon .......... 7 Aguascalientes .... 3 

Sonora ............... 5 Sinaloa .......... 2 

Chihuahua ............ 4 Hidalgo • ••••••• 0 1 

Baja California Norte .. 2 Tabasco ......... 1 

Coahuila ............. 1 

Mexican Cattle Inventories, Calf Crop, and 

Apparent Consumption 

The Mexican cattle inventory declined from 30.2 million animals in 1992 to an estimated 27.3 

million in 1997 (table D-27) or by 10 percent. High-interest rates, rising feed costs, the 

prevailing drought in northern Mexico and modest demand for beef in Mexico contributed to 

the decline. 14 The drought was described as the worst drought in northern Mexico in several 

decades.15 The calf crop declined from 9.7 million animals in 1992 to 8.5 million in 1996 and 

is forecast to decline to 8.0 million in 1997. The decline in the calf crop reflects both the decline 

in the number of cows and reduced cattle fertility associated with stress on the animals brought 

on by the drought. 16 The factors that led to the decline in the cattle inventories contributed to 

increased consumption (slaughter) of cattle and calves, which rose from 7.8 million animals in 

1992 to 8.2 million in 1996, and 8.2 million projected in 1997. 

The drought ended in parts of Mexico in the fall of 1996 and Mexican cattlemen began 

rebuilding their herds. Consequently, there have been very few heifer calves entering the United 

States from Mexico. During the drought the calving rate declined in Mexico, probably to 5 5 to 

60 percent, down from about 7 5 percent; some cattlemen did not have their cows bred because 

there was not adequate feed. 17 

Only limited data are available concerning the distribution of cattle in Mexico. However, as part 

of a cooperative U.S.-Mexican program concerning cattle disease control and eradication, 

12 USDA, FSIS, Foreign Countries and Plants Certified to Export Meat and Poultry to the United 

States, Mar. 1, 1996, pp. 169-173. 13 The state location of one plant was not reported. 14 USDA, FAS, Livestock Annual, (MX6099), July 24, 1996, p. 1. 15 USDA, FAS, Livestock Annual (MX5048), Aug. 1, 1995, p. 1. 16 Ibid. 17 USITC staff interview with Raul Tellez, marketing specialist with the New Mexico Department 

of Agriculture, Feb. 18, 1997. · 

3-3 
participating Mexican States provided data on cattle inventories to a Bi-National Committee. 

The cattle inventories for reporting Mexican States and the dates of the inventories are shown 

in table D-28. 

Mexican Grading System, Sanitary and 

Phytosanitary Measures 

Grading of meat, which is separate from inspection for sanitary and phytosanitary measures, 

is not common in Mexico. Some Northern States have grading systems based on U.S. standards 

that evaluate fat marbling, but in Mexico most beef is derived from grass-feed animals and 

maturity, firmness, and color of the lean and fat are of more importance than marbling. 18 

Mexico's livestock slaughtering and meat processing sector is made up of plants accredited and 

inspected for sanitary measures by the Mexican Federal Government Secretariat of Agriculture; 

such plants are called "Plants of Federal Inspection Type" (TIF). Local or county level plants 

are inspected for sanitary measures by the Mexican Department of Health (non-TIF). 19 In 1995 

Mexico had 149 TIF plants of which 27 were approved by the USDA to ship meat to the United 

States. Although detailed statistics are not available, it is estimated that only 20 percent of 

Mexican beef and pork was processed at TIF plants because costs were so much lower at nonTIF plants.20 Although official statistics are not available, it is estimated that nearly two-thirds 

of the beef sold in Mexico is sold fresh rather than chilled, frozen, prepared or preserved. 21 

According to the Mexican Cattlemen's Association the Mexican Federal Government has made 

efforts in recent years to assist Mexican cattle growers, especially with sanitary and 

phytosanitary measures. The Mexican Federal Government established a National Commission 

for the Eradication of Tuberculosis, and, after several years of work, participation in the 

program became compulsory throughout the country on March 8, 1996. 22 A similar program 

has begun for the eradication of Bovine Brucellosis. The Mexican Federal Government has also 

supported a campaign for the eradication of ectoparasites that became effective nationwide on 

May 19, 1995.23 

Mexican Trade in Live Cattle and Beef 

The United States has traditionally accounted for the bulk of Mexico's imports and exports of 

cattle for immediate slaughter. Also, the United States has accounted for virtually all of 

Mexico's imports and exports of fresh, chilled, or frozen beef since enactment of the NAFT A. 24 

18 USDA, FAS, Livestock Annual (MX 2185), Aug. 10, 1992, p. 15. 19 Livestock Annual (MX 2185), p. 14. 20 USDA, FAS, Livestock Annual (MX5048), Aug 1, 1995, p. 4. 21 Ibid., p. 13. 22 National Campaign for the Eradication of Bovine Tuberculosis, NOM-03 l-Z00-1995. 23 USITC staff interview with Cesar Gonzalez Quiroga, president; Heriberto Cardenes Galvan, 

general counsel; Gustavo Torres Flores, treasurer, Confederacion Nacional Ganadera (the Mexican 

Cattlemen's Association), Feb. 12, 1997. 24 These exports are discussed in chapter 4. 

3-4 
Mexican exports of cattle and calves for immediate slaughter to the United States have been 

small in relation to Canadian exports to the United States and very small in relation to U.S. 

domestic production. As shown in table D-29, Mexico is by far a net importer of beef. Also, 

as described earlier in this report and shown in table D-21, Mexico is an important market for 

U.S. exports of edible beef offal. In addition, Mexico was the third or fourth largest market for 

U.S. exports ofcattlehides, although such U.S. exports declined from 2.6 million hides in 1991 

to 0.9 million in 1995.25 The data suggest that it is more practical to slaughter cattle in Mexico 

than to ship the animals to the United States and then return products derived from the 

slaughter. · 

Mexican imports of beef declined from 287 million pounds in 1992 to 93 million pounds in 

1995 before increasing to 165 million pounds in 1996 (table D-29). The share of imports 

supplied by the United States increased from 51 percent in 1993 to 97 percent in 1996.26 The 

increase in the share supplied by the United States reflects changes in import tariff rates and 

countervailing duties described later in this section. Other suppliers of Mexican beef imports 

included Australia, New Zealand, and Denmark. 27 

In general, the United States appears to have a comparative advantage over Mexico in the 

production offed cattle and beef whereas some regions of Mexico, such as Northern Mexico, 

appear to have a comparative advantage over some parts of the United States, particularily in 

the Northeast, in the production of stocker and feeder catt!e and calves as described below. 

Grain production in the United States exceeds that in Mexico in part because the United States 

has a much larger amount of land with soil and growing conditions conducive to the growing 

of grain, such as in the Com Belt and the Wheat Belt. Also, grain production in the United 

States far exceeds the demand for direct human consumption in the United States. For example, 

com for food products for human consumption in the United States accounted for less than 15 

percent of total and projected use annually during 1993-97.28 By contrast Mexico is a net 

importer of grains. For example, during the 1995-96 cropyear Mexican consumption of coarse 

grains amounted to 29 million metric tons whereas production amounted to 21 million metric 

tons. 29 

Also, there are certain synergies associated with feeder calves, including feeder calves imported 

from Mexico, and winter wheat growing in parts of the Southwestern and South Central United 

States. 30 Typically calves are born in the early spring and are ready to be weaned in the late fall 

or early winter as pastures enter into seasonal decline. The weaned calves may be pastured on 

winter wheat from about November until mid-March or possibly as late as the end of May and, 

with proper management, the grazing will not adversely affect the wheat crop. The rate of 

weight gain on winter wheat grazing is typically about 1.5 to 2 pounds per day. Grazing winter 

25 USITC, Industry & Trade Summary Hides, Skins, and Leather, publication 3015, Jan. 1997, 

table B-10, p. B-12. 26 Livestock Annual (MX 5048), p. 28, and (MX 6099), p. 9. 27 Ibid. 

28 USDA, ERS, Feed Outlook, Dec. 13, 1996, tables 1 and 6. 29 USDA, FAS, Grain: World Markets and Trade, Dec. 1996, p. 33. 30 This description of grazing of calves on winter wheat was developed from a USITC staff 

interview with Dr. Robert E. Taylor, professor of Animal Science, Colorado State University, Jan. 28, 

1997. 

3-5 
wheat is especially profitable for light-weight, thin calves in that they could exhibit 

compensatory gain (gaining weight quickly and efficiently if they had previously been held back 

by inadequate nutrition). Wheat grazing gains are typically 50 percent less expensive than 

feedlot gains. Calves that were large enough after wheat grazing (about 600-800 pounds or so) 

may be moved directly to feedlots whereas lighter calves, about 500 pounds or less, may be 

transferred to grass pasture for further gain during the summer. 

Feedlot operators in Mexico are reportedly not normally able to pay the prevailing price for 

feeder animals destined for the export market and thus feedlot operators feed culled females or 

steers that did not meet U.S. standards.31 

Mexican Production, Domestic 

Consumption, and Prices 

As shown in table D-29, Mexican beef production rose from 3.6 billion pounds in 1992 to 4.1 

billion pounds in 1995, reflecting in part a sell-off oflive cattle. Production declined to 4.0 

billion pounds in 1996 and is forecast to amount to 4.0 billion pounds in 1997 reflecting, in 

part, the reduced Mexican live cattle inventory. Beef consumption rose from 3. 9 billion pounds 

in 1992 to 4.2 billion pounds in 1994-95 but declined to 4.1 billion pounds in 1996. 

The price of live cattle (steers) in Mexico declined irregularly from the equivalent ofUS$87 per 

100 pounds in the first quarter of 1992 to the equivalent ofUS$45 per 100 pounds in the first 

quarter of 1995 (table D-30). A decline was especially notable between the last quarter of 1994 

and the first quarter of 1995 when prices declined by 35 percent (from the equivalent of US$69 

per 100 pounds to the equivalent ofUS$45 per 100 pounds). That decline corresponded with 

a sharp decline in the peso, which is described further in chapter 4. Thereafter prices increased 

to the equivalent ofUS$60 per 100 pounds in the fourth quarter of 1996. 

The trend in beef prices in Mexico corresponded with that of cattle declining irregularly from 

the equivalent ofUS$1.36 per pound in the first quarter of 1992 to the equivalent ofUS$0.68 

per pound in the first quarter of 1995 (table D-31). Prices then rose to the equivalent of 

US$0.96 per pound in the fourth quarter of 1996. 

Mexican Trade Measures 

The rates of duty applicable to Mexican imports of live cattle and fresh, chilled, or frozen beef 

from the United States and Canada were reduced as a result of the NAFTA and are discussed 

in chapter 4. U.S. exports of certain fresh, chilled, or frozen beef and offal to Mexico were the 

subject of a Mexican antidumping investigation, which is also discussed in that chapter. 

Mexican countervailing duties of 45. 7 percent ad valorem were imposed on imports of frozen 

beef from the EU effective June 4, 1994. The countervailing duties (CVD) are in addition to 

a tariff rate of 25 percent and make it unlikely that Mexico will import significant quantities of 

31 USDA, FAS, Livestock Annual Report (MX2185), Aug. 10, 1992, pp. 6-7. 

3-6 
frozen beef from the EU as long as the CVD rates are in effect.32 In 1995 Mexico negotiated 

trade agreements with other countries including Costa Rica, Bolivia, Venezuela, and Colombia, 

but most livestock products were excluded or subject to long phase-in periods.33 

Canadian Cattle and Beef Sectors 

Structure of the Canadian Cattle and 

Beef Sectors 

Cattle are raised and beef is processed throughout Canada; however both tend to be 

concentrated in the Prairie Provinces (Alberta, Manitoba, and Saskatchewan) and the Central 

Provinces (Ontario and Quebec) (tables D-32 and D-33). Overall, Western Canada (the Prairie 

Provinces and British Columbia) accounted for about 70 percent of the Canadian cattle 

inventory and about 84 percent of the beef cow inventory (tables D-34 and D-35). 

The Prairie Provinces comprise 80 percent of the farmland of Canada. The region is well suited 

to the production of grains, especially wheat and barley, oilseeds, particularly canola, and 

forages including alfalfa. 34 The Prairie Provinces accounted for about two-thirds of the 

Canadian January 1 cattle inventory during 1993-97 with Alberta accounting for 37 to 38 

percent. The region accounted for an even larger share of the beef cattle sector. The Prairie 

Provinces accounted for three-fourths or more of the beef cow inventory, or 3 .2 million animals 

(table D-36); with Alberta accounting for 38 to 42 percent. 

Alberta's cattle industry appears to be competitive for a number ofreasons. The Canadian 

Cattlemen's Association (CCA) contends that Alberta is one of the lowest cost producers offed 

. cattle in North America. Large supplies and relatively low costs of barley in Alberta have 

contributed to increased cattle feeding there. The CCA estimates that 80 percent of Alberta's 

cow-calf growers are also grain farmers and many of them have expanded their cattle feeding 

operations. 35 

Ontario has the most diverse agricultural sector among the Canadian provinces in part because 

of soils and climate that are suitable for a variety of agricultural crops. Cattle are commonly 

kept as part of a diversified farming enterprise in Ontario. 36 Ontario accounted for 16 percent 

of the total Canadian cattle inventory and about 10 percent of the beef cow inventory. 

Quebec accounted for about 11 percent of the total Canadian cattle inventory and about 

5 percent of the beef cow inventory. Milk cows are concentrated in the Central Provinces. 

32 Livestock Annual (MX4053), p. 4. 33 Livestock Annual (MX6099). 34 "A Review of economic, social and political developments in Canada," Canada Yearbook 1988, 

p. 9-3. 

35 USDA, FAS, Dairy, Livestock, and Poultry: World Livestock Situation, FL&P 2-96, p. 26. 36 Canada Yearbook, p. 9-4. 

3-7 
Quebec accountedfor40 percent37 of Canada's total milk cow inventory as of January 1, 1997 

and Ontario accounted for 3 3 percent. 

As with cattle raising, cattle slaughter in Canada appears to be expanding in the Prairie 

Provinces (especially in Alberta), whereas it appears to be contracting slightly in the Central 

Provinces. The Prairie Provinces accounted for about two-thirds of Canadian cattle slaughter 

in recent years (table D-37), although the total number of cattle slaughtered has remained rather 

stable (table D-33). Also, the expansion of two major cattle-slaughtering facilities in Alberta 

by the last quarter of 1996, the IBP plant at Lakeside, Alberta and the Cargill plant at High 

River, Alberta, is expected to increase the slaughtering capacity by one-third.38 Data on 

Canada's beef sector are shown in table D-38. 

The traditional movement of cattle from Western Canada to Eastern Canada has been 

increasingly replaced by movement of cattle from Western Canada south to the United States. 

At the same time there has been an increasing trend for beef to move from the eastern and 

central United States to eastern Canada. These trends were noted in previous USITC 

investigations. 39 The CCA contends that these trends have continued in recent years, 40 and may 

be independent of the effects of the NAFTA. 41 

Canadian Cattle Cycle and Cattle Inventory 

The number of cattle and calves in Canada (as measured by the January 1 inventory reported 

by Statistics Canada) increased from 11.8 million in 1993 to 13.2 million in 1996 but declined 

to 12.8 million in 1997 (table D-39). The number of beef cows increased from 3.8 million in 

1993 to 4.3 million in 1996 but declined to 4.2 million in 1997 (table D-36). The spring of 

1996 was prolonged, limiting forage growth and requiring cattlemen to purchase or supply more 

feed than usual. Reduced profitability from lower cattle prices combined with relatively highfeed grain prices prompted a large sell-off of beef cows. 42 

Prices 

The price of slaughter cows in Canada declined significantly beginning in April-June of 1995 

when prices were US$39.43 43 per 100 pounds, down from US$47.04 in the corresponding 

quarter of 1994 (table D-40). Prices remained relatively low for the rest of 1995 and throughout 

1996, corresponding to increasing beef production in Canada as the Canadian cattle cycle 

appeared to be in its contraction phase. 

37 Calculated from statistics reported in Statistics Canada, Agriculture Division catalogue No. 23-

603-UFE. 38 Livestock Annual (CA6040), p. 3. 39 USITC, The Competitive Position of Canadian Live Cattle and Beef in U.S. Markets, 

investigation No. 332-241, USITC publication 1996, July 1987, p. 34, and Live Cattle and Beef 

U.S. and Canadian Industry Profiles, Trade, and Factors of Competition, investigation No. 332-

328, USITC publication 2591, Jan. 1993, pp. 5-4 and 5-5. 40 Prehearing briefof CCA, Mar. 10, 1997, pp. 15, 5-1 to 5-4. 41 David Andrews, president of the CCA, transcript of the hearing, p. 47. 42 Livestock Annual (CA6040), Aug. 2, 1996, p. 3. 43 Canadian dollar amounts have been converted to U.S. dollars at prevailing exchange rates. 

3-8 
The price of steers in Alberta, Canada, generally declined from the first quarter of 1993, when 

prices were about US$75 per 100 pounds through the second quarter of 1996, to US$54 per 

100 pounds (table D-41). However, prices recovered in the last half of 1996, averaging 

US$61.45 in July-September compared with US$57.27 in the corresponding quarter of 1995, 

and US$62.38 in October-December compared with US$59.33 in the corresponding quarter 

of 1995. 

. Canadian Trade and Tariff Measures 

Canadian imports of live cattle and calves as well as beef and veal are subject to import duties 

and tariff rate quotas as provided for under the Canadian Tariff Schedules. Such imports are 

also subject to sanitary and phytosanitary regulations administered by Agriculture and AgriF ood Canada and to countervailing and antidumping duties administered by the Canadian 

International Trade Tribunal (CITT). 44 

Tariffs and Tariff-Rate Quotas 

Portions of the Canadian Tariff Schedules applicable to imports oflive cattle and calves as well 

as beef and veal are shown in appendix H. Tariff rates applicable to Canadian imports of cattle 

for immediate slaughter and fresh, chilled, or frozen beef and veal from the United States and 

Mexico were reduced as a result of the CFTA and the NAFTA and are described in detail in 

chapter 4. 

Prior to implementation of the URA, Canada, like the United States, had provisions for quotas 

on imports of beef under the Canadian Meat Import Act. In its schedule of concessions45 

Canada agreed to convert its quotas to a tariff-rate quota system, under which the first 76,409 

metric tons,46 (product weight) of beef classifiable under headings 0201 and 0202 (fresh, 

chilled, or frozen beef and veal) would enter at a rate of duty of "Free." A side agreement 

provided New Zealand with a reserve of 26,600 metric tons. Canada imposed an initial rate of 

37.9 percent ad valorem on over-quota imports, with this rate to be reduced in stages to 26.5 

percent ad valorem. With the beginning of the implementation period Canada committed to 

matching the level of the U.S. tariff for the corresponding products. The U.S. tariff rate for 

1995 was 30.3 percent ad valorem and the final bound rate is to be 26.4 percent ad valorem. 

Imports from the United States and Mexico are not counted against the tariff quota; thus, all 

such imports received a rate of duty of "Free." 

44 The administration of Canadian countervailing and antidumping duties is described in USITC 

publication 1996, The Competitive Position of Canadian Live Cattle and Beef in U.S. Markets, pp. 

97-99. 45 The following description of the Canadian commitments under the URA was adapted from 

World Trade Organization, International Bovine Meat Agreement, Summary of the Results of the 

Uruguay Round in the Meat Sector, Feb. 1995, p. 23. 46 The metric units may be converted to pounds by multiplying by 2.204622. 

3-9 
On October 13, 1995, the Canadian Federal Government announced 1996 beef and veal tariff 

rate quota administrative guidelines. 47 New Zealand's country reserve was increased to 29,600 

metric tons and Australia was given a country reserve of 42,000 metric tons, leaving 4,809 

metric tons with no country reserve. Within the Canadian market 7 5 percent of the allocation 

was offered to processors and retailer processors based on their total imports in 1995, and 

distributors were allocated the remaining 25 percent. Australia's country reserve was reduced 

by 7,000 metric tons to 35,000 metric tons for 1997 whereas New Zealand's remained at 29,600 

metric tons. 48 

Countervailing Duties Applicable to 

Beef Originating in the EU 

On July 22, 1996 the CITT rescinded a countervailing duty order applicable to imports of 

boneless manufacturing beef originating in the EU. 49 The CITT concluded that it is persuaded 

that there is no likelihood of injury to domestic producers from the annual importation of not 

more than 5,000 tons (metric) of subsidized EU boneless manufacturing beef into Canada.50 

The CITT found that an Agreement between the EU and Canada would limit the subject imports 

to no more than the aforementioned 5,000 tons. 51 

Safeguard Action Applicable to Beef 

from non-NAFTA Countries 

On June 21, 1993, Canada took a safeguard action and imposed a tariff-rate quota on imports 

of boneless beef originating in non-NAFTA countries.52 Canada terminated the safeguard 

action on January 1, 1995 when it implemented a tariff-rate quota system pursuant to a URA 

commitment (as described in chapter 6 of this report). 53 Under the safeguard action Canada 

imposed a duty of 25 percent ad valorem effective May 1, 1993, on annual imports over 72,201 

metric tons; however, for the remainder of 1993 the duty was applicable for imports in excess 

of 48,000 metric tons. 54 The quantity of 72,201 metric tons was the average import volume for 

the 3 preceding years. 55 The action was taken following receipt of a recommendation from the 

CITT on May 28, 1993. The Canadian Federal Government had earlier asked the CITT to 

conduct an investigation in order that it might determine whether imports of boneless beef 

originating in countries other than the United States are causing or threatening serious injury to 

the producers of boneless beef in Canada, and if so, to provide advice as to the most appropriate 

47 Agriculture and Agri-Food Canada, news release, Beef TRQ: Important Dates (BeefTRQ: 

Important Dates), Nov. 1, 1996. 48 USITC staff telephone conversation with an official of the U.S. Embassy, Ottawa, Canada, Apr. 

29, 1997. 

49 The duty which was imposed on July 25, 1986 is discussed in USITC Pub. 2591, Live Cattle 

and Beef U.S. and Canadian Industry Profiles, Trade, and Factors of Competition, Jan. 1993, pp. 

3-8 and 3-9. 5

° CITT, Dumping and Subsidizing Reviews (Section 76) Orders and Reasons. 51 Ibid. 

52 Beef TRQ: Important Dates. For Canada's notification to GATT, see GATT document Ln2 l 9. 53 Canada Gazette, part II, vol. 129, No. 9, Mar. 5, 1995, pp. 1261-1264. 54 Ibid. 55 Ibid. 

3-10 
remedy. 56 The CITT found that imports of such boneless beef were in such increased quantities 

as to threaten Canadian slaughters, boners and cattle producers with serious injury, and 

recommended the annual tariff-rate quota be put in place for 3 consecutive years that preceded 

the previously discussed tariff-rate quota. 

On May 6, 1994, the tariff rate quota was increased by 13,000 metric tons to allow for 

importation of product in transit and the time the tariff-rate quota was filled for 1994; the 25 

percent tariff-rate quota became effective on May 26, 1994. On October 7, 1994, certain 

products (frozen inside and outside rounds, eye of the rounds, outside flats, and sirloin tips) 

were exempted from the 25 percent rate because the Canadian Federal Government determined 

that primary processors were not in a position to supply the 1994 needs of Canadian further 

processors. 

Central American Live Cattle and Beef Sectors 

The Central American countries of Costa Rica, Nicaragua, Honduras, and Guatemala are 

authorized by the USDA to export beef and veal to the United States. The Dominican Republic 

in the Caribbean is also authorized to export beef and veal to the United States. Most cattle in 

these countries are grass-fed. Thus, U.S. imports of beef from these countries generally 

compete with beef from U.S. cull cattle and imports of beef from Australia and New Zealand, 

most of which are derived from grass-fed cattle. 

There is no country-specific quota for U.S. imports of beef and veal from these countries under 

the U.S. tariff-rate quota for fresh, chilled, or frozen beef. Thus, such imports fall into a basket 

category of "other countries or areas." The in-quota quantity for "other" countries is set at 

64,805 metric tons. 57 This section provides information on the cattle and beef sectors for the 

above countries, and it briefly discusses the impact of the NAFTA and the URA on beef and 

veal exports from these countries to the U.S. market. 

Costa Rica 

During 1992-97, cattle inventories in Costa Rica declined by 10 percent to 1.5 million animals 

(table D-42). Beef production declined from 207 million pounds in 1994 to 205 million pounds 

in 1995 and 1996. Exports of beef and veal totaled 64 million pounds in 1996 and accounted 

for 31 percent of production. The United States is by far the largest export market for Costa 

Rican beef (94 percent in 1996); however, Costa Rica is increasing its exports to Colombia and 

other Central American countries in an effort to open alternative markets for its beef. 58 

56 The CITT investigation was requested by the Governor General in Council on the 

recommendation of the Minister of Finance et al. and was prompted because "importation into Canada 

of boneless beef at prices appreciably below domestic prices for boneless beef have been increasing 

significantly .... "-- from CITT, An Inquiry into the Importation of Boneless Beef, Originating in 

Countries other than the United States of America, Reference No. GC-93-001, May 28, 1993, p. 28. 57 The U.S. tariff-rate quota provisions are discussed in chapter 6 of this report. 58 USDA, FAS, Livestock Annual (CS6022), Aug. 6, 1996, p. 2. 

3-11 
Four plants are certified to export beef to the United States; however, three of the plants merged 

to form a new company, FOGASA. The company reorganized to increase efficiency and lower 

operating cost. 59 

According to officials of the U.S. Department of State, to date, the URA does not appear to have 

had a negative impact on Costa Rica's exports of beef to the United States.60 The "other" 

category in which U.S. imports from Costa Rica fall has not been filled; thus, U.S. imports from 

Costa Rica have entered at the lower in-quota rates. Eligible U.S. imports receive a rate of duty 

of "Free" under'the special CBERA provisions as described in chapter 2. However, like many 

other Central American countries, Costa Rica contends that if in the future its export potential 

increases, it would face a ceiling under the tariff-rate quota. In addition, Costa Rica is 

concerned that if additional countries are approved to export beef to the United States, it is 

possible that such exports will enter under the "other" category. If this occurs and the "other" 

quota is not expanded, Costa Rica believes its beef exports will be adversely affected, since the 

quota is filled on a first-come first-serve basis. 61 

Nicaragua 

During 1992-96, the Nicaraguan cattle inventory averaged about 1.7 million animals annually 

as shown in table D-43. Beef production ranged from 119 million pounds in 1994 to 108 

million pounds in 1996. The United States is the primary foreign market for Nicaraguan beef. 

U.S. imports of beef from Nicaragua increased from 19 million pounds in 1992 to 60 million 

pounds in 1994, then declined to 36 million pounds in 1996.62 Beef exports to the United States 

from Nicaragua are expected to continue to decline during the next 3 to 5 years as cattle 

producers attempt to redevelop traditional markets such as Costa Rica and Honduras. There are 

three USDA certified beef export plants in Nicaragua. 63 

The Nicaraguan livestock industry has expressed concern about the tariff-rate quota for beef, 

contending it will constrain beef exports to the United States. 64 Certain industry organizations 

in Nicaragua, Guatemala, Costa Rica, and the Dominican Republic in conjunction with the 

"U.S. Council of Beef Importers" are seeking to renegotiate the quantity allocated to the "all 

other" category. 65 

Honduras 

The Honduran cattle inventory declined from 2.4 million animals in 1992 to 2.2 million in 1996 

(table D-44). During this time beef production declined from 97 million pounds in 1992 to 66 

59 Livestock Annual (CS6022), Aug. 6, 1996, p. 2. 60 Department of State telegram, San Jose, Costa Rica, Apr. 10, 1997. 61 Department of State telegram, San Jose, Costa Rica, Apr. I 0, 1997. 62 Based on statistics of the U.S. Department of Commerce. 63 USDA, FSIS, Foreign Countries and Plants Certified to Export Meat and Poultry to the United 

States, Report of the Secretary of Agriculture to the U.S. Congress, Mar. 1, 1996, p. 185. 64 USDA, FAS, Livestock Annual Report, U.S. Embassy, Managua, Nicaragua (NU5003), Aug. 3, 

1995, p. 2. 65 Livestock Annual Report (NU5003), Aug. 3, 1995, p. 2. 

3-12 
million pounds in 1996. Approximately 61 percent of beef production was consumed 

domestically, up from 51 percent in 1992 reflecting a reduction in beef exports. 66 

A U.S. Department of State telegram stated that the NAFTA and the URA have not had a 

significant impact on Honduran beef exports to the United States. 67 The tariff-rate quota was 

not filled in 1995 or 1996; however, the lack of a country specific tariff-rate quota could make 

access to the U.S. market less certain for Honduras since the allocation is on a first-come firstserve basis. Honduran beef exports to the United States declined from 48 million pounds in 

1992 to 18 mI1lion pounds in 199668 reflecting depressed market conditions in the United 

States. 69 The number of USDA approved beef export plants declined to 4 as one plant was 

decertified on November 9, 1995.70 

Most of the Honduran beef exported to the United States is marketed in the Miami area and 

consists primarily of manufacturing type beef. In the U.S. market, Honduran beef competes 

with U.S. manufacturing type beef as well as manufacturing type beef imported from other 

sources, including other Central American countries. 71 

Guatemala 

Cattle inventories in Guatemala declined steadily from 1.8 million animals in 1992 to 1.7 

million animals in 1997 as land use continues to shift to more profitable goods such as sugar 

cane andrubber.72 Production of beef and veal increased from 106 million pounds in 1994 to 

117 million pounds in 1996 (table D-45). Beef exports declined from 24 million pounds in 

1992 to 7 million pounds in 1996. Depressed beef prices in the United States, Guatemala's 

principal export market, contributed to the decline in exports.73 Apparent consumption rose 

from 88 million pounds to 112 million pounds during 1993-96. 

Guatemala and other Central American countries originally criticized the within quota quantity 

of beef allocated to "other countries" under the URA saying it was too small. However, the 

quota has gone unfilled primarily because of depressed beef prices in the United States. 74 As 

of August 1996, two Guatemalan plants were certified by the USDA to export beef to the 

United States.75 

66 USDA, FAS, Livestock and Beef-- Corrected Numbers (H05027), Oct. 12, 1995, p. 1. 67 State Department telegram from U.S. Embassy, Tegucigalpa, Impact of NAFTA and the URA on 

Honduran Beef Exports to the U.S., Mar. 19, 1997, pp. 1-2. 68 Based on statistics of the U.S. Department of Commerce. 69 State Department telegram from U.S. Embassy, Tegucigalpa, Impact of NAFTA and the URA on 

Honduran Beef Exports to the U.S., Mar. 19, 1997, pp. 1-2. 70 USDA, FSIS, Foreign Countries and Plants Certified to Export Meat and Poultry to the United 

States, Report of the Secretary of Agriculture to the U.S. Congress, Mar. 1, 1996, p. 154. 71 State Department telegram from Tegucigalpa, Impact of NAFTA and the URA on Honduran 

Beef Exports to the U.S., Mar. 19, 1997, p. 1. 72 USDA, FAS, Livestock Annual Report (GT6029), Aug. 1, 1996, p. 1. 73 Ibid., p. 6. 74 Ibid. 

75 Ibid., p. 1. 

3-13 
A State Department telegram76 stated that the NAFTA and the URA had no impact on 

Guatemala's trade in beefwith the United States. However, opinion varies with respect to the 

issue of country-specific tariff rate quotas. The Guatemalan beef industry would like a countryspecific quota based on historical levels of Guatemala's beef exports to the United States. 

Some Guatemalan interests contend that the calculation of the quota for the "other" category 

was flawed because Nicaragua was not trading with the United States during the years used to 

calculate the "other" category. Since Nicaragua exported beef to the United States in 1996 

despite low prices, Guatemalan interests are concerned that if prices increase to more attractive 

levels, the "other category" could get crowded and make it difficult for Guatemala to compete 

with other Central American countries.77 

The Guatemalan beef industry also contends that since the tariff rate quota is allocated on a 

first-come first-serve basis, Guatemalan exporters are at a disadvantage in that they slaughter 

heavier animals in the second quarter of the year. A leading beef exporter, on the other hand, 

stated that the lack of country-specific quota will not harm Guatemala in the short term as there 

are no large quantities of animals available for the export market. In addition, many cattlemen 

have shifted to more profitable enterprises. 78 

Dominican Republic 

Table D-46 shows cattle inventory, beef and veal production, exports, and apparent 

consumption for the Dominican Republic for 1992-97. The cattle inventory averaged 2 million 

animals annually during the period. Beef and veal production increased from 97 million pounds 

in 1992 to 108 million pounds in 1996. Imports of beef and veal though negligible were 

supplied primarily by the United States. The Dominican Republic's exports of beef and veal 

declined from 22 million pounds in 1992 to 9 million pounds in 1995. During 1996, the 

Dominican Republic did not export any beef and veal. Apparent domestic consumption rose 

from 75 million pounds to 106 million pounds during 1992-96 as practically all production was 

being consumed domestically. 79 

The United States and Puerto Rico were the major export markets for the Dominican Republic 

during 1992-94. High costs associated with an increasing number ofresidue tests required by 

USDA, and attractive domestic prices relative to international market prices supported by an 

increase in demand for beef in the Dominican Republic, primarily by the tourist sector, virtually 

eliminated exports in 1996.80 The number of plants certified by USDA to export beef to the 

United States decreased from six to one. 81 

Reportedly, the NAFTA has not had a measurable impact on Dominican beef exports to the 

United States and the lack of a country-specific quota is not expected to impact beef exports to 

the United States. 82 

76 U.S. Department of State, telegram No. 023624, Guatemala, Mar. 19, 1997. 77 Ibid. 

78 Ibid. 

79 USDA, FAS, Livestock Annual (DR6015), Aug. 1, 1996, p. 2. 80 Ibid. 

81 U.S. Department of State, telegram No. 023624, Santo Domingo, Mar. 14, 1997. 82 Ibid. 

3-14 
Uruguayan and Argentine Cattle and Beef Sectors 

Uruguay and Argentina are major cattle and beef producers; however, historically their beef 

exports to the United States have been limited to prepared or preserved products because neither 

country had been certified by USDA as free of foot-and-mouth disease (FMD). Uruguay 

received authorization from USDA to export fresh, chilled, or frozen beef to the United States 

in the latter part of 1995 and Argentina recently received USDA authorization and may begin 

to export on August 25, 1997.83 A brief discussion of Uruguayan and Argentine cattle and beef 

sectors and the impact of the NAFTA and the URA on beef exports to the United States as 

reported by the U.S. Department of State follows. 

Uruguay 

The number of cattle in Uruguay increased gradually during 1992-97, and totaled 10. 6 million 

in the latter year as shown in table D-4 7. Beef production rose irregularly to 816 million pounds 

in 1996; however, domestic beef consumption declined from 534 million pounds to 441 million 

pounds. Beef exports increased from 271 million pounds in 1992 to 375 million poilllds in 

1996, accounting for most of the additional beef production. 84 

The EU, Brazil, and Israel were the major export markets for Uruguayan beef during 1992-96.85 

In November 1995, Uruguay was approved to export fresh, chilled, or frozen beef to the United 

States; such exports totaled 45 million pounds in 1996. 

It is not possible to measure the effects of the URA on Uruguay's cattle and beef industry at 

this time, since Uruguay only recently received approval to export fresh, chilled, or frozen beef 

to the United States. Such imports entered the U.S. market during a period of abundant 

domestic beef supplies and low prices. Uruguay reportedly could fill its quota in less than 1 

month; however, because of economic and commercial reasons it must provide its customers 

with a steady and reliable supply over the entire year. Uruguay reportedly has not had a 

problem with transshipments of beef to the United States.86 

Argentina 

The Argentine cattle inventory declined from 55 million animals in 1992 to 52 million animals 

in 1997 (table D-48), the lowest in the past 25 years.87 During the past 2 years drought 

contributed to the decline in the cattle inventory. During 1992-96, Argentine beef production 

(derived primarily from grass-fed cattle) averaged about 5. 7 billion pounds annually. Exports 

rose from 653 million pounds in 1992 to 1.1 billion pounds in 1995 then declined to 992 million 

pounds in 1996. Apparent consumption declined from 5.0 billion pounds in 1993 to 4.6 billion 

83 62 F.R. 34385 (June 26, 1997). 84 USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P 2-96, Oct. 1996, pp. 92-

99. 85 USDA, FAS, Annual Report (UY6002), July 30, 1996, p. 1. 86 U.S. Department of State, telegram No. 22175, Montevideo, Uruguay, Apr. 3, 1997. 87 USDA, FAS, Livestock Annual Report, Buenos Aires, Argentina (AR9652A), Aug. 8, 1996, 

p. 1. 

3-15 
pounds in 1995 and 1996, reflecting reduced demand because of high unemployment and an 

economic recession. 88 

Major Argentine beef export markets include the United States (prepared or preserved 

products), Chile, Germany, and Brazil. Argentine beef exports to the United States had been 

limited to prepared or preserved products because the country had not been declared free of 

FMD and rinderpest. There has been no reported incidences of FMD since April 1994 and 

Argentina is reportedly free of Bovine Spongiform Encephalopathy (BSE or "mad cow 

disease"). On 'June 26, 1997, USDA announced that Argentina had been found to be free of 

FMD and rinderpest and under certain conditions would be authorized to ship fresh, chilled, or 

frozen beef to the United States effective August 25, 1997.89 Argentina has already signed 

sanitary agreements with other countries (including Mexico, Hong Kong, and Thailand), and 

foresees the development of new beef export markets. Consequently Argentine beef exports 

are expected to increase dramatically by the end of this decade. 90 

Japanese Cattle and Beef Sectors and Markets 

Cattle inventories in Japan declined from 5.0 million in 1993 to 4.8 million in 1996 as shown 

in table D-49. Japanese beef production peaked at 1.33 billion pounds in 1994 then declined 

to 1.23 billion pounds in 1996. Apparent consumption peaked in 1995 at 3.3 billion pounds 

then fell to 3.2 billion pounds in 1996 as consumers shifted away from beef consumption due 

to safety concerns related to BSE and Escherichia coli 015 7 :H7 (E. coli 0157 :H7) outbreaks. 91 

Households account for approximately 40 percent of Japanese beef consumption; the remainder 

is consumed in the food service sector.92 Beef production in Japan is derived from domestic 

beef (W agyu) and dairy breeds (Holsteins). High-quality Wagyu beef is well marbled and very 

popular in Japan; beef produced from Holstein cattle is generally leaner. Normally, 

approximately 60-65 percent of domestic beef is marketed through the retail sector; however, 

the share has risen to 70 percent recently as several supermarket chains have replaced imported 

beef cuts with domestic cuts. With the BSE scare and E. coli 0157:H7 outbreaks, many 

Japanese consumers perceive domestic beef to be safer than imported beef.93 However, no U.S. 

beef was ever implicated in the E.coli 0157:H7 epidemic in Japan and the United States is 

reported to be free ofBSE.94 

The United States and Australia account for most of the foreign beef supplied to the Japanese 

market. U.S. beef in Japan is generally marketed through the food service sector and includes 

high-value frozen products, as well as high-value chilled products. U.S. beef is predominately 

88 Ibid., p. 6. 89 62 F.R. 34385 (June 26, 1997). 90 Ibid., pp. 1-2. 91 USDA, FAS, Livestock Annual Report, Tokyo, Japan (JA7004), Feb. 3, 1997, p. 1. 92 Ibid., p. 1. 93 Ibid. 94 USITC staff interview with officials of the U.S. Meat Export Federation (USMEF), Denver, CO, 

Jan. 27, 1997. 

3-16 
derived from grain-fed cattle and highly preferred by Japanese consumers. Beef imports from 

Australia consist primarily of chilled products, derived from grass-fed animals. 95 

According to a U.S. Department of State telegram, there has been a negligible impact on 

Japanese beef imports as a result of the URA. 96 Japanese tariffs on beef were reduced from 50 

percent in 1994 to 46.2percentin1996 and are to be reduced to 38.5 percent by the year 2000. 

Other factors including rising per capita beef consumption, relative price of U.S. beef vis-a-vis 

domestic (Japanese) cuts, and growing demand for chilled U.S. loins contributed to the increase 

in beef imports.97 However, the weakening yen (against the U.S. dollar) and health concerns 

somewhat weakened the market for imported beef in Japan in 1996.98 

Korean Cattle and Beef Sectors and Markets 

The Korean cattle sector is comprised of small farms, with nearly one-third of all native Korean 

beefcattle (Hanwoo) raised on farms producing 1-4 animals annually. 99 Farms that raise 5-20 

animals account for over 40 percent of production and farms that produce more than 20 animals 

account for about 25 percent.10° Korean consumers prefer well marbled beef; thus most 

Hanwoo cattle are grain fed. 

During 1992-97, Korean cattle inventories rose by 51 percent to 3.4 million animals (table D50).101 Beef production rose from 302 million pounds in 1992 to 509 million pounds in 1996, 

and apparent consumption rose from 690 million pounds in 1992 to 933 million pounds in 

1996. Imports increased steadily from 291 million pounds in 1993 to 432 million pounds in 

1996. Strong demand during 1992-95 and market liberalization contributed to the increase in 

domestic consumption. Approximately 60 percent of beef consumption occurs at the hotel and 

restaurant sector. Consumption rose by 17 percent from 1993 to 1994 and by 12 percent from 

1994 to 1995; such consumption rose only 1. 7 percent in 1996 from year earlier levels as food 

safety concerns coupled with an economic slowdown lessened demand.102 

The United States is the largest foreign supplier of beef to Korea, accounting for about 52 

percent of the quantity and 63 percent of the value imported in 1996.103 Other important import 

suppliers include Australia, New Zealand, and Canada. U.S. beef is marketed primarily through 

Korea's hotel and restaurant trade; however, sales in the retail sector are increasing. Most beef 

is imported frozen; however, with revised shelf life regulations that went in effect in October 

95 LivestockAnnualReport(JA7004),Feb. 3, 1997,p. 1. 96 USDA, FAS, U.S. Embassy, Tokyo, Japan, USJTC investigation into the impact of the UR 

agreement on U.S. beef exports, Apr. 7, 1997,facsimile. 97 Ibid. 

98 Ibid. 

99 USDA, FAS, Livestock Annual Report (KS6042), Aug. 5, 1996, p. 5. 

100 Ibid. 

101 Korea section adapted from USDA, FAS, Livestock Semi-Annual Report (KS7006), Feb. 3, 

1997, unless otherwise noted. 102 Livestock Semi-Annual Report (KS7006), Feb. 3, 1997, p. 3. 103 Based on Jan.-Oct. 1996 trade data, USDA, FAS, Livestock Semi-Annual Report (KS7006), 

Feb. 3, 1997, p. 4. 

3-17 
1995,104 imports of chilled beef from the United States are expected to grow, but at a slow rate. 

Reportedly, Korea currently lacks adequate storage and transportation facilities to accommodate 

chilled beef imports; thus such imports are not likely to reach their full market potential until 

after full liberalization on Jan. 1, 2001. In December 1993, during the Uruguay Round 

negotiations, Korea extended its 1993 Record of Understanding (ROU), set to expire in 1995, 

to the year 2000. The ROU is discussed in chapter 6.• 

104 For a detailed discussion on the revised shelf life regulations, see USITC, The Year in Trade 

1995, Operation of the Trade Agreements Program, 47th report, USITC publication 2971, Aug. 

1996, p. 62. 

3-18 
CHAPTER4 

IMPACT OF THE NAFTA ON 

U.S. TRADE IN CATTLE FOR 

SLAUGHTER AND BEEF 

General 

The NAFTA established bilateral market access provisions between the United States and 

Mexico and contains trilateral provisions on domestic support, export subsidies, rules of origin, 

safeguards, and phytosanitary standards. In addition, under the NAFTA the market access 

provisions of the U.S.-Canada Free-Trade Agreement (CFTA) continue to be in effect. The 

purpose of this chapter is to describe the major actions taken under the NAFTA concerning U.S. 

trade in live cattle for slaughter and beef. It includes a description of the negotiated tariff rate 

reductions, as well as a discussion of how Mexican beef exports were treated under the U.S. 

Meat Import Act of 1979 and Canada's Meat Import Act. The chapter also discusses factors 

that have influenced the implementation of the NAFTA, including the impact of the peso 

devaluation on U.S.-Mexican beeftrade in 1995 and 1996; antidumping actions against U.S. 

beef and edible offal; quality grading issues; and sanitary and phytosanitary measures. 

Since the NAFTA implementation, certain trade flows relating to cattle and beef have been 

influenced more than others, generating concern among some U.S. industry participants. In 

particular, increased U.S. imports of live cattle for slaughter from Canada and reduced U.S. 

exports of beef to Mexico are of concern to certain domestic interests. In order to evaluate the 

impact of the NAFTA on U.S. imports of live cattle for slaughter from Canada, and U.S. 

exports of beef to Mexico, additional analyses based on econometric modeling was undertaken. 

The purpose of the modeling exercise was to determine the relative importance of the NAFTA 

vis-a-vis other determinants of trade (such as macroeconomic and production factors). The 

empirical results are reported and discussed in this chapter. 

NAFTA Impacts: Summary 

Beef 

The most significant NAFTA-related action affecting U.S. trade in beef appears to have been 

the reduction in the Mexican import duty on U.S. beef. As a result of the NAFTA, U.S. beef 

receives a rate of duty of "Free" whereas Mexico imposes rates of 25 percent ad valorem and 

20 percent ad valorem on non-NAFTA imports of frozen beef and fresh beef, respectively. In 

1996, the United States supplied 97 percent of Mexican imports of beef compared with 51 

percent in 1993. Although the total quantity and value of U.S. exports of beef to Mexico 

declined in 1995, the decline appears to reflect the effects of a devaluation of the peso that led 

to a drop in consumer income and an increase in the purchase price for imported beef. The 

4-1 
result of empirical analysis by the US ITC staff indicates that the NAFTA expanded Mexican 

imports of U.S. beef and benefited U.S. beef producers and exporters.1 

Representatives of the Mexican Cattlemen's Association contend that the NAFTA has been and 

will continue to be a negative influence on development of the Mexican live cattle sector 

because of the access it provides to the Mexican beef market. 2 They contend that the Mexican 

cattle sector has been put at a comparative disadvantage in relation to the U.S. cattle sector 

because of factors such as the drought in northern Mexico and the peso devaluation that reduced 

the effective demand for beef in Mexico. 3 

The Australian Meat and Live-stock Corporation (AMLC) contends that as a result of Mexico's 

NAFTA duty preferences, U.S. beef exports have gained a competitive advantage in the 

Mexican market and increased their market share, thereby displacing Australian imports. 4 The 

New Zealand Meat Producers Board (NZMPB) also reported that New Zealand exports of beef 

to Mexico declined as a result of the NAFTA duty preferences. The NZMPB reported that prior 

to implementation of the NAFTA, New Zealand's exports to Mexico totaled nearly 10,000 

metric tons (22 million pounds) but such exports declined to 250 metric tons (551,000 pounds) 

in 1994-95 and then to 101 metric tons (223,000 pounds) in 1995-96.5 

As a result of the CFTA, which preceded but largely was incorporated into the NAFTA, most 

fresh, chilled, or frozen beef traded between the United States and Canada has received a rate 

of duty of "Free" since July 1993. Most imports of frozen boneless beef from other suppliers 

are dutiable at 4.4 cents per kilogram (equal to an estimated 1.2 percent ad valorem). The tariff 

differential appears to have given a competitive advantage to both countries in relation to other 

suppliers. However, other factors as described later in this chapter also impacted trade. By 

1996, Canada was the leading supplier of U.S. imports of fresh, chilled, or frozen beef and the 

United States was also Canada's leading supplier of fresh, chilled, or frozen beef, providing 

more than half of Canada's imports. 

Cattle for Slaughter 

The NAFTA appears to have had relatively little impact on U.S. trade in live cattle for slaughter, 

either with Canada or Mexico. The U.S. duty on slaughter cattle imported from Canada has been 

free since January 1, 1993, and relatively low at 2.2 cents per kilogram (about 1 cent per pound) 

prior to the CFTA. The United States-Mexican slaughter cattle trade has traditionally been 

minimal. Factors and events that have influenced trade in slaughter cattle in recent years include 

the U.S. and Canadian cattle cycles, increasing cattle production in western Canada, high feedgrain prices, and increased exports of U.S. beef to Pacific Rim markets. 

1 See appendix I. 2 USITC staff interview with Cesar Gonzalez Quiroga, president; Heriberto Cardenas Galvan, 

general counsel; Gustavo Torres Flores, treasurer; Confederacion Nacional Ganadera (the Mexican 

Cattlemen's Assoc.), Feb. 12, 1997. 3 Ibid. 

4 Posthearing brief of the Australian Meat and Live-stock Corporation (AMLC), Apr. 3, 1997, 

p. 16. 

5 Prehearing briefof New Zealand Meat Producers Board (NZMPB), Mar. 10, 1997, p. 18. 

4-2 
NAFTA Commitments and Actions Concerning 

Cattle and Beef 

Description of Tariff Concessions 

The CFTA which became effective January 1, 1989, provided for, among other things, the 

reciprocal phas~ out of duties over a 10 year period on imports of live cattle, including cattle for 

immediate slaughter, and fresh, chilled, or frozen beef and veal between the United States and 

Canada. 6 However, fresh, chilled, or frozen beef traded between the United States and Canada 

was subject to reciprocal accelerated duty elimination under the CFTA. Fresh or chilled beef 

and veal carcasses received a rate of duty of "Free" effective April 1, 1990. 7 Frozen beef and 

veal carcasses, fresh, chilled, or frozen other cuts with bone-in, and fresh boneless beef and veal 

received a rate of duty of "Free" effective July 1, 1991.8 Frozen boneless beef and veal 

received a rate of duty of "Free" effective July 1, 1993.9 

The NAFTA is based in large part on the provisions of the CFTA, and in many instances 

expands upon those provisions. 10 It carried forward the schedule for duty phaseouts on US.-

Canada trade contained in the CFTA. Under the NAFTA, the United States, Mexico, and 

Canada agreed to provide for a rate of duty of "Free" on eligible11 trade in live cattle, including 

cattle for immediate slaughter, and fresh, chilled, or frozen beef and veal effective January 1, 

1994, the date on which the NAFTA entered into force. 12 

Magnitude of Tariff Concessions 

The "General" (non-CFTA and non-NAFTA) rate of duty applicable to U.S. imports oflive 

cattle for immediate slaughter was 2.2¢ per kilogram in 1994 (declining to 1.8¢ in 1996 as a 

6 The phased reductions are shown in USITC, Live Cattle and Beef U.S. and Canadian Industry 

Profiles, Trade, and Factors of Competition, investigation No. 332-328, publication 2591, Jan. 

1993, p. F-12. 7 55 F.R. 21837 (May 30, 1990). 8 56 F.R. 50012 (Oct. 2, 1991). 9 58 F.R. 36842 (July 8, 1993). 1

° For further information see USITC, Potential Impact on the U.S. Economy and Selected 

Industries of the North American Free-Trade Agreement, investigation No. 332-337, publication 

2596,Jan. 1993,p. 1-1. 11 To be eligible for the NAFTA duty preferences, goods must comply with the rules of origin (i.e., 

they must either be "wholly obtained" in the NAFTA region or comply with enumerated tariff shifts 

(see HTS general note 12 (t)); also, importers must have certificates oforigin from 

suppliers/sellers/exporters and must make an a:ffmnative claim for any NAFTA duty preferences on 

customs entries. 12 Except for Canadian imports of fresh, chilled, or frozen boneless beef from Mexico that were 

dutiable at CAN 0.8¢ per kilogram (kg) (equal to about US 0.6¢ per kg or US 0.3¢ per pound) in 

1996. 

4-3 
result of the URA). 13 The two "General" rates '!-PPlicable to fresh, chilled, or frozen beef and 

veal were 4.4¢ per kilogram, (which was equivalent to about 4 percent ad valorem), or 10 

percent ad valorem, depending on the HTS subheading as of January 1, 1994. 

Absent the NAFTA, the range in the ad valorem equivalents (AVE's) of the rates of duty that 

would have been applicable to U.S. imports of cattle for immediate slaughter and fresh, chilled, 

or frozen beef from Mexico and Canada in 1996 are shown in the following tabulation (in 

percent): 

Cattle for immediate slaughter 

Mexico 

Canada 

0.82-1.55 

0.59-2.29 

Fresh, chilled or frozen beef 

Mexico 

Canada 

0.65-2.35 

1.24-4.91 

The A VE' s of the rates of duty that would have been applicable to Canadian and Mexican 

imports of cattle for immediate slaughter and fresh, chilled, or frozen beef from the United 

States in 1996 are shown in the following tabulation (in percent): 

Cattle for immediate slaughter 

Mexico 

Canada 

15 

1.5 

Fresh, chilled or frozen beef 

Mexico 

Canada 

20-25 

"Free" 

Between November 12, 1992, and entry into force of the NAFTA, imports oflive cattle for 

immediate slaughter entering Mexico from the United States and Canada were dutiable at 15 

percent ad valorem; fresh or chilled beef was dutiable at 20 percent ad valorem whereas frozen 

beef was dutiable at 25 percent ad valorem. 14 Representatives of the Mexican Cattlemen's 

Association reported that the duties imposed on November 12, 1992, were put into place as 

what the representatives called a "safeguard" measure (but not a safeguard action within the 

meaning of Article XIX of GATT 1994 or the WTO Agreement on Safeguards).15 They 

contend that the "safeguards" were necessary because increasing imports were injuring the 

Mexican live cattle sector that had been in decline because of Mexican Federal Government 

actions in 1988 that were intended to control inflation.16 

13 USTR, Uruguay Round, Draft Uruguay Round Tariff Schedules of the United States, vol. I, 

Agriculture, p. I-7. 14 USDA, FAS, LivestockAnnual (MX3105), Aug. 9, 1993, pp. 9 and 39-40. 15 USITC staff interview with Cesar Gonzalez Quiroga, president; Heriberto Cardenas Galvan, 

general counsel; Gustavo Torres Flores, treasurer; Confederacion Nacional Ganadera (the Mexican 

Cattlemen's Assoc.), Feb. 12, 1997. 16 Ibid. 

4-4 
Actions Concerning Quantitative Limitations17 

Article 704 of the CFTA generally prohibited either the United States or Canada from imposing 

quantitative restrictions on meat imports from each other. Accordingly, U.S. imports of fresh, 

chilled, or frozen beef and veal from Canada were not subject to quantitative restrictions 

imposed under the Meat Import Act of 1979. Similarly, Canadian imports of fresh, chilled, or 

frozen beef and veal from the United States were not subject to quantitative restrictions imposed 

under the Canadian Meat Import Act. Mexico did not have a meat import act comparable to 

those of the u'llited States and Canada. Article 704 of the CFTA was incorporated into and 

made a part of the NAFTA so as to apply between Canada and the United States.18 As part of 

the NAFTA, Mexico and the United States agreed not to seek a voluntary restraint agreement 

from the other party with respect to the exportation of meat. 19 

As required by the NAFTA, U.S. imports of fresh, chilled, or frozen beef and veal from Mexico 

were exempted from quantitative restrictions imposed under the Meat Import Act of 1979.20 

Canadian imports of fresh, chilled, or frozen beef and veal from Mexico were also not subject 

to quantitative restrictions imposed under Canada's Meat Import Act, as required by the 

NAFTA. 21 

Cattle 

U.S. Imports from Canada and 

Mexico After Concessions 

Canada and Mexico have accounted for virtually all U.S. imports of cattle for immediate 

slaughter. U.S. imports of cattle for immediate slaughter from Canada accounted for about 

3 percent of U.S. consumption (commercial slaughter) annually during 1992-96 (table D-14). 

Imports of such cattle from Canada increased irregularly since they have received a rate of duty 

of"Free," rising from 926,000 animals, valued at $733 million, in 1993 to 1.3 million animals, 

valued at $895 million, in 1996 (table D-11). 

The Canadian Cattlemen's Association (CCA)22 predicts that there will be a significant decline 

in the exportation oflive cattle (steers and heifers) to the United States because of the expansion 

of the slaughter activities of two plants in Canada-- the Cargill plant in High Point, Alberta, and 

the IBP plant in Brookside, Alberta. 23 Indeed, they suggest it is very likely that at times U.S. 

slaughter cattle will be exported to Canada as the Alberta plants increase their capacity 

17 U.S., Canadian, and Mexican imports of cattle for immediate slaughter were not subject to 

quantitative restrictions during the period covered by this investigation. 18 NAFTA, annex 702.1 :1. 19 NAFTA, annex 703.2. sec. A, para. 9. 20Annex 302.2 to the NAFTA, note 1 to chapter 2, U.S. schedule of concessions to Mexico. 

Mexico was exempted from quantitative restrictions effective Jan. 1, 1994. 21 NAFTA, annex 703.2, sec. B, para. 8. 22 USITC staff interview with David Andrews, president; Larry Sears, chairman, Foreign Trade 

Committee; and Dennis Laycraft, executive vice-president, CCA, Jan. 29, 1997. 23 In fact, U.S. imports of cattle for immediate slaughter from Canada were about 21 percent less 

during January-March 1997 compared with the corresponding period of 1996. 

4-5 
utilization. They also suggest that the increased plant capacity in Alberta may encourage the 

export of feeder cattle from U.S. Border States to Alberta feedlots. 

U.S. imports of cattle for immediate slaughter from Mexico accounted for 0.2 percent or less 

of U.S. consumption annually during 1992-96 (table D-14). Imports of such cattle from Mexico 

have fluctuated since they have received a rate of duty of "Free," rising from 3,000 animals, 

valued at$1million,in1994 to 67,000 animals, valued at $37 million in 1995, but declined to 

2,000 animals, valued at $1 million, in 1996 (table D-11). U.S.-Mexican trade in cattle is 

reportedly most sensitive when spreads between the markets are narrow enough to cover the 

costs of freight and importing expenses. Depending on cattle location and final use and 

destination, spreads as low as 5 cents per pound can drive movement. In addition to these 

factors, carcasses that fit the U.S. or Mexican market because of size or type will be drawn by 

price to their respective best market. 24 

Beef 

U.S. imports of quota-type meats25 from Canada increased from 131 million pounds (product 

weight) in 198 8 to 181 million pounds in 1989 (the first year imports from Canada were not 

subject to quantitative restrictions under the Meat Import Act of 1979). 26 Such imports declined 

to 166 million pounds in 1991 but then increased to 448 million pounds in 1994. As discussed 

in chapter 2, the Meat Import Act of 1979 was repealed effective January 1, 1995. 

U.S. imports of quota-type meats from Mexico have been relatively small in relation to U.S. 

production, and imports from other suppliers. Imports from Mexico increased from 0. 7 million 

pounds in 1992 to 1.9 million pounds in 1993. In 1994, the first year imports from Mexico 

were exempt from quantitative restrictions under the Meat Import Act of 1979, imports rose to 

3.3 million pounds. 

Cattle 

U.S. Exports to Canada and 

Mexico After Concessions 

The following tabulation shows U.S. exports of cattle other than certain purebred cattle for 

breeding purposes27 to Canada, during 1992-96 (thousand animals; compiled from official 

statistics of the U.S. Department of Commerce): 

24 USITC staff interview with Cacy H. Humphries, vice president International, Excel, Jan. 30, 

1997. 25 As defined by the Meat Import Act of 197 9. 26 USITC, Live Cattle and Beef U.S. and Canadian Industry Profiles, Trade, and Factors of 

Competition, investigation No. 332-328, publicatioq 2591, Jan. 1993, table D-34, p. D-36. 27 Statistics reporting exports of cattle for immediate slaughter are not available; statistics 

concerning such cattle are included in a basket category of"other." Feeder cattle, animals for 

breeding other than purebred, as well as slaughter cattle are classifiable within the "other" category. 

4-6 
Year Quantity 

1992 ........... 56 

1993 ........... 66 

1994 ........... 86 

1995 ........... 63 

1996 ........... 37 

U.S. exports ofsuchcattleto Canada were equivalent to less than 1 percent of U.S. production 

annually during the period under review. Such exports ranged from less than 1 percent to 

3 percent of Canadian cattle slaughter during 1992-96. 

Since 1992, U.S. exports to Mexico of live cattle for slaughter have undergone significant 

:fluctuations, as identified by the four distinct periods shown in figure 4-1. During 1992, 

Mexico imported 177,000 animals, with close to 95 percent supplied by the United States.28 

Imports declined to only 17 ,3 00 animals in the fourth quarter of 1992, compared with the 

quarterly average of 53,300 head for the first 3 quarters of that year. In 1993, U.S. exports were 

82,600, or less than half the level of 1992, reflecting in part, the increase in the rate of duty to 

15 percent ad valorem. In 1994 as a result of the NAFTA, Mexican imports of cattle for 

immediate slaughter from the NAFTA countries received a rate of duty of "Free" and U.S. 

exports increased to almost 100,000 animals in that year. However, beginning in November 

1994, exports declined significantly, and likely reflect the devaluation of the peso. In 1995, the 

United States exported 6,300 animals for immediate slaughter and 10,100in1996. 

Figure 4-1 

U.S. exports of live cattle for immediate slaughter to IVlexico, by quarter, Jan. 1992-Dec. 1996 

80 

70 

60 

Jll 50 

~ ·c: 

ca 40 0 

0 

o_ 30 

20 

10 

0 

Tariff rate Tariff rate 

of "Free" 15% tariff Peso devaluation 

92 II Ill IV 93 II Ill IV 94 II Ill IV 95 II Ill IV 96 II Ill IV 

Year/Quarter 

Source: Confederacion Nacional Ganadera, lnforrilacion Econorrica Pecuaria, pp. 59, Apr. 1996. 

28 Confederacion Nacional Ganadera, Informacion Econornica Pecuaria, Direccion de Estudios 

Econornicos y Comercio Internacional, Apr. 1996, p. 59. 

4-7 
In 1992, when 177 ,000 head were imported, this amount represented 2 percent of total Mexican 

slaughter (estimated at about 7.7 million animals). For the years after 1992, U.S. exports into 

Mexico represented less than 1 percent of their total slaughter. 

Beef 

U.S. exports of quota-type meats to Canada rose from 229 million pounds, valued at $329 

million, in 1992 to 259 million pounds, valued at $336 million, in 1994 (table D-20). The share 

of Canada's imports of quota-type meats supplied by the United States declined from 51 percent 

in 1992 to 40 percent in 1993 but then increased to 44 percent in 1994, 54 percent in 1995, and 

55 percent during January-November 1996 (the most recent period for which data are 

available). 29 · 

U.S. exports of quota-type meats to Mexico rose from 104 million pounds, valued at $112 

million, in 1993 to 201 million pounds, valued at $227 million, in 1994, the first year such 

exports received a rate of duty of"Free" under the NAFTA. However, such exports declined 

to 85 million pounds, valued at $85 million in 1995, following the devaluation of the peso in 

November 1994. In 1996, however, such exports increased to 164 million pounds, valued at 

$162 million (table D-20). 

NAFTA Grain Commitment Effects 

on Cattle Markets 

The CFTA provided for a rate of duty of "Free" for most grains traded between the United 

States and Canada (remaining duties are to be "Free" by January 1, 1998), but left intact many 

nontarifI measures, such as end-use certificates. 30 It is likely that the elimination of the tariffs 

on grains between the United States and Canada had little effect on trade since the 'rates of duty 

were already low. The CFTA did little to eliminate the nontariff measures, including the 

Canadian support programs.31 The NAFTA did not substantially affect the three primary 

mechanisms affecting grain within Canada-- the Canadian Wheat Board, the. Western Grain 

Transportation Act (WGTA), and the Gross Revenue Insurance Program (GRIP). 

The NAFTA generally reduced Mexico's tariffs on grains;32 however, Mexico as a grain-deficit 

country, feeds relatively little grain to cattle, and most of its grain consumption is in direct food 

use (com and wheat). The feed-grade com and sorghum that are imported into Mexico are fed 

29 The shares were calculated from statistics reported in USDA, FAS, Livestock Semi-Annual, 

CA7007, Jan. 31, 1997, p. 8. 3

° Canada-US. Joint Commission on Grains, Final Report, Oct. 1995, pp. 61-73. 

31 Ibid. 

32 USITC publication 2596, ch. 23. 

4-8 
mostly to poultry and hogs rather than to cattle; in the early 1990s, 7 5 percent of Mexican feed 

grain consumption went to poultry and swine, and only 15 percent for cattle in feedlots. 33 

NAFTA Implementation Issues 

A number of events make it difficult to assess the effects, if any, that the NAFTA has had on 

trad,e in cattle and beef. These factors include the Mexican peso devaluation, the filing in 

Mexico of an 'antidumping petition against U.S. beef and edible offal,34 U.S. Government 

implementation of cost recovery for import and export inspection, and allegedly, discriminatory 

Mexican quality grading regulations. Econometric models for U.S. exports of beef to Mexico 

and imports of cattle for slaughter from Canada were developed. The Mexican duty reductions 

applicable to beef were modeled because this was determined to be the most significant NAFTA 

development. U.S. imports of cattle for slaughter from Canada were modeled because such 

imports are of particular concern to domestic cattle interests. 

Mexican Antidumping Actions Against 

U.S. Beef and Edible Beef Offal 

U.S. exports to Mexico of fresh, chilled, or frozen beef and veal, as well as edible beef offal, 

were the subject of a Mexican antidumping investigation subsequent to implementation of the 

NAFT A. A representative of the Arizona Cattle Feeders Association (ACF A) cited the 

Mexican antidumping action as well as the Mexican peso devaluation, as factors contributing 

to the sharp drop in U.S. exports of beef to Mexico during 1995.35 

On May 2, 1994, the Confederacion Nacional Ganadera (CNG) (the Mexican Cattlemen's 

Association) submitted to the Secretariat of Commerce and Industrial Promotion (SECOFI) a 

request for compensatory quotas36 and for initiation of an antidumping investigation concerning 

beef and edible beef offal originating in the United States. 37 The CNG alleged that the products 

were being "dumped" by reason of sales in Mexico at prices less than in the United States.38 

The period ofreview was August 1, 1993-January 31, 1994. 

On April 21, 1995, SECOFI concluded preliminarily that imports made under price 

discriminatory conditions from the United States constitute a threat to domestic production. 

However, SECOFI decided not to impose compensatory quotas, citing the "current economic 

33 David Wheat and Francisco Medina, "U.S., Mexico feed trade expanding," Feedstuffs, May 17, 

1993, p. l; data are derived from the Mexican National Swine Commission. 34 The antidumping investigation was terminated without the imposition of antidumping duties after 

the U.S. and Mexican industries reached an understanding as described below. 35 Testimony of Basilio F. Aja, executive vice president, Arizona Cattle Feeders Association 

(ACFA), transcript of the hearing, Mar. 20, 1997, pp. 59-60. 36 In a USITC staff telephone interview on Feb. 19, 1997, Gustavo Uruchurtu Chauarin of 

SECOFI explained that the term "compensatory quotas" in the administration of Mexican 

antidumping margins and countervailing duties is comparable to U.S. antidumping margins or 

countervailing duties. 37 Official Gazette (Diario Oficial), June 23, 1995 (2995 SECTION TWO), pp. 1-2. 38 Interview with Gustavo Uruchurtu. 

4-9 
juncture" under which the quotas would hurt the consumer sector.39 SECOFI found "price 

discriminatory margins" ranging from less than 1 percent to 35.03 percent.40 SECOFI's 

preliminary conclusion was published officially in the Diario Oficial (Official Gazette) on 

June 23, 1995. 

Hearings concerning SECOFI's preliminary conclusions were scheduled and parties were given 

3 0 working days from the date of publication of the conclusions in the Official Gazette to 

present their arguments and supplementary evidence. 41 SECOFI's final conclusions were 

expected to be' announced by October-November 1995;42 however such conclusions were not 

announced. 

During the summer and winter of 1995 discussions were held between CNG and the National 

Cattlemen's Association (NCA),43 a representative of U.S. cattle interests. On April 25, 1996, 

the Diario Oficial reported that the investigation had been terminated at the request of CNG. 

The request for termination reportedly was a result of a Memorandum of Understanding (MOU) 

between CNG and NCA. 44 

The MOU provided for several things, including: collaboration to increase trade in beef, variety 

meats, and beef cattle between the United States and Mexico; meetings to review animal health 

and inspection issues; NCA technical assistance to the CNG on a number of issues; and GSM10345 credit lines sufficient to cover a substantial portion of Mexican ranchers' import needs 

of the next 2 years. 46 

Subsequent to the termination of the antidumping investigation there were indications that 

another Mexican organization, the Asociacion Mexicana de Engordadores de Ganado Bovino, 

AC., (AMEG--the Mexican Association of Cattle Feedyards), was considering filing an 

antidumping petition. 47 At the Commission's hearing the AMEG contended that U.S. beef was 

being "dumped" in the Mexican market and injuring the Mexican live cattle sector.48 AMEG 

was reported to have filed an antidumping petition with SECOFI on April 1, 1997 that claims 

that U.S. cattle carcasses are being sold at less than fair value in the Mexican market. 49 

39 Diario Oficial, pp. 73-7 4. 40 Gustavo Uruchurtu reported that under the administration of Mexican antidumping and 

countervailing duty laws SECOFI is charged with determining threat or injury to a domestic industry 

and determining the amount of countervailing duties and antidumping margins. 41 Diario Oficial, p. 73. 42 USDA, FAS, Livestock Annual (MX5048), Aug. 1, 1995, p. 7. 43 The National Cattlemen's Association was renamed the National Cattlemen's Beef Association, 

(NCBA). 44 USDA, FAS, Countervailing Duty Investigation on U.S. Beef ( MX6030), Apr. 30, 1996. 45 GSM-103 refers to a U.S. Government loan guarantee program operated by the USDA. 46 Memorandum of Understanding Between the CNG and the NCA, Jan 15, 1996. 47 USDA, FAS, Mexico's U.S. Meat Dumping Claims Unfounded (MX6138), Oct. 10, 1996, pp. 

1-2; USDA, FAS, Mexican Weekly Highlights and Hot Bites (MX7015), Jan. 30, 1997, p. 2.; and, El 

Financiero, Feb. 6, 1997, p. 22A. 48 Testimony of Enrique Lopez Lopez, director general, Mexican Association of Cattle F eedyards 

(AMEG), transcript of the hearing, Mar. 20, 1997, pp. 19-23. 49 USDA, FAS, Mexican Weekly Highlights and Hotbites, April/Two, (MX703 l ), p. 1. 

4-10 
SECOFI may make a determination concerning whether to accept the petition by the first week 

in July 1997.50 

Mexican State Beef-Grading Systems 

and Regulations 

There are no nationally accepted quality-grading standards for beef in Mexico. However, the 

Mexican States of Sonora and Sinaloa utilize State grading standards. 51 In general, Mexican 

State quality-grading standards are comparable to the U.S. quality-grading standards52 which 

are discussed in chapter 2 of this report. The Mexican State quality-grading standard, "Primo" 

is the general equivalent of U.S. "Prime," and "Choice" is the approximate equivalent of U.S. 

"Choice." A number of domestic interests have expressed concern about Mexican State qualitygrading standards on the ground that those standards have restricted U.S. exports of beef to 

Mexico. These interests contend that the Mexican State grading standards do not permit boxed 

beef, a product for which the United States is an especially efficient producer, to be graded,53 

thereby restricting U.S. exports of this product. 

Mexican interests contend that the Mexican State grading standards limit grading to carcasses, 

and that boxed beef, which typically consists of subprimal cuts, cannot be graded regardless of 

whether it is Mexican or imported. Thus, they contend that the Mexican State quality-grading 

standards do not discriminate against imports. 54 

At the Commission hearing, a representative of the ACF A stated that after entry into force of 

the NAFTA, the Mexican States of Sonora, Sinaloa, and Baja California required that all graded 

beef sold by authorized retailers be graded according to the respective Mexican States' grading 

system. According to the ACF A, this action has effectively excluded U.S. beef from markets 

in Sonora and Sinaloa. 55 The ACF A also said that in late 1992 the Mexican State of Sonora 

began implementing a meat-stamping program that required all U.S. beef to be identified by a 

brown stamp indicating "imported beef," whereas Mexican beef utilized a red label indicating 

"domestic beef." The ACFA further stated that this labeling procedure reduced export 

opportunities for U.S. beef in Sonora. 

U.S. and Canadian Quality Grade Issues 

During the course of the US ITC investigation, and at the hearing, the Commission received 

several expressions of interest and concern about quality-grading issues in the United States and 

50 USITC staff telephone conversation with an official ofUSDA, FAS, U.S. Embassy, Mexico 

City, Apr. 23, 1997. 51 Testimony of Marco E. Ojeda, vice president, Grupo Viz, transcript of the hearing p. 33. 52 USITC staff interview with Gilberto F. Lozano, director of U.S. Meat Export Federation 

(USMEF), Mexico City, Feb. 19, 1997. 53 USITC staff interviews with Bruce Cobb and Bryant Wadsworth of the USMEF, Denver CO, 

Jan. 27, 1997, and Gilberto F. Lozano, USMEF, Mexico City, Mexico, Feb. 10, 1997; Basilio F. Aja, 

ACFA; et al. 54 USITC staff interview with Gilberto F. Lozano, USMEF, Mexico City, Feb. 10, 1997. 55 Basilio F. Aja, He~g Statement, Mar. 20, 1997. 

4-11 
Canada. Of specific concern is that grading practices in Canada may unnecessarily restrict U.S. 

exports of beef. Neither the NAFTA nor the URA specifically address grading practices. A 

discussion of grading systems in the United States and Canada for imported cattle and beef 

follows below. 

USDA Quality Grading of Cattle Imported for 

Immediate Slaughter and of Imported Beef 56 

Beef carcasses (including sides and quarters) derived from cattle imported for immediate 

slaughter are considered products of U.S. origin for purposes of USDA quality grading (but not 

for other programs such as beef purchased for the School Lunch Program). Nearly 95 percent 

of all steers and heifers slaughtered in U.S. plants typically are graded. 57 Reportedly, most 

steers and heifers that are not graded are slaughtered at small-volume plants that choose not to 

have USDA quality grading because of cost considerations. The majority of U.S. imports of 

steers and heifers for immediate slaughter from Canada are thought to be purchased by largevolume packers that have continuous USDA quality grading; consequently nearly all Canadian 

steers and heifers slaughtered in the United States are likely graded. Generally, carcasses 

derived from cull cows are not quality graded as this beef is typically used for manufacturing 

into products such as hamburger for which quality grades are usually not a concern. Of the 7 .1 

million cows58 that were slaughtered in federally inspected plants in 1996, only 0.2 percent were 

graded.59 

Meat grading is administered by USDA's Agricultural Marketing Service (AMS). 60 According 

to USDA quality grading standards, "Meat of all eligible species shall be graded only in the 

establishment where the animal was slaughtered or initially chilled .... "61 The AMS Director may 

grant prior approval for grading at a location other than the establishment of slaughter or initial 

chill if the AMS is unable to provide grading service in a timely manner and if the meat can be 

identified as being in conformity with the standards. 62 The USDA grader must be notified of 

the intent to have the carcasses graded. The USDA also requires that imported meat be marked 

so that the name of the country of origin appears on most of the major retail cuts. 63 The mark 

of foreign origin may be removed after the USDA-quality grade is applied. 

Beef carcasses that are imported from Canada were granted an exemption to the standard that 

meat will be graded only in the establishment in which the animals were slaughtered or initially 

56 The following description is adapted from USITC staff interview with Craig Morris, 

international marketing specialist, USDA, Agricultural Marketing Service (AMS), Mar. 26, 1997, 

except as noted. 57 USDA, NASS, Livestock Slaughter Annual, various issues. 58 USDA, NASS, Livestock Slaughter 1996 Summary, Mt An 1-2(97), Mar. 1997, p. 15. 59 Facsimile from Lany Meadows, Chief, Meat Grading and Certification Branch, USDA, AMS, 

Feb. 20, 1997. 60 46 F.R. 63203, (Dec. 31, 1981). 61 Code ofFederalRegulations (CFR), 7 CFR §54.13, Jan. 1, 1996. 62 7CFR§54.13,Jan. l, 1996. 63 7 CFR, §54.5, Jan 1, 1996. 

4-12 
chilled. 64 Since U.S. graders cannot grade beef outside the United States, the imported 

carcasses may be graded at designated U.S. locations.65 In addition, USDA reports that grading 

services are automatic for Canadian carcasses when requested by the importer or exporter at 

least 1 day before it would be required and provided that grading service is available in the 

establishment for which it is requested. 

There is no requirement for collecting data on the quantity of foreign carcasses (including beef 

carcasses) graded in the United States. However, the AMS estimates that between 2,000 and 

4,000 imported carcasses are graded weekly in the United States.66 Table D-51 provides an 

estimate of the number of pounds of imported Canadian beef receiving U.S. quality grades for 

1992-96. Estimated U.S. imports of Canadian beef that was graded under USDA qualitygrading standards accounted for between 0.3 percent and 0.6 percent of U.S. beef production 

during 1992-96. 

Canadian Grading System and 

Labeling of Imported Beef 

Beef carcasses in Canada are graded by officials of the Meat & Poultry Products Division 

(MPPD) of Agriculture and Agri-Food Canada (AAFC). 67 According to Canada's Agricultural 

Products Act, only carcasses which bear a Canadian meat inspection stamp are eligible for 

grading with Canadian grades. Consequently, U.S. beef carcasses exported to Canada cannot 

be graded with Canadian grades. The MPPD has not received any request by U.S. interests to 

have U.S. beef carcasses graded in Canada; however, MPPD indicates that if such a request 

were received, Canada would be obligated to reciprocate. 68 

U.S. exports of beef to Canada can be labeled with a USDA quality grade or can be labeled as 

"no roll" (ungraded).69 Effective July 29, 1996, AAFC eased grade labeling requirements for 

beef As a result, U.S. meatpackers can export wholesale beef cartons to Canada employing the 

"or higher" statement in conjunction with a single USDA grade label description (e.g., USDA 

Select or Higher). Multiple grade designations are also permitted (e.g., USDA Select/USDA 

64 Letter to C. D. Caldwell, Counsellor Agriculture, Canadian Embassy, Sept. 24, 1980, from 

Michael L. Huggins, acting director, Meat Quality Division, Food Safety and Quality Service, USDA 

(now renamed the Food Safety and Inspection Service), Sept 24, 1980. USDA, AMS, letter-fax to 

USITC, Mar. 26, 1997. 65 Request for USDA quality grading of imported carcasses is not limited to Canada; other 

countries may request an exemption. USITC staff interview on April 1, 1997 with representatives of 

the New Zealand Meat Producers Board indicated that while they are aware that they may request 

USDA quality grading standards they chose to promote their products through brand identification. 66 Facsimile to USITC from USDA, AMS, Mar. 26, 1997. 67 For a detailed description of the Canadian grading system see Live Cattle and Beef U.S. and 

Canadian Industry Pro.files, Trade, and Factors of Competition, USITC publication No. 2591, Jan. 

1993, p. 3-5. 68 Facsimile from USDA, FAS, U.S. Embassy, Ottawa, Apr. 1, 1997. 69 Facsimile from USDA, FAS, U.S. Embassy, Ottawa, Background: Canadian Grade Labeling 

Regulations, Apr. 4, 1997. 

4-13 
Choice).7

° Changes to the grade labeling requirements are expected to facilitate the marketing 

of U.S. beef in Canada.71 

USDA and AAFC Quality 

Grade Equivalency 

A number of domestic and Canadian interests have expressed concern about the lack of quality 

grading equivalency between U.S. and Canadian grading standards. An industry source 

contends that cattlemen, processors, and consumers would benefit if processors that operate 

plants on both sides of the U.S.-Canadian border could supply markets in either country with 

beef with the same quality grades from cattle processed in either country. 72 The CCA noted that 

lack of a grading equivalency agreement between the United States and Canada means that U.S. 

boxed beef sold in Canada must be sold as "USDA" or "Ungraded" and that Canadian boxed 

beef in the U.S. market must be sold without a grade and take the appropriate discount. 73 

One study that sought to measure the impact of grade equivalency found, among other things, 

that the lack of equivalency added to the cost of U.S. beef in the Canadian market and Canadian 

beef in the U.S. market. 74 The study also found that equivalency would increase beef trade 

between the countries. 

Sanitary and Phytosanitary Inspection Issues 

During the course of the investigation interested parties, including ranchers and an agricultural 

organization, 75 expressed concern to the US ITC about the adequacy of USDA sanitary and 

phytosanitary inspections for imported beef, especially from Canada. Sanitary and 

phytosanitary regulations applicable to domestic production and U.S. imports of animals and 

meat were described in chapter 2 of this report. As noted there, officials of the Food Safety and 

Inspection Service (FSIS) of the USDA reinspect U.S. imports of meat and poultry products 

before they are allowed into U.S. commerce. The criteria FSIS employs to judge whether a 

shipment meets U.S. requirements and passes reinspection is the same for every source country 

and it is the same standard enforced in U.S. plants for domestically slaughtered and processed 

meat. 76 

The FSIS considers the inspection system of the eligible foreign countries, not its own 

reinspection at the port of entry, to be the primary control for ensuring that imported meat meets 

70 Ibid. 

71 Ibid. 72 USITC staff interview with Cary H. Humphries, Jr. , vice president, Excel, Jan. 30, 1997. 73 Prehearing brief of the CCA, Mar. 10, 1997, pp. 34-35. 74 Hayes, Hayenga, and Melton, The Impact of Grade Equivalency on Beef and Cattle Trade 

Between the United States and Canada, Iowa State University, Department of Economics, Jan. 1996. 75 Posthearing brief of the Montana Fann Bureau Federation, Apr. 3, 1997. 76 USDA, FSIS, Import Reinspection Between USDA and Agriculture Canada, background 

papers, Feb. 1997. 

4-14 
U.S. standards.77 As a check on the foreign countries' inspection performance, FSIS requires 

that every shipment of imported meat, including shipments from Canada, receive some level of 

U.S. inspector review at the border.78 

Background of U.S.-Canadian Import Inspection 

Process for Beef Relating to the NAFTA 

The CFTA speeifically addressed meat and poultry inspection. According to USDA, the FSIS 

modified U.S. reinspection procedures applicable to imports from Canada to bring these 

procedures into conformity with the CFTA.79 Effective January 1, 1989, the FSIS amended the 

federal meat and poultry products regulations by providing "streamlined" procedures for 

reinspection of Canadian meat and poultry products and by exempting all meat and poultry 

products imported from Canada from the requirement that such product or containers of product 

be marked with the official mark of inspection. 80 

The "streamlined" reinspection procedures provided that at the time a Canadian plant 

determined a consignment was destined for the United States a representative of the Canadian 

meat inspection system could contact the FSIS and request a reinspection assignment. FSIS 

would then determine whether a reinspection of that particular consignment was necessary. The 

FSIS determination was based on statistically based random sampling plans developed by FSIS. 

If no reinspection was determined to be necessary the product could proceed to the border 

through appropriate U.S. Customs controls, and then be delivered to the U.S. consignee. lfFSIS 

determined that reinspection was necessary, the Canadian representative was informed as to the 

number of samples needed for reinspection according to established sampling tables. The 

Canadian representative was then to select and identify the samples and place them in an easily 

accessible area of the transportation vehicle. At the import inspection establishment the 

samples were to be removed for reinspection. If approved, the consignment was released into 

U.S. commerce.81 

However, on December 27, 1989, the Canadian Government complained that U.S. inspectors 

were being unduly stringent; that the U.S. rate of reinspection had increased, and that the rate 

charged for U.S. border inspection fees had increased substantially. Consequently, U.S. and 

Canadian negotiators agreed to work toward harmonization of standards including the 

elimination of border reinspection for meat and poultry traded between the countries. 82. As part 

of the implementation, the FSIS proposed the elimination of border reinspection, on an 

experimental basis, for a period not to exceed 1 year. The FSIS proposal also included, among 

77 Robinson, Robert A., director, Food and Agriculture Issues, Resources, Community, and 

Economic Development Division, U.S. General Accounting Office, Food Safety Procedures for 

Inspecting Canadian Meat Imports, testimony statement before the Committee on Small Business, 

U.S. Senate, Apr. 2, 1997, p. 1. 78 Ibid. 

79 USDA, FSIS, Meat and Poultry Inspection, 1989 Report of the Secretary of Agriculture to the 

U.S. Congress, Mar. 1, 1990, p. 14. 80 54 F.R. 273 (Jan. 5, 1989). 81 54 F.R 273 (Jan. 5, 1989). 82 Agriculture Canada News Release, Joint Statement-- Canadian Minister of Agriculture Don 

Mazankowski and U.S. Secretary of Agriculture Clayton Yeutter, Feb. 26, 1990. 

4-15 
other things, exempting Canadian meat and poultry plants from certain regulations, and less 

stringent regulations applicable to U.S. meat and poultry exports to Canada.83 

The USDA received numerous comments concerning the proposal. Also the General 

Accounting Office (GAO) conducted a study relating to the proposal in July 1990 and issued 

a report entitled Food Safety--lssues USDA Should Address Before Ending Canadian Meat 

Inspections. The GAO study reported, among other things, that the FSIS determination that 

the Canadian inspection system for meat and poultry was equivalent to the U.S. system had not 

been adequately documented to allow an independent, objective review. The GAO report 

resulted in a March 1992 FSIS report entitled Equivalency Study of the United States and 

Canadian Meat and Poultry Inspection Systems, which concluded that the Canadian meat and 

poultry system is equivalent to the U.S. inspection system. On October 18, 1991, the USDA 

withdrew its proposal. 84 The USDA cited an overwhelming number of comments that led 

USDA to conclude it would be impossible to finalize the open border rule as proposed. USDA 

reported that since there had only been a proposed rule there was no change in reinspection 

practices. 85 

On July 15, 1992, the United States and Canada entered into another understanding concerning 

meat and poultry reinspection. 86 This understanding provided that the United States and Canada 

would (1) work to provide destination import reinspection as a common goal, (2) not participate 

in the then current sample and preselection and prenotification procedures known as the 

"streamlined" process and (3) reinspect at the same rates in either country. Staged 

developments were built into the understanding. The staged developments included the end of 

Canada's participation in the streamlined reinspection procedures effective August 10, 1992. 

Notwithstanding these efforts, destination import reinspection has not been achieved. 87 

One concern regarding the reinspection process that resulted from the July 15, 1992 agreement 

was that the samples of red meat carcasses were not selected on a purely random basis but only 

from the back of transportation vehicles. 88 The nonrandom sample occurred because of the 

great difficulty with off-loading, handling, and staging carcasses. None of the import 

reinspection establishments had the equipment or trained personnel to effectively unload and 

reload carcasses or the facilities to stage an entire load of carcasses for selecting random 

samples. 89 

Consequently, on August 23, 1993, FSIS notified Canada and the industry of the need to have 

random access carcass inspection by January 1, 1994, in order to establish an appropriate 

83 55 F.R. 26695 (June 29, 1990). 84 56 F.R. 52218 (Oct. 18, 1991). 85 USDA, News Release, USDA Withdraws Open Border Proposal for Canadian Meat and 

Poultry Products, Oct. 17, 1990. 86 Meat and Poultry Reinspection Understanding Between Agriculture Canada and the U.S. 

Department of Agriculture, signed by the United States representative on July 7, 1992 and by the 

Canadian representative on July 15, 1992. 87 USITC staff interviews with officials of the USDA, FAS, U.S. Embassy, Ottawa, Apr. 3, 1997; 

FSIS officials, Apr. 1, 1997; and counsel for the CCA, Apr. 1, 1997. 88 Report of the United States - Canada Technical Working Group on the Re inspection of 

Canadian Red Meat Carcasses Imported into the United States, p. 3. 

89 Jbid. 

4-16 
reinspection procedure.90 On January 8, 1994, the U.S. Secretary of Agriculture and the 

Canadian Minister of Agriculture requested a Technical Working Group to explore options for 

red meat carcass reinspection. 91 The Technical Working Group devised a proposed system, and 

on September 25, 1994, an agreement to test the proposed system was formalized,92 and 

resulted in the current import reinspection process. 

Current U.S.-Canadian Inspection 

Systems for Canadian Beef 93 

Canada is unique among countries that export to the United States in that its sanitary and 

phytosanitary inspection system is virtually the same as the U.S. system. These similarities 

were documented in a March 1992 report by PSIS entitled Equivalency Study of the United 

States and Canadian Meat and Poultry Inspection Systems. Because of the similarities in the 

U.S. and Canadian inspection systems, both countries are committed to extending the same 

equivalency to systems for reinspecting imported meat and poultry products imported from the 

other country. 

After a shipment has passed AAFC inspection and is certified for export to the United States, 

it proceeds to the U.S.-Canada border. All Canadian meat shipments receive a visual check for 

container damage and inaccurate labeling or paperwork.94 All Canadian meat shipments must 

stop at the import inspection station at the border to receive a reinspection assignment. The 

transportation vehicle may proceed inland to have the reinspection completed, but almost all 

reinspections take place at one of nine main locations along the Canadian border. As of April 

1997, only two U.S. destination facilities were authorized to conduct import reinspection.95 

When the vehicle arrives at the PSIS import reinspection station, the inspector receives a 

reinspection assignment for the shipment from the USDA Automated Import Inspection System 

(AIIS). For meat offered for importation from Canada, the AIIS96 is modified. 97 Rather than 

assigning inspections on the basis of the product type, the automated system is programmed to 

(1) randomly generate about 3,000 inspect assignments annually, at a rate of about 250 per 

month, and (2) automatically generate inspect assignments for those meat producers that are 

placed in intensified inspection status because ofrecent compliance problems. For Canadian 

90 Ibid., attachment 1. 91 Ibid. 

92 USDA, FSIS, Meat and Poultry Inspection 1994 report of the Secretary of Agriculture to the 

U.S. Congress, Sept. 1995, p. 24. 93 The following description of the reinspection procedures applicable to U.S. imports of beef from 

Canada was adapted from USDA, FSIS, Import Reinspection Between USDA and Agriculture 

Canada, background papers, Feb. 1997, except where noted. 94 Robinson, Robert A., director, Food and Agriculture Issues, Resources, Community, and 

Economic Development Division, U.S. General Accounting Office, Food Safety Procedures for 

Inspecting Canadian Meat Imports, testimony statement before the Committee on Small Business, 

U.S. Senate, Apr. 2, 1997, p. 1. 95 Ibid., p. 2. 96 The AIIS is described in chapter 2 of this report in the section entitled Sanitary and 

Phytosanitary Measures. 97 Ibid., pp. 3-4. 

4-17 
meat producers, 15 consecutive shipments of the refused type of product--equaling at least 15 

times the weight of the refused shipment--must pass inspection regardless of product type or 

reason for refusal before the producers are subject to the previous reinspection procedures.98 

For calendar year 1996, approximately 90 percent of Canadian meat shipments received skip 

assignments, about 7 percent received inspect assignments, and about 4 percent received 

intensified inspect assignments triggered by previous compliance problems. 99 Skip assignments 

for Canadian shipments also differ from those for other countries in that rather than unloading 

the shipment, 'inspectors check only what is visible when the rear doors of the carrier are 

opened. 100 

For inspect assignments the vehicle is unloaded at the border inspection facility (except for 

carcasses as described below) and the FSIS inspector checks all documents, including the export 

certificate from AAFC, verifies labeling, and performs all applicable inspection assignments. 

Generally, for fresh product, the inspector looks for defects and contamination and takes a 

sample to send to the laboratory to check for species and residues of drugs and pesticides. For 

processed products, inspection may also include checks for net weight, condition of container, 

and laboratory analyses for species, microbiological contamination, and food chemistry (such 

as fat, water, and nitrite levels). Products such as ground meat are subject to microbiological 

tests for E. coli 0157:H7. 

The inspector randomly chooses samples from throughout the shipment to conduct the 

reinspection. Random numbers are available from the computer, or inspectors can use other 

methods of generating random numbers. Every container in the shipment has an equal chance 

of being selected for inspection. The number of samples selected for reinspection is sufficient 

to provide a picture of the condition of the entire shipment. 

If the shipment passes reinspection, the documents are stamped, and the vehicle moves inland. 

If examination of the samples results in a rejection, the entire shipment is rejected and must 

return to Canada. 

Effective February 16, 1997, FSIS began a new system for reinspecting Canadian red meat 

carcasses to increase confidence in the current system. Under the new procedures, AAFC meat 

inspectors select samples according to U.S. requirements, mark those samples, and ensure they 

are loaded at the back of the transportation vehicle. When the carrier reaches the border and the 

load is an "inspect" assignment, the FSIS inspector will use the randomly selected samples to 

conduct reinspection. To verify that the samples are selected correctly by Canadian inspectors, 

FSIS performs a verification check at the final destination. FSIS inspectors examine, at 

destination points, about 15 carcass shipments per month that are not examined at the border. 101 

Inspectors look at the entire lot, randomly selecting samples, and compare the results obtained 

with the results FSIS import inspectors obtain at the border. These comparisons enable FSIS 

to determine if Canadian inspectors are selecting samples correctly. 

98 Ibid. 99 Ibid., p. 4. 

IOO Ibid. 

lOl Ibid., p. 2. 

4-18 
The new system for reinspecting Canadian red meat carcasses that became effective on February 

16, 1997, was adopted in part because only 1 (facility number I-47 at Sweetgrass, Montana) of 

the 21 PSIS approved inspection facilities along the U.S.-Canadian border has sufficient 

facilities to arrange a load of carcasses for random selection for reinspection.102 

Canadian Import Regulations Applicable to 

Bluetongue Disease 

Bluetongue disease occurs in the United States103 but AAFC officials have determined that the 

disease has not been established in Canada. 104 Canadian import regulations associated with 

bluetongue disease have been a source of controversy for U.S. and Canadian cattlemen for 

several years. 105 Bluetongue is a viral disease capable of producing severe clinical signs in 

sheep.106 Cattle, goats, and wild ruminants can be infected with bluetongue virus but their 

general health remains unaffected except in very rare instances. 107 However, cattle are a 

reservoir for future bluetongue infections in sheep.108 In cattle naturally occurring antibodies 

will kill the bluetongue virus within about 100 days of the animal being infected. 109 Bluetongue 

virus is transmitted by infected biting insects (vectors) found throughout the United States 

during warm weather. Bluetongue occurs seasonally during the summer months when the vector 

is most active.110 The vectors capable of transmitting bluetonge may be active in Canada 

between April 15 and October 15. 

Effective October 18, 1995, Canadian testing requirements relating to bluetongue disease and 

applicable to certain animals offered for importation into Canada from the United States were 

amended. m The amended import-testing requirements and the description of the test regimes 

are reproduced in appendix J. The amended Canadian regulations were formulated by the 

Canadian Federal Government after discussions with the Animal Health Working Group under 

102 Ibid., pp. 4-5. 103 USITC staff telephone conversation with Dr. Lisa Furgeson, USDA, APHIS, Apr. 8, 1997. 104 Agriculture and Agri-Food Canada, news release and backgrounder, Bluetongue Regulations 

Amended, Oct. 18, 1995. 105 USITC, The Competitive Position of Canadian Live Cattle and Beef in U.S. Markets, 

investigation No. 332-241, USITC publication 1996, July 1987, pp. 100-101 and Live Cattle and 

Beef U.S. and Canadian Industry Profiles, Trade, and Factors of Competition, investigation No. 

332-328, USITC publication 2591, Jan. 1993, p. 3-9. 106 Sheep Industry Development (SID) program, SID Sheep Production Handbook, June 1988, 

Health-34. For a more detailed discussion ofbluetongue disease see USITC, The Competitive 

Position of Canadian Live Cattle and Beef in U.S. Markets, investigation No. 332-241, USITC 

publication 1996, July 1987, pp. 100-101. 107 Sheep Industry Development (SID) program, SID Sheep Production Handbook, June 1988, 

Health-34. 108 Ibid. 109 USITC staff telephone conversation with W. J. McElhran, International Trade Team, Animal 

Health Division, Agriculture and Agri-Food Canada, June 11, 1997. Dr. McElhran indicates that 

scientific opinion varies concerning the length of time required to kill the virus. 110 Sheep Industry Development (SID) program, SID Sheep Production Handbook, June 1988, 

Health-34. 111 Canada Gazette, part II, vol. 129, No. 21, Oct. 18, 1995, pp. 2843-2853. 

4-19 
the CFT A.112 The Animal Health Working Group is an industry advisory organization that has 

members from the U.S. National Cattlemen's Beef Association, the USDA Animal and Plant 

Health Inspection Service (APHIS), the Canadian Cattlemen's Association, and AAFC. 113 

Canada's major trading partners, the United States, the EU, Australia, New Zealand, and Japan, 

were consulted and accepted the amendment. 114 

The specific tests used for the determinations under the amended Canadian testing requirements 

(the Agar Gel Immunodiffusion Test (AGID) and the c-ELISA) were developed in the United 

States and are the standard tests for bluetongue. Canada's bluetongue testing requirements vary 

based on four factors: (1) the purpose for which the animals are offered for importation--i.e., 

for breeding purposes or for feeding; (2) the incidence (prevalence) of bluetongue disease in the 

state from which the animals are offered for importation; (3) the time of year when the animals 

are offered for importation, or so-called vector free dates --dates after frosts have occurred 

which will kill insects that are the vectors of the bluetongue virus; and, ( 4) the risk of 

introduction of bluetongue disease into Canada.115 Canada's testing requirements are less 

stringent for feeder cattle offered for importation than for animals for breeding purposes offered 

for importation because feeders will likely be kept for a relatively short time before they are 

slaughtered for meat, whereas animals for breeding might well be kept for several years before 

they are slaughtered.116 See appendix J. 

Lack of Access to USDA Sanitary and 

Phytosanitary Inspection and Quality 

Grading Outside the United States 

The Imperial Valley Cattle Feeders Beef Plant Task Force (Task Force) has indicated that cattle 

feeding in Imperial Valley, California has not benefited from the NAFTA or the URA. 117 The 

Task Force has proposed that the U.S. and Mexican Governments negotiate a NAFTA provision 

to permit the USDA sanitary and phytosanitary inspection and quality grading ofU.S."grown 

cattle in border beef processing facilities in Mexico within 25 miles of the U.S.-Mexican 

border.118 

The USITC received a submission from the Agricultural Commissioner of Imperial County 

California supporting the USDA grading of "U.S. grown cattle" and beef processed within 25 

miles of the U.S. border. The submission included a copy of a resolution of the Imperial County 

Board of Supervisors "supporting USDA grading and inspection of U.S. grown cattle in border 

beef processing facilities." 

112 Ibid., p. 2851. 113 USITC staff telephone conversation with Dr. Lisa Furgeson, USDA, APIBS, Apr. 8, 1997. 114 Canada Gazette, part II, vol. 129, No. 21, Oct. 18, 1995, p. 2852. 115 Ibid., pp. 2843-2853. 116 USITC staff telephone conversation with Claude Lavigne, Food Production and Inspection, 

Agriculture and Agri-Food Canada, Apr. 17, 1997. 117 Posthearing brief of the Imperial Valley Cattle Feeders Beef Plant Task Force, Apr. 2, 1997, 

p. 1. 

118 Ibid., p. 4. 

4-20 
Representatives of the Mexican Association of Cattle Feedyards (AMEG) and Grupo Viz 

support amending119 U.S. laws to provide for USDA quality grading and sanitary and 

phytosanitary inspection services at Mexican beef processing plants within 25 miles of the U.S. -

Mexican border.120 The amendment would allow cattle originating in the United States to cross 

into Mexico for slaughter without losing their status as U.S. cattle.121 AMEG and Grupo Viz 

contend that the amendment would benefit U.S. cattle interests including cattlemen from the 

Imperial Valley of California by generating more business and jobs for them, farmers, and the 

various service companies they all depend on. 122 

U.S. Government Implementation of Cost Recovery 

for Import and Export Inspection 

Effective September 1, 1994, the USDA implemented a cost recovery program for inspection 

and certification of animals, including cattle for immediate slaughter and meat, including fresh, 

chilled, or frozen beef and veal for importation into, exportation from, and transit through the 

United States.123 

The minimum fee for any import inspection oflive animals as of March 1997 was $16.50. The 

fee for inspection of slaughter animals of all types for ports along the U.S. -Mexican border was 

$2.50 per animal whereas the fee for all other ports was $16.50 per load. 124 Reimbursable 

overtime schedules for APHIS employees, ranging from $25 to $47.96 per hour, and premium 

schedules ranging from $65 to $74 per hour were established under various circumstances.125 

In addition to the fees associated with inspection of live animals, fees for inspection of approved 

import establishments, warehouses, and facilities were $262.75 each for the first year of 

approval and $152 for renewed approval.126 The fee for endorsing export health certificates for 

a shipment of animals for slaughter to Canada or Mexico was $24.50.127 The hourly fee for 

export inspection and supervision services for live animals is $56 (with a I-hour minimum) and 

with a provision for overtime under certain circumstances.128 

119 In a posthearing briefthe Viz Cattle Corporation offered the following language for the 

amendment : "The United States Department of Agriculture (USDA) shall provide USDA grading 

and inspection of U.S. grown cattle processed in border beef processing facilities, provided that 

"U.S.-grown cattle," be defined as any cattle grown in the United States for a period of 100 days or 

more immediately prior to processing, and provided that "border beef processing facilities" be defined 

as located within 25 miles of the U.S. border." 120 Prehearingbrief of AMEG and Grupo Viz, Mar. 8, 1997, p. 8, and transcript of the 

Commission's hearing on investigation number 332-371, pp. 24-29. 121 Prehearing brief of AMEG and Grupo Viz, Mar. 8, 1997, p. 7. 122 Ibid., p. 8. 123 USITC staff interview with Joan M. Arnoldi, deputy administrator, Veterinary Services, USDA, 

Animal and Plant Health Inspection Service (APHlS), Jan. 30, 1997. 124 USDA, APHlS, Live Animal Import User Fee Schedule, exhibit 7-2, ch. 7, p. 1. 125 Ibid., p. 4. 126 Ibid., p. 3. 127 USDA, APHlS, Export User Fee Schedule, exhibit 8-1, p. 1. 128 Ibid., p. 2. 

4-21 
U.S. Department of Labor NAFTA Transitional 

Adjustment Assistance 

Title V of the North American Free Trade Agreement Implementation Act provides for, among 

other things, NAFTA Transitional Adjustment Assistance (NAFTA-TAA). Adjustment 

assistance is provided to workers found to be eligible by the Office of Trade Adjustment 

Assistance of the U.S. Department of Labor. This office reported applications by four firms for 

NAFTA-TAA in the 4-Digit SIC breakouts applicable to live cattle.129 Twenty-seven workers 

at two firms were found to be eligible to apply for NAFTA-T AA. Workers at two other firms 

were denied eligibility to apply for NAFTA-TAA. 

Peso Devaluation and Mexican Beef 

Import Demand 

As noted earlier, U.S. exports of fresh, chilled, or frozen beef increased sharply in 1994, the first 

full year of the NAFTA, but then fell to much lower levels in 1995 and 1996. However, less 

than one year after implementation of the NAFTA, Mexico experienced a period of 

macroeconomic instability, which also resulted in a declining value of the peso starting in 

November 1994. To provide further understanding of the impact of the NAFTA, staff 

conducted an empirical analysis that distinguishes the differential effects of the peso devaluation 

land the NAFTA on U.S. exports of beef to Mexico. 130 

After trading in the range of 3 .1 to 3. 4 pesos per dollar for most of 1994, the peso fell to 3. 9 

pesos per dollar in December, and after continuing to devalue in January and February, reached 

6.7 pesos per dollar in March 1995131 (figure4-2). For the remainder of 1995 the exchange rate 

remained in the 6. 0 to 7. 7 pesos per dollar range. The devaluation of the peso led to inflation 

(52 percent for 1994), sharply rising interest rates, a sudden drop in gross domestic product 

(GDP), and a decline in real consumer expenditure per capita. In the second quarter of 1995, 

GDP was down almost 10 percent compared with the previous year, and real GDP declined 

almost 7 percent between 1994 and 1995.132 

129 U.S. Department of Labor, Office of Trade Adjustment Assistance, facsimile Notices of 

determination, Apr. 10, 1997. 13° For a discussion on the reasons for the peso devaluation see C. Valdez, USDA, ERS, 

Agricultural Outlook, April 1995. 131 International Monetary Fund, Financial Statistics. 132 USDA, FAS, Mexico Economic and Financial Report, Jan. 1997. 

4-22 
Figure 4-2 

Mexican beef imports and peso/dollar exchange rate, by month, Jan. 1994-Dec. 1996 

30 9 

- 8 - 25 - ~ ..... - - - - - ~ - -

- - - 7 -

- ~ 

20 

"' .,, 

c: 

" 0 

,_ ~ - - - - - -- - --- -

6 ~ 

0 

.,, 5 ~ 

Q. 

., 

Q. 

c: 

~ E 

15 - r-

- "' ~ ...... - ~ ~ - - 0 4 "' ., 

Q. 

10 I• i. - r-

- - - - - - 3 

- - - - - - - - 2 - 5 ..... ,_ 

0 I I. -

I I I I 0 

94 J M M S N 95 J M M S N 96 J M M S N 

F A A 0 D A A 0 D F A A 0 D 

CJ Votum e of Im ports •Exchange rate 

Source: Confederacion Nacioanl Ganadera, Inform acion Economic Pecuaria, Apr. 1996; International Monetary Fund, 

International Financial Statistics. 

The peso devaluation had an important effect on Mexican imports of beef. In addition to a drop 

in consumer income, during the first half of 1995, Mexican purchase prices for imported beef 

increased approximately 40 to 50 percent,133 while beef prices at the retail level rose 20 

percent. 134 In each of the third and fourth quarters of 1994, Mexican beef imports from all 

countries were about 70 million pounds. 135 However, during the first quarter of 1995, these 

imports declined to less than 18 million pounds, increasing only slightly in the second quarter 

to 23 million pounds. Beef imports for all of 1994 were 265 million pounds compared to 90 

million pounds in 1995, a decline of two-thirds. 

U.S. exports of fresh, chilled, or frozen beef to Mexico were significantly disrupted by the peso 

devaluation, falling from 201 million pounds, valued at $227 million in 1994 to 85 million 

pounds, valued at $85 million in 1995 (table D-20). In spite of the sharp decline in the quantity 

of U.S. exports, the share of Mexico's beef imports supplied by the United States increased 

from 76 percent in 1994 to 93 percent in 1995.136 As the economy improved in 1996, U.S. 

exports of fresh, chilled, or frozen beef to Mexico increased to 164 million pounds (table D-20). 

133 USDA, FAS, Livestock and Poultry: World Markets and Trade, Apr. 1995. 134 USDA, FAS, Annual Livestock Report (MX6099), Aug. 1996. 135 Confederacion N acional Ganadera, Infonnacion Economica Pecuaria, Apr. 1996. 

136 Ibid. 

4-23 
While the peso devaluation significantly reduced overall U.S. exports of beef to Mexico, trade 

between the United States and Mexico in some meat products was assisted by the weak peso. 137 

The United States supplies two distinct markets in Mexico-the retail sector, where lowerpriced products are sold to the Mexican consumers through supermarkets and other retail 

outlets; and the hotel, restaurant, and institution (HRI) sector, where higher priced products are 

sold. While trade in the retail market declined significantly, the demand characteristics of the 

HRI trade are such that sales are relatively isolated from macroeconomic instability and changes 

in exchange rates when compared with the retail sector. Moreover, the devalued peso made 

Mexico attractive to many U.S. tourists which boosted beef sales to the HRI sector. As a result, 

the peso devaluation provided a boost to U.S. sales of high-quality beef to Mexico's HRI sector 

and moderated the overall impact of the peso devaluation on U.S. beef exports.138 

137 USITC staff interview with Gilberto Lozano, director of U.S. Meat Export Federation, Mexico 

City, Feb. 19, 1997. 138 Statistics concerning sales of beef into the retail and HR.I sectors are not separately reported. 

4-24 
Empirical Analysis of the Impact of the NAFTA 

on Mexican Imports of U.S. Beef 139, 140 

The empirical analysis is based on equations explaining Mexican imports of beef and the U.S. 

share of those imports. The equations were estimated using econometric techriiques (details of 

the econometric analysis are provided in appendix I). Separating out the impacts of the 

NAFTA on Mexican imports of beef from those of the peso devaluation of 1995-96 was a key 

challenge for this analysis. 

Approach 

The approach taken was to evaluate the level of Mexican beef imports from the United States 

under different assumptions about prices, incomes and trade policies that capture scenarios 

involving the NAFTA. Four separate scenarios were evaluated, including imports of U.S. beef: 

with the NAFTA, with peso devaluation (simulation 1), 

without the NAFTA, with peso devaluation (simulation 2), 

with the NAFTA, without peso devaluation (simulation 3), and 

without the NAFTA, without peso devaluation (simulation 4). 

139 For Vice Chairman Bragg's views on econometric modeling, see The Economic Effects of 

Antidumping and Countervailing Duty Orders and Suspension Agreements, USITC publication 

2900, June 1995 at xii, and, The Impact of the North American Free Trade Agreement on the U.S. 

Economy and Industries: A Three Year Review, investigation No. 332-381, USITC publication 

3045, June 1997 (expected to be released to the public in July 1997). 14° Commissioner Newquist notes that although he does not necessarily disagree with many of the 

"findings" in this report, he is generally skeptical of conclusions drawn from economic models rather 

than empirical quantification. In his view, economic modeling is essentially an exercise in untested, 

unverifiable, and often unrealistic theory. At its base level, economic modeling is nothing more than 

the manipulation of"data" and often vague or unspecific "variables." Underlying the data collection 

and identification of variables is the individual modeler's prejudices and subjective assumptions. 

Thus, individuals measuring the impact of a particular event or occurrence, may employ 

completely different assumptions and focus on different variables--to say nothing of "ranges" within 

the assumptions and variables. Likewise, the quality and representativeness of data collected must be 

assessed and acknowledged. 

Commissioner Newquist does not dispute that model results in this report may represent a 

particular manipulation of available data using certain assumptions. However, given the limitations of 

the modeling exercise, he questions the extent to which policy decisions should be based on these 

manipulations, particularly where, as here, some of the "measuring" is of events that did not occur. 

For further discussion of Commissioner Newquist's view regarding economic modeling, 

particularly its limitations, see, The Impact of the North American Free Trade Agreement on the U.S. 

Economy and Industries: A Three Year Review, investigation No. 332-381, USITC publication 

3045 at appendix F (June 1997) (expected to be released to the public in July 1997); The Economic 

Effects of Antidumping and Countervailing Duty Orders and Suspension Agreements, investigation 

No. 332-344, USITC publication 2900 at xi ("Views of Commissioner Don Newquist") (June 1995); 

see also, Potential Impact on the U.S. Economy and Industries of the GATT Uruguay Round 

Agreements, volume I, investigation No. 332-353, USITC publication 2790 at I-7, n.17 (June 1994); 

Potential Impact on the U.S. Economy and Selected Industries of the North American Free-Trade 

Agreement, investigation No. 332-337, USITC publication 2597 at 1-6, n.9 (January 1993). 

4-25 
30 

20 

10 

Simulation 1 represents the actual situation and serves as a comparison with the counter-factual 

simulations 2, 3, and 4. The analysis was undertaken for the period January 1994 to December 

1996, and the results are shown in figure 4-3, and also in appendix I, table 2. Each simulation 

is discussed in detail below. 

Figure 4-3 

lrrpact of NA.FTA and peso devaluation on Mexican beef irrports from the Uiited States, by month, 

Jan. 1993-Dec. 1996 

rrillions of pounds 

vi NAFTA 

vlo peso devaluation 

vlo NAFTA 

vi peso devaluation vi NAFTA 

vi peso devaluation 

93J M M J S N 94J M M J S N 95 M M J S N 96 M M J S N 

F A J A 0 D F A J A 0 D F A J A 0 D F A J A 0 D 

II Simulation 1 • Simulation 2 • Simulation 3 81 Simulation 4 

Source: USITC estimates (see appendix I). 

4-26 
Simulation I - Mexican beef imports from the United States 

with the NAFTA, with peso devaluation 

Simulation 1 represents the factual case and is used as the base simulation with which to 

compare the three counter-factual simulations. In this simulation, income and other 

macroeconomic variables were kept at their actual levels, while the tariff rates on imported beef 

were included according to the NAFTA (i.e., reduced to zero for the United States and 

maintained at the 15 - 25 percent range for the rest of the world). The NAFTA dummy variable 

in the share equation was set equal to 1 (see equation 5, appendix I). 

The model predicted Mexican beef imports from the United States at 267 million pounds in 

1994, representing an 86 percent share of total Mexican imports of 308 million pounds. Total 

imports decline to only 111 million pounds in 1995, although the U.S. share of these imports 

increases to 97 percent. Imports were predicted to rebound in 1996 to 216 million pounds, of 

which the United States supplies 98 percent (211 million pounds). 

Simulation 2-Mexican beef imports from the United States without the 

NAFTA, with peso devaluation 

Simulation 2 estimates what Mexico's demand for U.S. beef would have been without the 

NAFT A. Comparing simulations 1 and 2 measures the impact of the NAFTA in beef trade 

ceteris paribus, excluding the effects of the peso devaluation and other factors. In this 

simulation, the Mexican income variable was assumed to follow the pattern of actual income 

with a sharp decline in 1995 because of the peso crisis. However, the income growth rate was 

reduced by 0.5 percent based on the assumption that the NAFTA provides an incremental 0.5 

percent increase in the growth rate in GDP. 141 

It was also assumed that the tariff rates on imported beef from the United States would have 

remained at the rates prevailing in 1993 (i.e., were not reduced to "Free" in January 1994). This 

affected the price of imported beef in the total import demand equation as well as the U.S. 

import price in the share equation. The NAFTA dummy variable in the share equation was set 

at zero over the entire simulation period. 

Without the NAFTA, the analysis indicates that Mexico would have imported about 182 million 

pounds of beef from the United States in 1994, compared with 267 million pounds under the 

Agreement. This reduction is due both to a decline in the overall level of imports, as well as to 

a decline in the U.S. share (only 73 percent compared to 86 percent). This is because import 

prices would have been higher without the tariff reductions, and income growth would have been 

lower without the Agreement. With the NAFTA, Mexico is predicted to import 108 million 

pounds of U.S. beef in 1995, compared with only 70 million pounds if no agreement had been 

reached. Thus, for 1995, incremental imports because of the NAFTA were about 38 million 

pounds. The U.S. share of Mexican beef imports would likely have been about 84 percent 

compared with the base scenario of 97 percent. In 1996, Mexico is predicted to import almost 

64 million pounds more beef from the United States because of the NAFTA (comparing 211 

million pounds under the NAFTA with 147 million pounds without the NAFTA). 

141 USDA, ERS, Effects of the North American Free Trade Agreement on U.S. Agricultural 

Commodities, Mar. 1993. 

4-27 
Simulation 3 - Mexican beef imports from the United States with the 

NAFTA, without peso devaluation 

The third simulation represents what would have occurred in U.S./Mexican beef trade in the 

absence of the peso devaluation. Tariff reductions under the NAFTA are assumed to take place, 

thereby reducing the price of beef imported from the United States. The NAFTA dummy 

variable is set at one starting in January 1994. Thus the U.S. share of Mexican beef imports is 

assumed to remain the same in both the "with" and "without" peso devaluation scenarios. The 

main impact is through the income variable in the total import demand equation. Here income 

is assumed to increase by 3.5 percent, equal to the rate experienced in 1994. 142 The exchange 

rate and price deflators were kept at their 1994 levels assuming purchasing power parity holds 

in the long-run; 

Because the peso devaluation started at the end of 1994, impacts are measured for 1995 and 

1996. In 1995, if there had been no peso devaluation, total Mexican beef imports would have 

been 310 million pounds, compared with the base scenario imports of about 111 million pounds. 

Assuming a U.S. share of97 percent in both cases, imports from the.United States would have 

been 301 million pounds without the devaluation, compared with only 108 million pounds with 

the devaluation. Thus, in 1995, the peso crisis reduced U.S. beef sales to Mexico to roughly 

one-third of what they otherwise would have been. In 1996, the economic recovery increased 

Mexican imports of U.S. beef to almost 211 million pounds. However, if the peso had not 

devalued, Mexican demand for U.S. beef would have been 332 million pounds, 57 percent more 

than was the base simulation. Thus, during the 2-year period, the peso devaluation is estimated 

to have cost the U.S. beef industry losses on about 315 million pounds of beef exports to 

Mexico, valued at almost $300 million. 

Simulation 4 -Mexican beef imports from the United States without the 

NAFTA, without peso devaluation 

The final simulation combines the two previous ones to evaluate what Mexican imports of U.S. 

beef would have been without the NAFTA and without the peso devaluation. The price, income 

and policy assumptions embodied in this simulation are the same as those described above for 

the individual NAFTA and peso devaluation scenarios. 

The results for 1994 are the same as in simulation 2, given that the peso devaluation did not 

begin until the end of 1994. In 1995 Mexican imports from the United States were estimated 

to be about 149 million pounds compared with base level imports of 108 million pounds, while 

for 1996 total imports and imports from the United States were 233 million pounds and 211 

million pounds, respectively. Thus, under this simulation, it is estimated that trade in beef 

between the United States and Mexico would have been fairly similar to actual levels. 

142 U.S. Embassy, Mexico, Mexico Economic and Financial Report, Jan. 1997. 

4-28 
Results 

The preferential tariff treatment enjoyed by the United States following the NAFTA has meant 

that it now supplies almost all the beef imported into Mexico. The large market share held by 

the U.S. industry is unlikely to change until the tariffs on competing suppliers are removed. 

According to the model results, the NAFTA expanded Mexican imports of U.S. beef by 187 

million pounds during 1994-96, valued at $180 million. 

The results also show that the drop in U.S./Mexican beef trade in 1995 and 1996 compared with 

earlier years was due largely to the devaluation of the peso. According to the empirical results, 

the peso devaluation caused a loss in U.S. beef exports of about 314 million pounds, valued at 

almost $300 million, which more than offset the benefits of the NAFTA during the period under 

review. 143 

Empirical Analysis of Canadian Exports of Live 

Cattle for Slaughter to the United States 

An empirical analysis was also undertaken to identify and measure the factors, including the 

NAFTA, explaining Canadian exports oflive cattle for slaughter (LCFS) to the United States. 

A single equation econometric model was used, the details of which are reported in appendix 

K, to address the following key questions: what economic factors influence the trade flow in 

LCFS between the United States and Canada; did the NAFTA have an impact on Canadian 

exports ofLCFS to the United States; do changes in Canadian grain prices affect LCFS trade; 

how did changes in plant capacity in Southern Alberta affect Canadian exports of LCFS to the 

United States; and, what will be the likely outlook for LCFS trade in the near-term? 

According to the results of the estimated equation shown in appendix K, the factors found to 

influence Canadian exports of LCFS to the United States include the prices of slaughter steers 

on either side of the border. The elasticity of trade with respect to U.S. and Canadian prices is 

estimated at 3. 7, indicating packers are highly sensitive to price differentials between the United 

States and Canada. Cattle inventories were also found to be highly important in explaining the 

future level of live cattle trade. 

The estimated equation indicated that the NAFTA has not had any major impact on the trade 

in LCFS. This can be explained by the fact that the ad valorem equivalent (AVE) of the rate 

of duty for LCFS was less than 2 percent AVE before January 1994 when the NAFTA was 

143 As in any modeling exercise the results are open to challenge. It is acknowledged that there are 

several aspects of the modeling exercise that may have led to an under- or over-estimation of the true 

impacts of the NAFTA. Among these are possible weakness in the raw data, simplifying assumptions 

about the decision making processes of importers and exporters, assumption in the model 

specification, choice of estimator, and assumptions about the model's exogenous variables in the 

counter factual analysis. Because of these potential sources for error, the modeling procedures and 

assumptions have been made as transparent as possible. However, while readers must exercise 

caution with respect to the precise magnitudes of the policy impacts, they can be confident of the 

overall trends and direction of effects associated with the NAFTA and the peso devaluation that are 

predicted by the model. 

4-29 
implemented. Further, grain prices were found not to be important in explaining the pattern of 

trade over the last few years. 

Canadian slaughtering capacity was found to be a key factor in determining Canadian exports 

of LCFS to the United States. According to the results of the model, the increased capacity in 

the fall of 1996 led to an average decline of 44,000 animals per month being shipped to the 

United States. With additional capacity utilization, such as that at the IBP plant in mid-1997, 

it is likely that even fewer cattle will be shipped to the United States. 

The econometric analysis indicates that during 1997 and into 1998, Canadian exports ofLCFS 

should decline from the 1996 level assuming no significant change in the relative U.S./Canadian 

steer price. 144 This drop in exports is attributed to smaller Canadian cattle inventories during 

the latter part of 1996, and increased slaughtering capacity in Canada in 1997. 

While increased slaughtering capacity in Canada likely will result in fewer live cattle for 

slaughter moving south, it may also provide opportunities for increased shipments of feeder and 

slaughter cattle to Canada. If so, then Canada will increasingly export beef rather than live 

slaughter cattle, particularly if efforts to harmonize the meat-grading system of both countries 

are successful.• 

144 This result must be heavily qualified by the assumptions of the model, its specification and 

accuracy of data. Readers should interpret the results as likely direction in trend rather than precise 

forecasts of cattle movements. 

4-30 
CHAPTERS 

TRANSSHIPMENT ISSUES 

This chapter describes steps that the U.S. Customs Service and the USDA have taken since 

enactment of the NAFTA to prevent transshipment1 of live cattle and fresh, chilled, or frozen 

beef through Mexico and Canada into the United States. This chapter also reports on a 

transshipment issue that involved beef from Australia and New Zealand being transshipped 

through Canada for importation into the United States. The chapter also discusses a bonding 

program for live cattle entering the United States from Mexico that was terminated after the 

NAFTA became effective. 

U.S. Customs Service Action 

On March 24, 1997, the USITC received a letter from the U.S. Commissioner of Customs 

(Customs) concerning the transshipment issue.2 Customs reported that in 1995 the Office of 

Regulatory Audit performed 10 NAFTA verification audits on producers of beef products in 

Canada and Mexico. Although deficiencies with inventory records were noted, and Customs 

advised the producers concerning record keeping and inventory management, no transshipment 

was detected. 

According to their letter, the NAFTA implementing legislation required Customs to develop a 

methodology for estimating compliance with the laws administered by Customs to be presented 

in an annual report to the Congress. As a result of this legislation, a servicewide Compliance 

Measurement Program, with a NAFTA subset, was implemented in an effort to assure a high 

level of compliance and enforcement. 

Prior to the implementation of the NAFTA, Customs already had in place a National Trade 

Enforcement Plan (TEP), which was expanded to include the NAFTA subplan. In support of 

the TEP, the Office of Strategic Trade performs continuing analysis of import data in order to 

detect changes in trade patterns within trade sensitive industries, including agriculture. If an 

aberration in trade patterns were to occur, Customs reports that it would attract their attention. 

USDA Action 

On April 9, 1997, the USITC received a letter from the U.S. Secretary of Agriculture concerning 

the transshipment issue.3 The Secretary reported that the USDA does not have direct 

responsibility for monitoring or enforcing regulations on transshipments of product entering the 

United States. Nevertheless, personnel in the FSIS and APHIS are responsible for enforcing 

health and sanitary requirements for meat and live animals at the border, and thus, USDA 

1 For a definition of transshipment, please see the General Notes of the 1997 Harmonized Tariff 

Schedule of the United States (HTS) . 2 A copy of the letter is reproduced as appendix L. 3 A copy of the letter is reproduced as appendix M. 

5-1 
reported that it would be sensitive to problems potentially relating to transshipments. 

According to their letter, the NAFTA Implementation Act requires the Secretary of Agriculture 

to submit an annual report to Congress on the inspection of food and agricultural products 

(meat, poultry, other food, animals, and plants) imported into the United States in commercially 

significant quantities from Mexico and Canada.4 The Secretary reported that in 1995, the latest 

year for which data are available, that USDA was not aware of any incidence of transshipment 

of live animals. 5 The Secretary also reported that there were no known incidents of 

transshipment of meat or poultry products that originated in a non-NAFTA country and shipped 

to the United States through Canada or Mexico. 6 

Interested Parties 

Certain parties argued that, since entry into force of the NAFTA, there has been no economic 

incentive to transship beef through Mexico and Canada for importation into the United States. 7 

However, it was acknowledged that such incentives did exist under the Meat Import Act, which 

had quantitative restrictions applicable to U.S. imports from Oceania but not Canada.8 It was 

also reported that in a few situations where transshipments had been a problem, the 

transshipments resulted from misinformation and the situation was quickly corrected by industry 

and government through existing procedures.9 

It was also argued that to obtain any useful benefits through transshipments it would be 

necessary to legally change the country of origin of the subject beef to that of a third country 

(such as Canada) that enjoys a benefit not enjoyed by the country of origin. To obtain 

preferential status under the NAFTA rules of origin, third-country beefrequires a change from 

chapter 2 of the Harmonized Tariff Schedule of the United States (HTS), which provides for 

fresh, chilled, or frozen beef, to another chapter, typically chapter 16, which provides for 

processed beef. Under most circumstances the costs involved to turn the original product into 

another product (resulting in a reclassification to another HTS chapter) are too great to make 

such activity economical, merely to obtain a duty or quota benefit. 10 

Several domestic interests, including veterinarians11 and other animal health officers,12 

expressed concern about transshipment of live cattle from Central American countries through 

Mexico for importation into the United States. The concern was that a small shipment of cattle 

could introduce pests such as screw worms or disease such as tick fever into the U.S. herd. 

4 USDA, APHIS, Inspection of Imported Meat, Poultry, Other Foods, Animals, and Plants from 

NAFTA Countries, 1995 Report of the Secretary of Agriculture to the U.S. Congress, APHIS 31-05-

003, Dec. 1996, p. I. 5 Ibid., p. 10. 6 Ibid., p. 14. 7 Prehearing briefof the NZMPB, Mar. 10, 1997, p. 19; prehearing briefof the CCA, Mar. 10, 

1997,pp. 35-37;posthearingbriefoftheAMLC,Apr. 3, 1997,p. 15. 8 Prehearing briefof the NZMPB, Mar. 10, 1997, p. 19; prehearing briefof the CCA, Mar. 10, 

1997, pp. 35-37. 9 Posthearing brief of the Meat Importers Council of America (MICA), Apr. 3, 1997, p. 8. 10 Ibid. 

11 USITC staff interview with Bill Brown, Texas Animal Health Commission, Jan. 29, 1997. 12 USITC staff interview with G. Gale Wagner, professor of Veterinary Pathology and Coordinator 

of International Programs, Texas A&M University, Feb. 14, 1997. 

5-2 
Mexican interests argue that cattle ranchers in Northern Mexico also have concerns about cattle 

pests and diseases and thus the Mexican Government enforces sanitary and phytosanitary 

regulation on the movement of cattle within Mexico. 13 

Oceania Beef Transshipped Through Canada 

In a February 8, 1993 letter to the Secretary of Agriculture, the National Cattlemen's 

Association (NCA) alleged that Canadian interests were transshipping Australian beef to the 

United States in violation of Article 302 of the CFTA. The NCA asked the Secretary to 

investigate their complaint. 

As noted in appendix G, in 1992, 1993, and 1994 Australia and New Zealand entered into 

Voluntary Restraint Agreements (VRAs) negotiated under section 204 of the Agricultural Act 

of 1956 to limit their exports of quota-type meats to the United States. However, there were 

no quantitative restrictions on Australian and New Zealand exports of quota-type meats to 

Canada. Thus, an arbitrage opportunity became plausible in 1992 when the VRAs were signed. 

Some Canadian processors allegedly would import relatively low-priced Australian or New 

Zealand beef, mix that beef with Canadian beef, and then export the commingled product to the 

United States as a product of Canada. 14 

The U.S. Customs Service issued a Trade Enforcement Alert that reported a large quantity of 

frozen beef had been shipped from Australia to Canada in the latter part of 1992. Some concern 

was expressed that this beef, after some minimal processing, would be exported to the United 

States as a Canadian product. 15 The U.S. Customs Service received many inquiries as to 

whether they charged imports through Canada against the proper third country quota.16 The 

U.S. Customs Service then implemented an administrative approach in dealing with imports 

from Canada as follows: 17 

1. maintain consistent posit~ons in the areas of tariff classification, 

marking, CFTA, and quota status, 

2. adopt a common strategy for identifying and monitoring Canadian 

shippers, and 

3. establish an information network to ensure that developments 

regarding shippers, importers, and related issues be disseminated 

on a timely basis to all interested parties. 

On April 8, 1993, the official testing of the arbitrage opportunity arose. On that date, the U.S. 

Customs Service denied entry to ground beef from Canada that had been minimally processed 

13 Bi-National Committee (BNC) for the Eradication of Tuberculosis and Brucellosis, 

Tuberculosis Program, Stage II Review, Oct. 21-25, 1996. 14 USITC staff telephone conversation with officials of USDA, FAS, Jan. 30, 1997. 15 U.S. Customs Service, Office of Commercial Operations, Quota Branch, Apr. 8, 1993. 16 Ibid. 

17 Source: Correspondence from Richard B. Schroeter, USDA to Michael Lane, Acting 

Commissioner of Customs. 

5-3 
and mixed with Australian or New Zealand beef.18 Customs ruled that the commingled beef 

violated the terms of the VRA requirements that subject Australian or New Zealand beef enter 

the United States on a through bill oflading. 19 

Canada immediately challenged the U.S. Customs Service's prohibition by stating that this was 

contrary to Article 704 of the CFTA requiring official notification and consultations before 

prohibiting entry of meat products. 20 Acknowledging that no consultations were provided, the 

USDA formally asked the U.S. Customs Service to allow entry of the commingled CanadianAustralian or Canadian-New Zealand beef products until April 24, 1993. U.S. Customs Service 

did not count these commingled shipments entering the United States during this interim period 

against the Australian or New Zealand VRA. 

In a letter to the Acting Commissioner of the U.S. Customs Service on April 9, 1993, USDA 

outlined three scenarios involving Australian or New Zealand beef shipped to the United States 

through Canada: 21 

1. Meat of Australia or New Zealand without substantial transformation 

in Canada--

Since the Australian and New Zealand VRA were in effect, and the terms 

of the VRA required a through bill of lading, meat should only be allowed 

entry under existing regulations, i.e., counted against the VRA. 

2. Meat of Australia or New Zealand with minimal transformation in 

Canada--

A Canadian inspection certificate is required for any beef that originated 

in a third country and has undergone minimal Canadian processing such 

as shredding, chopping, and mixing, but not enough of a substantial 

transformation to change country-of-origin guidelines. 

3. Meat of Australia or New Zealand with substantial transformation in 

Canada--

Beef from any third-country that has been substantially transformed as to 

change tariff chapter classification will be deemed a product of Canada 

and be afforded all the preferences of Canadian beef. 

On April 21, 1993, Canada formally asked the United States to extend the April 24, 1993, 

deadline to perfect a long-term solution and to allow for clearing of various contractual 

obligations between U.S. and Canadian trade. On April 22, 1993, two days before the deadline, 

Canada made a proposal to USTR and USDA concerning exports of blended Canadian-Oceanic 

18 USDA Decision Memorandum for the Acting Undersecretary, written by Richard B. Schroeter, 

acting administrator, USDA, FAS, Apr. 21, 1993. 19 A through bill oflading is a bill oflading covering the shipment of goods from the origin to the 

final destination, including all connecting carriers. 20 USDA Decision Memorandum for the Acting Undersecretary, written by Richard B. Schroeter, 

acting administrator, USDA, FAS, Apr. 21, 1993. 21 Letter from Richard B. Schroeter, USDA to Michael Lane, Acting Commissioner of Customs. 

5-4 
meat to the United States. 22 Canada's proposal would have required entry of meat blends 

containing a de mini mis portion of beef originating outside Canada or the United States. These 

products would not count against the VRAs but would be afforded Most Favored Nation tariff 

treatment. Ultimately, the United States rejected Canada's proposal. 

However, as noted in chapter 2 of this report, on June 1, 1993 Canada imposed a tariff-rate 

quota on imports of boneless beef originating in countries other than the United States and 

Mexico. A provision of the tariff-rate quota required that beef not shipped from the country of 

origin on a through bill oflading to Canada will immediately be subject to the higher over-quota 

rate, virtually eliminating any arbitrage opportunity to ship minimally processed AustralianCanadian or New Zealand-Canadian beef to the United States. 

Thus, since enactment of the NAFTA, there appears to have been no arbitrage opportunity to 

transship fresh, chilled, or frozen beef through Mexico and Canada for importation into the 

United States. 

Measures Taken by U.S. Customs to Prevent 

Transshipments of Cattle and Fresh, Chilled, 

or Frozen Beef from Mexico 

Mexico is a relatively minor supplier of fresh, chilled, or frozen beef to the United States, with 

just 0.6 percent of total U.S. imports in 1996. The USITC is unaware of any transshipment of 

fresh, chilled, or frozen beef through Mexico. However, the NAFTA has had some impact on 

the measures that the U.S. Customs Service takes in preventing the possibility of such 

transshipments. 

Prior to January 1, 1994, the date on which the NAFTA entered into force, the U.S. Customs 

Service collected duties and bonds on cattle imported from Mexico destined to be ultimately 

returned to Mexico for slaughter. Such cattle were exempted from meeting certain testing 

requirements for tuberculosis and brucellosis--diseases that present a greater than average risk 

of spreading disease to U.S. livestock. As a means of ensuring that the in-bond Mexican cattle 

were maintained in accordance with the regulations while in the United States and were actually 

returned to Mexico upon completion of their feeding period in the United States, regulations 

required the importer to post a bond with the U.S. Customs Service at the port of entry. 23 It was 

presumably in the importers' economic interest to meet all the terms of the regulations because 

Customs required that the value of the bond could be three times the value of the cattle. 

The U.S. Customs Service discontinued its in-bond program on January 1, 1994 to comply with 

the terms of the NAFTA. Consequently, U.S. importers no longer were required to post a bond 

when importing cattle from Mexico into the United States for feeding and return to Mexico. 

The U.S. Customs Service however continued to monitor such cattle. A penalty of $400 was 

22 John McNab, Counsellor (Commercial), Canadian Embassy to David Weiss, USTR, et. al., 

Apr. 22, 1993, facsimile. 23 60 F.R. 13896 (Mar. 15, 1995). 

5-5 
imposed for failure to return in-bond Mexican cattle to Mexico24 --such a fine would likely be 

a relatively small penalty relative to forfeiting a bond or the value of the cattle. 

The APHIS began to monitor the in-bond program once the U.S. Customs Service discontinued 

its collection of duties and bonds. 25 Unable to prevent the dissemination into the United States 

of animal diseases by in-bond cattle that remain in the United States in violation of the 

regulations, APHIS terminated the in-bond program effective March 30, 1995.26• 

24 Ibid. 

25 Ibid. 

26 Ibid. 

5-6 
CHAPTER6 

IMP ACT OF THE URA ON U.S. TRADE IN 

CATTLE FOR SLAUGHTER AND BEEF 

General 

As discussed in chapter 1, the Uruguay Round Agreements (URA) are the result of multilateral 

negotiations conducted under the auspices of the GATT during 1986-93. The URA consist of 

the Agreement Establishing the World Trade Organization (WTO) and a series of multilateral 

and plurilateral agreements and understandings set forth in annexes to the WTO Agreement and 

entered into force on January 1, 1995. This chapter examines major URA issues related to 

cattle and beef trade. 

URA Impacts: Summary 

To date, the URA appears to have had little impact on U.S. imports and exports of cattle for 

slaughter and fresh, chilled, or frozen beef. 1 URA commitments concerning beef include: the 

conversion of quotas under the United States and Canadian Meat Import Acts to tariff-rate 

quotas; U.S. side agreements with Uruguay and Argentina to provide for U.S. imports of fresh, 

chilled, or frozen beef; a U.S./Korea Record of Understanding (ROU) providing for access to 

the Korean beef market; Japanese duty reductions applicable to beef; and, reductions in 

government incentives for cattle and beef exports. In addition, more general WTO agreements 

that might impact such trade include the WTO Agreement on the Application of Sanitary and 

Phytosanitary Measures (SPS Agreement), and dairy and grain commitments. 

The repeal of the Meat Import Act of 1979 in the United States and subsequent replacement 

with a tariff-rate quota apparently has had little effect on U.S. trade. The in-quota amounts 

agreed to under the URA were about 15 percent higher than the previous amounts under the 

Meat Import Act, and U.S. beef imports have been declining steadily since 1992, generally 

reflecting low U.S. beef prices and increased U.S. production (in part, a result of the contraction 

phase of the U.S. cattle cycle). 

As a result of a side agreement negotiated during the Uruguay Round, Uruguay was authorized 

to ship fresh, chilled, or frozen beef to the United States but the authorized quantity is less than 

1 percent of U.S. consumption, and Argentina, as of August 25, 19972 was authorized to ship 

fresh, chilled, or frozen beef to the United States. Japan and Korea are likely to be important 

1 It should be noted that the full impact of some of the agreements (the U.S./Korean Record of 

Understanding, the agreed upon reductions relating to export incentives for cattle and beef exports, 

and grain commitments) have not yet been fully realized since they are to be phased in over a period 

of years. 

2 62 F.R. 34385 (June 26, 1997). 

6-1 
future markets for U.S. beef; however, U.S. exports in 1995-96 were limited by consumer health 

concerns in those countries relating to beef in general. 3 

Although the URA requires the United States to reduce beef export incentives, U.S. beef export 

incentives have not been used in recent years. The EU (the primary user of these incentives) is 

required to substantially reduce export incentives over the next few years. The extent to which 

U.S. beef exports might benefit from these EU reductions is unclear, since the primary 

purchasers (e.g., North African and Central and Eastern European countries) may switch to less 

expensive protein sources, such as poultry and grains, instead of U.S. or EU (without export 

incentives) beef.4 

As of early June 1997 there had been no determinations under the SPS Agreement that have 

impacted cattle or beef trade. In view of the minor impact of the URA on the U.S. dairy sector 

it appears that the dairy commitments have had only a very minor impact on U.S. trade in live 

cattle for slaughter and fresh, chilled, or frozen beef. Canadian commitments relating to grain 

transportation (the elimination of the WGTA in July 1995) have been offset by relatively high 

world grain prices during 1995-96 and as a result have had little effect on cattle and beef trade. 

The European Union's URA grain commitments apparently also result in little impact on U.S. 

cattle or beef trade, since the EU does not feed significant quantities of grain to cattle or export 

significant quantities of feedgrains to cattle producing countries. 

URA Commitments and Actions Concerning 

Cattle and Beef 

Repeal of the Meat Import Act of 1979 

As noted in chapter 2, section 403 of the Uruguay Round Agreements Act converted U.S. 

quotas under the Meat Import Act of 1979 to a tariff-rate quota to bring U.S. law into 

conformity with U.S. obligations under the WTO Agreement on Agriculture. The Australian 

Meat and Live-stock Corporation (AMLC) stated that the Meat Import Act had long been a 

disruptive and distortive factor in beef trade. 5 The United States committed to a tariff-rate 

quota of 656,621 metric tons (1.4 billion pounds, product weight) and an additional 20,000 

metric tons ( 44.1 million pounds) each from Uruguay and Argentina under certain conditions 

explained below. The rate of duty applicable to in-quota quantities varies depending on the HTS 

heading as shown in appendix F. There is no limit to the quantities that enter from Canada and 

Mexico subject to in-quota rates of duty. 6 The following tabulation shows the in-quota quantity 

of beef allocated by country: 

3 E. Coli and BSE concerns. 4 See the section of this chapter entitled EU Export Incentive Commitments. 5 Posthearing brief of the Australian Meat and Live-stock Corporation (AMLC), Apr. 3, 1997, p. 2. 6 Additional U.S. Notes (#3), ch. 2, HTS, 1996, p. 2-1. 

6-2 
Country Quantity 

(metric 

tons) 

Canada . . . . . . . . . . . . . . . . No limit 

Nlexico . . . . . . . . . . . . . . . . 

Australia .............. . 

New Zealand ........... . 

Japan ................. . 

Uruguay .............. . 

Argentina ............. . 

Other countries or areas . . . 

Total ............... . 

No limit 

378,214 

213,402 

200 

20,000 

20,000 

64,805 

696,621 

(J,000 

pounds) 

No limit 

No limit 

833,819 

470,471 

441 

44,092 

44,092 

142,871 

1,535,786 

The base over-quota tariff for fresh, chilled, or frozen beef was 31. l percent ad valorem in 

1995, to be reduced by 15 percent in equal annual installments over 6 years, resulting in a bound 

tariffrate of 26.4 percent ad valorem. The over-quota tariffrate for 1997 is 28.8 percent ad 

valorem.7 The AMLC stated that the over-quota rate of duty is prohibitive and progress should 

be made to open the market more. 8 At the US ITC hearing, the Meat Importers Council of 

America (MICA) stated that the out-of-quota rate of duty is so high that it is trade prohibitive 

and in effect represents an absolute quota above the in-quota rate.9 

U.S. imports of tariff-rate quota-type meats from Canada amounted to 381 million pounds in 

1995 and increased to 507 million pounds in 1996.10 U.S. imports of tariff-rate quota-type 

meats from Mexico amounted to 4 million pounds in 1995 and then increased to 8 million 

pounds in 1996. Imports from other suppliers were less than the tariff-rate quota (table D-52). 

Australia filled 59 percent of its tariff rate-quota in 1995 and 48 percent in 1996, while New 

Zealand filled 90 percent in 1995 and 78 percent in 1996. Based on statistics of the U.S. 

Customs Service's Trade Compliance Division, U.S. imports of quota-type meat from Uruguay 

totaled 19,400 tons (42.8 million pounds), or 97 percent of the in-quota quantity allocation in 

1996; up from 0.3 million pounds in 1995. 

As shown in the following tabulation, U.S. imports of tariff-rate quota-type meats during 1995 

and 199611 were less than the imports of meats of the type subject to the Meat Import Act of 

1979 from all sources (including Canada and Mexico) during the 5 years prior to the repeal of 

the Meat Import Act of 1979. 

7 World Trade Organization, International Bovine Meat Agreement, Summary of the Results of the 

Uruguay Round in the Meat Sector, Geneva, Feb. 1995, pp. 24-25. 8 PosthearingbriefoftheAMLC,Apr. 3, 1997,p. 4. 9 Testimony of Rufus E. Jarman, Jr., of Barnes, Richardson & Colburn on behalf of the Meat 

Importers Council of America, Inc., transcript of the hearing, Mar. 20, 1997, p. 66. 10 Quantities compiled from official statistics of the U.S. Department of Commerce. 11 The only 2 years that the tariff-rate quota has been in effect. 

6-3 
Imports of meats of the type 

subject to the Meat Import Imports of tariff rate 

Year Act of 19791 quota-type meats1 

------------------------(mi Ilion pounds)------------------------

1987 .. . 

1988 .. . 

1989 .. . 

1990 .. . 

1991 .. . 

1992 .. . 

1993 .. . 

1994 .. . 

1995 .. . 

1996 .. . 

1,428.3 

1,521.3 

1,322.1 

1,533.0 

1,496.2 

1,587.7 

1,585.0 

1,669.9 

(2) 

(2) 

1 Includes Canada and Mexico. 2 Not applicable. 

The US ITC estimate of what the "trigger level" and quota quantity for 1995 and 1996 would 

have been had the Meat Import Act of 1979 remained in effect and the URA tariff-rate in-quota 

quantity are shown in the following tabulation (in million pounds): 

Meat Import Act of 1979 

Estimated Estimated URA tariff 

Year "trigger level" quota rate in quota 

1995 1,373 1,248 1,536 

1996 1,359 1,235 1,536 

The USITC's estimate of what would have been the trigger level under the Meat Import Act of 

1979 is 163 million pounds (12 percent) less than the tariff-rate-in-quota quantity in 1996 and 

177 million pounds (13 percent) less in 1997. 

Side Agreements with Uruguay and Argentina 

Section 404 of the Uruguay Round Agreements Act authorized the President to increase the 

tariff-rate in-quota quantity for beef to implement agreements reached with Uruguay and 

Argentina in March 1994. Under these side agreements,12 the United States committed to 

provide each country with an in-quota quantity of 20,000 tons ( 44 million pounds) to the United 

States in the event that the U.S. Secretary of Agriculture determined that those countries or areas 

12 Side agreements reproduced in app. N. 

6-4 
of those cmmtries are free of rinderpest and foot-and-mouth diseases.13 Uruguay was found to 

be free of rinderpest and foot-and-mouth diseases and was granted approval by USDA to ship 

fresh, chilled, or frozen meat, including beef and veal, to the United States in mid-November 

1995.14 On June 26, 1997, USDA announced that Argentina had been found to be free of the 

diseases and under certain conditions would be authorized to ship fresh, chilled, or frozen beef 

to the United States effective August 25, 1997.15 

Tariff-Rate Quota Reallocation 

During the course of the investigation, and at the USITC hearing, there was considerable 

discussion about reallocation of in-quota quantities. The discussions mostly related to quota 

reallocation from countries that might not supply their in-quota amounts to countries that could 

exceed their allocations. 

The :MICA contends that the tariff-rate quotas, contrary to the spirit of the URA, are on a course 

of action that effectively lowers access to the U.S. market because of the lack of reallocation. 16 

The MICA supports reallocation of in-quota quantities. 17 The MICA reported that in 1996, 

Uruguayan exporters deliberately exported slightly below their in-quota quantity to avoid the 

tariff on any out-of-quota quantity. Uruguayan exporters report that tariffrates applicable to 

out-of-quota quantities are so high that they must be avoided at all costs and they were 

constrained in exporting the full in-quota quantity because of concerns that delays associated 

with U.S. Customs Service tariff collection might result in the application of out-of-quota 

rates. 18 

The :MICA suggests that if Uruguay had a larger in-quota quantity it would likely export more 

beef to the United States, notwithstanding the fact that Australia and New Zealand had not 

supplied their in-quota quantities in 1995 or 1996, primarily because Uruguay does not yet have 

access to third country markets, such as Japan or Korea. 19 The MICA also listed a number of 

other reasons that Uruguay might export more beef: Uruguay shipped 97 percent of its 

allocation in 1996 and controls were necessary to assure that the in-quota was not exceeded; so 

far in 1997 Uruguay is shipping at a rate substantially higher than that of 1996; Uruguay's 

supplies are high (and expanding) relative to Australia and New Zealand; buyers in 

Asian/Pacific markets have a geographic advantage over U.S. buyers of Oceanic beef; the 

amounts in question are relatively small; and, Uruguay's in-quota quantity is small (5 percent 

of production) and processors can easily switch markets. 20 

13 Rinderpest and foot-and-mouth diseases are highly contagious, infectious diseases that can afilict 

cloven-footed animals (such as cattle, sheep, swine, and deer). Because the diseases are easily 

transmitted and debilitating, they are an ever-present threat to the U.S. livestock industry. The 

diseases do not present a direct threat to human health. 14 60 F.R. 55440 (Nov. 1, 1995). 15 62 F.R. 34385 (June 26, 1997). 16 Prehearing brief of the MICA, Mar. 10, 1997, p. 2. 17 Rufus E. Jarman, Jr., of Barnes, Richardson & Colburn on behalf of MICA, testimony, transcript 

of the hearing, Mar. 20, 1997, pp. 67-72. 18 PrehearingbriefoftheMICA,Mar. 10, 1997,pp. 4-5. 19 Posthearing briefofthe MICA, Apr. 3, 1997, p. 3. 20 Ibid., pp. 5-6. 

6-5 
The MICA favors free trade in the subject commodity. MICA contends that the United States 

could create a situation more closely approximating free trade over the next several years by 

establishing a procedure for freeing portions of unusable Australian and/or New Zealand inquota quantities. 21 

New Zealand, on the other hand, stated that its country allocation is an integral part of the 

balance of rights and concessions negotiated in the Uruguay Round and it opposes any 

reallocation of Australian or New Zealand in-quota quantities. 22 Australia stated that its country 

specific allocation, and the binding of that allocation, was a major element of Australia's 

bilateral settlement with the United States at the end of the Uruguay Round. Australia further 

contends that the reallocation by the United States of any unused allocation of Australia's bound 

tariff quota share would modify the U.S. concession which is an Australian entitlement on beef. 

Reallocation, Australia contends, would not therefore be consistent with the U.S. obligations 

set forth in the U.S. Country Schedule to the WTO Agreement on Agriculture. 23 The NZMPB 

reports that to reallocate in-quota quantities at times when the U.S. market is not sufficiently 

attractive to draw full in-quota quantities from Australia and New Zealand, as typically occurs 

at a contraction phase of the cattle cycle, might have the effect of exacerbating both the depth 

and length of these cyclical market conditions. 24 

Repeal of Canada's Meat Import Act and 

Implementation of a Tariff-Rate Quota 

To meet its URA obligations, Canada also repealed its Meat Import Act. 25 Canadian quotas 

applicable to fresh, chilled, or frozen beef were converted to tariff-rate quotas with staged tariff 

reductions effective January 1, 1995. 26 As shown in appendix H, Canadian imports of tariff-rate 

quota type beef from the United States and Mexico receive a rate of duty of"Free." 

U.S. exports of tariff-rate quota-type meats to Canada increased from 259 million pounds, 

valued at $336 million in 1994 to 283 million pounds, valued at $338 million in 1995, but 

declined to 264 million pounds, valued at $295 million in 1996 (table D-20). The share of 

Canada's market supplied by the United States increased from 44 percent in 1994 to 54 percent 

in 1995 and 55 percentinJan.-Nov. 1996, the most recent period for which data are available. 27 

Officials of the CCA contend that U.S. beef exports to Canada were never effectively limited 

by the quotas that were set under the Canadian Meat Import Act. 28 

21 Prehearing briefofthe MICA, Mar. 10, 1997, p. 13. 22 New Zealand Embassy, letter to the USITC, Mar. 13, 1997. 23 Submission of the Embassy of Australia to the USITC, Apr. 2, 1997. 24 PosthearingbriefoftheNZMPB,Apr. 3, 1997,p. 2. 25 Canada Gazette, part II, vol. 129, No. 9, Mar. 5, 1995, p. 1263. 26 WTO, International Bovine Meat Agreement, Summary of the Results of the Uruguay Round in 

the Meat Sector, Geneva, Feb. 1995, p. 23. 27 The shares were calculated from statistics reported in USDA, FAS, Livestock Semi-Annual, 

CA7007, Jan. 31, 1997, p. 8. 28 David Andrews and Dennis Laycraft, CCA, testimony, transcript of the hearing, Mar. 20, 1997, 

pp. 49-50. 

6-6 
Record of Understanding Between the United 

States and the Republic of Korea on 

Agricultural Market Access in the URA 

During the Uruguay Round, the United States and Korea entered into a Record of Understanding 

(ROU) concerning, among other things, market access for beef. The ROU was initialed on 

December 13, 1993, and augmented a U.S.-Korean ROU of July 15, 1993.29 The part of the 

ROU concernillg beef is reproduced as appendix 0. 

The ROU includes an increase in Korea's global beef import quota from 99,000 metric tons 

(218 million pounds) in 1993 to 225,000 metric tons (496 million pounds) in the year 2000. 

By the year 2001 there are to be no quotas. Duties applicable to the subject imports were to be 

20 percent ad valorem in 1993 and 1994, rising to 43.6 percent in 1995 and then be subject to 

phased reductions to 40 percent in 2004. The share of imports to be handled by the Livestock 

Products Marketing Organization (LPMO), a Korean quasi-governmental agency, was to decline 

and the share handled by the private sector, the so-called simultaneous-buy-sell system (SBS) 

was to increase from 15 percent in 1993 to 70 percent by the year 2000. By 2001 there is to 

be no LPMO involvement and complete private sector autonomy regarding product quantity, 

price, quality, and supplier and there is to be no government restriction on product utilization. 

Officials of the U.S. Meat Export Federation contend that the ROU should contribute to a 

significant increase in U.S. exports of beef to Korea. 30 U.S. exports of beef to Korea rose from 

112 million pounds, valued at $151million,in1993 to 265 million pounds, valued at $319 

million, in 1995 but declined to 196 million pounds, valued at $243 million in 1996. 

Japanese Duty Reductions Applicable to Beef 

As part of the URA, Japan agreed to staged tariff rate reductions applicable to beef from 50 

percent ad valorem to 38.5 percent ad valorem by the year 2000. The tariff rates were reduced 

to 46.2 percent in 199631 and further reduced to 44.3 percent effective April 1, 1997.32 The 

reductions contributed to increased imports of U.S. beef; however, as noted in chapter 3 of this 

report, other factors such as rising per capita beef consumption and relative price of U.S. beef, 

have been more important than the duty reductions in affecting U.S. exports.33 The U.S. meat 

industry, which considers the Japanese reductions to be modest, continues to press the 

Government of Japan for accelerated reductions through the American Chamber of Commerce 

29 The July 15, 1993 Record of Understanding is described in USITC, The Year in Trade 1993 

Operation of the Trade Agreements Program 45th Report, publication 2769, June 1994, p. 111. 30 USITC staff interview with officials of the U.S. Meat Export Federation, Jan. 27, 1997. 31 USDA, FAS, U.S. Embassy, Tokyo, Japan, USJTC investigation into the impact of the UR 

agreement on U.S. beef exports, Apr. 7, 1997, facsimile. 32 USDA, FAS, Livestock, Dairy, and Poultry, Apr. 16, 1997, p. 7. 33 USDA, FAS, U.S. Embassy, Tokyo, Japan, USJTC investigation into the impact of the UR 

agreement on U.S. beef exports, Apr. 7, 1997, facsimile. 

6-7 
in Japan. 34 Overall, the impact of the URA on Japanese imports of beef reportedly has been 

negligible. 35 

Sanitary and Phytosanitary Agreement and 

U.S.-EU Dispute Concerning Beef From 

Animals Receiving Growth Hormones36 

As discussed ill Chapter 1, one of the most significant Uruguay Round agreements for the cattle 

and beef industries is the Agreement on the Application of Sanitary and Phytosanitary Measures 

(SPS Agreement). One aim of the SPS Agreement is to liberalize trade in agricultural goods 

and processed food and beverages by reducing nontariff trade measures in the form of arbitrary 

regulations on such topics as pest and disease control and food safety. The principle reflected 

in the agreement is that members' efforts to protect human, animal, or plant life and health 

within their territories should not discriminate arbitrarily or unjustifiably against another 

member's goods. 37 

The SPS Agreement is the basis for the U.S. challenge in the WTO to the EU's ban on certain 

imports of meat. The United States views this ban as having no basis on scientific grounds and 

therefore considers it to be in violation of the SPS Agreement. Starting in January 1989, the EU 

banned imports of meat from countries where the use of certain growth-promoting hormones 

is permitted. 38 Exceptions allowed imports of offal for pet food and imports of beef derived 

from animals certified as having not received the subject hormones. The EU actions affected 

approximately $100 million in U.S. exports annually (85 percent of these exports were offal for 

human consumption).39 Immediately following the ban, the U.S. sought a review of its legality 

in the GATT but the EU blocked formation of a review panel. Consequently, the United States 

retaliated by increasing duties on certain agricultural imports from the EU. 

After the WTO Agreements entered into force, the United States renewed its challenge to the 

EU action on the premise that the ban has no basis on scientific grounds and therefore is in 

violation of the SPS Agreement. In early 1996, the European Parliament approved a resolution 

to maintain the ban, and the EU Agriculture Council also re-affirmed its commitment to 

maintaining the ban. Consequently, the United States requested consultations with the EU 

pursuant to the WTO dispute settlement provisions. Consultations were held in March 1996, 

at which time Australia, Canada, and New Zealand joined with the United States. These 

34 Ibid. 

35 Ibid. 

36 The following discussion was obtained from USITC staff interview with officials of USDA, 

FAS, Dec. 1996, except as noted. 37 USITC, The Year in Trade: Operation of the Trade Agreements Program, 45th report, 1993, 

publication 2769, June 1994, p. 9. 38 In the United States, five hormones can be used to augment cattle growth. Three are natural 

hormones (estradiol, progesterone, and testosterone) and can be found in all animal foods, humans, 

and in many other food products. The two other hormones--zeranol and trenbolone acetate, which are 

synthetically produced--have similar growth promoting effects, but do not occur naturally in cattle. 

The three natural hormones are approved for use in the EU for therapeutic purposes, but none can be 

used for the purpose of growth promotion. 39 USTR, press release No. 96-03, Jan. 11, 1996. 

6-8 
consultations failed to resolve the dispute. Accordingly, at the May 1996 meeting of the WTO 

Dispute Settlement Body, the United States requested that a panel be formed. Under the new 

WTO rules, the EU was unable to block the formation of a panel. Panel meetings were held in 

October and November 1996. A third and final meeting was held in February 1997, during 

which time the panel met with technical experts. While no official report has been released to 

the public, in early May 1997 a number of news organizations reported that the panel had 

concluded that the EU prohibition was not based on scientifically justifiable criteria. 

On June 30, 1997, the panel released its final report to the parties. The panel's final report was 

in favor of the United States and found the EU's ban to be inconsistent with obligations under 

the SPS Agreement.40 On July 1, 1997, EU representatives announced their intention to bring 

the matter before the Appellate Body of the WT0.41 

U.S. Export Incentive Commitments42 

Since 1987, the United States has not provided export incentives for beef. Such incentives are 

now subject to limitation commitments under the WTO Agreement on Agriculture. U.S. export 

incentive commitments are applicable to live dairy animals, and fresh, chilled, or frozen beef. 

In 1986-87, the U.S. provided incentives ofUS$36 million on 48.5 million pounds of beef. The 

incentives resulted because in 1986 and 1987 direct sales were made by the Commodity Credit 

Corporation to support U.S. beef prices following implementation of the dairy termination 

program.43 

Because the U.S. export incentives were provided during the base period from which URA 

export incentive commitments are calculated, the United States is authorized to provide export 

incentives. However, as part of the URA, countries agreed to reduce allowable export 

incentives. The maximum allowable export incentive quantities and maximum allowable 

budgetary outlays for the United States are shown in the following tabulation: 

Year 

1995 

1996 

1997 

1998 

1999 

2000 

Maximum allowable 

assisted exports 

(million pounds) 

47 

46 

44 

42 

40 

39 

Maximum allowable budgetary 

outlays for assisted exports 

(million dollars) 

34 

31 

29 

27 

25 

23 

40 USITC staff telephone conversation with officials of the USTR and facsimile from USTR, 

July3, 1997. 41 The European Union Delegation of the European Commission to the United States, pressrelease 

"Commission Wants to Appeal WTO Hormone Panel Conclusions, " July 1, 1997. 42 The following description of the commitments was taken from WTO, Summary of the Results of 

the Uruguay Round in the Meat Sector, Feb. 1995, pp. 25-26, except as noted. 43 For additional information on the CCC and the dairy termination program see USITC, The 

Competitive Position of Canadian Live Cattle and Beef in U.S. Markets, investigation No. 332-241, 

publication 1996, July 1987, pp. 105-106. 

6-9 
EU Export Incentive Commitments44 

The EU has also committed to reduce export assistance for beef. The limits are applicable to 

live animals, edible offal, and prepared or preserved meat products. The starting point for EU 

reduction commitments for beef was listed as 1,179,150 tons (2.6 billion pounds), described as 

an average of assisted base level exports (1986-90) and assisted exports during 1991-92. The 

maximum allowable assisted quantities for exports are shown in the following tabulation: 

Year Maximum allowable assisted exports 

1995 ...... . 

1996 ...... . 

1997 ...... . 

1998 ...... . 

1999 .... ' .. 

2000 ...... . 

(1,000 metric tons) (million pounds) 

1,118.7 

1,058.4 

998.l 

937.7 

877.4 

817.l 

2,466 

2,333 

2,200 

2,067 

1,934 

1,801 

The maximum allowable budgetary outlays for assisted exports are shown in the following 

tabulation: 

Year 

1995 ...... . 

1996 .... ' .. 

1997 ...... . 

1998 ...... . 

1999 ...... . 

2000 ...... . 

Maximum allowable budgetary 

outlays for assisted exports 

(million ECU) 

1,900.6 (equal to US$2.5 billion) 

1,772.3 

1,644.1 

1,515.9 

1,387.6 

1,259.4 

The maximum allowable budgetary outlays were equal to US$2.5 billion in 1995 and US$2.2 

billion in 1996 with exchange rates in effect at the time. 

During the course of the Commission's investigation various opinions were expressed about the 

impact of the EU export restitution reductions. One trade source contends that in the absence 

of the EU commitments the amount of assistance to exports would have risen because of 

increasing EU intervention stocks that resulted from declining demand for beef in the EU as a 

result of the BSE issue. 45 One industry source noted that the effect on U.S. exports of beef to 

specific markets as a result of EU reductions in export restitutions is uncertain. As is the case 

44 The following description of the commitments was taken from WTO, Summary of the Results of 

the Uruguay Round in the Meat Sector, Feb. 1995, pp. 14, except as noted. 45 USITC staff interview with Knud Buhl, director of International Affairs, Danske Slagterier 

(Danish Bacon and Meat Council), Washington, DC, Feb. 19, 1997. 

6-10 
with any world traded product, protein will shift from country to country, whether beef, pork, 

poultry, mutton etc., and competition will emerge from new markets. 46 

Officials of the USMEF contend that the reduction in EU export restitutions might lead to 

increased U.S. exports ofbeef.47 They said that the United States would likely be competitive 

in the Eastern European markets (including Russia) for grain-fed beef and might be competitive 

in some markets for manufacturing beef, but that all such exports would require promotion. The 

NZMPB suggests that the EU export restitutions have driven beef prices down in third markets 

to levels that make New Zealand, Australian, and U.S. beef noncompetitive. They further 

suggest that as EU export restitutions decline prices will rise and New Zealand, Australia, and 

the United States should have opportunities to compete.48 

URA Dairy Commitments on Cattle and Beef Trade 

In addition to trade policy changes in the beef sector, the URA mandated several policy changes 

in other agricultural sectors which may influence the profitability of raising cattle and producing 

beef. In particular, linkages in beef and dairy production suggest that changes in dairy policies 

under the URA could, potentially, influence U.S. trade in live cattle and beef. The dairy and 

beef sectors are connected through two important relationships. 49 First, dairy cow inventories 

influence the number of dairy feeder steers that are sold to feedlot and backgrounding 

operations, which in turn affect the price of feeder cattle and profitability of cattle feeding 

operations. Dairy cow inventories also account for most of the supply of veal calves and the 

price of veal. Second, changes in dairy cow inventories and in the number of dairy cows 

slaughtered impact the supply and price of beef (especially manufacturing type beef). 

Therefore, dairy policy changes (such as those required under the URA) which affect the 

profitability of dairy production might lead to changes in cow inventories, and therefore to 

changes in prices and profitability in the beef sector. 

Studies by the USITC50 and the USDA51 found that implementation of the URA was likely to 

have only a minor impact on the U.S. dairy industry, with production and commercial use more 

or less unchanged. 52 The studies found that the URA would likely lead to a small increase in 

milk prices, while expenditures on U.S. Government purchases of dairy products will increase 

significantly following reductions in Government-assisted exports under the Dairy Export 

Incentive Program (DEIP). Changes in world trade following the URA may be influenced by 

export incentive reductions and increased market access required of the EU and United States, 

46 USITC staff interview with Cary H. Humphries, vice president International, Excel, Jan. 30, 

1997. 47 USITC staff interview with officials of the USMEF, Jan. 27, 1997. 48 William Joyce, vice president, North American Operations of the NZMPB, transcript of the 

hearing, Mar. 20, 1997, p. 16. 49 The following discussion on the influence of the dairy sector on the beef sector was derived from 

a USITC staff interview with Dr. Robert E. Taylor, professor of animal science, Colorado State 

University, Jan. 28, 1997. 50 USITC, Potential Impact on the U.S. Economy and Industries of the GATT Uruguay Round 

Agreements, publication 2791, June 1994. 51 USDA, ERS, Effects of the Uruguay Round Agreement on U.S. Agricultural Commodities, 

Mar. 1994. 

52 Jbid. 

6-11 
and secondarily, increased market access and stronger economic growth, particularly in East 

Asian and Latin American countries. In view of the minor impact of the URA on the U.S. daily 

sector it appears that dairy commitments likely will have only a very minor impact on U.S. trade 

in live cattle for slaughter or fresh, chilled, or frozen beef. 

URA Grain Commitment 

Canada 

URA-associated changes in Canada's grain policies may influence Canada's cattle sector 

because cattle in Canada are fed relatively large quantities of grain. Since 1994, changes in 

Canadian agricultural programs, mainly the elimination of the Western Grain Transportation 

Act (WGTA), occurred as described below because of the URA commitments on export 

assistance and internal agricultural support. Further, Canadian agricultural program changes 

reportedly arose from the Canadian Government's desire to reduce its fiscal deficit. The lower 

Canadian agricultural support for grain production may encourage farmers to diversify 

production to other crops (such as forage or oilseeds) and to raise livestock, a trend likely to 

boost Canadian cattle production in the provinces of Manitoba, Saskatchewan, and Alberta 

("Prairie Provinces"). However, livestock feeders in Eastern Canada would be disadvantaged 

because of higher feed grain costs. 

Background of the WGTA53 

As one of the "twin pillars" of Canadian grain policy for many decades (the other being the 

Canadian Wheat Board), the WGTA has exerted a strong influence on grain trade in Canada. 

Under the WGTA, the Canadian Federal Government paid between one-half to three-quarters 

of the cost of rail transportation for eligible grain and agricultural (crop) products from the 

Prairie Provinces to export ports, Vancouver and Prince Rupert, British Columbia; Churchill, 

Manitoba; and Thunder Bay, Ontario.54 Also, grain shipped to the eastern Canadian domestic 

market (mainly Ontario and Quebec) was eligible for the benefit. In the final year (1994/95) 

of the program, total rail assistance was Can$561 million (US$406 million; converted at 

average exchange rates in effect at the time). 55 

Under the NAFTA, Canada agreed not to grant WGTA benefits for grain exported through the 

west coast ports to the United States. But eastern grain shipments (through Thunder Bay), and 

then exported to the United States were eligible to receive the benefits. 

During the URA negotiations, the Government of Canada acknowledged that the WGTA 

constituted an "export subsidy" for grain shipped through west coast ports and Churchill, 

53 For background on WGTA, see USITC publication 2794, Wheat, Wheat Flour, and Semolina, 

July 1994, pp. II-55 to II-57; and Canada-United States Joint Commission on Grains, Final Report, 

vol. I, Oct. 1995, pp. 39-68. 54 USITC publication 2794, p. II-55. 55 Canada-United States Joint Commission on Grains, p. 39. 

6-12 
Manitoba.56 Under the URA, Canada was obliged to reduce its export assistance over 6 years 

by 36 percent in budget terms, and 21 percent in export volume. However, in meeting the 

export assistance reductions, the Canadian Government chose to eliminate the WGTA rather 

than simply reduce it by the above formula. 57 The Canadian Government also indicated at that 

time that their large fiscal deficit was a justification for eliminating the WGTA. 58 

On August 1, 1995, Canada eliminated the WGTA, and then made one-time (ex-gratia) 

payments of Can$1.6 billion (about US$1.2 billion) to farm land owners, and Can$300 million 

(US $220 million) in payments in other adjustment costs to affected agricultural interests in 

compensation for this loss. 59 Officials of the CCA also reported that some Canadian Provinces 

had programs to offset the effects of the WGTA and those programs were removed when the 

WGTA was eliminated. 60 

Impact of the Elimination of the WGTA 

The short-term effects of the modification or elimination of the WGTA cannot be easily 

discerned because the changes were so recent (over the past 2 years), and because of relatively 

high world grain prices in recent years. High grain prices associated with the U.S., Canadian, 

and world grain markets over the past 3 years (described in chapter 2, section, U.S. Feed Grain 

Markets) would largely mask the effects of the Canadian program changes. 

However, over the long-term, the modification or elimination of the WGTA will likely lower 

grain prices from what they otherwise would have been in the Prairie Provinces. Lower grain 

prices may stimulate cattle feeding and raising in these Provinces. The maximum effect of the 

elimination of the WGTA may elicit a 1- to 2-percent increase in the supply of beef in the 

Prairie Provinces if offsetting factors do not occur. 

One offsetting factor would be higher exports of Canadian grain to adjacent U.S. markets or to 

third-country markets, both situations associated with higher grain prices. Another factor is the 

likelihood of efficiency improvements in the Canadian rail and grain-handling industry, thereby 

reducing the increased transport cost. 61 Prior economic studies of the supply of c;anadian beef 

indicate that a 10-percent decline in the price of feed grain would eventually increase the volume 

of beef supplied by 1 to 2 percent.62 

56 Ibid., p. 77. 57 The Canadian Government acknowledged that the URA requires a reduction of its annual grain 

export incentives of Can$153 million by the year 2001; the Can$561 million in WGTA expenditures 

exceeded this required minimum reduction. USDA, FAS, Grain and Feed, American Embassy, 

Ottawa, Apr. 28, 1995, pp. 20-21. 58 Gregory Johnson, "Loss of Canada Rail Subsidy ... ," Journal of Commerce, Apr. 17, 1995; and 

USDA, FAS, Grain and Feed, Annual Report, American Embassy, Ottawa, Apr. 28, 1995, p. 1. 59 USDA, FAS, Grain and Feed Annual, Apr. 28, 1995, pp. 10-13. 60 Prehearing brief of the CCA, Mar. 10, 1997, p. 27. 61 Linda Young, Changing Canadian Grain Policies: Implications for Montana's Grain Industry, 

Montana State University, 1996, pp. 21-26. 62 Walter Gardiner, Vernon Roningen, and Karen Liu, Elasticities in the Trade Liberalization 

Database, USDA, May 1989, p. 5, found supply elasticities ofbeefranging from -0.12 to -0.20 in 

Canada, with respect to com prices. Com prices are highly correlated in Canada with the prices of 

(continued ... ) 

6-13 
If the full effect of the loss of the WGTA is reflected in lower feed grain prices, then the price 

of feed grain might drop around 10 percent. In the final year (1994/95) of the program, the 

WGTA freight assistance was Can$14.72 per metric ton (US$10.65). In 1995/96, the 

Winnipeg price of Western feed barley averaged Can$168 per ton (US$125), and thus the 

assistance would have amounted to about 9 percent of this average price. In 1996/97, the 

projected return to farmers for feed barley (No.1 CW) is Can$143 to Can$163 per ton, 

according to the Canadian Wheat Board (Sept. 1996 projection). 63 Consequently, a 10-percent 

drop in feed grain prices would elicit a 1- to 2-percent increase in the volume of beef supplied 

or about 20 million to 40 million pounds (carcass weight equivalent). 64 Canadian exports to the 

United States of beef and live cattle averaged about 1.2 billion pounds (carcass weight 

equivalent) annually during 1992-96 (table D-17); a 40-million pound increase in Canadian 

supply is equivalent to about 3 percent of these exports to the United States. 

Officials of the CCA said that they think that one of the more significant effects of the URA was 

the elimination of Canadian grain transportation incentives, specifically the elimination of the 

WGTA. 65 They contend that the effects of the WGTA termination, which became final on July 

1, 1995, were masked by high grain prices that kept grain production at high levels in 1996. 

They predict that when prices decline, as they may in 1997, grain production in Canada will 

also decline and the effects of reduction in grain transportation incentives in Canada will become 

evident. They said that the elimination of the grain transportation incentives might result in 

some land being taken out of grain production and being used for the production of forages. 

They also predicted that some land would be shifted to the growing of speciality crops such as 

peas, lentils, mustard, and others. 

The CCA predicted that the effect of the elimination of grain transportation incentives will be 

most significant in Saskatchewan because that Province is the most distant from either coast. 

They said they thought it would be likely that Saskatchewan would expand its cow-calf herd 

but might not develop a cattle-feeding sector but rather ship feeder animals to Alberta feedlots 

or possibly to feedlots in the United States. 

EU 

The URA contained three key provisions that affected EU grain production and trade: reduction 

of internal support to agriculture; improvement of market access; and reduction of export 

restitutions. These grain provisions took effect for the EU on July 1, 1995. The internal 

support measure required the EU (and the United States as well) to reduce agriculture support 

by 20 percent from the level during 1986-88. In May 1992, the EU changed its agriculture 

support with the so-called "CAP (Common Agriculture Program) reform" that entailed a lower 

62 ( ... continued) 

the other principal feedgrains, feed barley and feed wheat. 63 USDA, FAS, American Embassy, Ottawa, Grain and Feed, Voluntary Report, Nov. 5, 1996, 

p. 4. 

64 Based on the average production of beef in Canada during 1992-97 of 2.1 billion pounds. 65 USITC staff interview with David Andrews, president, Larry Sears, chairman, Foreign Trade 

Committee, and Dennis Laycraft, executive vice-president, Canadian Cattlemen's Association (CCA), 

Jan. 29, 1997. 

6-14 
internal (intervention) grain price, an acreage reduction program, and conversion of incentives 

to direct (and non-trade distorting) payments to farmers. 66 

The EU does not feed significant quantities of grain to cattle, nor in general is EU grain 

exported to countries that use it to feed cattle. Consequently, these URA changes that affected 

EU grain production are believed to have had little effect on cattle and beef production.• 

66 USDA, FAS, "CAP Reform Implementation," International Agriculture and Trade Reports and 

Outlook, Sept. 1993, pp. 51-55. 

APPENDIX A 

SECTION 58 OF THE MISCELLANEOUS 

TRADE AND TECHNICAL 

CORRECTIONS ACT OF 1996 

A-1 
SEC 58. fNVESTIGATION ON CATTLE AND BEEF TRADE. 

(a) IN GENERAL.--The United States International Trade Commission shall conduct a study 

pursuant to section 332 of the Tariff Act of 1930, and not later than 270 days after the date of the 

enactment of this Act, shall report to the appropriate committees on--

( I) the impact of the North American Free Trade Agreement and the Uruguay Round 

Agreements on United States imports and exports oflive cattle for slaughter and fresh, chilled, and 

frozen beef; and 

(2) the steps that have been taken by the United States, since the enactment of the North 

American Free Trade Agreement, to prevent the transshipment oflive cattle and fresh, chilled, and 

frozen beef through Mexico and Canada for importation into the United States. 

(b) APPROPRIATE COMMITTEES.--For purposes of subsection (a), the term "appropriate 

committees" means the Committee on Finance of the Senate and the Committee on Ways and Means 

of the House of Representatives. 

SEC. 59. SPECIAL RULE FOR GENERALIZED SYSTEM OF PREFERENCE~: 

The President is authorized to grant waivers under subsections (c)(2)(F) and (d)(l) of section 

503 of the Trade Act of 1974 for those products that exceeded the limitations for 1994 under section 

504(c)( I) of the Trade Act of l 974, as in effect on June 30, 1995, and lost eligibility for duty-free 

treatment under title V of that Act as of July 1, 1995. In granting such waivers, the President shall 

apply the provisions of subsections (c)(3) and (d)(2) of section 504 of the Trade Act of 1974, as in 

effect on July 31, 1995, and the references to "preceding calendar year" in such section 504 shall be 

references to 1994. 

Approved October 11, 1996. 

PL I 04-295, 1996 HR 3815 

END OF DOCUMENT 

A-2 
APPENDIXB 

COMMISSION'S NOTICE OF 

INVESTIGATION AND HEARING 

B-1 
Federal Register I Vol. 61. No. 216 I Wednesday, November 6, 1996 L Na.tices 57451 

Written Submissions 

Each party who is an interested party 

shall submit a prehearing brief to the 

Commission. Prehearing briefs must 

conform with the provisions of section 

207.23 of the Commission's rules; the 

deadline for filing is February 21, 1997. 

Parties may also file written testimony 

in connection with their presentation at 

the hearing. as provided in section 

207.24 of the Commission's rules. and 

posthearing briefs. which must conform 

with the provisions of section 207 .25 of 

the Commission's rules. The deadline 

for filing posthearing briefs is March 6, 

1997; witness testimony must be filed 

no later than three days before the 

bearing. In addition, any person who 

has not entered an appearance as a party 

to the investigation may submit a 

written statement of information 

pertinent to the subject of the 

investigation on or before March 6, 

1997. On March 25, 1997, the 

Commission will make available to 

parties all information on which they 

have not had an opportunity to 

comment. Parties may submit fina-1 

comments on this information on or 

before March 27, 1997, but such final 

comments must not contain new factual 

information and must otherwise comply 

with section 207 .30 of the Commission's 

rules. All written submissions must 

conform with the provisions of section 

201.8 of the Commission's rules; any 

submissions that contain BPI must also 

conform with the requirements of 

sections 201.6, 207.3, and 207.7 of the 

Commission's rules. 

In accordance with sections 201.16(c) 

and 207.3 of the Commission's rules, 

each document filed by a party to the 

investigation must be served on all other 

parties to the investigation (as identified 

by either the public or BPI service list), 

and a certificate of service must be 

timely filed. The Secretary will not 

accept a document for filing without a 

certificate of service. 

Authority: This investigation is being 

conducted under authority of title Vil of the 

Tariff Act of 1930: this notice is published 

pursuant to section 207.21 of the 

Commission's rules. 

Issued: October 30, t 996. 

By order of the Commission. 

Donna R. Koehnke, 

Secretary. 

(FR Doc. 96-28535 Filed 11-~96; 8:45 am] 

BILLING COOE 702G-02...P 

[Investigation 332-371] 

Cattle and Beef: Impact of the NAFTA 

and the Uruguay Round Agreements 

on U.S. Trade 

AGENCY: United States International 

Trade Commission. 

ACTION: Institution of investigation and 

scheduling of hearing. 

EFFECTIVE DATE: October 28. 1996. 

SUMMARY: As required by section 58 of 

the Miscellaneous Trade and Technical 

Corrections Act of 1996 (Act), (Pub. L. 

104-295, Oct. 11, 1996, 110 Stat 3514, 

3557). the Commission has instituted 

Investigation No. 332-371, under section 

332(g) of the Tariff Act of 1930 (19 

U.S.C. 1332(g)) for the purpose of 

conducting a study and preparing a 

report on (1) the impact of the North 

American Free Trade Agreement 

(NAFT A) and the Uruguay Round 

Agreements on United States imports 

and exports of live cattle for slaughter 

and fresh. chilled, and frozen beef; and 

(2) the steps that have been taken by the 

United States, since the enactment of 

the NAFTA, to prevent the 

transshipment of live cattle and fresh, 

chilled. and frozen beef through Mexico 

and Canada for importation into the 

United States. As directed by the Act, 

the Commission will transmit its report 

to the House Committee on Ways and 

Means and Senate Committee on 

Finance no later than 270 days after the 

date of enactment, or by July 7, 1997. 

FOR FURTHER INFORMATION CONTACT: 

Information on industry aspects may be 

obtained from David Ludwick, Office of 

Industries (202-205-3329) or William 

Lipovsky, Office of Industries (202-205-

3330), and legal aspects. from William . 

Gearhart, Office of the General Counsel 

(202-205-3091). The media should 

contact Margaret O'Laughlin, Office of 

External Relations (202·205·1819). 

Hearing impaired individuals are 

advised that information on this matter 

can be obtained by contacting the TDD 

terminal on (202-205·1810). 

PUBLIC HEARING: A public hearing in 

connection with the investigation will 

be held at the U.S. International Trade 

Commission Building. 500 E Street SW, 

Washington, DC, beginning at 9:30 a.m. 

on March 20, 1997. All persons will 

have the right to appear, by counsel or 

in person, to present information and to 

be heard. Requests to appear at the 

public hearing should be filed with the 

Secretary, U.S. International Trade 

Commission, 500 E Street SW. 

Washington, DC 20436, no later than 

5:15 p.m., March 6, 1997. Any 

prehearing briefs (original and 14 

copies) should be filed not later than 

B-2 

5:15 p.m., March 10, 1997; the deadline 

for filing posthearing briefs or 

statements is 5:15 p.m .• April 3, 1997. 

In the event that, as of the close of 

business on March 6, 1997, no witnesses 

are scheduled to appear at the }\earing. 

the hearing will be canceled. Any 

person interested in attending the 

hearing as an observer or non· 

participant may call the Secretary to the 

Commission (202·205·1816) after March 

6, 1997, to determine whether the 

hearing will be held. 

WRITTEN sUBMISSIONS: In lieu of or in 

addition to participating in the public 

hearing. interested persons are invited 

to submit written statements concerning 

the matters to be addressed in the 

report. Commercial or financial 

information that a party desires the 

Commission to treat as confidential 

must be submitted on separate sheets of 

paper, each clearly marked 

"Confidential Business Information" at 

the top. All' submissions requesting 

confidential treatment must conform 

with the requirements of section 201.6 

of the Commission's Rules of Practice 

and Procedure (19 CFR 201.6). All 

written submissions, except for 

confidential business information, will 

be made available for inspection by 

interested persons in the Office of the 

Secretary to the Commission. To be 

assured of consideration by the 

Commission, written statements relating 

to the Commission's report should be 

submitted at the eart:est practical date 

and should be received no later than 

April 3, 1997. All submissions should 

be addressed to the Secretary, U.S. 

International Trade Commission, 500 E 

Street SW, Washington, DC 20436. 

Persons with mooility impairments 

who will need special assistance in 

gaining access to the Commission 

should contact the Office of the 

Secretary at 202-205-2000. 

Issued: October 29, 1996. 

By order or the Commission. 

Donna R. Koehnke, 

Secretary. 

(FR Doc. 96-28534 Filed 11-5-96: 8:45 aml 

BILUNG CODE 7020-02-" 

[lnvesUgatlon No. 731-TA-745 (Final)] 

Steel Concrete Reinforcing Bars From 

Turkey 

AGENCY: United States International 

Trade. Commission. 

ACTION: Scheduling of the final phase of 

an antidumping investigation. 

SUMMARY: The Commission hereby gives 

notice of the scheduling of the final 

phase of antidumping investigation No. 
CALENDAR OF PUBLIC HEARINGS 

Those listed below appeared as witnesses at the United States International Trade 

Commission's hearing: 

Subject 

Inv. No. 

Date and Time 

CATTLE AND BEEF: IMPACT OF THE NAFTA 

AND THE URUGUAY ROUND AGREEMENTS 

ONU.S. TRADE 

332-371 

March 20, 1997 - 9:30 a.m. 

Sessions were held in connection with the investigation in the Main hearing room 101, 500 

E Street, S.W., Washington, D.C. 

ORGANIZATION AND WITNESS 

Panel I 

Wigman, Cohen, Leitner & Myers, P.C. 

Washington, D.C. 

on behalf of 

New Zealand Meat Producers Board 

Bill Joyce, Vice President, North American Operations 

Edward J. Farrell--OF COUNSEL 

Panel 2 

Mexican Association of Cattle Feedyards, Napoles, Mexico 

(Asociacion Mexicana de Engordadores de 

Ganado Bovine A.C., "AMEG") 

Enrique Lopez Lopez, Director General 

Gina Lugo, Translator, Manchester Trade 

B-3 
ORGANIZATION AND WITNESS 

Group Viz, S.A. de C.V. ("Grupo Viz"), Mexico City, Mexico 

Marco E. Ojeda, Vice President 

Panel 3 

Wigman, Cohen, Leitner & Myers, P.C. 

Washington, D.C. 

on behalf of 

Canadian Cattlemen's Association 

Panel 4 

David Andrews, President, Canadian Cattlemen's Association (CCA) 

Larry Sears, Chairman, Foreign Trade Committee, CCA 

Dennis Laycraft, Executive Vice President, CCA 

Chris Mills, Policy Adviser, CCA 

Edward J. Farrell--OF COUNSEL 

Arizona Cattle Feeders' Association, Phoenix, Arizona 

Basilio F. Aja, Executive Vice President 

Panel 5 

Barnes, Richardson & Colburn 

Washington, D.C. 

on behalf of 

Meat Importers Council of America, Incorporated 

William C. Morrison, Executive Director, Meat Importers Council 

of America, Incorporated 

Rufus E. Jarman, Jr.--OF COUNSEL 

-END-
APPENDIXC 

IMPACT OF THE URA ON U.S. CATTLE 

AND BEEF TRADE--REVIEW OF 

LITERATURE 

C-1 
Impact of the URA on U.S. Cattle and Beef Trade--1

Review of Literature 

During the period of the Uruguay Round Agreements (URA) negotiations, various studies 

were undertaken which attempted to evaluate the likely quantitative impacts of alternative policy 

scenarios. Most studies focused on the implications of greater market access and the resulting 

effects on prices, incomes, and the economic welfare of producers and consumers, however, 

certain studies had an agricultural focus and separated out the impacts of the URA on the world 

beef market. These studies provide a useful body of evidence on the likely impacts of the URA 

on world beef trade and prices, and likely impacts facing U.S. producers of beef and cattle for 

slaughter. 

A comprehensive empirical analysis of the URA on U.S. agriculture was undertaken by the 

U.S. Department of Agriculture. 2 The approach taken was to make baseline projections of prices, 

production, consumption, and trade for the period 1994-2005 without the Agreement, and to 

compare them with an equivalent set of projections that included the URA domestic and trade 

policy changes. Overall, the analysis indicated that the URA would lead to an increase in world 

beef trade, largely because of increased access to markets in East Asia (Japan and South Korea) 

and North America (United States and Canada), and because increased incomes would strengthen 

demand worldwide. World exports were ~?'pected to increase by as much as 4 percent by 2000 

and 11 percent by 2005, even though the requirement to lower export incentives would reduce 

exports from the EU. 

The study found that the impact of the URA on the U.S. beef sector would be small. The 

reduction in trade barriers and higher income was expected in increase producer prices by 5 to 7 

percent by 2000 and to a small increase in beef production (projected to increase by less than onehalf of 1 percent by 2005 compared to the baseline). Domestic consumption was estimated to 

remain almost unchanged, with growth in real incomes offsetting the impact of higher beef prices. 

1

Analyzing the URA's policy changes across many sectors (e.g., cattle, beef, dairy, feedgrains) and for many 

countries presents an extremely complicated modeling exercise, requiring considerable time and resources in developing 

a suitable analytical approach and in collecting and compiling the huge data sets required for such an exercise. 

Therefore, it was not possible to develop an econometric model that would adequately capture the great complexity of 

the URA in the time frame available for the study. 2

United States Department of Agriculture (USDA), Economic Research Service (ERS), Effects of the Urnguay 

Round Agreement on U.S. Agricultural Commodities, Mar. 1994. 

C-2 
The study expected U.S. beefimports to increase by 6 to 10 percent by 2005, following the 

replacement of the U.S. Meat Import Act of 1979 with a tariff-rate quota of 656,621 tons. 

Meanwhile, exports were expected to rise by more than imports-I 0 to 14 percent higher than in 

the baseline scenario. Higher exports were predicted as a result of trade liberalization in the major 

markets for U.S. product. The high quality of U.S. grain-fed beef was expected to allow the 

United States to capture much of the increased trade opportunities in South Korea and maintain 

its share of the increased Japanese market. 3 Higher world income was expected to contribute to 

increased beef consumption, particularly in East Asia and Latin America, while reductions in 

export subsidies by the EU were projected to open up opportunities for other exporters. The 

USDA predicted that the United States would remain a net importer of beef, but that net imports 

would decline. However, the value of U.S. beef exports would increase $1.1 billion to $1.35 

billion, significantly higher than the value of imports. 

A study by the Food and Agricultural Organization of the United Nations (FAO) focused 

mainly on the impact of the agreement on agricultural trade flows and prices for certain 

agricultural commodities. 4 To accomplish this task, the FAO World Food Model (WFM) was 

used to provide baseline projections based on assumptions regarding the economic and 

demographic conditions, and technology expected to prevail by 2000. The assessment of the 

URA was made based on market and policy changes likely to arise up to the year 2000 when the 

bulk of the URA commitments would be completed. The study covered only measurable policy 

changes in trade and agricultural policies explicitly defined in the GATT commitments and likely 

to occur in practice over the implementation period (these relate to the tariffication of trade 

distortion measurements and the agreed reductions of tariffs). Country specific commitments 

concerning cuts in subsidized exports and increased imports under the minimum access provisions 

were also included in the simulation runs. The simulation "with the UR'' assumed that countries 

would undertake reforms according to their offers on the reductions in tariffs, as presented in the 

schedules of reduction commitments. Evaluating the impact of policy changes was done by 

3

Japan, for example, will lower its beef tariffs from 50 percent to 38.5 percent by 2000, while South Korea will 

increase its import quota from 106,000 tons to 225,000 tons by 2000. 4

Food and Agriculture Organization (FAO), Impact of the Uroguay Round of Agriculture, (Rome, 1995). 

C-3 
comparing the results of the simulation run which included these policy alterations with those of 

the base run. No feed back effects due to liberalization were included in the URA scenario with 

the exemption of its likely impact on income growth. 

The study reported that trade in bovine meat would remain the most important commodity 

in international meat trade. Between the late 1980s and 2000, bovine meat imports were 

projected to grow by 35 percent (or 2.5 percent per annum) to 8 million tons, of which close to 6 

percent of the 35-percent increase could be associated with the URA. Import markets were 

expected to expand by more than 4 percent in the developing countries (particularly, China, 

Indonesia, South Korea, the Philippines, Malaysia, Brazil, Mexico and Nigeria). Among the 

developed countries, Japan was projected to import 1.3 million tons by the year 2000, three times 

more than in the base period, reflecting duty reductions. By contrast, U.S: bovine meat imports 

were expected to decline somewhat, while U.S. exports were projected to be boosted by its 

growing penetration of expanded markets in the Far East. In terms of prices, the baseline 

projected a 6-percent increase in the price of bovine meat between 1987-89 and 2000. With the 

URA, bovine prices were expected to increase by 14 percent over the same period, thus indicating 

the URA provided an additional price increase of 8 percent. The results for total meats, indicated 

that United States production in 2000 without the URA would be 34.8 million tons, and with the 

URA it would be 35.7 million tons (an increase of0.9 million tons, or 2.6 percent). The 

corresponding figures for U.S. consumption were 33.8 million tons and 33.6 million tons (a 

decline ofless than 1 percent). U.S. exports in 2000 were expected to increase from 2.3 million 

tons to 3.6 million tons, while imports were expected to expand from 1.41 million tons to 1.43 

million tons. 

An empirical analysis of the URA before the final agreement was reached was undertaken 

by the Center for Agricultural and Rural Development (CARD), and reported by Westhoff 

(1991). 5 The CARD study examined the effects of an agreement to reduce internal supports and 

tariff equivalents by 33 percent and export subsidies by 50 percent from a 1986-88 base by 1996. 

5

P. Westhoff. Implications of a GATT Agreement on Agriculture: The Known, the Unknown, and the 

Unknowable, GATT research paper 92-GATT. Iowa State University, Center for Agricultural and Rural Development 

(CARD), Oct. 1991. 

C-4 
Results were reported for both 1996 and an average of the period 1997-2000. Because the 

analysis was undertaken several years before the final agreement was reached, the simulations 

reflect the likely outcome of the agreement in the early 1990 and therefore differ somewhat from 

what was finally agreed upon. Interestingly, however, the results are fairly similar to those 

reported by the USDA, and show the agreement benefiting U.S. livestock producers but the gains 

are small. The price of beef (Omaha steer price) was expected to increase by 6 percent, resulting 

in increased livestock production in the United States by an estimated 1 percent. The increase in 

beef production was expected to strengthen demand for feed grain and proteins, giving rise to com 

prices increasing 9 percent and soybean prices increasing 6 percent. Milk prices were expected to 

increase by 5 percent. 

Vanzetti (1994)6 provided estimates of the impact of the URA on 14 major agricultural 

exporting countries which comprise the Cairns Group.7 Using a SWOPSIM (Static WOrld Policy 

Simulation Model) trade model (Roningen, 19868

), preliminary estimates were made of 

implications of changes in market access, domestic support, and export subsidies as contained in 

two preliminary agreement-the Dunkel text and the Blair House Accord. 9 The SWOPSIM 

framework is based on comparative static, partial equilibrium, which evaluates response to policy 

changes over the medium term (about 5 years). The SWOPSIM model was adjusted to 

accommodate regions and commodities of key importance to Cairns Groups countries, and was 

expanded to differentiate between beef from foot-and-mouth-free and -affected areas. The model 

was run using 1989 data (the most recent available at the time ofpublication)-a period of 

6

D. Vanzetti, N. Andrews, S. Hester, and B.S. Fisher. "U.S. E.C. Agricultural Trade Relations and the 

Uruguay Round: A Cairns Groups Perspective". In Agricultural Trade Conflicts and GATT. New Dimensions in U.S.-

European Agricultural Trade Relations. Edited by G. Anania, C.A. Carter, and AF. McCalla. Westview Press. 1994. 7

Cairns groups countries include Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Hungary, 

Indonesia, Malaysia, New Zealand, Philippines, Thailand, and Uruguay. The United States is not a member. 8

V.O. Roningen. "A Static World Policy Simulation (SWOPSIM) Framework," Washington DC, USDA ERS 

staff report No. AGES860625, 1986. 9

The Dunkel package (Dec. 1991) contains support for reductions in the three areas-market access, internal 

supports, and export subsidies-with reductions in support implemented over a six year period from 1993 to 1999. The 

Blair House Accord (Nov. 1992) was a bilateral agreement between the United States and the EU on those aspects of 

the negotiations on which these countries had differing views. While the Blair House Accord maintained the basic 

structure of the Dunkel text, certain aspects were modified. The main differences include: (1) the 20 percent reduction 

in domestic support would apply to the aggregate value of support, rather than for individual commodities, (2) some 

forms of direct payments would be excluded from reduction commitments for domestic support, and (3) the reduction in 

the volume of subsidized exports would be 21 percent instead of 24 percent under the Dunkel text. 

C-5 
relatively higher prices (a consequently low levels of protection)-giving rise to impacts that were 

less than earlier SWOPSIM analyses based on 1986 data, a period when prices were low. 

URA reform of agricultural policies, including greater market access, reduced internal 

supports, and curtailment of subsidized exports, were estimated to have a marked positive impact 

on the prices of agricultural commodities entering world markets. In terms of percentage 

changes from the 1989 base, beef (foot-and-mouth-free) prices were estimated to increase by 9 

percent and by 6 percent, under the Dunkel Package and Blair House Accord, while equivalent 

price increases for beef from FMD-affected areas were 3 percent and 1 percent, respectively, for 

the two policy packages. The difference between the results for the Dunkel and Blair House 

Agreements are due to the less significant reductions in domestic support for livestock products in 

the EU under the Blair Accord. Grain prices (wheat, com, and other coarse grains) were 

estimated to rise by between 6 percent and 7 percent, while soybean prices were estimated to rise 

by 1 percent and 2 percent. 

As a result of the increases in beef prices, substantial welfare gains were expected to 

accrue to beef producers in both Australia ($174 million) and Canada ($130 million), while gains 

of $75 million and $45 million were expected for Brazil and Argentina, respectively. The 

distinction between beef produced in regions that have been deemed free of FMD and beef 

produced in FMD-affected areas was an important factor in the result. As Australia and Canada 

are FMD free, producers in these countries stand to gain more as a result of the greater increases 

in the world price of beef produced in areas that are FMD-free. The authors noted that a large 

part of this increase was due to an increase in Japanese imports that result from the 36-percent 

reduction in the Japanese tariff equivalent, and that this reduction was only part of the of the 

liberalization of the Japanese beef market. As such, the study speculated that the increase in 

Japanese imports and the associated increase in the world price would have occurred even 

without a successful conclusion of the URA. 

Goldin and van de Mensbrugghe (1995)10 evaluated the impact of the GATT using the 

101. Goldin, and D. van der Mensbrugghe. "The Uruguay Round: An Assessment ofEconomywide and 

Agricultural Reforms", In The Uruguay Round and the Developing Economies, Edited by W. Martin, and L.A. 

Winters, WorldBankdiscussionpaperNo. 307. World Bank, Washington, DC Oct. 1995. 

C-6 
Rural/Urban-North/South (RUNS) Model-a computable general equilibrium model containing 

22 regions and 20 sectors. Their analysis was confined to quantifying the impact of tariffication 

of agriculture and, in an aggregate manner, manufacturing (it does not include trade in services, 

investment and intellectual property rights). The analysis also incorporated export subsidies, 

while domestic support were captured by input subsidies based on producer subsidy equivalents. ,. 

Minimum access commitments were ignored. The model results were reported in terms of 

percent deviations from baseline levels in 2002 for world agricultural prices and real income. In 

all, five simulation results were reported covering different assumptions about the baseline levels 

of protection and about tariff reductions, input subsidy levels, and employment under the URA. 11 

For beef, veal, and sheep (beef was not separated in the RUNS model), the world prices 

were expected to increase by 0.2 to 6 percent above baseline levels by 2002, depending on the 

model assumptions. As expected the largest impact ( 6 percent) was obtained under the scenario 

of greatest tariff and input subsidy reductions. Under the scenario which most closely resembled 

the final agreement, the world beef price was expected to increase by only 1.4 percent. The 

model also found fairly small price changes for most other commodities, including those linked to 

beef production. For instance, coarse grain prices were estimated to increase by at most 5 percent 

in 2002 above the baseline price level. The largest impacts were found for wheat which ranged 

from 1.2 percent to 10 percent, while increases in prices of dairy products were reported less than 

2.5 percent (except under the scenario representing implementation of the Final Draft 

Agreement). Overall, the results indicated that the impact of the URA on agricultural prices and 

trade would be fairly small, although the magnitude of impacts were highly sensitive to the 

11The simulations reported include the following: (I) baseline protection are the 1982-93 (long-run) average, 

tariff reductions as presented in the URA submissions, input subsidies remain unchanged (Simulation I), (ii) as 

Simulation I but using base protection level given by the 1989-93 (recent reform) average (Simulation II), (iii) as 

Simulation II, with 1989-93 baseline protection, and tariffs reduced according to URA submissions, but with input 

subsidies reduced by 36 percent for OECD countries, and 24 percent for non-OECD countries to reflect an overall 

commitment of these countries to reducing the aggregate level of agricultural support (Simulation III), (iv) as Simulation 

III, but instead of assuming tariff reductions as outlined in countries' submissions, the tariffs were assumed to be 

lowered according to the Draft Final Act, that is, tariffs for OECD countries were lowered by 36 percent and those of 

non-OECD countries reduced by 24 percent (Simulation IV), (v) as Simulation III, although full employment is not 

assumed, unlike other simulations (Simulation V). 

C-7 
underlying data and assumptions regarding the baseline scenarios. 

Brandao and Martin (1993)12 used a general equilibrium model to capture the welfare 

consequences of trade liberalization, with special focus on agricultural reforms. Using the RUNS 

model, four scenarios were analyzed. First, a scenario to capture implementation of the Dunkel 

package in the developed countries was undertaken. Next, an experiment for reductions outline 

in the Dunkel package in all protection (positive and negative) in developed and developing 

countries was carried out. This goes beyond the Dunkel package in requiring reductions in 

negative as well as positive assistance and was intended to explore the consequences of GATT 

liberalization complemented by a corresponding wave of liberalization undertaken either 

unilaterally or through regional arrangements. The third scenario examined the implications of an 

agreement closer to the Dunkel proposal, including a reduction of distortions applied to 

agriculture by the OECD countries and a reduction of positive protection in the developing 

countries in the order of two-thirds of that in the OECD. A final experiment considered a 

reduction in all protection (positive and negative) rates in the developing countries alone. The 

results were presented for the year 2002, thereby incorporating most of the long-run supply and 

demand adjustments that would be expected from the liberalization process. 

These scenarios were evaluated in terms of their impacts on world prices and on welfare. 

Under each scenario, dairy, sugar, beef and wheat were commodities for which the largest price 

increases were observed, reflecting the high levels of protection in OECD countries. Beef prices 

increases ranged between 5 to 6 percent over the baseline by 2002, while dairy price increases 

were higher by 9 and 10 percent. Wheat prices rose by 4 to 6 percent. The results from the first 

experiment indicate that agricultural policy reform in the OECD countries will have significant 

impacts on world prices of a limited number of commodities. The main gainers from these 

reforms are the OECD countries themselves. By contrast, when policy reform was extended to all 

countries, there was a substantial increase in the benefits going to the developing countries, 

indicating clearly that the major source of welfare gains for this group of countries is the reforms 

of their own policies. 

12AS. Brandao, and W. J. Martin. "Implications of Agricultural Trade Liberalization for Developing 

Countries." Agricultural Economics, vol. 8, pp. 313-343. 1993. 

C-8 
Harrison (1995)13 evaluated the welfare benefits of the URA associated with several key 

provisions, including tariff reductions in manufactured products, tari:ffi.cation of nontariff barriers 

in agriculture and binding commitments to reduce the level of agricultural protection, reduction of 

export and production subsidies in agriculture, and elimination of Voluntary Export Restraints and 

the Multifiber Agreement (MFA). The evaluations were made using a general-equilibrium model 

containing 24 regions and 22 commodities of which the major agricultural commodities were 

paddy rice, wheat, grains (other than rice and wheat), non grain crops, wool, milk products, and 

meat and livestock products. Beef was not separated out in the model but included in the meat 

and livestock category. 

The study found that the world stands to gain $96 billion annually, with most benefits 

concentrated in the higher income countries, especially, the EU countries, Japan, and United 

States. These gains were fairly small when compared with GDP, however (for example, the $13 

billion gain accruing to the United States represents about 0.2 percent ofits GDP). In the 

United States, agriculture contributed only $1.8 billion of the total $13 billion in gains, while 

MF A reforms benefit the country by $10 billion, and reform in manufacturing contributed $1.2 

billion. The study also reported the percentage changes in employment and prices in each of the 

22 sectors. In the United States, the price of meat and livestock products was estimated to 

increase by about 2 percent. Similar price increases were estimated in the EU, while prices in 

Japan and South Korea were estimated to decline by 13 percent and 9 percent, respectively. The 

model expected a 1-percent increase in employment in the meat and livestock sector. The price 

changes for agricultural products related to the beef industry included a 6-percent increase in 

grain prices, and a 2-percent increase in the price of dairy products. 

Francois (1995)14 also used a general-equilibrium model to evaluate the URA, consisting 

of 13 regions and 19 sectors, including four of agriculture-grains, nongrain crops, livestock, and 

processed food. The model was simulated to included impacts of cuts in export subsidies and the 

imposition of market access commitments, however, tariff reductions and domestic supports were 

13G.W. Harrison, T.F. Rutherford, and D.G. Tarr. "Quantifying the Uruguay Round."In The Uruguay Round 

and the Developing Economies. In The Uruguay Round and the Developing Economies, Edited by W.J. Martin, and 

L.A. Winters, WorldBankdiscussionpaperNo. 307. WorldBank, Washington, DC Oct. 1995. 14J.F. Francois, B. McDonald, and H. Nordstrom. "Assessing the Uruguay Round." Ibid. 

C-9 
not included in the URA experiments. The results were reported in terms of changes in 

production, wages, and welfare. Assuming constant returns to scale and perfect competition, the 

study estimated the overall benefits to be almost $40 billion, representing only 0.17 percent of 

global GDP. Of the $40 billion in benefits, less than $5 billion were associated with reforms in 

agriculture. The model estimated small loses in income for the United States resulting from 

reforms in agriculture, but overall the United States was expected to gain over $10 billion 

(roughly 0.2 percent of GDP). For the United States, the model expected a small decline in 

livestock production (less than 1 percent). Changes in the production of food products was also 

found to be less than 1 percent. Meanwhile production was expected to decline in the EU, but 

by only 2 percent. Grain production in the United States was expected to increase by about 1 

percent. Because the livestock sector was not broken out into separate livestock categories, 

price and income impacts on the beef sector were not reported. This brief review of the literature 

on the impact of GATT on the beef sector has shown that there are many different ways that the 

URA can be analyzed empirically. Differences in model approaches and assumptions have been 

summarized by Sharma et al. (1996)15, who identified several possible reasons why empirical 

results from different models given different levels for the magnitude of price changes. 

First, not all models fully incorporated all the components of the URA (market access, 

export subsidies, internal supports, and SPS regulations). Second, different assumptions were 

made about the extent of tariff reductions actually simulated in the models. 16 Third, differences 

in results were from differences in the choice of base period used. For example, in the RUNS 

model simulation II, the 1989-93 benchmark protection level was higher than in RUNS simulation 

I (1982-93 base), so that liberalization resulted in larger world price increases. Fourth, 

differences arose due to model structure. One such difference was between the partial equilibrium 

and the general equilibrium models. As larger adjustments take place within an economy-wide 

model, the effects of agricultural/food policy changes on prices tend to be muted by relative to 

15R. Shanna, P. Konandreas, and J. Greenfield."An Overview of Assessments of the Impact of the Uruguay 

Round on Agricultural Prices and Incomes," Food Policy, vol. 21 No.4/5. Sept./Nov. 1996. pp. 365-376. 16This related to cases when base tariff rates in the country Schedules were found to differ, often markedly from 

those that were estimated to prevail in the base period. In this case, the researchers had to choose which base tariff to 

use (the actual or dirty) to apply the committed tariff cuts, or whether in fact to apply any cuts at all (that is, when the 

dirty base tariff is well above the actual base tariff). 

C-10 
those from partial equilibrium models. Fifth, there were differences stemming from dissimilar 

aggregations of countries and commodities. For example, where commodities and countries were 

grouped such that distortions tend to cancel out, the impacts were less pronounced (for example, 

aggregation of cereals in one group the impact would have been evident for rice (in Japan) was 

muted. Finally, differences in projected price changes between models were also due to the use of 

different elasticities for domestic demand and supply. 

In spite of the differences, some general conclusions of the various studies on the 

quantitative impact of the URA on the U.S. beef sector can be summarized as follows: 

• The URA will result in small increases in U.S. beef prices, in the range of 4 to 6 percent. 

• Gains associated with price beef prices are offset by higher grain and oilseed prices, 

resulting is small increases in U.S. production. 

• Although beef prices increase, higher consumer incomes will also rise, leaving U.S. 

consumption of beef more or less unchanged. 

• The market access provisions of the agreement will provide opportunities to expand trade 

particularly with Japan and Korea. 

• Higher incomes in both high and low-income countries will boost the demand for U.S. 

beef worldwide, although increased market access will intensive competition for expanded 

markets. 

• The export subsidy and internal support provisions have a negligible impact on U.S. beef 

trade. 

C-11 

APPENDIXD 

STATISTICAL TABLES 

D-1 
Table D-1 

U.S. operations with cattle and number of cattle and calves as of Jan. 1, bl region, 1992-96 

Corn Belt States __ Western States Southeastern States Other Total 

Cattle Cattle Cattle Cattle Cattle 

and and and and and 

Year oeerations calves oeerations calves oeerations calves oeerations calves oeerations calves 

1,000 1,000 1,000 1,000 1,000 

Number head Number head Number head Number head Number head 

1992 ........ 395,000 32,450 370,900 43,370 372,500 17,150 88,460 4,586 1,226,860 97,556 

1993 ........ 397,000 32,870 368,100 44,250 373,500 17,470 91,140 4,586 1,229,740 99,176 

1994 ........ 395,000 33,250 380,900 45,200 368,000 18,100 69,790 4,438 1,213,690 100,988 

1995 ........ 381,000 33,180 380,500 46,490 376,500 18,650 73,110 4,435 1,212,110 102,755 

1996 ........ 377,000 33,760 378,800 46,580 368,500 19,000 70,090 4,479 1,194,390 103,819 

CJ 

I 

N 

Share of total (percent) 

1992 ........ 32.2 33.3 30.2 44.4 30.3 17.6 7.2 4.7 100.0 100.0 

1993 ........ 32.3 33.1 29.9 44.6 30.4 17.6 7.4 4.6 100.0 100.0 

1994 ........ 32.5 32.9 31.4 44.8 30.3 17.9 5.8 4.4 100.0 100.0 

1995 ........ 31.5 32.3 31.4 45.2 31.1 18.1 6.0 4.3 100.0 100.0 

1996 ........ 31.6 32.5 31.7 44.9 30.9 18.3 5.9 4.3 100.0 100.0 

Source: U.S. Department of Agriculture, NASS, Cattle Final Estimates, 1989-93 and Cattle, Feb. 1996 and Jan. 1997. 
Table 0-2 

Cattle on feed: Number of feedlots and marketings, by size of feedlot capacities, in the five major feeding Corn Belt States and the eight 

major feeding Western Rangelands States, 1992-951 

(Feedlot capacity in number of head) 

Under 1.000 1,000-7,999 8,000-31,999 32,000 and over Total 

Cattle Cattle Cattle Cattle Cattle 

Year and area Lots marketed Lots marketed Lots marketed Lots marketed Lots marketed2 

1,000 1,000 1,000 1,000 1,000 

No head No head No head No head No head 

1992: 

Corn Belf ........... . 39,490 2,566 1,036 2,809 156 4,385 18 1,785 40,700 11,545 

Western Rangelands4 •• 5,175 280 359 1,214 153 3,944 59 4,996 5,746 10.434 

Total ............ . 44,652 2,826 1,403 3,944 309 7,883 82 7,326 46,446 21,979 

1993: 

Corn Belf ........... . 37 ,690 2,603 1,038 2,652 151 4,230 21 1,900 38,900 11,385 

Western Rangelands4 •• 4,819 239 354 1.306 137 4.106 60 5.340 5.370 10.991 

d Total ........... . 42,503 2,825 1,392 3,851 288 7,827 87 7,873 44,270 22,376 I 

w 

1994: 

Corn Belf ........... . 36,870 2,348 1,158 2,777 148 4,085 24 2,325 38,200 11,535 

Western Rangelands4 •• 4.586 261 344 1,203 140 4.197 62 5.783 5,132 11.444 

Total ........... . 41,445 2,580 1,502 3,883 294 7 ,854 91 8,662 43,332 22,979 

1995: 

Corn Belf ........... . 34,915 1,963 1,204 3,104 160 4,615 21 2,315 36,300 11,997 

Western Rangelands4 •• 4.524 325 344 1, 145 134 3.922 63 5.976 5,065 11,368 

Total ............ . 39,429 2,269 1,546 4,056 301 8,246 89 8,794 41,365 23,365 1 The sum of the numbers shown under a specified group may not add to the totals shown for that group, since some area groups are combined to 

avoid disclosing individual operations. 2 The total marketings shown were equal to about 83 percent of the fed cattle marketings in the United States. 3 The Corn Belt includes the States of Illinois, Iowa, Kansas, Minnesota, and Nebraska. 4 The Western Rangelands include the States of Arizona, California, Colorado, Idaho, Oklahoma, South Dakota, Texas, and Washington. 

Source: 1992-93 data compiled from USDA. NASS, Cattle Final Estimates, 1989-93 and 1994-95 data compiled from USDA, NASS, Cattle on Feed, 

various issues, see http://www. usda.gov.nass/pubs/pubs.htm. 
Table D-3 

Cattle on feed: Number of feedlots and marketings, by size of feedlot capacities, in cattle-feeding 

Corn Belt States and cattle-feeding Western Rangelands States, 1996 

(Feedlot capacity in number of head) 

1.000-7.999 8.000-31.999 32.000 and over ~To=t=al'-----

Cattle Cattle Cattle 

Year and area Lots marketed Lots marketed Lots marketed Lots 

Cattle 

marketed 

1996: 

Corn Belt ........... . 

Western Rangelands .. 

Total ............ . 

1,000 1,000 1,000 

No head No head No head 

1,016 2,728 

354 1 ;002 

1,370 3,730 

163 

153 

316 

4,830 

4.261 

9,091 

21 

63 

84 

2,340 

5.959 

8,299 

No 

1,000 

head 

1,200 9,898 

570 11.222 

1,770 21,120 

Note.--ln 1996, cattle on feed reporting procedures changed, so as not to disclose the confidentiality of individual 

operations. 

Source: Data compiled from USDA, NASS, Cattle on Feed, Feb. 14, 1997; http://www.usda.gov.nass/pubs/pubs.htm. 

Table D-4 

Cattle: Number of Federally inspected slaughter plants, by sizes, number of cattle slaughtered in 

such eiants, and shares of total commercial slaushter accounted for, 1992-96 

Number of cattle slaughtered 

1,000 10,000 50,000 

Under to to to 500,000 

Year 1,000 9,999 49,999 499,999 and more Total 

1992: 

Plants ............................... 694 144 53 60 20 971 

Quantity slaughtered (thousands) ......... 187 458 1,334 10,694 19,182 31,849 

Share of commercial slaughter (percent) ... 0.6 1.4 4.1 32.5 58.4 1 96.9 

1993: 

Plants ............................... 667 145 42 60 20 934 

Quantity slaughtered (thousands) ......... 182 452 1,066 11,306 20,056 33,062 

Share of commercial slaughter (percent) ... 0.5 1.4 3.2 33.9 60.2 1 99.2 

1994: 

Plants ............................... 637 124 42 57 22 882 

Quantity slaughtered (thousands) ......... 183 378 995 10,082 21,845 33,483 

Share of commercial slaughter (percent) ... 0.5 1.1 2.9 29.5 63.9 1 97.9 

1995: 

Plants ............................... 602 115 39 56 24 836 

Quantity slaughtered (thousands) ........ 182 360 1,010 9,893 23,435 34,880 

Share of commercial slaughter (percent) ... 0.5 1.0 2.8 27.8 65.8 1 97.9 

1996: 

Plants ............................... 561 131 39 58 23 812 

Quantity slaughtered (thousands) ........ 190 391 1,013 11,578 22,898 36,070 

Share of commercial slaughter (percent) ... 0.5 1.1 2.8 31.6 62.6 1 98.6 1 Remainder accounted for by State inspection. 

Note.--Because of rounding, figures may not add to the totals shown. 

Source: USDA, NASS, Livestock Slaughter, annual issues, 1992-96. 

D-4 
Table D-5 

Calves: Number of Federally inspected slaughter plants, by sizes, number of calves slaughtered in 

such plants, and shares of total commercial slaughter accounted for, 1992-96 

Number of calves slaughtered 

Under 100 to 10,000 

Year 100 9,999 and more Total 

1992: 

Plants ............................... 330 66 31 

Quantity slaughtered (thousands) ......... 4 175 1,145 

Share of commercial slaughter (percent) ... 0.2 12.8 83.5 

1993: 

Plants ............................... 305 68 29 

Quantity slaughtered (thousands) ......... 3 135 1,043 

Share of commercial slaughter (percent) ... 0.2 11.3 87.3 

1994: 

Plants o 0 0 0 0 0 0 0 0 0 0 0 0 o 0 0 o 0 o o 0 0 0 Io 0 0 0 0 0 0 257 63 28 

Quantity slaughtered (thousands) ......... 3 141 1,093 

Share of commercial slaughter (percent) ... 0.2 11.1 86.1 

1995: 

Plants ............................. ". 249 62 32 

Quantity slaughtered (thousands) ........ 3 139 1,250 

Share of commercial slaughter (percent) ... 0.2 9.7 87.4 

1996: 

Plants ............ " .................. 264 79 37 

Quantity slaughtered (thousands) ........ 3 145 1,581 

Share of commercial slau~hter !E,ercenQ ... 0.2 8.2 89.4 1 Remainder accounted for by State inspection. 

Note.--Because of rounding, figures may not add to the totals shown. 

Source: USDA, NASS, Livestock Slaughter, annual issues, 1992-96. 

Table D-6 

Number of U.S. firms slaughtering cattle and calves by type of cattle, 1991-94 

Steers and Cows and All 1 

Year heifers bulls cattle 

1991 . . . .. .. .. . .. . 254 

1992 . . . . . . . . . . . . . 230 

1993 . . . . . . . . . . . . . 217 

1994 . . . . . . . . . . . . . 195 1 Includes steers, heifers, cows, and bulls. 

282 

256 

229 

205 

321 

293 

267 

239 

427 

1,324 

1 96.5 

402 

1,182 

1 98.9 

348 

1,237 

1 97.5 

343 

1,392 

1 97.3 

380 

1,729 

1 97.8 

Calves 

139 

139 

129 

108 

Source: USDA, Packers and Stockyards Statistical Report, 1991-94, Reporting Years, SR-96-1, Oct. 1996, p. 14. 

D-5 
tJ 

I 

O'\ 

Table D-7 

o· 

Region/state 

Upper Midwest1 

Wisconsin 

Minnesota 

Northeast2 

New York 

Pennsylvania 

Central3 

Southeast4 

Wesf' 

California 

U.S. TOTAL 

b 

1 - 29 

1993 1996 

189 139 

100 74 

61 42 

87 67 

25 19 

45 39 

135 114 

44 29 

23 15 

2 1 

480 364 

,f t" d dmilk d 

Size of operation by herd size 

30-49 50- 99 100 - 199 200+ 

1993 1996 1993 1996 1993 1996 1993 1996 

Number of cows (1,000 animals) 

702 583 1,092 983 503 558 217 278 

427 377 665 594 275 304 76 100 

209 155 260 245 88 102 17 54 

307 263 709 662 411 427 277 318 

97 79 284 260 190 197 131 147 

161 148 271 264 115 129 48 64 

253 183 606 539 411 427 418 471 

84 57 233 207 263 228 371 337 

36 23 132 89 227 217 1,786 2,073 

5 4 21 10 46 48 1,136 1,201 

1,382 1, 108 2,772 2,480 1,814 1,858 3,069 3,478 

1 Michigan, Minnesota, North Dakota, South Dakota, Wisconsin. 

b 1993 

Total Milk 

inventory production 

1993 1996 1993 1996 

Million pounds 

2,704 2,541 40,711 39,524 

1,543 1,449 23,014 22,376 

635 598 9,705 9,440 

1,790 1,738 28,028 28,449 

727 702 11,425 11,529 

640 644 10,190 10,640 

1,824 1,733 26,708 25,614 

995 858 13,732 12,185 

2,204 2,418 40,864 47,680 

1,210 1,264 22,921 25,859 

9,517 9,287 150,043 153,452 

2

· Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont. 3 Arkansas, Illinois, Indiana, Iowa, Kansas, Louisiana, Missouri, Nevada, Ohio, Oklahoma, Texas. 4 Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia. 5 Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming. 

Source: Data compiled from USDA, AMS, Dairy Market Statistics, Annual Summary, 1993 and 1996. 

Milk 

production 

nAr f'nw 

1993 1996 

Pounds per cow 

15,056 15,555 

14,915 15,442 

15,283 15,786 

15,656 16,373 

15,715 16,423 

15,922 16,522 

14,645 14,782 

13,801 14,202 

18,538 19,719 

18,943 20,458 

15,765 16,523 
Table D-8 

Cattle and calves: Share of slaughter accounted for by 4, 8, and 20 largest firms, by type and 

years, 1990-94 

Item 1990 1991 1992 1993 1994 

All cattle: 

4 largest firms ............ 58.6 60.6 63.5 66.0 67.8 

8 largest firms .......... ., . 67.8 68.8 71.1 73.3 74.3 

20 largest firms ............ 79.0 79.3 80.8 83.1 83.6 

Steers and heifers: 

4 largest firms ............ 71.6 73.5 77.8 79.8 80.9 

8 largest firms ............ 82.1 82.7 85.9 87.6 87.5 

20 largest firms ............ 91.5 91.3 92.7 93.8 92.5 

Cows and bulls: 

4 largest firms ........... 20.4 21.1 22.0 24.0 26.3 

8 largest firms ........... 33.2 32.9 35.8 38.4 41.1 

20 largest firms ........... 57.6 59.4 60.0 63.4 67.8 

Calves: 

4 largest firms ........... 31.1 20.5 25.1 25.9 24.3 

8 largest firms ••• 0 ••••••• 47.2 33.9 40.1 41.8 40.2 

20 lar!lest firms ........... 71.5 56.7 65.4 70.2 65.9 

Source: Compiled from official statistics of USDA, Packers and Stockyards Statistical Report, 1991-94 Reporting Years, 

SR-96-1, Oct. 1996, pp. 60-63. 

Table D-9 

Cattle: U.S. cattle inventories, by type, Jan. 1, 1992-97 

(1,000 animals) 

Year 

1992 ................................. . 

1993 ................................. . 

1994 ................................. . 

1995 ................................. . 

1996 ................................. . 

1997 ................................. . 

All cattle 

97,556 

99,176 

100,988 

102,755 

103,819 

101,209 

Beef cows 

33,775 

33,888 

34,650 

35,156 

35,333 

34,280 

Source: 1992-93 data compiled from USDA, NASS, Cattle Final Estimates, 1989-93, Jan. 1995, p. 1; data for 1994, 

USDA, ERS, Red Meat Yearbook, 1994, p. 105; and data for 1995-96, USDA, NASS, Statistical Highlights of U.S. 

Agriculture, 1995196, see http://www.usda.gov/nass/pubs/stathigh/coverlhtm; 1997 from USDA, NASS, Cattle, Jan. 

31,1997. 

D-7 
Table D-10 

Cattle prices: U.S. auction prices, by types, by quarters and annual average, 1992-96 

(Dollars per hundred weigh2 

Slaughter Feeder Cull 

Period cattle1 cattle2 cattle3 

1992: 

1st. quarter ................ 75.71 84.93 44.91 

2nd. quarter .............. 75.94 85.90 44.67 

3rd. quarter .............. 73.88 88.82 45.61 

4th. quarter .............. 75.86 86.22 44.16 

Annual average ......... 75.35 86.47 44.84 

1993: 

1st. quarter ............... 80.65 90.87 47.75 

2nd. quarter .............. 79.78 96.13 49.20 

3rd. quarter .............. 73.77 92.72 49.29 

4th. quarter .............. 71.23 87.17 43.83 

Annual average ......... 76.36 91.72 47.52 

1994: 

1st. quarter ............... 73.11 88.96 44.44 

2nd.quarter .............. 68.79 85.35 46.16 

3rd. quarter .............. 65.83 80.64 42.77 

4th. quarter .............. 67.63 78.01 36.68 

Annual average ......... 68.84 83.24 42.51 

1995: 

1st. quarter ............... 71.58 77.70 39.58 

2nd. quarter .............. 64.70 72.59 37.18 

3rd. quarter .............. 62.65 67.77 34.93 

4th. quarter .............. 66.10 63.91 30.61 

Annual average ......... 66.26 70.49 35.58 

1996: 

Veal 

calves4 

89.78 

88.76 

84.62 

84.87 

87.01 

86.81 

92.92 

89.69 

87.03 

89.11 

84.38 

90.61 

89.24 

87.78 

88.01 

1st. quarter............... 63.06 59.12 32.52 (5) 

2nd. quarter . . . . . . . . . . . . . . 60.26 58.81 30.37 (5) 

3rd. quarter . . . . . . . . . . . . . . 66.51 62.59 31.74 (

5

) 

4th. quarter . . . . . . . . . . . . . . 70.39 64.70 26.68 <5> 

Annual average . . . . . . . . . 65.05 61.31 30.33 (

5

) 

1 U.S. prices based on sales of slaughter cattle, steers, Choice Nos. 2 and 4, Nebraska direct, 1100-1300 lbs. 2 Feeder cattle prices were accumulated for Med. No. 1, steers, Oklahoma City, 600-650 lbs. 3 U.S. prices on sales of cows, boning utility, Sioux Falls. 4 U.S. prices were accumulated for choice veal calves, Albany, NY. 5 Data no longer collected. 

Source: Facsimile from USDA, ERS, updates to Red Meat Yearbook, 1994, Jan. 28, 1997. 

D-8 
Table D-11 

Live cattle and calves: 1 U.S. imports for immediate slaughter from Canada, Mexico, and all other 

sources, 1992-96 

Source 1992 1993 1994 1995 

Quantity (1,000 animals) 

Canada ............... ,960 926 908 1,055 

Mexico ••••••••••••••• 0 3 2 3 67 

All other ............... 0 (2) 0 0 

Total ............... 963 927 910 1,123 

Value (Million dollars) 

Canada ............... 726 733 727 809 

Mexico ................ 2 1 1 37 

All other ............... 0 (3) 0 0 

Total ............... 728 734 728 846 1 Includes HTS subheadings 0102.90.4020, 0102.90.4024, 0102.90.4028, 0102.90.4062, 0102.90.4064, 

0102.90.4066, and 0102.90.4068. 2 Less than 500 animals. 3 Less than $500,000 dollars. 

Note.--Because of rounding, figures may not add to the totals shown. 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

Table D-12 

Cattle destined for immediate slaughter: U.S. imports from Canada, by type, 1992-96 

Source 1992 1993 1994 1995 

Quanti!X ~1,000 animals) 

Steers and heifers 1 ...... 575 584 627 744 

Cow and bulls2 •••••••••• 346 310 255 294 

Veal calves3

• 

4 ••••••••••• 39 33 25 18 

Total .............. 960 926 908 1,055 

Value (Million dollars} 

Steers and heifers 1 ...... 487 505 544 625 

Cows and bulls2 •••.••••• 233 223 178 181 

Veal calves3

• 

4 ••••••••••• 6 5 4 3 

Total .............. 726 733 727 809 1 HTS subheadings 0102.90.4062 and 0102.90.4068. 2 HTS subheadings 0102.90.4064 and 0102.90.4066. 3 HTS subheadings 0102.90.4020, 0102.90.4024, and 0102.90.4028. 4 Calves weighing less than 90 kilograms each. 

Note.-Because of rounding, figures may not add to the totals shown. 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

D-9 

1996 

1,296 

2 

0 

1,298 

895 

1 

0 

896 

1996 

901 

379 

17 

1,296 

693 

200 

2 

895 
ti 

I 

....... 

Table D-13 

Cattle for slaughter: U.S. imports from Canada, monthly, 1992-96 

(1,000 animals) . 

Year Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. Total 

1992 ...... 72 80 90 83 84 85 55 71 95 94 73 79 960 

1993 ...... 73 79 76 94 81 102 70 83 91 71 52 53 926 

1994 ...... 40 57 72 84 93 90 84 88 98 92 58 50 908 

1995 ...... 68 76 99 101 94 107 80 97 103 89 84 58 1,055 

1996 ...... 93 123 112 122 141 111 111 127 114 109 61 74 1,296 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

Table D-14 

Live cattle and calves: U.S. production, 1 imports for immediate slaughter from Canada, Mexico, and total,2 consumption,3 and imports for 

immediate slaughter as a share of consumption, 1992-96 

Imports of slaughter cattle and calves 

from--

Total, all 

Share of consumption supplied by 

imoorts fromo Year Production Canada Mexico countries Consumption 

Total, all 

Canada Mexico countries 

- --------------------------------Thousands----------------------------- ---------------Percentage---------

1992 ...... 38,933 960 3 963 34,245 2.8 

1993 ...... 39,448 926 2 927 34,520 2.7 

1994 ...... 40,059 908 3 910 35,467 2.6 

1995 ...... 40,211 1,055 67 1,123 37,070 2.8 

1996 ...... 39,586 1,296 2 1,298 38,352 3.4 1 The calf crop, which is the number of calves born during the year. 2 Imports of live cattle and calves from all other sources combined amounted to fewer than 1,000 animals in every year during 1992-96. 3 Commercial cattle and calf slaughter. 4 Less than 0.05 percent. 

Note.--Because of rounding, figures may not add to the totals shown. 

(4) 2.8 

(4) 2.7 

(4) 2.6 

0.2 3.0 

(4) 3.4 

Source: 1992 production and consumption data compiled from official statistics of the USDA, NASS, Cattle Final Estimates 1989-93, Jan. 1, 1995, p. 1; 1993 data 

compiled from USDA, ERS, Livestock and Poullry Situation and Outlook Report; 1994-96 data compiled from USDA, NASS, Cattle, Jan. 31, 1997; imports compiled 

from official statistics of the U.S. Department of Commerce. 
Table D-15 

Calves: U.S. commercial slaughter, imports for consumption from Canada, and imports for 

consumption from Canada as a share of U.S. commercial slaughter, 1992-96 

Item 1992 1993 1994 1995 

U.S. commercial slaughter 

1996 

(1,000 animals) . . . . . . . . . 1,372 1, 195 1,268 1,430 1,768 

Imports from Canada 

( 1,000 animals) . . . . . . . . . 39 33 25 18 17 

Imports from Canada as a 

share of U.S. commercial 

slaughter <percenp . . . . . . 2.8 2.8 2.0 1.3 1.0 

Source: Imports compiled from official statistics of the U.S. Department of Commerce (HTS subheadings 0102.90.4024 

and 0102.90.4028). U.S. commercial slaughter compiled from USDA, ERS, Livestock, Dairy and Poultry Situation and 

Outlook, various issues. 

D-11 
Table D-16 

Fresh, chilled, or frozen beef and veal: U.S. imports for consumption, carcass weight equivalent, by 

major sources, 1992-96 

Source 1992 1993 1994 1995 1996 

Quantity (1,000 pounds, carcass weight equivalent) 

Canada ............... . 328,897 396,679 447,319 439,420 579,530 

Australia ............... 1,011,288 905,576 876,079 670,207 544,531 

New Zealand ........... 637,887 560,619 526,462 577,775 502,110 

Costa Rica ............. 45,085 68,398 65,239 58,366 54,196 

Uruguay ............... 0 0 0 381 60,808 

Nicaragua ............. 18,960 59,479 60,369 51,348 35,810 

Honduras .............. 47,789 47,487 47,706 17,665 18,124 

Mexico ................ 876 3,207 2,775 5,631 10,295 

Guatemala ............. 20,316 28,074 16,886 10,378 2,075 

Japan ................. 18 13 71 19 17 

Dominican Republic ..... 18,116 20,062 15,424 5,911 0 

All other ............... 6 349 12 093 9409 1 732 732 

Total ............... 2,135,581 2,101,688 2,067,739 1,838,832 1,808,229 

Value (1,000 dollars) 

Canada ............... 286,476 357,452 367,315 352,560 454,306 

Australia ............... 738,039 685,702 604,198 385,565 281,735 

New Zealand ........... 504,317 457,671 412,562 357,378 269,626 

Costa Rica ............. 39,868 60,396 53,755 45,154 37,950 

Uruguay ............... 0 0 0 257 35,449 

Nicaragua ............. 16,237 51,909 49,811 37,719 22,467 

Honduras .............. 40,060 40,456 39,885 14,057 12,008 

Mexico ................ 1,372 2,565 3,198 5,915 8,760 

Guatemala ............. 17,536 22,702 14,490 8,601 1,397 

Japan ................. 451 327 449 425 460 

Dominican Republic ..... 16,089 17,793 12,258 4,245 0 

All other ............... 4 053 8 235 7 461 2405 2164 

Total .................. 1,664,498 1,705,207 1,565,382 1,214,279 1,126,322 

Note.--Because of rounding, figures may not add to the totals shown. 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

D-12 
Table 0-17 

Beef: U.S. imports of beef and veal from Canadian live cattle and calves, beef and veal from Canada, 

total imports, U.S. beef and veal production from U.S. cattle and calves, and ratio of imports from 

Canada to U.S. production, 1992-96 

Beef and U.S. beef and 

veal from Beef and veal production 

Canadian-live veal from Total from U.S. cattle 

Period cattle and calves 1 Canada imports and calves 

-------------:-----------------(Million pounds)----------------------------------

1992 .......... 698 329 1,027 22,698 

1993 .......... 685 397 1,082 22,649 

1994 .......... 709 447 1,156 23,970 

1995 .......... 838 439 1,277 24,703 

1996 .......... 1,007 580 1,587 25,059 

Ratio of 

imports from 

Canada to U.S. 

production 

Percent 

4.5 

4.8 

4.8 

5.2 

6.3 1 Carcass weight equivalent of U.S. beef and veal from U.S. imports of live cattle and calves. Data estimated by 

multiplying the pounds of imported live cattle by a dressed-weight yield of 59 percent and by multiplying the pounds of 

imported calves by a dressed-weight yield of 56 percent. 

Note.--U.S. beef and veal production is less than other tables in this report which include beef derived from imported live 

cattle for immediate slaughter. 

Source: U.S. imports compiled from official statistics of the U.S. Department of Commerce; U.S. production compiled 

from official statistics of USDA. 

D-13 
Table D-18 

Beef and veal: 1 U.S. production, imports for consumption from Canada and all other sources, exports of domestic merchandise, apparent 

consumption, and imports as a shar~ of consul'l'll!_tion an~J>rnduction, 1992-96 · 

Year 

Imports of fresh, Exports of 

chilled, or frozen fresh, 

beef for consumption chilled, or 

from-- frozen 

All domestic Apparent 

Imports as a share of 

consumption from--

All 

Production Canada other Total beef consumption2 Canada other Total 

Imports as a share of 

production from--

All 

Canada other Total 

---------------------------Million pounds---------------------------------- ----------------------------Percent----------

1992 ..... 23,396 329 1,807 2,136 1,277 

1993 ..... 23,334 397 1,705 2,102 1,219 

1994 ..... 24,679 447 1,621 2,068 1,547 

1995 ..... 25,541 439 1,400 1,839 1,736 

1996 ..... 26,066 580 1,228 1,808 1,742 1 Includes commercial and farm production, carcass weight equivalent. 2 Adjusted for stock changes. 

24,572 

24,292 

25,414 

25,853 

26,324 

1.3 

1.6 

1.8 

1.7 

2.2 

7.4 

7.0 

6.4 

5.4 

4.7 

8.7 

8.7 

8.1 

7.1 

6.9 

1.4 

1.7 

1.8 

1.7 

2.2 

7.7 

7.3 

6.6 

5.5 

4.7 

9.1 

9.0 

8.4 

7.2 

6.9 

t;j Note.-Because of rounding, figures may not add to the totals shown. I 

,_. 

~ Source: Production and apparent consumption compiled from official statistics of the USDA, ERS, Red Meats Yearbook, 1994 and facsimile updates to Red Meats 

Yearbook, Jan. 29, 1997; import and export data compiled from official statistics of the U.S. Department of Commerce. 
Table D-19 

Cattle: Commercial slaughter, by classes of cattle, 1992-96 

Cows, bulls, Percent of total 

Fed and Total Fed 

Year cattle stags (culls) Calves slaughter cattle Culls Calves 

-------------------------1, 000 head-------------------------

1992 ................. 26,374 6,499 1,372 34,245 77 19 4 

1993 ................. 2~,580 6,745 1,195 34,520 77 20 3 

1994 ................. 27,616 6,582 1,268 35,467 78 19 4 

1995 ................. 28,673 6,967 1,430 37,070 77 19 4 

1996 ................. 28,710 7,862 1,767 38,339 75 21 5 

Note.--Because of rounding, figures may not add to the totals shown. 

Source: Compiled from official statistics of the USDA, ERS, Cattle and Sheep Outlook, a supplement to Livestock and 

Poultry Situation and Outlook Report, LDP-CS-12, Nov. 13, 1996. 

Table D-20 

Fresh, chilled, or frozen beef and veal: U.S. exports, by principal markets, 1992-96 

Country 1992 1993 1994 1995 1996 

Quantity (1,000 pounds, carcass weight-equivalent) 

Japan ................. 621,701 715,025 826,892 995,718 972,600 

Canada ............... 228,967 219,775 259,076 282,843 264,158 

Korea ................. 160,329 112,484 175,321 265,390 195,640 

Mexico ................ 184,632 103,986 201,393 84,702 163,739 

All other ............... 81,420 67,375 84,154 107,455 128,493 

Total .............. 1,277,049 1,218,645 1,546,836 1,736,108 1,742,450 

Value (1,000 dollars) 

Japan ................. 1, 113,730 1,228,578 1,328,843 1,680,332 1,489,770 

Canada ............... 329,218 320,562 336,024 337,773 295,399 

Korea ................. 211,570 151,138 226,976 319,244 243,107 

Mexico ................. 209,074 112,070 227,406 84,678 161,576 

All other ............... 134,508 124,840 132,201 160,244 185,498 

Total .............. 1,998,100 1,937,188 2,251,450 2,592,271 2,375,368 

Source: Compiled from official statistics of the U.S. Department of Commerce. 

D-15 
D-16 
Table D-22 

Frozen boneless manufacturing beef: Comparative average U.S., Canadian, and other imported 

prices, 65 CL (percent chemical lean), by quarters and annual average, 1993-96 

(Cents per pound) 

United Other 

Period States1 Canada2 imports3 

1993: 

1st. quarter ............. 85 89 78 

2nd. quarter ............ 88 98 90 

3rd.quarter ............. 81 83 77 

4th. quarter ............. 74 77 82 

Annual average ....... 82 87 82 

1994: 

1st. quarter ............. 66 66 72 

2nd.quarter ............ 67 67 68 

3rd.quarter ............. 62 61 62 

4th. quarter ............. 60 57 58 

Annual average ....... 64 63 65 

1995: 

1st. quarter ............. 65 64 62 

2nd. quarter ............ 59 60 62 

3rd. quarter ............. 62 63 62 

4th. quarter ............. 58 61 69 

Annual average ....... 61 62 64 

1996: 

1st. quarter . . . .. . . . . .. . . 57 58 61 

2nd.quarter ............ 59 61 61 

3rd. quarter . . . . . . . . . . . . . 64 68 64 

4th. quarter . . . . . . . . . . . . . 66 70 69 

Annual average . . . . . . . 62 64 64 1 U.S. prices are delivered Chicago. 2 Converted from Toronto delivered to Chicago, by adding a factor of 3¢ per pound, per telephone conversation with 

Bill Albanos of The Meat Sheet, Chicago, IL, Nov. 26, 1996. 3 Delivered East Coast price. 

Source: Derived from daily price quotations of representative market prices as reported in The Meat Sheet, Chicago, IL. 

D-17 
Table D-23 

Boxed beef: 1 Wholesale price, cut-out value, by quarters and years, 1992-96 

(Dollars per hundred weight) 

1st 2nd 3rd 4th Annual 

Period quarter quarter quarter quarter average 

1992 .................... 117.72 118.46 113.85 116.91 116.73 

1993 .................... 123.21 124.61 115.29 111.87 118.74 

1994 .................... 113.12 108.92 106.02 105.84 108.47 

1995 .................... 110.39 104.96 103.80 107.58 106.68 

1996 .................... 98.98 97.87 103.96 111.55 103.09 1 Derived from Choice Nos. 2-3, 550-700 lbs. 

Source: Facsimile from USDA, ERS, updates to Red Meats Yearbook, 1994, Jan. 29, 1997. 

Table D-24 

Feed grain: Domestic use in feed and residual uses, by principal grains, crop years 1992/93 to 

1996/97 

(Million metric tons) 

Crop year 

beg. Sept. 1 Corn Sorghum Barley Oats Wheat Total 

1992/93 134.5 11.9 4.2 3.4 5.3 159.3 

1993/94 119.4 11.6 6.1 3.4 9.6 150.0 

1994/95 140.6 10.2 4.9 2.8 7.4 166.0 

1995/96 119.7 7.9 4.6 2.1 6.2 140.6 

1996/971 ••••• 126.4 13.3 4.1 2.2 8.0 154.0 1 Projected, December 1996. 

Source: Compiled from official statistics of the U.S. Department of Agriculture. 

D-18 
Table D-25 

Livestock: U.S. grain-consuming animal units (GCAUs), by type, and U.S. feed consumption, crop 

years 1992/93 to 1996/97 

Type. livestock 

Crop year Dairy Cattle on Other Other 

beg. Sept 1-- cattle feed cattle Hogs Poultry livestock Total 

------------------------------Million units----------------------------------

1992/93 10.9 19.5 4.0 22.4 25.3 0.6 82.7 

1993/94 10.7 19.8 4.1 22.6 26.0 0.6 83.9 

1994/95 10.7 19.1 4.1 23.0 26.8 0.6 84.3 

1995/96 10.6 19.6 2

4.2 22.1 27.8 0.6 84.9 

1996/973 ••. 10.5 20.0 2

4.2 22.2 28.8 0.6 86.3 1 Includes feed wheat. 2 Estimated. 

3 Projected on Dec. 1996. 

Source: Compiled from official statistics of the USDA. 

Table D-26 

Feed grain consumption 1 

Per animal 

Total unit 

Million Metric 

metric tons tons 

159.3 1.93 

150.0 1.79 

166.0 1.97 

140.6 1.66 

154.0 1.79 

Feed grains (except wheat): U.S. production, imports, exports, domestic consumption, ending 

stock, and average farm price, crop years 1992/93 to 1996/97 

Crop year 

beg. Sept. 1 

1992/93 

1993/94 

1994/95 

1995/96 

1996/971 • , , 

Apparent consumption 

Food, 

alcohol, Ending 

Production Imports Exports Feed seed Subtotal stock 

---------------------------------(Million metric tons)---------------------------------------

277.1 1.4 51.1 154.2 44.2 198.7 63.1 

186.2 3.9 40.3 140.4 46.1 186.5 27.4 

284.8 3.3 62.4 158.5 48.8 207.3 45.3 

209.3 3.3 57.5 134.4 49.0 183.4 20.0 

267.0 2.4 55.3 146.0 47.8 193.8 46.1 1 Projected, December 1996. 

Source: Compiled from official statistics of the U.S. Department of Agriculture. 

D-19 

Farm price 

of corn 

Bushel 

$2.07 

2.50 

2.26 

3.24 

2.65 
Table D-27 

Live cattle and calves: 1 Mexican inventories, production, imports, exports, and apparent 

consumption, 1992-97 

(Thousand animals) 

Year Inventories Production2 Imports 

1992 ............ 30,232 9,650 246 

1993 ............ 30,649 9,850 93 

1994 ............ 30,702 9,500 156 

1995 ............ 30, 191 8,900 22 

19964 ........... 28,141 8,500 40 

19975 ........... 27,286 8,000 30 

1 Includes buffalo. 2 The calf crop, which is the number of animals born during the year. 3 Number of cattle and calves slaughtered. 4 Preliminary. 

5 Forecast. 

Apparent 

Exports consumption3 

1,019 7,770 

1,292 7,870 

1,045 8,310 

1,656 8,550 

1,450 8,180 

1,400 8,200 

Source: Inventories and apparent consumption derived from USDA, FAS, Livestock and Poultry: World Markets and 

Trade, FL&P 2-96, (Oct. 1996), pp. 92-93; production, imports, and exports derived from USDA, FAS, U.S.American 

Embassy Mexico City, Mexico, Livestock Annual, various issues. 

Table D-28 

Mexican cattle inventories: Reporting Mexican States and dates of the inventories 

Date of Number of Number of 

States inventory beef cattle dairy cattle 

Northern States: 

Sonora ................. Mar. 1996 1,196,404 49,456 

San Luis Potosi ............ Sept. 1995 915,704 273,521 

Chihuahua ............... Jun. 1996 864,774 158,520 

Durango ................. Dec.1995 711,751 10,000 

Coahuila ................. Dec.1995 402,150 10,082 

Nuevo Leon .............. Mar. 1996 320,000 15,000 

Baja California Norte ....... Mar. 1996 30,000 30,861 

Other States: 

Jalisco ................... Dec. 1995 1,290,864 515,916 

Sinaloa .................. Dec. 1995 1,005,000 15,000 

Tamaulipas ............... Dec. 1995 918,972 0 

Yucatan .................. Mar. 1996 366,816 957 

Aguascalientes ............ Mar. 1996 61,500 58,950 

Veracruz ................. Sept. 1996 1,886,000 (1) 1 Not available. 

Total 

cattle 

1,245,860 

1,189,225 

1,023,294 

721,751 

412,232 

335,000 

60,861 

1,806,780 

1,020,000 

918,972 

367,773 

120,450 

(1) 

Source: Compiled from statistics of the National Commission for the Eradication of Bovine Tuberculosis and Brucellosis, 

Feb. 7, 1997. 

D-20 
Table D-29 

Beef and veal: Mexican production, imports, exports, and apparent consumption, 1992-97 

Year 

1992 ..................... . 

1993 ..................... . 

1994 ....... " ............. ··. 

1995 ..................... . 

19961 •••••••••.•••••..•••• 

19972 ••••..•.••••••••••••• 

1 Preliminary. 

2 Forecast. 

(Million pounds, carcass weight equivalent) 

Production 

3,660 

3,770 

3,990 

4,079 

3,968 

3,968 

Imports 

287 

212 

198 

93 

165 

243 

Apparent 

Exports consumption 

2 3,944 

2 3,979 

2 4,187 

4 4,167 

4 4,129 

7 4,204 

Source: Derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P 2-96, (Oct. 1996), p. 87 and 

p. 97. 

Table D-30 

Live steers: Average prices in the Federal District of Mexico, by quarter, 1992-96 

Year Jan.-Mar. 

1992 . . . . . . . . . . . . . 87 

1993 "............ 79 

1994 . . . . . . . . . . . . . 77 

1995 . . . . . . . . . . . . . 45 

1996 . . . . . . . . . . . . . 55 

(U.S. dollars per 100 pound) 

Apr.-Jun. 

87 

79 

73 

46 

56 

Jul.-Sept. 

85 

78 

73 

46 

57 

Oct.-Dec. 

77 

77 

69 

47 

60 

Source: Compiled from official statistics of the Servicio Nacional de lnformacion de Mercados (the National Service of 

Market Information) Anuario Estadistico Abasto de Carne de Bovino al Distrito Federal y A.M. (Annual Statistical 

Abstract of Bovine Meat in the Federal District of Mexico}, annual issues. 

Table D-31 

Wholesale beef: Average prices in the Federal District of Mexico, by quarter, 1992-96 

(U.S. dollars per pound) 

Year Jan.-Mar. Apr.-Jun. Jul.-Sept. Oct.-Dec. 

1992 ............. 1.36 1.39 1.34 1.25 

1993 ............. 1.31 1.34 1.23 1.28 

1994 ............. 1.24 1.17 1.15 1.08 

1995 ............. .68 .71 .73 .71 

1996 ............. .92 .91 .91 .96 

Source: Compiled from official statistics of the Servicio Nacional de lnformacion de Mercados (the National Service of 

Market Information) Anuario Estadistico Abasto de Carne de Bovino al Distrito Federal y A.M. (Annual Statistical 

Abstract of Bovine Meat in the Federal District of Mexico}, annual issues. 

D-21 
Table-D-32 

Cattle and calf inventories in Canada, by Provinces and regions, Jan. 1993-97 

Province/region 

Alberta .................. . 

Saskatchewan ............ . 

Manitoba ................ .' 

Prairie Provinces 1 ••••••.•• 

British Columbia .......... . 

Western Canada, total2 •••• 

1993 

4,363 

2,039 

1 052 

7,454 

621 

8,075 

(1,000 animals) 

1994 

4,615 

2,135 

1 100 

7,850 

648 

8,499 

1995 

4,828 

2,307 

1 194 

8,329 

694 

9,023 

Ontario . . . . . . . . . . . . . . . . . . . 2,080 2,054 2,115 

1996 1997 

4,958 4,692 

2,420 2,336 

1 251 1 304 

8,629 8,332 

710 683 

9,339 8,995 

2,100 1,996 

Quebec . . . . . . . . . . . . . . . . . . __,_.1 =31_,_,6~ __ __,_1..,,3=8=-5 ___ -'1.....,3~9<.!.7 ___ __..,W=O!....._-----l~ 1 435 1 466 

Central Provinces3 . . . . . . . . 3,396 5,439 3,512 3,535 3,462 

Maritime Provinces 312 312 4 • • • • • • • • • _..:3 ..... 1=5 ____ -'3,._1.....,5.__ ___ __,,3'-'1.;;,;4 ____ ~..!.!:::..----~u: 

Eastern Canada, total 3 847 3 772 5 . . . . -=3..,_7_,_1 _,_1 -----=3...,,_7"""5_,_4 ___ --"'3..,,8<=2.,.6 ___ __,,=u_---~!....!..!:: 

Canada, total . . . . . . . . . . 11,786 12,254 12,848 1 Alberta, Saskatchewan, and Manitoba. 2 Includes Prairie Provinces and British Columbia. 3 Ontario and Quebec. 4 Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland. 5 Includes Central and Maritime Provinces. 

Source: Statistics Canada, Agriculture Division, Cat. No. 23-603-UFE. 

Table-D-33 

Cattle: Slaughter, in Canada, by Provinces and regions, 1992-95 

Province/region 

Alberta ................... . 

Saskatchewan & Manitoba ... . 

Prairie Provinces 1 •••••••••• 

British Columbia ........... . 

Western Canada, total2 •.•.• 

1992 

1,372 

266 

1,638 

67 

1,705 

(1,000 animals) 

1993 

1,436 

158 

1,594 

59 

1,653 

13,186 12,767 

1994 1995 

1,486 1,537 

164 194 

1,650 1,731 

51 51 

1,701 1,782 

Ontario . . . . . . . . . . . . . . . . . . . . 720 648 633 632 

Quebec . . . . . . . . . . . . . . . . . . . --=2=34_,___ _____ ___...21_,_,5"---------'2.._1.!...!7 _____ __.4::2'-"'=02 

Central Provinces3 • • • . . . . . . 954 863 850 834 

Maritime Provinces4 • • • • • • • • • • 135 25 111 89 __,c.=..:: _______ ....,., ______ __, ........... ______ ~ 

Eastern Canada, total5 . . . . . _,_1..,,0=8=9 ______ _,8,.,.8=8'----------=96=-1,__ _____ ~92~3 

Canada, total . . . . . . . . . . 2,794 2,541 2,662 2,705 1 Alberta, Saskatchewan, and Manitoba. 2 Includes Prairie Provinces and British Columbia. 3 Ontario and Quebec. 4 Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland. 5 Includes Central and Maritime Provinces. 

Source: Statistics Canada, Agriculture Division, Cat. No. 23-603-UFE. 

D-22 
Table D-34 

Distribution of Canadian cattle inventories, by Provinces and regions, Jan. 1, 1993-97 

(Percent) 

Province/re~ion 1993 1994 1995 1996 1997 

Alberta .................. 37 38 38 38 37 

Saskatchewan ............ 17 17 18 18 18 

Manitoba ••••••••• 0 •••••• 9 9 9 9 10 

Prairie Provinces1 •••••••• 64 64 65 66 65 

British Columbia .......... 5 5 5 5 5 

· Western Canada, total2 ••• 69 69 70 71 70 

Ontario .................. 18 17 16 16 16 

Quebec ................. 11 11 11 11 12 

Central Provinces3 ....... 29 28 27 27 28 

Maritime Provinces4 ••••..•• 2 3 3 2 2 

Eastern Canada, totals ... 31 31 30 29 30 

Canada, total ......... 100 100 100 100 100 1 Alberta, Saskatchewan, and Manitoba. 2 Includes Prairie Provinces and British Columbia. 3 Ontario and Quebec. 4 Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland. 5 Includes Central and Maritime Provinces. 

Source: Statistics Canada, Agriculture Division, Cat. No. 23-603-UFE. 

Table D-35 

Distribution of beef cows in Canada, by Provinces and regions, Jan. 1, 1993-97 

(Percent) 

Provincetreaion 1993 1994 1995 1996 1997 

Alberta .................. 42 42 42 41 38 

Saskatchewan ............ 23 23 24 25 23 

Manitoba ................ 11 12 11 12 13 

Prairie Provinces1 •••••••• 76 76 77 78 76 

British Columbia .......... 6 6 6 6 7 

Western Canada, total 2 ••. 83 83 84 84 83 

Ontario .................. 10 10 10 9 9 

Quebec ...... " .......... 5 5 5 5 6 

Central Provinces3 •.•.•.. 15 15 15 14 15 

Maritime Provinces4 •••••••• 2 2 1 2 1 

Eastern Canada, totals ... 17 17 16 16 16 

Canada, total ......... 100 100 100 100 100 1 Alberta, Saskatchewan, and Manitoba. 2 Includes Prairie Provinces and British Columbia. 3 Ontario and Quebec. 4 Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland. 5 Includes Central and Maritime Provinces. 

Source: Statistics Canada, Agriculture Division, Cat. No. 23-603-UFE. 

D-23 
Table-D-36 

Beef cow inventories in Canada, by Provinces and regions, Jan. 1993-97 

(1,000 animals) 

Province/region 1993 1994 1995 1996 

Alberta .................. 1,620 1,680 1,776 1,777 

Saskatchewan ............ 885 832 1,045 1,080 

Manitoba ................ 414 480 490 515 

Prairie Provinces 1 •••••••• 2,919 2,992 3,311 3,372 

British Columbia .......... 242 255 276 280 

Western Canada, total2 ... 3,161 3,347 3,585 3,862 

Ontario .................. 399 405 415 400 

Quebec ................. 195 200 216 220 

Central Provinces3 ..•.... 594 605 631 620 

Maritime Provinces4 •••••••• 61 81 60 61 

Eastern Canada, totals ... 655 686 691 681 

Canada, total ......... 3,815 41013 4,276 4,333 1 Alberta, Saskatchewan; and Manitoba. 2 Includes Prairie Provinces and British Columbia. 3 Ontario and Quebec. 4 Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland. 5 Includes Central and Maritime Provinces. 

Source: Statistics Canada, Agriculture Division, Cat. No. 23-603-UFE. 

Table D-37 

Cattle: Distribution of cattle slaughter in Canada, by Provinces and regions, 1992-95 

Province/region 

Alberta ............................. . 

Saskatchewan & Manitoba ............. . 

Prairie Provinces1 •..•••...•••.••••••• 

British Columbia ..................... . 

Western Canada, total2 .............. . 

(Percent) 

1992 

49 

10 

59 

2 

61 

1993 

57 

6 

63 

2 

65 

Ontario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 26 

1994 

56 

6 

62 

2 

64 

24 

1997 

1,650 

1,030 

540 

3,220 

280 

3,450 

380 

230 

610 

62 

672 

4,152 

1995 

57 

7 

64 

2 

66 

23 

Quebec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---'8~ ____ ___,,8,__ ____ ~--------'-- 8 7 

Central Provinces3 • . . . . . . . • . . . . . . . . . • 34 34 32 31 

Maritime Provinces 4 3 4 • • • • • . • • • • • • • • . . • • • • ___;5~ ____ __,1'------~------~ 

Eastern Canada, totals . . . . . . . . . . . . . . . ~39~ ____ _,3,._,,5,__ ____ ~------~ 36 34 

Canada, total . . . . . . . . . . . . . . . . . . . . . 100 100 1 Alberta, Saskatchewan, and Manitoba. 2 Includes Prairie Provinces and British Columbia. 3 Ontario and Quebec. 4 Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland. 5 Includes Central and Maritime Provinces. 

Source: Statistics Canada, Agriculture Division, Cat. No. 23-603-UFE. 

D-24 

100 100 
Table D-38 

Beef and veal: Canadian production, imports, exports, and apparent consumption, 1992-97 

(Million pounds, carcass weight equivalent) 

Year Production Imports Exports 

1992 ............ . 

1993 ............ . 

1994 ............ . 

1995 ............ . 

19962 ........... . 

19973 ..•......... 

1,980 

1,896, 

1,991 

2,046 

2,260 

2,469 1 Includes changes in inventories. 2 Preliminary. 

3 Forecast. 

487 

595 

631 

564 

518 

441 

551 

421 

485 

483 

573 

683 

Apparent 

consumption 1 

2,116 

2,053 

2,121 

2,136 

2,194 

2,231 

Source: Derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P 2-96, (Oct. 1996), p. 87. 

Table D-39 

Live cattle and calves: 1 Canadian inventories, production, imports, exports, and apparent 

consumption, 1992-97 

(Thousand animals) 

Year Inventories Production2 Imports 

1992 ............. 11,713 4,199 37 

1993 ............. 11,786 5,345 61 

1994 ............. 12,254 5,440 90 

1995 ............. 12,849 5,202 86 

1996 ............. 413, 186 4

5,104 440 

19975 ............ 412,767 5,390 50 1 Includes buffalo. 2 The calf crop, which is the number of animals born during the year. 3 Number of cattle and calves slaughtered. 4 Derived .from Statistics Canada Catalogue 23-803-UFE, table 1. 5 Forecast. 

Apparent 

Exports consumption3 

1,307 3,238 

1,212 3,036 

1,010 3,083 

1,125 3,148 4

1,511 4

3,603 

800 3,975 

Source: Inventories and apparent consumption derived from USDA, FAS, Livestock and Poultry: World Markets and 

Trade, FL&P 2-96, (Oct. 1996), pp. 92-93; production, imports, and exports derived from USDA, FAS, U.S. Embassy 

Ottawa, Canada, Livestock Annual, various issues, except as noted. 

D-25 
Table D-40 

Slaughter cows: 1 Prices in Alberta, by quarter, 1992-96 

(U.S. dollars per 100 pounds) 

Year Jan.-Mar. Apr.-Jun. Jul.-Sept. Oct.-Dec. 

1992 ..... 44.37 47.05 46.41 45.75 

1993 ..... 47.36 49.49 51.84 46.37 

1994 ..... 45.78 47.04 45.16 38.61 

1995 ..... 42.58 39.43 37.07 30.29 

1996 ..... 33.75 34.16 35.08 30.52 1 Grades D1 and D2. 

Source: Compiled from facsimile from Canadian Cattlemen's Association, Mar. 18, 1997. 

Table D-41 

Steers: Direct sales prices in Alberta, by quarter, 1992-96 

(U.S. dollars per 100 pounds) 

Year Jan.-Mar. Apr.-Jun. Jul.-Sept. Oct.-Dec. 

1992 ..... 65.61 67.28 67.18 71.22 

1993 ..... 74.75 72.07 69.40 69.83 

1994 ..... 67.79 63.66 60.85 62.70 

1995 ..... 67.54 59.77 57.27 59.33 

1996 ..... 56.94 53.96 61.45 62.38 

Source: Compiled from Statistics Canada, Agriculture Division, Cat. No. 23-603. 

Table D-42 

Costa Rica: Cattle inventories, beef and veal production, exports, and apparent consumption, 

1992-97 

Year 

1992 ....... . 

1993 ....... . 

1994 ....... . 

1995 ....... . 

19961 ••••••• 

19972 .••••.• 

1 Preliminary. 

2 Forecast. 

Cattle 

inventories 

1,000 animals 

1,707 

1,699 

1,693 

1,645 

1,585 

1,525 

Beef and veal 

Apparent 

Production Exports consumption 

---------------Million pounds, carcass weight equivalent-------------

185 

205 

207 

205 

205 

203 

64 

66 

64 

62 

64 

60 

123 

139 

143 

143 

141 

146 

Source: Derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P2-96, Oct. 1996, pp. 92-99. 

D-26 
Table D-43 

Nicaragua: Cattle inventories, beef and veal production, exports, and apparent consumption, 

1992-97 

Year 

1992 ....... . 

1993 ....... . 

1994 ....... . 

1995 ....... . 

19961 ••••••• 

19972 ••••••• 

1 Preliminary. 

2 Forecast. 

Cattle 

inventories 

1,000 animals 

1,640 

1,655 

1,630 

1,600 

1,650 

1,665 

Beef and veal 

Apparent 

Production Exports consumption 

---------------Million pounds, carcass weight equivalent-------------

110 

115 

119 

110 

108 

108 

44 

55 

57 

57 

57 

37 

66 

60 

62 

53 

51 

71 

Source: Derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P2-96, Oct. 1996, pp. 92-99. 

Table D-44 

Honduras: Cattle inventories, beef and veal production, exports, and apparent consumption, 

1992-97 

Year 

1992 ....... . 

1993 ....... . 

1994 ....... . 

1995 ....... . 

19961 •.••••• 

19972 ••••.•• 

1 Preliminary. 

2 Forecast. 

Cattle 

inventories 

1,000 animals 

2,351 

2,315 

2,286 

2,205 

2,182 

2,152 

Beef and veal 

Apparent 

Production Exports consumption 

--------------Million pounds, carcass weight equivalent--------------

97 

97 

99 

71 

66 

64 

49 

46 

44 

26 

26 

24 

49 

51 

55 

45 

40 

40 

Source: Data for 1992-93 and 1997 derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, 

FL&P2-96, Oct. 1996, pp. 92-99; data for 1994-96 derived from FAS, Livestock and Beef--corrected numbers, 

H05027, pp. 2-3. 

D-27 
Table D-45 

Guatemala: Cattle inventories, beef and veal production, exports, and apparent consumption, 

1992-97 

Year 

1992 ....... . 

1993 ....... . 

1994 ....... . 

1995 ....... . 

19961 .•••..• 

19972 •••..•• 

1 Preliminary. 

2 Forecast. 

Cattle 

inventories 

1,000 animals 

1,790 

1,780 

1,762 

1,717 

1,697 

1,667 

Beef and veal 

Apparent 

Production Exports consumption 

---------------Million pounds, carcass weight equivalent-------------

115 

117 

106 

110 

117 

119 

24 

29 

13 

9 

7 

7 

90 

88 

93 

101 

112 

115 

Source: Derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P2-96, Oct. 1996, pp. 92-99. 

Table D-46 

Dominican Republic: Cattle inventories, beef and veal production, exports, and apparent 

consumption, 1992-97 

Year 

1992 ....... . 

1993 ....... . 

1994 ....... . 

1995 ....... . 

19961 ••••••• 

19972 ••••••• 

1 Preliminary. 

2 Forecast. 

Cattle 

inventories 

1, 000 animals 

1,976 

1,982 

1,983 

1,984 

1,985 

1,986 

Beef and veal 

Apparent 

Production Exports consumption 

---------------Million pounds, carcass weight equivalent-------------

97 

99 

101 

106 

108 

110 

22 

20 

15 

9 

0 

0 

75 

79 

86 

97 

106 

110 

Source: Derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P2-96, Oct. 1996, pp. 92-99. 

D-28 
Table D-47 

Uruguay: Cattle inventories, beef and veal production, exports, and apparent consumption, 1992-97 

Beef and veal 

Year 

1992 ....... . 

1993 ....... . 

1994 ....... . 

1995 ....... . 

19961 ••••••. 

19972 .•••••. 

1 Preliminary. 

2 Forecast. 

Cattle 

inventories 

1,000 animals 

9,508 

10,093 

10,477 

10,512 

10,436 

10,600 

Apparent 

Production Exports consumption 

---------------Million pounds, carcass weight equivalent-------------

805 

681 

811 

758 

816 

860 

271 

231 

335 

315 

375 

408 

534 

450 

476 

443 

441 

452 

Source: 1992-94 data derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P2-96, Oct. 

1996, pp. 92-99; 1995-97 data derived from USDA, FAS, Livestock Annual Report, (UY6002), June 21, 1996, pp. 7-10. 

Table D-48 

Argentina: Cattle inventories, beef and veal production, imports, exports, and apparent 

consumption, 1992-97 

Year 

1992 ....... . 

1993 ....... . 

1994 ....... . 

1995 ....... . 

19961 ••••••• 

19972 ••••••• 

1 Preliminary. 

2 Forecast. 

Cattle 

inventories 

1, 000 animals 

55,229 

55,577 

54,875 

54,207 

53,569 

51,691 

Beef and veal 

Apparent 

Production Imports Exports consumption 

---------------Million pounds, carcass weight equivalent---------------

5,556 35 653 4,921 

5,622 4 617 5,011 

5,732 7 829 4,916 

5,732 13 1,131 4,603 

5,622 9 992 4,641 

5,512 4 1,058 4,464 

Source: 1992-94 data derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P2-96, Oct. 

1996, pp. 92-99; 1995-97 data derived from USDA, FAS, Livestock Annual Report, (AR6050), Aug. 8, 1996, pp. 1-3. 

D-29 
Table D-49 

Japan: Cattle inventories, beef and veal production, imports, and apparent consumption, 1992-97 

Beef and veal 

Apparent 

Year 

Cattle 

inventories Production Imports consumption 1 

1, 000 animals 

4,980 

----------------Million pounds, carcass weight equivalent---------------

1992 ....... . 

1993 ....... . 

1994 ....... . 

1995 ....... . 

19962 ••••••• 

19973 ...... . 

5,024 

4,990 

4,916 

4,828 

4,795 

1,305 

1,307 

1,327 

1,325 

1,228 

1,202 

1 Includes changes in inventories; exports are negligible. 2 Preliminary. 

3 Forecast. 

1,303 

1,612 

1,856 

2,044 

1,969 

1,951 

2,624 

2,870 

3,188 

3,347 

3,170 

3,197 

Source: 1992-94 data derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P2-96, Oct. 

1996, pp. 92-99; 1995-97 data derived from USDA, FAS, Livestock Annual Report., (JA7004), Feb. 3, 1997, p. 12. 

Table D-50 

Republic of Korea: Cattle inventories, beef and veal production, imports, and apparent 

consumption, 1992-97 

Beef and veal 

Apparent 

Year 

Cattle 

inventories Production Imports consumption 1 

1, 000 animals ----------------Million pounds, carcass weight equivalent---------------

1992 ..... . 

1993 ..... . 

1994 ..... . 

1995 ..... . 

19962 •••.• 

19973 ••••• 

2,269 

2,527 

2,814 

2,945 

3,147 

3,423 

302 

388 

441 

472 

509 

564 1 Includes changes in inventories; exports are negligible. 2 Preliminary. 

3 Forecast. 

403 

291 

364 

428 

432 

516 

690 

699 

820 

917 

933 

1,038 

Source: 1992-95 data derived from USDA, FAS, Livestock and Poultry: World Markets and Trade, FL&P2-96, Oct. 

1996, pp. 92-99; 1996-97 data derived from USDA, FAS, Livestock Semi-Annual Report., (KS7006), Feb. 13, 1997, 

pp. 1-3. 

D-30 
Table 0-51 

Canadian beef: Estimated quantity1 graded under USDA quality grading standards and subject 

imports as a share of U.S. beef production,1992-96 

Year 

Average 

dressed 

weight 

Pounds 

1992 . . . . . . 705 

1993 . . . . . . 694 

1994 . . . . . . 717 

1995...... 711 

1996 . . . . . . 702 

Quantity graded based on 

imports of 

2,000 carcasses 4,000 carcasses 

per week per week 

-~-----------Million pounds--------------

73 

72 

75 

74 

73 

147 

144 

149 

148 

146 

Subject imports as a share of U.S. 

beef production based on grading 

of imports of 

2,000 carcasses 4,000 carcasses 

per week per week 

-----------------Percentage--------------

0.3 

0.3 

0.3 

0.3 

0.3 

0.6 

0.6 

0.6 

0.6 

0.6 1 There has been no requirement for collecting data on the quantity of foreign beef carcasses graded in the United 

States. However, the Agricultural Marketing Service of the USDA estimated in a Mar. 26, 1997 facsimile to the USITC 

that between 2,000 and 4,000 imported carcasses are graded weekly in the United States. 

Note.--Based on U.S. imports of 2,000 carcasses a week, annual imports would total 104,000 carcasses; and at 4,000 

carcasses a week, imports would total 208,000 annually. 

Source: Average dressed weight of cattle slaughtered under Federal inspection compiled from USDA, NASS, Livestock 

Slaughter, annual issues, 1992-96; pounds of imported beef estimated by the staff of the USITC based on imports of 

2,000 carcasses and 4,000 carcasses per week; U.S. beef production used to calculate share of subject imports derived 

from table D-18. 

Table 0-52 

Beef and veal: Tariff rate in-quota quantity, imports of tariff rate quota type beef, and ratio, 1995-96 

Tariff rate Imports of tariff 

in-quota rate quota type beef Ratio 

Country quantity 1995 1996 1995 1996 

--------1,000 pounds product weight---------- ------------Percent----------

Australia ............... 833,819 492,316 400,401 59 48 

New Zealand ........... 470,471 423,581 369,113 90 78 

Japan ................. 441 14 13 3 3 

Uruguay1 0 0 0 0 0 0 0 0 0 0 0 0 D 0 44,092 280 44,688 1 101 

Argentina .............. 44,092 (2) (2) (3) (3) 

Other ................. 142 871 105 737 73 014 74 57 

Total ............... 1,535,786 1,021,928 896,043 67 58 1 Based on statistics of the U.S. Customs Service's Trade Compliance Division, U.S. imports of quota-type meat from 

Uruguay totaled 19,400 metric tons (42.8 million pounds), or 97 percent of the in-quota quantity in 1996. 2 Argentina had not met U.S. health and sanitary requirements thus was not authorized to ship unprocessed beef to 

the United States. 3 Not applicable. 

Source: Tariff rate in-quota quantity compiled from the Harmonized Tariff Schedule; imports compiled from official 

statistics of the U.S. Department of Commerce. 

D-31 

APPENDIXE 

U.S. IMPORTS OF LIVE CATTLE 

AND CALVES, BY STATE, AS 

REPORTED BY "QUARTERLY 

RECAP OF IMPORT ANIMALS 

INSPECTED" 

E-1 
live cattle: U.S. imports by state of destination, 1992-96 

AL 

AK 

AZ 

AR 

CA 

co 

CT 

DE 

FL 

MI 

MN 

MS 

MO 

MT 

NE 

NV 

NH 

SD 

TN 

TX 

UT 

VT 

VA 

WA 

WV 

WI 

WY 

1/ July • December only. 

1992 /1 

.......... :::::::·: ··i·.:::::::·.:·· 

73 

0 

689 

169 

607 

46,378 

3 

93 

292 

34,688 

0 

208 

1,615 

42,222 

29 

12,522 

76 

9,584 

21,509 

45 

135 

86,485 

1 

9,745 

1993 

51 

0 

19 

37 

728 

95,668 

12,548 

0 

347 

14,051 

35,009 

18,707 

169 

5,700 

56,519 

27,048 

7 

13,610 

5,921 

11,682 

59,868 

768 

611 

64,272 

12,108 

21,574 

1994 

0 

0 

0 

0 

872 

112,096 

57 

30,741 

82,006 

0 

0 

77 

100,172 

0 

0 

8,216 

0 

75 

84,675 

2,305 

0 

19,797 

0 

46,931 

975 

2/ 'Not Designated' Includes Incomplete data (Le., not 1pectned under state destinations or 'Other'). 

1995 

0 

0 

0 

0 

1,804 

100,553 

0 

0 

0 

42,881 

95,965 

0 

0 

0 

83,879 

0 

0 

16,389 

0 

79 

158,160 

2,185 

0 

271,566 

0 

26,737 

0 

Note.- Data are not available for all ports of entry; thus the data In this table are not necessarily comparable to data In 

other parts of this report. 

Source: Compiled from USDA, Animal, Plant and Health Inspection Service, "Quarterly Recap of Import Animals Inspected, 

third quarter of1992 through fourth quarter of1996." 

E-2 

1996 

0 

0 

0 

1,989 

179,345 

0 

0 

0 

44,444 

133,440 

0 

0 

3 

133,648 

0 

22,878 

87 

0 

150,795 

2,311 

0 

335,308 

0 

29,633 

0 
APPENDIXF 

CATTLE AND MEAT OF CATTLE: 

U.S. RATES OF DUTY, BY HTS 

HEADING AND RELEVANT LEGAL 

NOTES 

F-1 
~ 

HARMONIZED TARIFF SCHEDULE of the United States (19'97) 

Annotated for Statistical Reporting Purposes 

CHAPTER 1 

LIVE ANIMALS 

1. Thia chapter covers all live animals except.: 

(a) Fish and crustaceans, molluscs and other aquatic invertebrates, of heading 0301, 0306 or 0307; 

(b) Cultures of microorganisms and other products of heading 3002; and 

(c) Animals of heading 9508. 

Additional U.S. Not.es 

I 

1-1 

1. The expression "purebred breeding animals" covers only animals certified t.o the U.S. Customs Service by the Department. of 

Agriculture as being purebred of a recognized breed and duly registered in a book of record recognized by the Secretary of 

Agriculture for that. breed, imported specially for breeding purposes, whet.her int.ended t.o be used by the import.er himself or for sale for such purposes. 

2. Certain special provisions applying t.o live animals are in chapter 98. 

F-2 
I 

1-2 

Heading/ 

Subheading 

0101 

0101.11.00 

0101.19 .00 

0101.20 

0101.20.10 

0101.20.20 

0101.20.30 

0101.20. 40 

0102 

0102.10.00 

0102.90 

0102.90.20 

0102.90.40 

Stat. 

Suffix 

10 

20 

10 

90 

00 

00 

00 

00 

10 

20 

30 

50 

11 

12 

10 

24 

28 

34 

38 

54 

58 

62 

64 

66 

68 

72 

74 

82 

84 

HARMONIZED TARIFF SCHEDULE of the United States (1997). 

Annotated tor Statistical Reporting Purposes 

Article Description 

Units 

of 

Quantity 

Live horses, asses, mules and hinnies: 

Horses: 

Purebred breeding animals ............... . ........ Male ............................... . Ho. 

Female ............................. . Ho. 

Other .......•........•................ · .. ········ Imported for inmediate slaughter ..•• Ho. 

Other ... , .•••......................• Ho. 

Asses, mules and hinnies: 

Asses: 

Purebred breeding animals ......•...• Ho .•..•. other ......•.....................•.• Ho ...... 

Mlles and hinnies: 

Imported for inmadiate slaughter .... Ho ...•.. Ot.har ......••...•.•....•.....•..•••. Ho ••..•• 

Live bovine animals : Purebred breeding animals ................•.... ........ Dairy: 

Mala ...•............................ Ho. 

Female ............................. . Ho. 

Other: 

Male ............................... . Ho. 

Female ........................... : .. Ho. 

other: 

Cows imported specially for dairy 

purposes ................................ . . ....... Weighing lass than 90 kg each ...... . Ho. v kg Weighing 90 kg or more each ........ . Ho. v kg 

Other ................................... . ........ 

Bison............................... Ho. v kg ·0thar: 

Weighing lass than 90 kg 

each: 

Male...................... No. 

kg 

Female.................... No. 

Weighing 90 kg or more but 

less than 200 kg each: 

kg 

Male...................... No. 

kg 

Female.................... No. 

Weighing 200 kg or more but 

lass than 320 kg each: 

kg 

Male...................... No. 

kg 

Female.................... No. 

Weighing 320 kg or more each: 

For inmediate slaughter: 

kg 

Stears............... No. 

kg 

Bulls................ No. 

kg Cows................. No. 

kg 

Heifers. . . . . . . . . . . . . . No. 

kg 

For breeding: 

Male................. No. 

kg 

Female............... No. 

kg Other: 

Male................. No. 

kg 

Female............... No. 

kg 

F-3 

v 

v 

v 

v 

v 

v 

v 

v 

v 

v 

v 

v 

v 

v 

General 

Free 

Free 

Free 

10.9% 

Free 

7.3% 

Free 

Free 

1.6¢/kg 

Hates ot uutv 

Soecial 

Free 

20% 

Free 

Free CCA,E,IL,J, 15% 

MK) 

Free 

Free CE,IL,J,MK) 20% 

1% (CA) 

Free 

2 

6.6¢/kg 

Free (CA,E,IL,J, 5.5¢/kg 

MK) 
HARMONIZED TARIFF SCHEDULE of the United States (1997) 

Annotated for Statistical Reporting Purposes 

CHAPTER 2 

MEAT AND EDIBLE MEAT OFFAL 

l. This chapter does not cover: 

(a) Products of the kinds described in headings 0201 to 0208 or 0210, unfit or unsuitable for human consumption; 

(b) Guts, bladders, or stanachs of animals (heading 0504) or animal blood (heading 0511 or 3002); or 

(c) Animal fat, other than products of heading 0209 (chapter 15) 

Additional U.S. Notes 

l. For the purposes of this chapter--

(a) The term "processed" covers meats which have been ground or camdnuted, diced or cut into sizes for stew meat or similar uses, rolled and skewered, or specially processed into fancy cuts, special shapes, or otherwise made ready 

for particular uses by the retail cons\mler. 

I 

2-1 

(b) The term "high-quality beef cuts" means beef specially processed into fancy cuts, special shapes, or otherwise made 

ready for particular uses by the retail cons\mler (but not ground or caiminuted, diced or cut into sizes for stew meat or similar uses, or rolled or skewered), which meets the specifications in regulations issued by the U.S. Department 

of Agriculture for Prime or Choice beef, and which has been so certified prior to exportation by an official of the 

government of the exporting country, in accordance with regulations issued by the Secretary of the Treasury after 

consultation with the Secretary of Agriculture. 

2. In assessing the duty on meats, no allowance shall be made for normal canponents thereof such as bones, fat,-. and hide or skin. The dutiable weight of meats in airtight containers subject to specific rates includes the entire contents of the 

containers. 

3. The aggregate quantity of beef, entered under subheadings 0201.lO.lO, 0201.20.10, 0201.20.30, 0201.20.50, 0201.30.10, 

0201.30.30, 0201.30.50, 0202.10.10, 0202.20.10, 0202.20.30, 0202.20.50, 0202.30.10, 0202.30.30 and 0202.30.50 in any 

calendar year shall not exceed the quantities specified in this note. 

Canada 

Mexico 

Australia 

New Zealand 

Japan 

Argantina 

Uruguay 

Other countries or areas 

Quantity 

(metric ton) 

No limit 

No limit 

378,214 

213,402 

200 

20,000* 

20,000* 

64,805 

Imports under these provisions are subject to regulations issued by the United States Trade Representative. 

• The quantity for Argentina or Uruguay shall be permitted entry pursuant to the provisions of this note on and after the 

date of publication by the Secretary of Agriculture of a notice in the Federal Register that Argentina or Uruguay has been 

granted approval by the Department of Agriculture to ship fresh, chilled or frozan beef to the United States. This 

paragraph and the "*" symbol following the quantity for Argentina and Uruguay shall be deleted fran this note on the 

January 1 following the later date of the date of publication of the notice for Argantina or Uruguay. 

F-4 
I 

2-2 

HARMONIZED TARIFF SCHEDULE of the United States (1997) 

Annotated for Statistical Reporting Purposes 

Heading/ Stat. 

Suf- Subheading fix 

0201 

0201.10 

0201.10.05 

L r'IS2ol .10 .10 

0201.10.50 

0201.20 

0201.20.02 

0201.20.04 

0201.20.06 

I ,Czol.20 .10 

0201.20.30 

0201.20.50 

0201.20.80 

0201.30 

0201.30.02 

0201.30.04 

0201.30.06 

0201.30.10 

0201.30.30 

0201.30.50 

0201.30.80 

10 

90 

10 

90 

10 

90 

00 

00 

00 

00 

00 

00 

10 

90 

00 

00 

00 

00 

00 

00 

00 

Article Description 

Meat of bovine animals, fresh or chilled: 

Carcasses and half-carcasses: 

Described in general note 15 of the 

tariff schedule and entered pursuant 

to its provisions ............•.•...•..•.• 

Veal. ........................ · .. ···· Other ........•................•.•... Described in a8ditional U.S. note 3 to 

this chapter and entered pursuant to 

its provisions .......................... . 

Units 

of 

Quantity 

kg 

kg 

Veal................................ kg 

Other............................... kg 

Other l/ ................................ . 

Veal. .......•................ ··.···• Other ....••.......•........•...••.•. Other cuts with bone in: 

Described in general note 15 of the 

tariff schedule and entered pursuant 

to its provisions: 

Processed: 

High-quality beef cuts ....•...• 

Other ......................... . 

Other .............................. . 

Described in additional U.S. note 3 to 

this chapter and entered pursuant to 

its provisions: 

Processed: 

High-quality beef cuts ........ . 

Other ......................... . 

Other .............................. . 

Other 1/ ................................ . Bison .............................. . Other .............................. . Boneless: 

Described in general note 15 of the 

tariff schedule and entered pursuant 

to its provisions: 

Processed: 

High-quality beef cuts ........ . 

Other ......................... . 

Other". .......•...................... 

Described in additional U.S. note 3 to 

this chapter and entered pursuant to 

its provisions: 

Processed: 

High-quality beef cuts ...•..... 

Other ..........•............... 

Other .............................. . 

Other l/ ................................ . 

kg 

kg 

kg ..... . 

kg ..... . 

kg ..... . 

kg ••..•• 

kg ..... . 

kg ..... . 

kg 

kg 

kg ..... . 

kg ..... . 

kg ..... . 

kg ..... . 

kg ..... . 

kg ..... . 

kg ..... . 

1/ See subheadings 9904.02.01-9904.02.37. ~I See subheading 9903.23.00. 

F-5 

General 

4 .4¢/kg 

4.4¢/kg 

28.8% 

4% 

10% 

4.4¢/kg 

4% 

10% 

4. 4¢/kg 

28.8% 

4% 

10% 

4.4¢/kg ~/ 

4% 

10% 

4.4¢/kg '!:! 

28.8% 

Rates of Dutv 

Snecial 2 

Free (CA,E*,IL,J, 

MX) 

13.2¢/kg 

Free (CA,E*,IL,J, 13.2¢/kg 

MX) 

Free (MX) 31.1% 

Free CCA,E*,IL,J, 20~ 

MX) 

Free CCA,E*,IL,J, 20% 

MXl 

Free CCA,E*,IL,J, 13.2¢/kg 

MX) 

Free CCA,E*,IL,J, 20% 

MX) 

Free CCA,E*,IL,J, 20% 

MX) 

Free CCA,E*,IL,J, 13.2¢/kg MX) 

Free (MX) 31.1% 

Free (CA,E*,IL,J, 20% 

MX) 

Free CCA,E*,IL,J, 20% 

MX) 

Free CCA,E*,IL,J, 13.2¢/kg 

MX) 

Free (CA,E*,IL,J, 20% 

MX) 

Free CCA,E*,IL,J, 20% 

MX) 

Free (CA,E*,IL,J, 13.2¢/kg 

MXl 

Free (MX) 31.1% 
HARMONIZED TARIFF SCHEDULE of the United States 

Annotated for Statistical Reporting Purposes 

Heading/ Stat. 

Subheading Suf- Article Description fix 

0202 Meat of bovine animals , frozen: 

0202.10 Carcasses and half-carcasses: 

0202.10.05 Described in general note 15 of the 

tariff schedule and entered pursuant 

to its provisions ........................ 

10 Veal. ......••......... · .. ·········•• 90 other .......•••................•...• 0202.10.10 Described in additional U.S. note 3 to 

this chapter and entered pursuant to 

its provisions ..•••...............••...•. 

10 Veal. .......••.•............•....... 90 Other .......•..••..................• 0202.10.50 Other 1/ .........•...............•....... 10 Veal. ..........................•.... 90 other ................•............•. 0202.20 Other cuts with bone in: 

Described in general note 15 of the 

tariff schedule and entered pursuant 

to its provisions: 

Processed: 

0202.20.02 00 High-quality beef cuts ..•....•. 

0202.20.04 00 Other .•................•...•••• 

0202.20.06 00 Other ......•.... ,. ................... 

Described in additional U.S. note 3 to 

this chapter and entered pursuant to 

its provisions: 

Processed: 

0202.20.10 00 High-quality beef cuts ......... 

0202.20.30 00 Other .......................... 

0202.20.50 00 Other ............................... 

0202.20.80 00 Other ],,/ ................................. 

0202. 30 Boneless: 

Described in general note 15 of the 

tariff schedule and entered pursuant 

to its provisions: 

Processed: 

0202.30.02 00 High-quality beef cuts ......... 

0202.30.04 00 Other ......•................... 

0202.30.06 00 Other ............................... 

Described in additional U.S. note 3 to 

this chapter and entered pursuant to 

its provisions: 

Processed: 

0202.30.10 00 High-quality beef cuts ......... 

0202.30.30 00 Other .......................... 

0202.30.50 00 Other ............................... 

0202.30.80 00 other lf ................................. 

1/ See subheadings 9904.02.01-9904.02.37. ~I See subheading 9903.23.00. 

F-6 

Units 

of 

Quantity General 

kg ...... 4.4¢/kg 

kg 

kg 

········ 4.4¢/kg 

kg 

kg 

········ 28.8% 

kg 

kg 

kg ...•.. 4% 

kg ...... 10% 

kg ...... 4.4¢/kg 

kg ...... 4% 

kg ...... 10% 

kg ...... 4.4¢/kg 

kg ...... 28.8% 

kg ...... 4% 

kg ...... 10% 

kg ...... 4.4¢/kg '!:.! 

kg ...... 4% 

kg ...... 10% 

kg ...... 4. 4¢/kg '!:./ 

kg ...... 28.8% 

( 1997) 

I 

2-3 

Rates of DUtV 

1 2 Soecial 

Free (CA,E*,IL,J, 13.2¢/kg 

MlO 

Free CCA,E*,IL,J, 13.2¢/kg MK) 

Free (MK) 31.1% 

Free CCA,E*,IL,J, 20% 

MK) 

Free CCA,E*,IL~, 20% 

MK) 

Free (CA,E*,IL,J, 13.2¢/kg MK) 

Free CCA,E*,IL,J, 20% 

MK) 

Free CCA,E*,IL,J, 20% 

MK) 

Free CCA,E*,IL,J, 13.2¢/kg MK) 

Free (MK) 31.1% 

Free CA,CA,E*,IL, 20% 

J,MK) 

Free (CA,E*,IL,J, 20% 

MK> 

Fre,e CCA,E*,IL,J, 13.2¢fkg MK) 

Free CA,CA,E*,IL, 20% 

J,MK) 

Free CCA,E*,IL,J, 20% 

MK) 

Free CCA,E*,IL,J, 13.2¢/kg MK) 

Free (MK) 31.1% 
APPENDIXG 

ACTIONS UNDER THE MEAT IMPORT 

ACT OF 1979, AND SECTION 204 OF 

THE AGRICULTURAL ACT OR 1956 

G-1 
A c t° ions un d er th e M t ea Im tpo rt A t c' 1992 -94 

Adjusted base Trigger level Import level 

(adjusted base estimated Actual 

Year prescribed under plus 10%) under imports Action taken by 

section 2 (a) section2 © section 2(b )(2) President 

Million vounds 

1992 1,192.0 1,311.2 1st. qtr. 1,274 1,321.l Voluntary restraint 

2nd.qtr 1,286 agreements negotiated under 

3rd. qtr. 1,311 section 204 with Australia 

4th. qtr. 1,311 and New Zealand. 1 

1993 1,144.7 1,259.2 1st. qtr. 1,259 1,259.1 Voluntary restraint 

2nd. qtr. 1,259 agreements negotiated under 

3rd. qtr. 1,259 section 204 with Australia 

4th. qtr. 1,259 and New Zealand. 1 

1994 1,218.9 1,340.8 1st. qtr. 1,218 1,218.8 Voluntary restraint 

2nd. qtr. 1,218 agreements negotiated under 

3rd. qtr. 1,218 section 204 with Australia 

4th. qtr. 1,218 and New Zealand. 1 

1 During 1992-94, the United States signed VRAs with Australia and New Zealand to limit those countries' exports of 

the subject meats to the United States for the rest of 1992-94. The restraint levels are shown in the following tabulation: 

Country 1992 1993 1994 

----------{million pounds)-------

Australia . . . . . . . . 736.8 

New Zealand . . . . 446.8 

694.9 

425.0 

Source: Facsimile transmission from USDA, FAS, Jan. 29, 1997. 

G-2 

664.9 

406.6 
APPENDIXH 

SELECTED PORTIONS OF THE 

CANADIAN TARIFF SCHEDULES 

H-1 
Tariff 

Item 

02.01 

SS Descripuon of Goods 

Meat of bovine animals, fresh or chilled. 

-"-·~asses and h11lf-· -~casses 

SCHEDULE I 

Unit 

of 

Meas. 

'0201.10.10 101=~-~i::~~-~-~.~-~~~~'.'.~~~'. ............................................ . Kat.41 

I 90 ----Other... .. . ... · .. .......... ............... .. ............. . KGtvi I 

I 

I 0201 10.201 1---l'")ver access commitment 

10 ---Veal .......................................................................... . KGM 

90 ---Other.......................................................... ........... .. KGM 

0201.20 -Other cuts with bone in 

0201.20.10 --Within access commitment 

10 ---Veal ........................................................................... . KGM 

20 ----Other, processed ....................................................... . KGM 

30 ----Other, torequarrer ..................................................... . KGM 

40 ---Other, hindquartP• .................................................... . KGM 

---Other: 

91 -----Rib .......................................................................... . KGM 

92 -----Hip ................ ........................................................ . KGM 

93 -----Loin ......................................................................... . KGM 

99 -----Other............ . ................................................... . KGM 

0201.20.20 ---Over access commitment 

10 ----Veal .......................................................................... . KGM 

20 -----Other, processed ....................................................... . KGM 

30 ----Other, forequarter ..................................................... . KGM 

40 ---Other, hindquarter ..................................................... . KGM 

-----Other: 

91 ----Rib .......................................................................... . KGM 

92 ----Hip .......................................................................... . KGM 

93 ---Loin ........................................................................ . KGM 

.,:; ---- --Other............ .. ................................................. .. KGM 

0201.:JO -Boneless 

0201.30.1 O ---Within access commitment 

10 -----Veal ............................................................................ KGM 

20 ----Other, processed........................................................ KGM 

30 -----Other, forequarrer . .... .... ....... ....................... .... ........ ... KGM 

40 ----Other, hindquarter...................................................... KGM 

-----Other: 

91 -----Brisket ...................................................................... KGM 

92 ----Chuck...................................................................... KGM 

93 -----Rib.................... . ........ .... ... .. . . ................... ........ .. .. ... KGM 

94 ---Hip........................................................................... KGM 

95 -----Loin.......................................................................... KGM 

99 -----Other........................................................................ KGM 

I 

M.F.N. 

Tariff 

Free 

28.8% 

Free 

28.8% 

Free 

0201.30.20 ---Over access commitment 28.8% 

10 -----Veal ............................................................................ KGM 

20 ----Other, processed........................................................ KGM 

30 ----Other, forequarter...................................................... KGM 

40 ----Other. hindquarter...................................................... KGM 

-----Other: 

91 ------Brisket.. .................................................................... KGM 

H-2 

G.P. 

Tariff 

Free 

x 

Free 

x 

Free 

x 

. U.S. Mexico 

Tariff Tariff 

Free Free 

Free Free 

Free Free 

Free Free 

Free Free 

Free Free 

02. 1 

MexlcoU.S. 

Tariff 

NIA 

NIA 

NIA 

NIA 

NIA 

NIA 

Issued January 1. 1997 
02. 2 

Tariff 

Item SS Description of Goods 

SCHEDULE I 

Unit 

of 

Meas. 

0201.30.20 92 ------Chuck...................................................................... KGM 

Continued 93 ---Rib ................. : ......................................................... KGM 

94 ----Hip........................................................................... KGM 

95 ------Loin .......................................................................... KGM 

99 ---Other........................................................................ KGM 

02.02 Meat of bovine animals, frozen. 

0202.10 -Carcasses and half-carcasses 

M.F.N. 

Tariff 

0202. 1O.10 --Within access commitment Free 

1 O ----Veal............................................................................ KGM 

90 ---Other .......................................................................... KGM 

0202.10.20 --Over access commitment 28.8% 

0202.20 

10 ---Veal............................................................................ KGM 

90 ---Other.......................................................................... KGM 

-Other cuts with bone in 

0202.20.1 O --Within access commitment Free 

10 -----Veal............................................................................ KGM 

20 -----Other. processed........................................................ KGM 

30 -----Other, forequarter . . ... .. . . .. . . . . . . . . . . ... .... ..... ... . .. .... .... .... ... KGM 

40 -----Other. hindquarter...................................................... KGM 

----Other: 

91 ------Rib ........................................................................... KGM 

92 ------Hip........................................................................... KGM 

93 -----Loin.......................................................................... KGM 

99 ------Other........................................................................ KGM 

0202.20.20 ---Over access commitment 28.8% 

0202.30 

10 ---Veal............................................................................ KGM 

20 ----Other, processed........................................................ KGM 

30 -----Other, forequarter...................................................... KGM 

40 ---Other, hindquarter...................................................... KGM 

-----Other: 

91 ----Rib........................................................................... KGM 

92 ---Hip ........................................................................... KGM 

93 ---Loin.......................................................................... KGM 

99 -----Other........................................................................ KGM 

-Boneless 

0202.30.1 O ---Within access commitment 

10 -----Veal ........................... : ................................................ KGM 

20 ---Other, processed........................................................ KGM 

30 ---Other. forequarter...................................................... KGM 

40 -----Other. hindquarter...................................................... KGM 

---Other: 

91 ---Brisket ...................................................................... KGM 

92 ----Chuck...................................................................... KGM 

93 ---Rib........................................................................... KGM 

94 ------Flank........................................................................ KGM 

95 ----- Eye of round, outside round, inside round, outside 

flat and sirloin tip . ... .... ....... .... .... ........ .... ... .... .... ....... KGM 

96 ------Other. hip ................................................................. KGM 

H-3 

Issued January 1. 1997 

Free 

G.P. 

Tariff 

Free 

x 

Free 

x 

Free 

U.S. 

Tariff 

Free 

Free 

Free 

Free 

Free 

"ldexlC:o 

Tariff 

Free 

Free 

Free 

Free 

Free 

MexlcoU.S. 

Tariff 

NIA 

NIA 

NIA 

NIA 

NIA 
SCHEDULE I 

02 - ~ 

I 

Tariff Unit M.F.N. G.P. u:S. Mexico Mexico- I 

Item SS Description of Goods of Tarin Tariff Tariff Tariff U.S. 

Meu. Taritt I 

0202.30.10 97 ---Loin .......................................................................... KGM 

Continued 99 ---Other ........................................................................ KGM 

0202.30.20 --Over access commitment 28.8% x Free Free NIA 

10 ---"'al ............................................................................ KGM 

20 ---Other, processed ........................................................ KGM 

30 ---Other, forequarter ...................................................... KGM 

40 --Other, hindquarter ...................................................... KGM 

---Other: ,. 

91 ---Brisket ...................................................................... KGM 

92 ---Chc.ic1c ...................................................................... KGM 

93 ---Rib ........................................................................... KGM 

94 ---Flank ........................................................................ KGM 

95 ---Eye of round, outside round, Inside round, outside 

flat and sirloin tip ..................................................... KGM 

96 ---Other, hip ................................................................. KGM 

97 ---Loin .......................................................................... KGM 

99 ---Other ........................................................................ KGM 

02.03 Meat of swine, fresh, chllled or frozen. I 

I 

-Fresh or chllled: I 

0203.11.00 00 --Carcasses and half-carca88es KGM Free Free Free Free NIA 

0203.12.00 00 --Hams, shouldeni and cuts thereof, with bone In KGM Free Free Free Free NIA 

0203.19.00 --Other Free Free Free Free NIA 

10 ---Spare ribs .................................................................. KGM 

20 --Back ribs···································································· KGM 

---Other: 

91 ---Processed ................................................................ KGM 

99 ---Other ........................................................................ KGM 

-Frozen: 

0203.21.00 00 --Carca88es and half-carca88es KGM Free Free Free Free NIA 

0203.22.00 00 --Hams, shouldeni and cuts thereof, with bone In KGM Free Free Free Free NIA 

0203.29.00 --Other Free Free Free Free NIA 

10 ---Spare ribs .................................................................. KGM 

20 --Back ribs···································································· KGM 

90 ---Other .......................................................................... KGM 

02.04 Meat of sheep or goats, fresh, chilled or frozen. 

0204.10.00 00 -Carcasses and half-carcaHS of lamb, fresh or chilled KGM 5.42¢/kz9. 

AUIN 

Free Free Free NIA 

Free 

H-4 

Issued January 1 . 1997 
APPENDIX I 

AN EMPIRICAL ANALYSIS OF THE 

IMPACT OF THE NAFTA ON 

MEXICAN BEEF IMPORTS FROM 

THE UNITED STATES 

1-1 
An Empirical Analysis of the Impact of the 

North American Free Trade Agreement on 

Mexican Beef Imports from the United States 

Introduction 

Beef trade between the United States and Mexico consists almost entirely of Mexican imports of U.S. beef. 

During the 1980s and early-1990s, Mexico's steady per capita income and population growth led to a rapid 

expansion in the demand for imported beef, and the United States has generally been the major supplier of these 

imports. 1 Although the United States is important in satisfying Mexican demand for beef, Mexico represents 

a key market for U.S. beef exports. Thus, beef trade between Mexico and the United States is important to both 

countries. 

The purpose of this empirical analysis is to determine the impact of the NAFTA on Mexican beef imports from 

the United States. This task is complicated by the many "non-NAFTA" factors that occurred immediately prior 

to and following signing the Agreement. In particular, separating out the impacts of the NAFTA from those of 

the peso devaluation of 1995/96 is a key challenge for this analysis. A secondary objective of this analysis is to 

determine whether there has been a structural change in the demand for imported beef in Mexico following the 

NAFTA. 

Factors Affecting Mexican Beef Imports from the 

United States in the 1990s 

TheNAFTA 

hnmediately upon enactment of the NAFTA, Mexico made several concessions to the United States. Under the 

Agreement, the 15 percent tariff on live slaughter animals, 20 percent tariff on fresh/chilled beef; and 25 percent 

tariff on frozen beef were eliminated. In addition, it was agreed that Mexico's 20-percent import tariff on beef 

edible offal from the United States (and Canada) would be phased out over a 10-year period. 

While the NAFTA gave the United States free access to the Mexican market for most meat and livestock 

products, its main competitors, such as Australia and New Zealand, still faced tariffs on these commodities of 

between 20 and 25 percent. These tariff differentials provided the United States with a substantial price 

advantage in the Mexican market. Between 1990 and 1994, the United States' share of Mexican beef imports 

was about 75 percent. Within 6 months after signing the NAFTA, the share had risen to 98 percent, and remained 

above 95 percent for all of 1995 and 1996 (figure 1). 

1 For example, in 1980 only 2 million pounds of beef was imported, compared to 300 million pounds in 1992. (Carlos Salinas de 

Gortari. Quinto Informe de Gobierno, Nov.1993, Annual Livestock Report, 1994, U.S. Embassy Mexico). 

I-2 
Rgure 1 

IVexican irrports of fresh, chilled, or frozen beef, and value of peso, rronthly, Jan. 1991-Dec. 1996 

30 

Ill 

"C 

c: 

:l 

0 

Q. 

~ 

'E 

20 

91 MM J S N92 MM J S N93 MM JS N94 MM JS N 95M M J SN 96M M J SN 

F A J A 0 D F A J A 0 D F A J A 0 D F A J A 0 D F A J A 0 D F A J A 0 D 

+ Exchange rate D lrrports from the Lhited States D lrrports from all countries 

Source: Secretariat of Commerce and Industrial Promotion (SECOFI), International Monetary Fund. 

Peso Devaluation 

6 .... 

111 

'5 

"C 

.... 

Q) 

Q. 

ig 

Ill 

Q) 

4 Q. 

Less than 1 year after signing the NAFTA, Mexico experienced a period of extreme macroeconomic instability 

following the devaluation of the peso that began in November 1994. After trading in the range of 3 .1 to 3 .4 pesos 

per dollar for most of 1994, the peso fell to 3.9 pesos per dollar in December. It continued to depreciate in 

January and February 1995 and reached 6.7 pesos per dollar in March 1995.2 For the remainder of 1995 the 

exchange rate remained in the 6.0 to 7.7 pesos per dollar range, and was between 7 to 8 pesos per dollar in 1996. 

The devaluation of the peso led to rapid inflation (52 percent for 1994), sharply rising interest rates, and a sudden 

drop in GDP and consumer expenditure per capita. In the second quarter of 1995, GDP was down by almost 10 

2 International Monetary Fund. Financial Statistics. 

I-3 
percent compared to the same quarter in the previous year, and real GDP declined by almost 7 percent between 

1994 and 1995. 3 4 

The peso devaluation had a dramatic impact on Mexican imports of beef. In addition to the drop in consumer 

income, the price of Mexican beef imports increased approximately 40 to 50 percent during the first half of 

19955

, while beef prices at the retail level rose 20 percent. 6 In each of the third and fourth quarters of 1994, total 

beef imports were about 90 million pounds. 7 During the first quarter of 1995, they declined to about 20 million 

pounds, increasing only slightly in the second quarter to 30 million pounds. Beef imports for 1995 were 114 

million pounds compared to 328 million pounds in 1994, a decline of two-thirds. Imports of beef from the United 

States were significantly disrupted by the peso crisis, falling from 283 million pounds in 1994 to 112 million 

pounds in 1995, while the value of U.S. imports declined from about $300 million to a little over $100 million 

over the sameperiod.8 In spite of the sharp decline in imports from the United States, the U.S. share of Mexico's 

total beef imports increased from 86 percent in 1994 to 97 percent in 1995, largely because of the preferential 

tariffs benefitting the United States under the NAFTA. 

During 1996, the Mexican economy made a strong recovery, with the peso stabilizing and the inflation rate 

considerably lower than in the previous year. Real GDP growth for 1996 is expected at 4 percent, and continued 

growth and economic stability are projected for 1997.9 As the economy improved in 1996, beef imports from 

the United States rebounded and reached about 200 million pounds for the year (representing 98 percent of all 

beef imports into Mexico). 10 

3 The major cause of the peso crisis was Mexico's large current account deficit which approached $30 billion in 1994. To finance 

this deficit, the Mexican authorities sold highly liquid short-term bonds. The lack of confidence in the government's ability to 

continue financing the large current account deficit induced domestic and foreign investors to sell their holdings of short-term 

government securities. These bond holders rushed to convert their pesos into dollars. In late March, the Mexican Government 

announced that repayments would be made in dollars. These sales increased the demand for dollars, lowering the value of the peso 

vis-a-vis the U.S. dollar. In response to this strong demand for dollars, and in an effort to conserve foreign currency reserves (which 

had fallen from a high of $30 billion in February 1994 to $6 billion prior to devaluation), the Mexican authorities devalued the peso on 

December 20, 1994 to 4 pesos per dollar (a drop of about 15 percent). However, the lack of international currency reserves to 

support the value of the peso forced the government to abandon its efforts to manage the devaluation, thus allowing market forces 

alone to determine the exchange rate. Once the peso was allowed to float, speculation started in the financial markets, and the peso 

slipped to almost 6 pesos per dollar in early 1995, a 42 percent devaluation from the predevaluation levels (USDA, 1995). 4 U.S. Embassy Mexico City, Mexico Economic and Financial Report, Jan. 1997. 5 Secretaria de Comercio y Fomento Industrial (SECOFI). 6 U.S. Embassy, Mexico City, Annual Livestock Report, 1996. 7 Confederacion Nacional Ganadera. Informacion Economica Pecuaria. Apr. 1996. 8 Secretaria de Comercio y Fomento Industrial (SECOFI). 9 U.S. Embassy Mexico City, Mexico Economic and Financial Report, Jan. 1997. 10 While the peso crisis significantly reduced overall U.S. exports of beef to Mexico, trade between the United States and Mexico 

in some meat products was assisted by the weak peso (based on interview with Gilberto Lozano, Director of U.S. Meat Export' 

Federation Mexico City office). This is because the United States supplies two distinct markets in Mexico-the retail sector (where 

products are sold to Mexican consumers through supermarkets and other retail outlets) and the hotel, restaurant, and institution (HRI) 

sector (supplying high-quality cuts). While trade in the retail market was cut significantly, the demand characteristics ofHRl trade are 

such that sales are relatively isolated from macroeconomic instability and changes in exchange rates when compared to the retail 

sector. Moreover, the devalued peso made Mexico attractive to many U.S. tourists which boosted beef sales to high-end hotels and 

restaurants. As a result, the peso devaluation provided a boost to U.S. sales of high-quality beef to Mexico's HRl sector and lessened 

the overall negative impact of the peso crisis on U.S. beef exporters (the reporting of trade data does not allow beef sold into the retail 

and HRl sectors to be distinguished). 

I-4 
Tariffs and Antidumping Action 

On November 9, 1992, under pressure from livestock producers, the Mexican Government introduced an ad 

valorem tariff on several beef products from all countries in an effort to stem the flow ofbeef imports. 11 The 

tariff rate was 15 percent for live cattle and carcasses, 20 percent for chilled boxed beef and 25 percent for frozen 

boxed beef. Upon signing the NAFTA, these tariffs were dropped to a rate of duty of "Free" for the United States 

and Canada. 

In May 1994, Mexico commenced an antidumping investigation against beef products from the United States.12 

Under Mexico's antidumping law, imports from the United States could have become subject to large 

anti.dumping duties within 6 months of the commencement of the antidumping investigation. This antidumping 

controversy was resolved in January 1996, when the National Cattlemen's Beef Association and the Mexican 

National Livestock Confederation signed a memorandum of understanding. 

The Mexican Drought 

The Mexican beef market was further influenced by a severe drought during most of the early 1990s. The 

drought is described as the worst in northern Mexico for several decades. The calf crop, which is the number of 

calves born during the year, declined from 9.7 million animals in 1992 to 8 million in 1996, and is forecast to 

remain at 8 million in 1997. The decline in the calf crop reflects both the decline in the number of cows and 

reduced cattle fertility associated with stress on the animals brought on by the drought. The drought ended in 

parts of Mexico in the fall of 1996, and Mexican cattle producers began to rebuild their herds. Consequently, 

there have been very few heifer calves entering the United States from Mexico. During the drought the calving 

rate declined in Mexico, to about 60 percent, down from about 75 percent; some cattlemen did not have their 

cows bred because there was not adequate nutrition. 

Model Specification 

In order to separate out the impacts of the NAFTA from other factors affecting U.S./Mexico beef trade, an 

Armington-type approach was used based on a simple model containing two regression equations and an identity. 

Armington's approach assumes that utility is weakly separable so that the consumer's decision process may be 

viewed as occurring in two stages (Armington, 1969,1970). The total quantity of a commodity to be imported 

is first determined, and then this quantity is allocated among competing suppliers. In this case, Mexican 

consumers are assumed to determine the total level of beef imports in the first stage, and in the second stage to 

allocate this total among U.S. and competing import suppliers. The first equation (first stage) explains Mexican 

demand for beef imports from all countries, while the second equation (second stage) explains U.S. share of total 

Mexican beef imports. Mexican imports of U.S. beef is derived by multiplying the two dependent variables in 

these equations. 

Mexican demand for beef imports from all countries was specified according to standard theory of demand, in 

which consumers allocate their income among consumable commodities in an effort to achieve maximum 

satisfaction. The quantity of imports purchased by any consumer will depend on their income, the price of 

imports, and the price of other consumable commodities (Leamer and Stem, 1970). In estimating import demand 

11 Testimony of Basilio F. Aja, Executive Vice President of the Arizona Cattle Feeders' Association, transcript of the hearing, Mar. 

20, 1997,pp.52-53. 

12 Ibid 

I-5 
functions for agricultural commodities, researchers have typically estimated import demand as a function of the 

import price of the imported commodity, the domestic price of the imported commodity, prices of other 

commodities that are close substitutes forthe import, and income (for example, Babula, 1997; Ay en Tanyeri and 

Rosson, 1996).13 

For this study, Mexican beef imports were specified to depend on the price of imported beef, prices of 

domestically produced beef, pork, and chicken, and income. In addition, a lagged dependent variable was 

included in the specification (table 1). This was based on the stock-adjustment model that assumes consumers 

fail to adjust fully in the short-term to the desired level of imports in response to price and income changes 

(Nerlove, 1958). 

Table 1 

Model structure and specification 

Equation 1. Mexican beef import demand from all countries: 

~ = f( ~-1' IPBF1 , DPBF1 , PPKt, PCK1 , JNC1 ) 

Equation 2. U.S. share of Mexican beef imports: 

USSHA.RF,1 = f( USSHA.RF,t-1' PBFUS1 , PBFRO~, NAFTAt) 

Equation 3. Mexican beef import demand from the United States: 

where: 

M, 

IPBFt 

DPBFt 

PP:Ki 

PC:Ki 

IN Ct 

US SHARE, 

PBFUSt 

PBFROWt 

NAFTAt 

USM. 

USAli = USSHARE1 * M, 

Mexican beef imports, 

price of imported beef, 

price of domestically produced beef, 

price of domestically produced pork, 

price of domestically produced chicken, 

mcome, 

United States' share of total Mexican beef imports, 

price of imported beef from United States, 

price of imported beef from rest-of-the-world, 

dummy variable for January, 1994 to December 1996, and 

Mexican beef imports from the United States. 

Several studies have estimated equations in terms of shares (for example, Meilke and Griffiths, 1981; Wahl, 

Hayes, and William, 1991). The U.S. share of Mexican imports of beef is specified as a function of the price of 

beef imports from the United States, price of beef imports from other countries (mainly Australia and New 

Zealand), and a zero-one variable for the period covering the NAFT A. A lagged dependent variable was also 

included in the regression to capture lags in responses (table 1 ). 

13 For example, Babula estimated the U.S. demand for New Zealand lamb as a function of the domestic price oflamb, the import 

price of New Zealand lamb, the import price of Australian lamb, and income (Babula, 1997). 

I-6 
Model Estimation and Results 

The equation was estimated using the Ordinary Least Squares (OLS) estimator14 after all variables had 

been tested for stationarity.15 The equations were regressed using monthly data from January 1991 to December 

1996 (giving 72 observations). All variables were converted into logs so coefficients represent short-run 

elasticities. The regression results are reported in equation 4. 

Eq. 4. M, -19.9 + 0.39M,.1 - l.121PBF, + l.04DPBF, + 0.19PPK, + 0.24PCK, + l.481NC, 

(-2.5) (5.1) (-6.1) (3.2) (0.6) (0.5) (2.6) 

Adjusted R2 = 0.85 Durbin' s h-statistic = 1.12 F-statistic = 68.0 

Overall the equation's diagnostics are satisfactory. The adjusted-R2 indicates that about 85 percent of the 

variation in Mexican beef imports can be explained by the selected regressors. The Durbin h-statistic indicates 

that the model errors are not serially correlated.16 The F-statistic shows that the set of variables are statistically 

significant in explaining imports of beef. 

All variables are found to have a sign consistent with economic theory. The price of imported beef (IPBF) is 

highly statistically significant, with a coefficient indicating that for every I-percent increase in the price of 

imported beef, import demand falls about 1.1 percent.17 The domestic price of beef (DPBF) is also highly 

significant and indicates that consumers are sensitive to the relative prices of domestic and imported beef. 

Although the prices of pork and chicken are not statistically significant they have the right sign. The income 

variable is significant and indicates that for every I-percent increase in income, imports rise by about 1.5 percent. 

The regression results for U.S. share of Mexican beef imports are shown in equation 5. 

Eq. 5. USSHARE:, = 0.24 + 0.63 USSHARE:1

•

1 -0.007 PBFUS, + 0.004PBFROW, + 0.13NAFTA, 

R2 = 0.92 

(4.1) (10.8) (-1.0) (1.2) (5.9) 

+ 0.30 D9209 

(5.6) 

Durbin's h-statistic = 0.32 F-statistic = 160.0 

The U.S. share of Mexican beef imported is explained by a lagged dependent variable, imported beef price from 

United States, imported beef prices from all other importers, a NAFTA dummy variable, and a dummy variable 

for September 1992. In this equation a linear :functional form was used because it provided a better fit than when 

variables were converted into logarithms. The imported beef price variables included tariffs. Therefore, the 

United States price was lowered relative to the rest-of-the-world price following the NAFTA. All variables have 

the right sign, although the import price variables are not significantly different from zero. The lack of variability 

14 For estimation of single equation models, the OLS estimator is the Best Linear Unbiased Estimator (BLUE). 15 Pindyck and Rubinfeld, 1981. 16 The Durbin h-statistic is the appropriate test for serial correlation when a lagged dependent variable is specified (Pindyck and 

Rubinfeld, 1981). 17 The price of imported beef variable is a import unit value for beef combining imports from both the United States and all other 

countries. The variable also includes the import tariffs. 

I-7 
in the dependent variable during 1995 and 1996 may explain this lack of significance, as well as the strong 

significance of the lagged dependent variable. Also, following the NAFTA, the market for non-U.S. imports 

became very thin, and the price (measured by the unit value) became highly volatile. Because of the lack of 

significance of the price variables the NAFTA dummy was included. The coefficient on this variable indicates 

that the United States increased its share of the Mexican market by a factor of 13 percentage points. The dummy 

variable for September 1992 captures an unexplained reduction in imports from non-U.S. countries in that 

month. 18 

The estimated values of total Mexican imports ofbeefand the U.S. share of those imports were multiplied, giving 

the estimated Mexican beef imports from the United States. These estimated values are compared with actual 

import data in figure 2. In general the equations track well and capture most of the trends and turning points in 

the import flows. 19 

Analysis 

Impact of the NAFTA on Mexico/u.S. Beef Trade 

An analysis of the impact of the NAFTA was undertaken based on the econometrically estimated equations 

presented above. The approach was to evaluate the level of Mexican beef imports from the United States under 

different assumptions about prices, incomes and trade policies that capture scenarios involving the NAFT A. Four 

separate scenarios were evaluated, including imports from U.S.: 

with the NAFTA, with peso devaluation (simulation 1), 

without the NAFTA, with peso devaluation (simulation 2), 

with the NAFTA, without peso devaluation (simulation 3), and 

without the NAFTA, without peso devaluation (simulation 4). 

Simulation 1 represents the actual situation and serves as a comparison with the counter-factual simulations 

2, 3, and 4. The analysis was undertaken from January 1994 to December 1996, and the results are reported 

in table 2 and figure 3. Each simulation is discussed in detail below. 

Simulation 1 -Mexican beef imports from US. with NAFTA, with peso devaluation 

Simulation 1 represents the factual case and is used as the base simulation with which to compare the three 

counter-factual simulations. In this simulation, the income variable in the total import demand equations was 

kept at its actual level, as were other macroeconomic variables, such as the exchange rate and price index. The 

18 A dummy variable to capture the suspension of the antidumping case in January 1996 was found not to be statistically 

significant in explaining the U.S. share of Mexican beef imports. 19 The method used here was to estimate an import demand function via a logarithmic transformation, derive parameters by linear 

regression, and then to retransform the estimated function by taking anti-logs. Kennedy (1982 and 1992) showed that this procedure 

results in biased predictions of the retransformed dependent variable. This is a small sample problem, however, and the asymptotic 

properties of the probability density function of the estimated coefficients means that the bias drops to zero as the sample size goes to 

infinity. Given the large number of observations used in this study, the bias was expected to be insignificant. An adjustment 

procedure outlined by Stynes, Peterson, and Rosenthal (1986) corrects for this bias by changing the constant of the double-log 

function, e". Applying this procedure also indicated that the bias in the estimated import demand function presented above was very 

small. 

I-8 
Figure 2. Model results. Actual vs estimated values, Jan. 1991-Dec. 1996 

50 

40 

{g 30 c: 

5 

a. 

c: 

,g 20 'E 

10 

0 

Total Mexican imports of beef 

91MM JS N92MMJ SN93MM J SN 94MMJ S N96MMJ SN 96MM J SN 

FAJ AODFAJ AODFAJAODFAJ AODFAJAODFAJAOD 

20 U.S. share of Mexican beef imports 

0 

91MM J SN92MM J SN 93MM J SN 94MMJ SN96MMJ SN 96MMJ SN 

FAJAODFAJAODFAJAODFAJAODFAJAODFAJAOD 

40 

Mexican imports ofbeeffrom the United States 

30 

"' "C 

c: 

:::s 

0 

a. 20 c: 

.Q 

~ 

10 

0 

91 M M J S N 92 M M J S N 93 M M J S N 94 M M J S N 96 M M J S N 96 M M J S N 

FA J A 0 D FA J AO D FA J AO D FA J AO D FA J A 0 D FA J A 0 D 

-a-Actual -+- Estirreted 

I-9 
1-1 

I 

,_. 

0 

Table 2 

Impact of the NAFTA and peso devaluation on Mexican beef imports from the United States, 1994 - 1996 

1994 1995 1996 

Scenario Total U.S. Imports Total U.S. Imports Total U.S. Imports 

from from from Model imports share U.S. imports share U.S. imports share U.S. Simulation ,_ 

NAFTA Peso Million Percentage Million Million Percentage Million Million Percentage Million 

devaluation pounds pounds pounds pounds pounds pounds 

1 (base)1 with with 308 86 267 111 97 108 216 98 211 

2 without with 249 73 182 84 84 70 173 85 147 

3 with without 308 86 267 310 97 301 340 98 332 

4 without without 249 73 182 177 84 149 275 85 233 

Actual2 with with 328 86 282 114 98 112 206 98 202 

1 Simulation 1 is referred to as the "base" in the discussion of the results. 

2 Source: Compiled from official statistics of Mexico's Secretariat of Commerce and Industrial Promotion (SECOFI); other export statistics in this 

report are derived from official statistics of the U.S. Department of Commerce and are not directly comparable. 
~ ....... 

....... 

Rgxe3 

lnpcd of Nl\FTA aid peso devaluctim on 1111exicai beef irrports from1he Uiited S:ates, by rronth, JCl1. 1993-09c. 1996 

40~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~----. 

rrillions of pounds 

vi NAFTA 

vlo peso devaluation 

30 

20 

10 

vlo NAFTA 

vi peso devaluation vi NAFTA 

vi peso devaluation 

0 I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I 

93J M M J S N 94J M M J S N 95J M M J S N 96J M M J S N 

F A J A 0 D F A J A 0 D F A J A 0 D F A J A 0 D 

• Sirruation 1 + Sirruation 2 * Sirruation 3 a Sirruation 4 
tariff rates used in the imported beef prices for the United States and rest-of-the-world were set according to 

the NAFTA (i.e., reduced to zero for the United States and maintained at the 15-25 percent range for the restof-the-world). The NAFTA dummy variable in the share equation was set equal to 1. 

The model predicted beef imports from the United States at 267 million pounds in 1994, representing an 86 

percent share of total imports of308 million pounds (table 2). Total imports decline to only 111 million pounds 

in 1995, although the U.S. share of these imports increases to 97 percent. Imports were predicted to rebound in 

1996 to 216 million pounds of which the United States supplies 98 percent (211 million pounds). 

Simulation 2 -Mexican beef imports from U.S. without the NAFTA, with peso devaluation 

Simulation 2 estimates what Mexico's demand for U.S. beef would have been without the NAFT A. Comparing 

simulations 1and2, measures the impact of the NAFTA in beef trade ceteris paribus, excluding the effects of 

the peso devaluation and other factors. In this simulation, the income variable in the total import demand 

equation was assumed to follow the pattern of actual income with a sharp decline in 1995 because of the peso 

crisis (i.e., assuming that the NAFTA was not a cause of the peso crisis). However, income growth rate was 

reduced by 0.5 percent based on the assumption that the NAFTA provides an incremental 0.5 percent increase 

in the growth rate in GDP. 20 

It was also assumed that the tariff rates on imported beef from the United States would have remained at the rates 

prevailing in 1993 (i.e., were not reduced to "Free" in January 1994). This affected the price of imported beef 

in the total import demand equation (i.e., it was higher than in the base simulation) as well as the U.S. import 

price in the share equation. The NAFTA dummy variable in the share equation was set at zero over the entire 

simulation period. 

Without the NAFTA, Mexico would have imported about 182 million pounds of beef from the United States in 

1994, compared to 267 million pounds with the Agreement. This reduction is due both to a decline in the overall 

level of imports, as well as to a decline in the U.S. share (only 73 percent compared to 86 percent).21 This is 

because import prices would have been higher without the tariff reductions, and income growth would have been 

lower without the Agreement. With the NAFTA, Mexico is predicted to import 108 million pounds of U.S. beef 

in 1995, compared to only 70 million pounds if no agreement had been reached. Thus, for 1995, incremental 

imports because of the NAFTA were about 38 million pounds. The U.S. share of Mexican beef imports would 

likely have been about 84 percent compared to the base scenario share of 97 percent. In 1996, Mexico is 

predicted to import almost 64 million pounds more beef from the United States because of the NAFTA 

(comparing 211 million pounds with the NAFTA to 147 million pounds without the NAFTA). 

Simulation 3 -Mexican beef imports from U.S. with the NAFTA, without peso devaluation 

The third simulation represents what would have occurred in U. S ./Mexican beef trade in the absence of the peso 

devaluation. Tariff reductions under the NAFTA are assumed to take place, thereby reducing the price of beef 

imported from the United States. The NAFTA dummy variable is set at one starting in January 1994. Thus the 

U.S. share of Mexican beef imports is assumed to remain the same in both the "with" and "without" peso 

devaluation scenarios. The main impact is through the income variable in the total import demand equation. Here 

20 USDA, ERS, "Effects of the North American Free Trade Agreement on U.S. Agricultural Commodities", Mar. 1993. 21 The results show that in the absence of the NAFTA the price effects of higher tariff rates outweigh the income effects of lower 

income growth. 

I-12 
income is assumed to increase by 3.5 percent, equal to the rate experienced in 1994.22 The exchange rate and 

price deflators were kept at their 1994 levels assuming purchasing power parity holds in the long-run. Tariff rates 

which affected the prices of imported beef in the total beef import demand equation and share equation were set 

at their actual levels. 

Because the peso devaluation started at the end of 1994, impacts are measured for 1995 and 1996. In 1995, if 

there had been no peso devaluation total Mexican beef imports would have been 310 million pounds, compared 

to base imports of about 111 million pounds. Assuming a U.S. share of 97 percent in both cases, imports from 

the United States would have been 301 million pounds without the devaluation, compared to only 108 million 

pounds with the devaluation. Thus in 1995, the peso crisis reduced U.S. beef sales to Mexico to roughly onethird of what they otherwise would have been. In 1996, the economic recovery increased Mexican imports of U.S. 

beef to 211 million pounds. However, if the peso had not devalued, Mexican demand for U.S. beef would have 

been 332 million pounds, 57 percent more than was the base simulation level. Thus over the two-year period, 

the peso devaluation resulted in a loss of 314 million pounds of U.S. beef exports to Mexico, valued at almost 

$300 million. 23 

Simulation 4 -Mexican beef imports from U.S. without the NAFI'A, without peso devaluation 

The final simulation combines the two previous ones to evaluate what would have been Mexican imports of U.S. 

beef if there had been no NAFTA and no peso crisis. The price, income and policy assumptions embodied in this 

simulation are the same as those described above for the individual NAFTA and peso devaluation scenarios. 

The results for 1994 are the same as in simulation 2, given that the peso devaluation did not begin until the end 

of 1994. In 1995 Mexican imports from the United States were estimated to be about 149 million pounds 

compared to base level imports of 108 million pounds, while for 1996 the total imports and imports from the 

United States were 23 3 million pounds and 211 million pounds, respectively. Thus, trade in beef between the 

United States and Mexico would have been fairly similar to the actual level if there had been no NAFTA and no 

peso devaluation. 

Test for Structural Change 

The analysis presented above assumes that equation coefficients do not change because of the NAFT A However, 

if a change in one or more of the coefficients had occurred because of the Agreement, then this would represent 

a structural change in Mexico's import demand for beef. Structural change in demand occurs for many reasons, 

including: changes in the taste and preferences, changes in the distribution of income, or introduction of new 

22 U.S. Embassy Mexico City, Mexico Economic and Financial Report, Jan. 1997. 23 Sensitivity analysis was undertaken to test the robustness of the model results to alternative assumptions about GDP growth in 

the counter-factual simulations. Without the peso devaluation, GDP was assumed to increase at 3.5 percent annually in 1995 and 

1996, based on growth rates experienced in the early 1990s. This growth gave rise to Mexican beef imports from the United States of 

301 million pounds in 1995 and 332 million pounds in 1996. With a GDP growth of only 2.5 percent, imports would have been 297 

million pounds and 321 million pounds in 1995 and 1996, respectively. Alternatively, with a GDP growth rate of 4.5 percent, the 

model estimates Mexican imports ofU.S. beefin the amount of305 million pounds in 1995 and 345 million pounds in 1996. This 

indicates that the results are fairly insensitive to the GDP assumption, with a one percentage point difference in the GDP growth rate 

assumption giving rise to less than a 4 percent difference in beef trade between the United States and Mexico. In the "without the 

NAFTA" simulation, the Mexican GDP growth rate was assumed to be one-half of one percentage point lower than its actual level 

(i.e., "with the NAFTA"). To test the sensitivity of this assumption, two additional model simulations were undertaken-the first 

assuming no change in Mexican GDP growth rate and the second assuming the GDP growth rate dropped by one percentage point. 

In each case, the estimated level of Mexican imports of U.S. beef changed by less than 3 percent during the period 1994-96. Again 

this indicated that the mo?el results are fairly insensitive to GDP growth rate assumptions. 

1-13 
products.24 If structural change did occur after January 1994, then analysis based on regressions covering January 

1991 to December 1996 may lead to the impacts of the NAFTA being either over- or under-stated because of bias 

in the regression coefficients. 

To test the hypothesis that the model coefficients have changed because of the NAFTA, a Chow test was 

employed (see Fisher, 1970, for formal derivations) based on a Ftest.25 If there are enough observations in the 

period following the structural change then running two separate regressions allows the parameters to differ 

between the two time periods. In this case, the general form of the F-statistic (with R and T - K degrees of 

freedom) is: 

[(SSE conrtromed - SSE unconrtromed) I K} I [SSE unconstrained I (Tl + T2 - 2K) 1 

R is the number of restrictions being tested, K is the number of regressors (including the intercept), T1 is the 

number of observations in the first period and T1 is the number of observations in the second period. The SSE 

constrained is the sum of squared errors from an equation using data both pre and post the point in time the 

structural change is expected to have occurred (i.e., data from January 1991 to December 1996). This 

"constrains" the coefficients in the pre-structural change period to be the same as the coefficients in the post 

structural change period. The SSE unconstrained is the addition of the sum of squared errors from two separate 

regressions, the first estimated over a period before structural change is expected to have occurred (January 1991 

- December 1993), and the second over the period after structural change is expected to have occurred (January 

1994 - December 1996). 

With structural change assumed to take place in January 1994, there are sufficient observations to run the post 

structural change regression. However, the results of this second regression would be confounded because of the 

peso devaluation that took place just 11 months after January 1994. It was important to test for structural change 

associated with the NAFTA without capturing the influence of the peso devaluation. One approach would have 

been to run the second regression between January 1994 and November 1994 thus stopping prior to the 

devaluation. However, this was not feasible because of a lack of degrees of freedom (only 11 observations). 

Therefore, an alternative approach was used. 

In general, if there are too few observations in the second period to run a separate regression an alternative Chow 

test can be developed. The procedure is to form T1 dummy variables, one for each observation in the second 

period. Each dummy variable has a value of one for its particular observation and zeros elsewhere. Regressing 

the K independent variables plus the T1 dummies over T1 + T1 observations gives the unconstrained regression, 

identical to the regression using K independent variables and T1 observations. The constrained version comes 

from restricting each of the T2 dummy variable coefficients to be zero, yielding a regression identical to the one 

using the K independent variables and T1 + T1 observations. The F-statistics thus becomes: 

[(SSE co11!1rained - SSE wu:onstrained ) I T2 JI [SSE unco11l1Tained I (Tl - K) l 

This procedure was followed to test structural change in the Mexican beef import demand function. The 

unconstrained SSE was obtained by adding ten dummy variables to equation 1, one dummy variable for each of 

the first ten months ofl994. The regression was run from January 1991 to October 1994. The constrained SSE 

was obtained from the regression of equation 1 without the ten monthly dummy variables over the same period 

(January 1991 to October 1994). 

24 Tomek and Robinson, 1985. 25 The discussion on forming the Chow test is taken from Kennedy, 1979. 

I-14 
The F-statistic was estimated to be 1.18. This is clearly less than the critical value of the F distribution at either 

the 1 or 5 percent level. Therefore, the null hypothesis that there was no NAFTA induced structural change can 

not be rejected. In other words, the test failed to show evidence of structural change in Mexico's import demand 

for beef because of the NAFTA. 

Conclusions 

The analysis presented in this paper shows that the NAFTA has significantly benefited U.S. beef exporters. The 

preferential tariff treatment enjoyed by the United States following the NAFTA has meant that it now supplies 

almost all the beef imported into Mexico. This situation is unlikely to change until the tariffs on competing 

suppliers are removed. According to the model results, the NAFTA expanded Mexican imports of U.S. beef by 

187 million pounds during 1994-96, valued at roughly $180 million. 

The results also show that simply comparing the actual level of Mexican imports of U.S. beefbefore and after 

the NAFTA implementation and attributing the difference to the NAFTA is a highly flawed analysis. As the 

modeling results make clear, reduced U.S./Mexican beef trade in 1995 and 1996 compared to earlier years was 

not the result of the NAFTA, but due largely to the devaluation of the peso. According to the empirical results, 

the peso devaluation caused a loss in U.S. beef exports to Mexico of about 314 million pounds, valued at $300 

million. Thus the overall impact of the peso devaluation on U.S./Mexican beef trade was more significant than 

the NAFTA during the period under review. 26 • 

26 As in any modeling exercise the results are open to challenge. It is acknowledged that there are several aspects of the modeling 

exercise that may have led to an under- or over-estimation of the true impacts of the NAFTA. Among these are: possible weakness in 

the raw data, simplifying assumptions about the decision making processes of importers and exporters, assumption in the model 

specification, choice of estimator, and assumptions about the model's exogenous variables in the counter-factual analysis. 

1-15 
References 

Armington, P.S., 1969, "A Theory of Demand for Products Distinguished by Place of Production," IMF Staff 

Papers 16:159-178. 

Armington, P.S., 1970, "The Geographic Pattern of Trade and the Effects of Price Changes," IMF Staff 

Papers 17:1979-199. 

Ay en Tanyeri and Rosson, P., 1996, "The NAFTA and Mexican Import Demand for Dairy Products," 

NAFTA and Agricultural Symposium, San Antonio, Texas, Nov. 1-2, 1996. 

Babula, R., 1997, "An Empirical Examination of U.S. Lamb-related Import and Domestic Market 

Relationships Near the Farmgate," Journal of International Food & Agribusiness Marketing, 8(2): 65-81. 

Fisher, F, 1970, "Test of Equality Between Sets of Coefficients in Two Linear Regressions: An Explanatory 

Note," Econometrica, 38:83-119. 

Kennedy, P, 1979, A Guide to Econometrics, Martin Robertson & Co. Ltd. Oxford. 

Kennedy, P, 1983, "Logarithmic Dependent Variables and Prediction Bias," Oxford Bulletin of Economics 

and Statistics, 45:389-392. 

Leamer, E.E., and RM. Stem, 1970, Ouantitative International Economics, Allyn and Bacon, Inc. Boston. 

Meilke, K.D., and G.R. Griffith, 1981,"An Application of the Market Share Approach to the Demand for 

Soyabean and Rapeseed Oil," European Review of Agricultural Economics, 8:85-97. 

Nerlove, M., 1958, "Distributed Lags and Estimation of Long-Run Supply and Demand Elasticities, 

Theoretical Considerations," Journal of Farm Economics, 40(2): 301-11. 

Stynes, D.J., G.L. Peterson, and D.R. Rosenthal, 1986, "Log Transformation Bias in Estimating Travel Cost 

Models," Land Economics, 62(1): 94-101. 

U.S. Department of Agriculture. Economic Research Service, "Peso Devaluation: Impact on Agricultural 

Trade," prepared by C. Valdez, in Agricultural Outlook, Apr. 1995, pp.12-15. 

Wahl, T.I., D.J. Hayes, and G.W. William, 1991, "Dynamic Adjustment in the Japanese Livestock Industry 

Under Beef Import Liberalization," American Journal of Agricultural Economics, 73(1): 118-132. 

I-16 
APPENDIXJ 

CANADIAN BLUETONGUE TESTING 

REQUIREMENTS 

J-1 
c..., 

I 

N 

r-.. 

(I) 

' "'"' CN 

' 'Ill' 

c 

BLUETONGIJE REGULATIONS 

BBEEDERS FEEDERS 

APRIL 1 - f TEST "A" IF I TEST "C" 

OCT. 14 SR- 30, ELSE 

TEST"D" APRIL 1 - I TEST "A" IF I TEST "C" 

SEPT. 30 SR - 30, ELSE 

TEST"B" TEST ".B" 

.1OCT.15 - I NO TEST IF SR - 60, TEST "A" OCT. 1- I NO TEST 

· IAN. 15 ELSE TEST "A" DEC. 31 

JAN. 16- I NO TEST IF SR - 60, TEST"D" JAN. 1- NO TEST IF SR - 30, ELSE 

MARCH31 ELSE TEST "D" MARJI TEST "A:' 

S.R : State Residency 

TEST"D" 

TEST "D" 

0) 
6132286630 

04121197 MON 11:47 FAX 6132286630 INTERNATIONAL TRADE TEAM 

TEST REGIMES 

TESTA: 

All cattle in group to be shipped must have passed one negative test, conducted in the state of export as 

follows: 

1. if no reactors: 

ship animals so that unportation occurs within 30 days of blood drawn. 

2. If reactor(s) found: 

remove reactor(s) 

wait 30 to 90 days and repeat (1) 

TESTB: 

All cattle in group to be shipped must have had two (2) consecutive negative tests 30 to 90 days apart, 

conducted in the state of export as follows: 

1. First test: 

if no reactors found, wait 30 to 90 days and continue to (2) 

else - remove reactor(s), wait 30 to 90 days and continue to (2) 

2. Second test: 

if no reactors found - ship animals so that importation occurs within 30 days oflast blood sample 

drawn. , 

else - remove reactor(s), wait 30 to 90 days and repeat (2). 

TESTC: 

Same test schedule as above Test B with the following addition: 

From the time of the first test, the cattle shall be subjected to insect control and be EITHER 

a. isolated from other ruminant animals by at least 200 yards and kept under a roof QR 

b. isolated from other ruminant animaJs by 500 yards or more. 

TESTD: 

Same test schedule as above Test B with the following addition: 

From the time of the first test the cattle shall be subjected to insect control and isolated from other ruminant 

animals by at least 200 yards and kept under a roof. 

NOTES: 

1. Cattle, sheep and goats must be transported directly from the premises of test to the Canada - USA 

border, except for animals going to a consignment sale as per subsection 22( 6). 

2. Upon arrival in Canada there are no restrictions on the movement or kill dates of the animals. 

3. The required test is currently the Agar Gel lmmunodiffusion Test (AGID) or c-ELISA Test, on the 

condition that when a second test is required it be the same as the first. 

4. Purebred cattle, sheep and goats for temporary stay at a show can come in with one test as provided by 

section 21.1(5). 0 ... J-3 

l@004 
6132286630 

04/21/97 MON 11:47 FAX 6132286630 INTERNATIONAL TRADE TEAM 141005 

Low Incidence 

Connecticut 

Massachusetts 

Maine 

Minnesota 

New Hampshire 

New Jersey 

Ohio 

Pennsylvania 

Rhode Island 

Vermont 

Wisconsin 

Alaska 

Hawaii. 

New York 

West Virginia 

Maryland 

Delaware 

Michigan 

North Dakota 

Indiana 

p:\mcelher•.n\regman 

QLUEIONGUE STATUS OF STATES 

1995 

Medium Incidence 

Colorado 

Iowa 

Nebraska 

Tennessee 

Wyoming 

Illinois 

Kansas 

Utah 

Virginia 

Oklahoma 

tdaho 

Kentucky 

Montana 

South Dakota 

Missouri 

New Mexico 

North Carolina 

Washington 

Oregon 

J-4 

High Incidence 

Alabama 

Arizona 

Arkansas 

California 

Florida 

Georgia 

Louisiana. 

Mississippi 

Nevada 

South Carolina 

Texas 

,J /) e--kte tt-f e.-- lrt I qq' 

Se.c.r-vey r-ec;.b-l+s -/-6Y" fl q Q '- "'o-f- ye.c. e-1..J ed. 'I e,, • 
6132286630 

04/21/97 MON 11:48 FAX 6132286630 ... INTERNATIONAL TRADE TEAM ~006 

LOW-RISK STATES 

ALASKA NEBRASKA 

COLORADO NEW HAMPSHIRE 

CONNECTICUT NEW JERSEY 

DELAWARE NEW YORK 

HAWAII NORIBDAKOTA 

IDAHO omo 

INDIANA PENNSYLVANIA 

IOWA RHODE ISLAND 

KANSAS SOUTH DAKOTA 

MAINE UTAH 

MARYLAND VERMONT 

MASSACHUSETTS WASHINGTON 

MICHIGAN WEST VIRGINIA 

MONTANA WISCONSIN 

MINNESOTA WYOMING 

J-5 
The Canadian determination of the incidence ofbluetongue disease in the various states in 

the United States is based on an annual bluetongue survey conducted by the APHIS and on 

published meteorological data. 1 Low incidence states are defined as those that have no more than 

2 percent positive tests in a survey of at least 600 samples; medium incidence states are defined as 

those that have 2 percent or more positive tests in a survey of at least 600 samples in states that 

have a frost (vector free) period of 90 days or more; and, high incidence states are defined as 

those that are not low incidence or medium incidence. 2 In general, Canada's testing requirements 

are less stringent for states with a low incidence ofbluetongue disease, more stringent for states 

with a medium incidence, and most stringent for states with a high incidence. 

Low-risk states have a low incidence ofbluetongue or have frost dates before November 

1, and after March 31, that kills the vector required for the spread of bluetongue. 3 The 

meteorological data must come from key centers in the state (at least three) and all centers must 

satisfy the frost requirement. 4 Test requirements are based on the possible exposure to the vectors 

experienced by the animals offered for importation. The rationale for the test requirements is 

shown in the following tabulation. 

1 USITC staff telephone conversation with Claude Lavigne, Food Production and Inspection, Agriculture and Agri-Food 

Canada, Apr. 17, 1997. 2 Facsimile to USITC from W.J. McElhran, International Trade Team, Animal Health Division, Agriculture and AgriFood Canada, Apr. 21, 1997. USITC staff telephone conversation with Claude Lavigne, Food Production and 

Inspection, Agriculture and Agri-F ood Canada, Apr. 17, 1997. 3 Canada Gazette, part II, vol. 129, No. 21, Oct. 18, 1995, p. 2849. 4 Facsimile to USITC from W.J. McElhran, International Trade Team, Animal Health Division, Agriculture and AgriFood Canada, Apr. 21, 1997. USITC staff telephone conversation with Claude Lavigne, Food Production and 

Inspection, Agriculture and Agri-F ood Canada, Apr. 17, 1997. 

J-6 
Purpose and date, for which animal is offered for 

importation, and incidence ofbluetongue or risk in 

state from which animal is shipped 

(1) Breeder; 1 APR-14 OCT; low incidence 

state; state resident 30 days 

(2) Breeder; lAPR-14 OCT; low incidence 

state; not state resident 30 days 

(3) Breeder; 1 APR-14 OCT; medium incidence 

state 

(4) Breeder; 1 APR-14 OCT; high incidence 

state 

(5) Breeder; 15 OCT- 15 JAN; low risk 

state; state resident 60 days 

(6)Breeder; 15 OCT-15 JAN; low risk 

state; nQ1 state resident 60 days 

(7) Breeder; 15 OCT-15 JAN; high risk 

State 

(8) Breeder; 16 JAN-31 MAR; low risk 

state; state resident 60 days 

(9) Breeder; 16 JAN-31 MAR; low risk 

State; not state resident 60 days 

(10) Breeder; 16 JAN-31 MAR; high risk 

state 

(11) Feeders; lAPR-30 SEP; low incidence 

state; state resident 3 0 days 

(12) Feeders; lAPR-30 SEP; low incidence 

state; not state resident 3 0 days 

(13) Feeders; lAPR-30 SEP; medium incidence 

state 

J-7 

Test and rational 

"A:' Exposed only in low incidence state 

"B" Could have come from other than 

low incidence state 

"C" Exposed in medium incidence state 

"D" Exposed in high incidence state 

"No" No exposure for at least 149 days 

"A:' Could have been exposed in other 

than low risk state 

"A:' From high risk state 

"No" No exposure for at least 75 days 

"D" Could have been exposed in other 

than low risk state and exposed in 

Canada within 15 days of entry 

"D" Exposed in high risk state and could 

be exposed in Canada within 15 days 

of entry 

"A:' Exposed only in low incidence state 

"B" Could have been exposed in other 

than low incidence state 

"C" Exposed in medium incidence 

state and would be exposed in 

Canada upon entry 
(14) Feeders; lAPR-30 SEP; high incidence 

state 

(15)Feeders; 1 OCT-31 DEC; low, medium, 

or high incidence state 

(16) Feeders; 1 JAN-31 MAR; low or medium 

incidence; state resident 30 days 

(17) Feeders; 1 JAN-31 MAR; low or medium 

incidence not state resident 30 days 

(18) Feeders; 1 JAN-31 MAR; high incidence 

state 

J-8 

"D" Exposed in high incidence state and 

would be exposed in Canada upon 

entry 

"No" Minimal exposure in Canada 

"No" No exposure for 45 days 

".N' Could have been exposed in a 

high incidence state 

"D" Exposed in high incidence 

state 
APPENDIXK 

ANALYSIS OF CANADIAN EXPORTS OF 

LIVE CATTLE FOR SLAUGHTER TO 

THE UNITED STATES 

K-1 
Analysis of Canadian Exports of Live Cattle 

for Slaughter to the United States 

Introduction 

Following enactment of the United States-Canada Free-Trade Agreement (CFTA) in 1989, live cattle and beef 

trade between the United States and Canada became an increasingly important feature of the North American 

livestock economy. CFTA excluded Canada and the United States from each others' respective Meat Import Acts 

(which had put quantitative restrictions on meat trade), reduced tariffs on live cattle to a rate of duty of "Free," 

and cutback tariffs on beef. This eliminated almost all trade measures on livestock and bovine meat products 

between the two countries. 1 Subsequent to CFTA, trade expanded rapidly. Between 1989 and 1992, for 

example, U.S. beef exports to Canada more than doubled (71 million pounds to 143 million pounds) and 

continued to increase during the mid-1990s.2 Canadian exports offeeder cattle to the United States also increased 

substantially-from 60,000 animals in 1989 to almost 300,000 in 1992.3 

Canadian exports oflive cattle for slaughter (LCFS) to the United States also grew strongly during the 1980s, 

and particularly after the CFTA. From 1989 to 1992, exports rose from 417,000 to 920,000 animals. Between 

1992 and 1994, close to 900,000 animals were exported annually, growing to over 1 million animals by 1995 

(figure 1). The year 1996 saw a record 1.3 million animals exported, with well over 300,000 sold in each of the 

first three quarters of the year. In the fourth quarter of 1996, exports moderated to just over 200,000 animals, 

similar to levels recorded in the fourth quarter of the preceding 2 years. 

U.S. trade data indicate LCFS export growth in the first half of 1996 resulted predominantly from increased 

shipments by producers in Southern Alberta (where the cattle feeding industry in Canada is concentrated). Cattle 

producers in some Northern States claim Canadian exports depress prices they receive for their cattle.4 They 

argue Canadian exports are a consequence of trade policies favoring the Canadian industry, as well as Canadian 

grain policies that provide its livestock producers lower production costs. 5 In response, some producer groups 

are urging the U.S. Government to intervene through protective trade measures. 6 Other commentators, however, 

1 U.S. imports of cattle from and exports to Canada have received a rate of duty of"Free" since 1993 as a result of an 

accelerated duty elimination agreement negotiated under the CFT A. By 1994 most imports of fresh, chilled, or frozen 

beef received a tariff rate of "Free" as the results of the accelerated duty elimination agreements. The pre-CFTA rates of 

duty were relatively low. 2 Canadian International Trade Tribunal, An Inquiry into the Competitiveness of the Canadian Cattle and Beef 

Industries, Nov. 1993. 3 Ibid. 

4 For example, Pat Goggins in address to Conference on Livestock Marketing at the National Cattlemen's Beef 

Association, Kansas City, Jan. 29-Feb. 1, 1997. 5 Resolutions proposed to the International Markets Committee of the annual convention of the National Cattlemen's 

Beef Association, Kansas City, Jan. 29-31, 1997. 6 Ibid. . 

K-2 
Figure 1 

Canadian exports ofcattle for slaughter to the United States, Quarterly 1992-96 

'000 animals 

Ill IV Ill IV Ill IV Ill IV Ill IV 

Source: U.S. Department of Commerce. 

argue Canadian export growth is associated with different factors, such as liquidation of the Canadian cattle herd 

and unexpected delays in the expansion of processing capacity in Southern Alberta. 7 8 

Empirical analysis can provide a better understanding of factors accounting for the LCFS trade pattern in the 

early- and mid-1990s. The scrutiny ofLCFS trade is a fairly recent phenomenon, and has not received much 

attention in the academic literature. Most previous studies focus on trade in beef and feeder cattle (Webber, 

Graham, and MacGregor 1988; Cluff and Huff 1985). Marsh and Greer (1994) analyzed the U.S. price effects 

from exports of Canadian live cattle and beef. They estimated that during 1993 and 1994, exports ofLCFS and 

meat from Canada led to a decline in U.S. steer prices by about $2 per hundred weight (less than. 3 percent). In 

a similar study, Marsh and Peck (1996) looked at the effects of U.S. beef and live cattle trade on the prices of 

U.S. feeder cattle. In both studies, the relatively minor impact Canadian exports were found to have on U.S. fed 

and feeder cattle prices reflects the small share of total U.S. beef supplies these exports represent (3 percent). 

Apart from these analyses, no empirical studies were found specifically dealing with factors affecting Canadian 

LCFS exports following the NAFTA and repeal of the Western Grain Transportation Act (WGTA). 

The purpose of this econometric analysis is to identify and measure the economic and policy factors explaining 

Canadian exports of live cattle for slaughter to the United States. A single equation econometric model is 

presented and used to address the following key questions: 

• What economic factors influence the trade flow in LCFS between the United States and Canada? 

7 Interview with Professor John Marsh, Department of Agricultural Economics, Montana State University, Bozman. 8 Based on personal interviews with livestock producers from Southern Alberta and representatives of the Canadian 

Cattlemen's Association. 

K-3 
• Did the NAFTA have an impact on Canadian exports ofLCFS to the United States? 

• Did changes in Canadian grain policy affect LCFS trade? 

• How did changes in plant capacity in Southern Alberta affect Canadian exports of LCFS to the 

United States? 

• What is the likely outlook for LCFS trade in the near-term? 

Factors Influencing Trade in Live Cattle for Slaughter 

Several short- and long-term factors are known to influence LCFS trade between the United States and Canada. 

These factors can be separated into those affecting the export supply (excess supply) in Canada and import 

demand (excess demand) in the United States. They include both domestic demand and supply parameters on 

either side of the border. 

Canadian Export Supply 

Off er Prices 

Price formation in the Canadian livestock market is dominated by that of the United States which is almost 10 

times as large. This, combined with the minor trade restrictions, means livestock prices are determined in the 

United States, while the Canadian price is the U.S. price times the exchange rates, adjusted for transportation 

costs (Meilke and Coleman, 1986) (figure 2). 

Although this relationship is observed over the long-term, short-term margins between Canadian and adjusted 

U.S. prices arise frequently. For instance, Canadian steer prices were higher than U.S. prices during the fourth 

quarter of 1993, while U.S. prices were slightly higher than Canadian prices for the second and third quarters of 

1996. 

Margins between U.S. and Canadian cattle prices open because of short-term changes in demand and supply 

conditions. For example, an increase in demand for beef in Canada pushes retail prices higher and enables 

Canadian packers to bid more for cattle. Alternatively, low plant capacity utilization in Washington State may 

cause U.S. buyers to bid more for Canadian cattle in order to increase throughput. 

In Western Canada, most operators of large lots sell their cattle once a week through a sealed bid system. On 

average between four and seven bids on each load of cattle marketed are made, with at least three bidders 

representing U.S. packing plants. Cattle are sold to the highest bidder, so cattle going to the United States are 

bid away from Canadian packing plants by U.S. firms. 9 10 No Canadian slaughter cattle are shipped into the 

9 Cattle are raised on either side of the border with more or less similar production conditions. The main difference is 

that Canadian cattle are fed mostly barley, wheat and protein supplement (canola), while in the United States cattle are 

fed com and protein supplement (soybean meal). 10 Canadian Cattlemen's Association, 1997, prehearing brief presented to public hearing on U.S. International Trade 

Commission, Cattle and Beef Impact of NAFTA and Uruguay Round Agreements on U.S. Trade, investigation No. 

332-371, Mar. 20, 1997. 

K-4 
Figure 2 

Comparison on U.S. ard Canadian s1eer prices 

canadan dollars per cwt 

92 M M J S N 93 M M J S N 94 M M J S N 95 M M J S N 96 M M J S N 

F A J A 0 D F A J A 0 D F A J A 6 D F A J A 0 D F A J A 0 

• canadan price 

Sol.l"ce: Agiculture Canada and U.S. Department of ~ricultl.l"e. 

• us price in canada 

United States on a speculative basis, but only after they have been purchased by U.S. companies.11 Because of 

this tight market integration, Canadian and U.S. prices move very closely, with price margins quickly removed 

through arbitrage. 

Inventories 

The level of cattle inventories is another important factor in determining the number of Canadian cattle supplies 

for export to the United States. Jarvis (1974) argued cattle inventories represent the fixed capital stock associated 

with beef production, and the breeding herd can be considered a capital asset (since it cari be used to produce 

additional output or it can be sold as a consumption good). Breeding herd size is a key factor determining the 

number of steers and heifers available for slaughter 18 to 24 months hence. Producers' expectations of weaker 

11 Ibid. 

K-5 
feeder cattle prices leads them to reduce their herd size, resulting in fewer feeder cattle raised. Over the long-term 

(18-24 months) this lowers the supply of steers and heifers marketed, as well as the number of cattle available 

for export to the United States. 

Inventories also affect the supply of cattle for slaughter in the short-term. As the herd is liquidated, the number 

of cull beef cows and bulls marketed increases in the short-term (1-6 months), leading to more cattle exported 

to the United States. Thus the relationship between cattle inventories and exports of Canadian LCFS is positive 

in the long-term and negative in the short-term (Ospina and Shumway, 1980; Meilke and Coleman, 1986). 

Grain Prices 

Canadian slaughter cattle exports to the United States depend also on production costs. Canadian grain policies 

(such as the WGTA), have influenced patterns of grain movements and livestock production throughout Canada. 

The WGTA subsidized grain transportation from West to East Canada, encouraging feedgrain production in the 

West and cattle feeding in the East. 12 Repeal of the WGTA in July 1995 means Western feedgrain prices likely 

will drop, and, as feeding cattle becomes relatively more profitable than producing grains, leading to more cattle 

fed in the West and animals available for exports to the United States. 

Slaughtering Capacity 

On the demand side of the Canadian market, the level of cattle slaughtering capacity and plant utilization is of 

great importance. Competition between slaughter plants is strong because they must attract sufficient throughput 

to be profitable. Canadian cattle slaughtering capacity has grown with the increased production at the Excel plant 

at High River (in the fall of 1996). Additional capacity is expected once the expansion of the IBP plant at 

Lakeside is complete (expected in the second quarter of 1997). By the fall of 1997, it is estimated that Alberta's 

annual capacity will reach 44,500 animals per week. The increased modernization and capacity of these plants 

will make them more competitive with U.S. packers in purchasing Canadian slaughter cattle.13 

During 1994-95, Canadian cattle producers built their inventories in order to supply the IBP and Excel plants 

expected to have their increased capacity fully operational by mid-1996. 14 With these plants not operating fully 

by fall, 1996, Canadian producers sold their cattle to U.S. slaughter houses where spare capacity had bid up 

prices relative to Canadian prices. Once the IBP and Excel plants enter full production, exports to the United 

States may decline as competition from Canadian plants intensifies.15 

U.S. Import Demand 

Bid Prices 

Canadian cattle move south because of a demand for cattle from U.S. facilities. Canadian LCFS are imported 

by U.S. packers for a number of reasons. There continues to be over capacity in the U.S. meatpacking industry, 

especially in the Northwest region. Some believe that without a supply of Canadian cattle, one or more plants 

12 Based on personal interviews with livestock producers from Southern Alberta and representatives of the Canadian 

Cattlemen's Association. 

l3 Ibid. 

14 Interview with Professor John Marsh, Department of Agricultural Economics, Montana State University, Bozman. 15 Interview with Mike Mullins, Washington Liaison (Meat) Cargill. 

K-6 
in Washington State would close. 16 In Washington State, and to a lesser extent Utah and Colorado, packing 

plants are willing to bid Canadian cattle away from Canadian plants because of the shortfall in local available 

cattle.17 

Lack of specialized Canadian processing facilities concentrating on specific types of animals (cows and bulls, 

for example) means that such animals are often attracted to U.S. plants. Price bids by U.S. importers also reflect 

beef demand factors in the United States. These include per capita incomes and prices of alternative meat 

products. 

Trade Policy 

Trade policy can influence the flow of live cattle for slaughter between the United States and Canada. As 

mentioned earlier, following the CFTA, trade in LCFS is with a rate of duty of "Free". There are no quantitative 

measures that impede the movement of live cattle, although cattle are required to pass border health inspections 

before proceeding to U.S. packing plants. 

The Model Specification 

The economic and institutional structure of the production and marketing system suggests U.S./Canada LCFS 

trade should be modeled as a Canadian export supply function rather than a U.S. import demand function. This 

is because the Canadian cattle inventory is small relative to the U.S. inventory, making U.S. demand for Canadian 

cattle perfectly elastic. As reported earlier, economic factors Canadian cattle producers consider important in 

their production and marketing decisions include relative U.S. and Canadian prices, inventory levels, input prices, 

and policy variables. 

These factors are generally consistent with those predicted by neoclassical theory of the firm. According to 

theory, a supply function (as well as input demand functions) can be derived from the first order conditions of 

the firm's profit function (Hotelings lemma). 18 The result is a supply function in which the product and input 

prices appear on the right-hand-side. This supply function is conditional on state variables such as the level of 

technology, fixed inputs, and the opportunity costs of resources allocated to alternative production processes. 19 

Diewert and Morrision (1986) used a production theory approach to derive theoretical export supply functions. 

Their derivations resulted in export supply as a function of the price of the product in the domestic market, the 

price of the product in the international market, input prices (both domestic and international), and technology. 

Applying this theory to Canadian cattle producers, LCFS supplies are expected to depend on Canadian prices of 

live cattle for slaughter, input prices (such as feed grains), opportunity costs (prices foregone for selling in the 

Canadian market vis-a-vis the U.S. market), capital (inventories), and policy factors. 20 

16 Canadian Cattlemen's Association, 1997, prehearing brief presented to public hearing on U.S. International Trade 

Commission, Cattle and Beef Impact of NAFTA and Uruguay Round Agreements on U.S. Trade, investigation No. 

332-371, Mar. 20, 1997. 17 Ibid. 

18 Varian, 1981. 19 Tomek and Robinson, 1979. 20 Several factors indicate that the neoclassical theory of the firm may not represent the decision making behavior of 

Canadian cattle producers. For example, the theory assumes that producers are profit maximizers, do not face 

production or price risk, and consider only a single production period. Because of the discrepancies between observed 

(continued ... ) 

K-7 
The export supply function was expressed as: 

Where: 

Qi, 

x. 

SPX 

SPd 

e 

INVt-i 

GPt-i 

SLCAPt 

Eq. 1. 

SP *e 

Xt = f( Qit, ~-1' ( ;p )t, I~-i, GPt-i, SLCAPt, TRPOLt) 

d 

= quarterly seasonal dummy variables, 

= Canadian exports to United States oflive cattle for slaughter, 

= U.S. price of slaughter steers, 

= Canadian price of slaughter steers, 

= exchange rate ($Canadian/$U.S.) 

= lagged cattle inventories in Western Canada, 

= lagged price of grains, 

= dummy variable for expansion of slaughter capacity in Southern Alberta (equals 0 

prior to October, 1996, otherwise 1), and 

= dummy variable for the NAFTA (equals 0 prior to January 1994, otherwise 1). 

Canadian exports ofLCFS were estimated as a function of the ratio of U.S. and Canadian steer prices (with the 

U.S. price adjusted for the exchange rate), cattle inventories, grain prices, dummy variables for changes in 

slaughter capacity in Southern Alberta, and the NAFT A. 21 The ratio of Canadian and U.S. steer prices captures 

the producers' response to price differences U.S. and Canadian packers bid for cattle. In ratio form the price 

elasticities are constrained to be the same, but avoids colinearity problems associated with entering prices as 

separate regressors. Cattle inventories lagged 18 months captures the capital investment in livestock production. 

Grain prices were included to account for the response in export supplies to changes in feed costs. 

A lagged depend variable was also added to the specification. This accounts for a short-run momentum factor 

and associated rigidities in the marketing structure that prevent full adjustment to price and policy changes. The 

lagged dependent variable enables the calculation of short- and long-run price elasticities (Nerlove, 1958). 

Seasonal dummy variables were included in the model to capture the strong seasonality in Canadian LCFS 

exports. 

Model Estimation and Results 

The equation was estimated using the Ordinary Least Squares (OLS) estimator22 after all variables had been 

tested for stationarity.23 The regression was run using monthly data from January 1992 to December 1996 

(giving 60 observations). The results are reported in equation 2. 

20 ( ... continued) 

producer decision making process and that assumed by the theory, the theory should be used only to give guidance in 

selecting the models explanatory variables, and should not be used to dictate the choice of variables or determine the 

model specification (Johnson, 1986). 21 The U.S. slaughter steer price represents the opportunity costs of selling cattle in the Canadian market. 22 For estimation of single equation models, the OLS estimator is the Best Linear Unbiased Estimator (BLUE) 

(Kennedy, 1979). 23 Pindyck and Rubinfeld, 1981. 

K-8 
Eq. 2. x; -312038 + 8120 Q2-6694 Q3-10577 Q4 + 0.35 X,_1 +243466 ( SPx .e I SPd) 1 

(-6.06) (1.87) (-1.56) ( -2.64) (4.48) (5.10) 

+ l l.66 INVi_18 + 0.24 GPt - 43749 * SLCAP1 

(4.57) (0.04) (-4.97) 

Adjusted R2 = 0.82 Durbin's h-statistic = -2.06 F-statistic = 24.54 

Overall the equation's diagnostics were reasonable. The adjusted R2 indicated over 80 percent of the variation 

in Canadian LCFS exports can be explained by the regressors. The Durbin h-statistic indicated the model errors 

were not serially correlated. 24 The F-statistic showed that the set of variables were statistically significant in 

explaining exports of LCFS. The model's performance was evaluated further by plotting actual and estimated 

exports (figure 3). Generally the estimated equation was able to track the historical data fairly well, capturing 

most of the trends and turning points in export flows. 

Figure 3 

Canadian exports of live cattle for slaughter 

Actual vs estimated,Jan.1992-Dec.1996 

'000 head 

FA J A 0 D FA J AO D FA J A 0 D FA J A 0 D FA J AO D 

MMJSN93JMMJ SN94JMMJ SN MMJSN96JMMJ SN 

-e Actual *"Estimated 

The ratio of U.S. and Canadian steer prices was found to be highly significant in explaining LCFS trade. The 

coefficient on the price ratio variable was used to calculate export elasticities with respect to the U.S. price, the 

Canadian price, and the exchange rate. Given the price ratio specification, the export elasticity with respect to 

each of the variables was constrained to be the same in absolute value, with a positive sign on the U.S. price and 

exchange rate and negative sign on the Canadian price. The elasticity was calculated to be 3. 7, indicating a 1-

24 The Durbin h-statistic is the appropriate test for serial correlation when a lagged dependent variable is specified 

(Pindyck and Rubinfeld, 1981 ). 

K-9 
percent increase (decrease) in the U.S. price gives a 3. 7-percent increase (decrease) in shipments of Canadian 

cattle to the United States. Similarly, a 1 percent devaluation of the Canadian dollar would give rise to a 3. 7-

percent increase in exports to the United States. 25 Conversely, a I-percent increase (decrease) in the Canadian 

price of steers would generate a 3. 7-percent decrease (increase) in exports of Canadian cattle to the United States. 

The high elasticity estimate shows producers are highly responsive to price signals. This result was expected 

based on the discussion of livestock marketing and pricing presented above. 

To capture livestock inventory dynamics, the inventory variable was lagged 18 months. This variable was also 

highly significant and correctly signed. The estimated coefficient indicates that for every thousand animal 

increase (decrease) in the cattle inventory, shipments to the United States increases (decreases) by about 12 

animals per month, 18 months in the future. The lagged dependent variable was statistically significant, giving 

an adjustment parameter of 0.65.26 This indicates, as expected, producers adjust their marketing decisions fairly 

quickly in response to changes in price signals. 

With the exemption of the third quarter, the seasonal dummy variables are highly significant and captured the 

increase in trade flows in the second quarter and decreases in the third and fourth quarters, in comparison to 

the first quarter. The dummy variable for slaughtering capacity in Canada is also highly significant. Its 

coefficient indicates exports decline an average of 44,000 each month, once Canadian slaughter capacity 

increased after October 1996. 

The feedgrain price is statistically insignificant. One explanation is that expectations of future grain price 

changes are embodied in the cattle inventories level. To test whether the repeal of the WGTA had an impact on 

live cattle trade, a dummy variable was included equal to zero between January 1992 and June 1995, and equal 

to one after July 1995. This variable too was not found to be significant. One explanation is that the end of the 

WGT A coincided with a period of very high grain prices. As a result, producers in Western Canada remained 

in grain production during 1996 instead of switching over to cattle. 27 In 1997, lower grain prices are expected 

to reduce the production of grains, providing incentives for more cattle raising and feeding. Finally, the NAFTA 

variable was found to have a negative sign (indicating a decline in trade after the NAFTA) and was not 

statistically significant. The NAFTA variable therefore was dropped from the model specification. 

Using equation 2, the flow ofLCFS between the United States and Canada was projected until mid-1998. With 

the exemption of the price variable, actual values for all right-hand-side variables in the equation could be used 

for the projection of trade until June 1998, since the inventory variable was lagged 18 months and all other 

regressors in the equation were dummy variables. Over the forecast period the price variable (i.e., the ratio of 

U.S. and Canadian prices) was set equal to the monthly average during 1996. The projections are reported in 

figure 4. 

25 Some models of Canadian agriculture contain price equations with U.S. price and exchange rate as separate 

regressors (for example, Agriculture Canada's Food and Agriculture Regional Model). As separate regressors, 

elasticities with respect to price and exchange rate are not constrained to be the same. 26 0.65 is the partial adjustment parameter from the adaptive expectations model. It is the fraction between the 

desired adjustment and actual adjustment in the dependent variable to changes in independent variables (Kennedy, 

1979). 27 Based on personal interviews with livestock producers from Southern Alberta and representatives of the Canadian 

Cattlemen's Association. 

K-10 
Figure 4. 

Acrual and predicted Canadian exports of live cattle for slaughter 

'000 head 

500 

400 

300 

200 

100 

0 

951 II Ill IV 961 Ill IV 971 Ill IV 981 

Quarter IY ear 

LCFS trade for 1997 is likely to continue the downward trend started in the fourth quarter of 1996. Overall 

exports of LCFS for the year are projected at about 700,000 animals, and expected to remain less than 200,000 

animals in the first 2 quarters of 1998. The expected decline in Canadian exports compared to 1995 and 1996 

is driven by two key factors. First, liquidation of the Canadian herd that began in early 1996 means that less fed 

slaughter steers and heifers will be marketed in 1997 and 1998, and therefore fewer animals will be exported to 

the United States. Second, the increased slaughtering capacity in Canada will result in significantly more cattle 

being slaughtered and processed in Canada, and consequently fewer animals will be transported south to packing 

plants in the United States. 

Summary and Conclusions 

Although certain cattle producers in the Northwest of the United States argue that the NAFTA and Canadian 

grain policies are crucial in explaining recent trade flows, other commentators identify the pattern with a different 

set of factors. In order to test alternative hypotheses about what factors are important, a simple single equation 

regression model was developed. The model was formulated after detailed discussion of the marketing and 

pricing system for LCFS in the Northern States of the United States and Southern Alberta (between which regions 

most of the international trade takes place). The model was developed to address specific questions as outlined 

earlier, and the overall results and conclusions are presented below. 

What economic factors influence the trade flow in LCFS between the United States and Canada? Based on 

the analysis presented above, the key economic factors influencing trade in live cattle for slaughter are relative 

prices of slaughter steers on either side of the border. The elasticity of trade with respect to U.S. and Canadian 

K-11 
prices was estimated at 3. 7 indicating a high degree of responsiveness in trade to price. Cattle inventories were 

also found to be highly important in explaining the future level of live cattle trade. 

Did the NAFI'A have an impact on Canadian exports of LCFS to the United States? The analysis indicates the 

NAFTA has not had any major impact on the trade in LCFS. This can be explained by the fact that the ad 

valorem equivalent of the rate of duty for LCFS was less than 2 percent before January 1994 when the NAFTA 

was signed. 

Did changes in Canadian grain policy affect LCFS trade? Grain prices were found not to be important in 

explaining the pattern of trade over the last few years. Most likely this is because of high grain prices during 

1996 meant the effects of repealing the WGTA were not felt in that year. With most forecasts suggesting lower 

grain prices in 1997, the removal of the grain transportation assistance likely will be felt by producers in W estem 

Canada, and more feeding of cattle in the West is likely to result. With more cattle fed in the West, supplies 

available for marketing to the United States will increase. However, whether these additional cattle will actually 

move south depends critically on the relative prices, availability of slaughter capacity on either side of the border, 

and the development of other foreign markets for beef, such as Japan and the Republic of Korea (Korea). 

How did changes in plant capacity in Southern Alberta affect exports of LCFS to the United States? Canadian 

slaughtering capacity is a key factor in determining future Canadian exports of LCFS to the United States. The 

increased capacity in the fall of 1996 led to an average decline of 44,000 animals per month moving south. As 

plant capacity further increases when the additional capacity at the IBP plant comes into production in mid-1997, 

it is likely even fewer cattle will be shipped to the United States. 

What is the likely outlook for LCFS trade in the near-term? The econometric analysis indicates Canadian 

exports of LCFS will fall during 1997 and into 1998 (assuming no significant change in the relative 

U.S./Canadian steerprice).28 Exports in 1997 could be around 700,000 animals, similar to the level in the early 

1990s. This drop is attributed to smaller Canadian cattle inventories during the latter part of 1996, and increased 

slaughterillg capacity in Canada. 

While increased slaughter capacity in Canada likely will result in fewer live cattle for slaughter moving south, 

it may also provide opportunities for increased shipments of feeder and slaughter cattle to Canada. If so, then 

Canada will increasingly export beef rather than live slaughter cattle, particularly if efforts to harmonize the meat 

grading system of both countries are successful. 29 • 

28 This result must be heavily qualified by the assumptions of the model, its specification and accuracy of data. 

Readers should interpret the results as likely direction in trend rather than precise forecasts of cattle movements. 29 Interview with Mike Mullins, Washington Liaison (Meat) Cargill. 

K-12 
References 

Cluff, M., And H.B. Huff, ed. 1986, Modeling Livestock Stabilization. Proceedings of the Workshop on 

Modeling Livestock Stabilization, Ottawa, June 20-21, 1985. Agriculture Canada. 

Diewert, W.E. and C.J. Morrison, 1986, "Export Supply and Import Demand Functions: A Production 

Theory Approach," National Bureau of Economic Research, Inc., working paper No. 2011. 

Jarvis, L.S., 1974, "Cattle as Capital Goods and Ranchers as Portfolio Managers: An Application to the 

Argentine Cattle Sector," Journal of Political Economy, 82 (3): 489-520. 

Johnson, G. L., 1986. Research Methods in Economics. New York: McGraw-Hill Books Co. 

Kennedy, P, 1979, A Guide to Econometrics, Martin Robertson & Co. Ltd. Oxford. 

Marsh, J.M. and C. Peck, 1996, "The U.S. Beef and Live Cattle Trade: Effects on domestic Feeder Cattle 

Prices," Department of Agricultural Economics and Economics, Montana State University, departmental 

special report No. 18, June. 

Marsh, J.M. and R. C. Greer, 1994, "Price Effects from U.S. Imports of Canadian Live Cattle and Beef," 

Department of Agricultural Economics and Economics, Montana State University, departmental special 

report No. 14, December. 

Meilke, K.D. and J.R. Coleman, 1986, "An Evaluation of the Influence of Exchange Rates on the Canadian 

Red Meat Sector," Department of Agricultural Economics, University of Guelph, paper AEB/86/4. 

Nerlove, M., 1958, "Distributed Lags and Estimation of Long-Run Supply and Demand Elasticities, 

Theoretical Considerations," Journal of Farm Economics, 40(2): 301-11. 

Ospina, E. And C.R. Shumway, 1980, "Disaggregated Econometric Analysis of U.S. Slaughter Beef Supply," 

Technical Monograph No. 9, The Texas Agricultural Experimental Station. 

Pindyck, R. S. and D.L. Rubinfeld, 1981, Econometric Models and Economic Forecasting, New York: 

McGraw-Hill Book Company. 

Tomek, W. G. and K.L. Robinson, 1985, Agricultural Product Prices, Cornell University Press. 

Varian, 1981. Microeconomic Theozy, New York: McMillan Book Company. 

Webber, C.A., J.D. Graham, and R.J. MacGregor, 1988, "A Regional Analysis of Direct Government 

Assistance Programs in Canada and Their Impacts on the Beef and Hog Sectors," Agriculture Canada 

working paper No. 6/88. 

K-13 

APPENDIXL 

LETTER FROM THE U.S. 

COMMISSIONER OF CUSTOMS 

REGARDING TRANSSHIPMENTS 

L-1 
THE COMMISSIONER OF CUSTOMS 

WASHINGTON, D.C. 

March 18, 1997 MAN-1-FO:TA GM 

Ms. Marcia E. Miller 

Chairma.n 

United States International Trade Commission 

Washington, D.C. 20436 

Dear Ms. Miller: 

:2::. 

r-=- -0 -n·~ 

.. -.·· .:.;:;,~ . \ -... , .. -.... ~ ....... 

C5 .. ': 

Thank you for your letter of January 27, 1997, (Jl;ithfn~ 

which you ask what steps have been taken by tht° ~~ 

U.S. Customs Service, since the enactment of the North 

American Free Trade Agreement (NAFTA) , with respect to 

the possible transshipment of live cattle and fresh, 

chilled, or frozen beef through Mexico and Canada into 

the United States. 

In calendar year 1995~ the Off ice of Regulatory Audit 

performed 10 NAFTA verification audits on producers of 

beef products in Canada and Mexico. Although 

deficiencies with inventory records at most facilities 

were noted, no transshipment was detected, and the audit 

verification reports recommended that positive origin 

determinations be issued. All of the companies were 

advised that, absent adequate recordkeeping audit trails, 

the only acceptable inventory management method available 

under the NAFTA is specific identification (physical 

segregation). Further, the companies were told that they 

must adhere to an acceptable inventory management method 

to identify the origin of beef goods shipped to the 

United States claiming NAFTA preferential treatment. 

In addition, the NAFTA implementing legislation required 

Customs to develpp a methodology for estimating the 

compliance with the laws administered by the Customs 

Service to be presented in an annual report to the 

Congress. As a result of thi~ legislation a service-wide 

Compliance Measurement Program, with a NAFTA subset, was 

implemented in an effort to assure a high level of 

compliance and enforcement . 

.. Pltuc visit the U.S. Customs Web at bttp:llwww.customs.ustrcu.gov" 

' j ' .:-J 1-

\_ 

. .... 

L-2 

Equal Opportunny 
- 2 -

Prior to the implementation of the NAFTA, the 

U.S. Customs Service already had in place a National 

Trade Enforcement Plan (TEP) designed to better focus 

resources on certain priority industries, which was 

expanded to include a NAFTA sub-plan to address issues 

unique to the NAFTA. In support of the TEP, the Office 

of Strategic Trade performs continuing analysis of import 

data in order to detect changes in trade patterns within 

trade sensitive industries. Agriculture is one of these 

industries. 

If an aberration in trade patterns from the above 

activities were detected, it would attract significant 

attention from Customs in every regard. 

Should you have any further questions regarding this 

·matter, please contact Gary Manes, Trade Agreements, at 

(202} 927-1133. 

Sincerely, 

George J. Weise 

Commissioner 

L-3 

APPENDIXM 

LETTER FROM THE SECRETARY OF 

AGRICULTURE REGARDING 

TRANSSHIPMENTS 

M-1 
Ms. Marcia E. Miller. 

Chairman 

DEPARTMENT OF AGRICULTURE 

OFFICE OF THE SECRETARY 

WASHINGTON, O.C. 20250 

APR 9 1991 

r-· j '• -

United States International Trade Commis&on 

Washington, D.C. 20436 

.-

VI 

Dear Madam Chairman: 

Thank you for your letter of January 27, 1997, informing the Department of 

Agriculture (USDA) of the investigation initiated by the International Trade Commission 

(ITC) on October 28, 1996, to report on the impact of the North American Free Trade, 

Agreement and Uruguay Round agreements on U.S. trade in beef and cattle. 

USDA does not have direct responsibility for monitoring or enforcing regulations 

on transshipments of product entering the United States. That responsibility belongs to the 

U.S. Customs Service. Nevertheles.C\,_.our personnel in Food Safety and Inspection Service 

and Animal Plant and H~th Inspection· Service are responsible for enforcing health and 

sanitary requirements for meat and live animrls at the border, and thus, would be sensitive 

to problems potentially relating to transshipments. 

We have enclosed two reports that specifically address the issue of transshipments. 

During 1995, the latest period for which data is available, there were no known incidents of 

transshipments of meat We trust that you will find these reports helpful. We look forward to 

the results of the investigation into these issues which are of great significance to the U.S. beef 

and live cattle industries, and to USDA As always, USDA is prepared to provide the r.rc with 

any appropriate resources and expertise that may be reqbired to assist in the investigation. 

Please contact me at your convenience if additional participation from USDA is 

warranted. 

Thank you for writing. 

Enclosures 

M-2 

AN EQUAL OPPORTUNITY EMPLOYER 

... ·- ,~ 

'• -
APPENDIXN 

URA SIDE AGREEMENTS BETWEEN 

THE UNITED STATES AND URUGUAY; 

AND BETWEEN THE UNITED STATES 

AND ARGENTINA 

N-1 
Geneva, 9 March 1994 

MEMORANDUM OF UNDERSTANDING 

RESULTS OF URUGUAY ROUND NEGOTIATIONS ON AGRICULTURE 

BETWEEN THE UNITED STATES OF AMERICA AND URUGUAY 

Uruguay and the United St.ates of America have concluded their bilateral negotiations with 

respect to agricultural products within the framework of the Uruguay Round of trade 

negotiations. Below are the results of that negotiation. 

The United St.ates Department of Agriculture (USDA) commits to engage in consultations 

with Uruguayan authorities and to make its best efforts to achieve a mutually satisfactory 

resolution of outstanding issues related to U.S. health and sanitary restrictions on Uruguayan 

beef. Once Uruguay is approved by the appropriate USDA authorities to ship fresh, chilled 

or frozen beef to the United States, the United States will increase the amount of the t.ariffrate quot.a for beef granted by the United States in its Uruguay Round Schedule of 

Conce,sions by at least 20,000 MT (boneless basis) and allocate the amount of the inc:re.ase 

to Uruguay. 

Tariffs and tariff-rate quotas 

The attached lists contain additional concessions exchanged between Uruguay and the United 

States of America. 

Mr. 

g~f~ David P. Shark 

(or the United States of America 

N-2 
\, 

~ I 

Geneva, 24 March 1994 

MEMORANDUM OF UNDJm.STMJDlNG 

RESULTS OF URUGUAY ROUND MARKET ACCESS NEGOTIATIONS 

ON AGRICULTURE BETWEEN THE UNITED STATES OF AMERICA . AND ARGENTINA . 

. . . . 

1. The Republit;: ·of Argentina and the United states of America 

have concluded. their bilateral neqotiations with respect to 

agricultural products within the framework of the Uruguay Round. 

of trade neqotiations. Below are the reslilts of ··that ·. nevotiation. 

2. The United States Government, throuqh the Department of 

Aqriculture (USDA), commits to.enqaqe in consultations with 

Argentine authorities and to Jmlke its best efforts to achieve a 

mutually satisf aotory resolution of· outstandinq issues related to 

u. s. heal th and sanitary restrictions on Argentine beef. .. . . , .. 

3. sanitary aqencies of both qovernments will establish a ·· · workinq group and arspecific agenda as soon as possible after-the 

Marrakecb Ministerial Meeting. 

4. .Once Arqentina is approved by .. the appropriate ·USDA . . ... · authorities to ship fresh, chil1ed ·or.frozen beef to tne United 

States, the United States will increase the amount of the tariffrate quota.for beef qranted Joy the Uniteq states in.its Uruguay· 

Round Schedule of concessions by at least 20,000 MT (boneless basis) and allocate the amount or the increase to Arqentina. 

feangts 1nd peanut prgd.uc~s 

5. In implementing its minimma access tariff-rate quota for: . peanuts the United States will allocate to.Arqentina 78% of the 

amount of such tariff-rate quota in a lDanner consistent with the 

reqUirements of Article XIII of the.GATT. Access under such. · quota may require an appropriate certificate of origin. The new 

allocations to Arqentina will."be_as follows: 

Year 

1995 

1996 

1997 

1998 

1999 

2000 

Volume 

26.341 

29.853 

33.365 

36.877 

40.388 

43.901 . 

N-3 
\ 

Arqentine-u.s. MOU 

24 March 1994 

Paqe 2 

6. Arqentina accepts that the United states will establish a 

tariff-rate quot• f cr peanut butter and peanut paste as part of 

its Uruquay Round market access off er on peanuts and that such 

tariff-rate q11ota will'include the following elements: 1} An inq11ota am.aunt for peanut butter and peanut paste (tariff line 

20.oa .. 11 .. 11) o"f 3.650 metric tons will be allocated to Arqentiha in the first year of impleaentation of the t1ruquay Round; 2) An 

additional in-quota amount of 1.600 metric tons will be allocated 

for developing countries which are included in the existing list 

of eligible countries under the General system. of Preferences 

applied. by the united statu on the data of t)lia Me:m.arandma of' 

Understanding (this allocation is in accordance with Paragraph 1 

of Article 15 of ·the Aqreement on Agricult'.U.re); ·of that amount 

750 metric tons will be allocated during the first year of 

implementation of the Uruguay Round and, sUbsequently, 850 metric 

tons will be distributed. on equal installments durinq the rest of 

the implementation period of the Round (1996-2000); 3) An . 

additional in-quota amount of 250 metric tons.will.be allocated 

to other countries1 4) The in-quota tariff rate will be fixed 

initially at the same duty level and reduced on the same scbedul'e 

as applicable to Canada under the bilateral Free Trade Agreement between Canada and the united States; 5) The over-quota tariff· 

rate will be uss.t and applied to all J>Etanut products in 20. os. ll 

as well as for. sh•lled peanuts in chapter 12. . . 7. Argentine :runner-type or Arqentine ground. nut kernel-type 

peanuts, and peanut butter and peanut paste manufactured from 

these peanuts will be eliqible tar entry into the United States 

under these provisions, assuming that the products meet the 

relevant u.s. standards. in· every case,. an appropriate certificate af oriqin will.be required. 

~beese 

I 

s. The government of the united states will grant to Argentina 

an additional quota of 2.000 metric tons of cheese (specified in 

annex 1) to be fully implemented from the beqinning of the 

UrugUay Round implementation period. These quantities will not 

be subject to reallocation without the consent of the government 

of Argentina. The qovernm.ent of Argentina may designate a u.s. 

importer for these quantities if it so chooses. 

9. Argentina will fully implement the tariff concessions listed 

in annex 2 on almonds, in-shell (080211); almonds, shelled 

(080212); walnuts, in-shell (080231); and wainut, shelled 

(080232) from the beginning of the implementation period. 

N-4 

·~. 
• 

!/}I/ ~b MON 17: 31 FA.I 

inriff1·and tm:i,f-rate qμota1 

Argentine-u.s. MOU 

24 March 1994 

Page 3 

10. The attached annexes contain additional concessions 

exchanged between A;qentina and the united States of America. · 

B.E .. 

for 

<:arlos Sanchez Arnau 

.,..-=-1"-lic. of Arqentina 

'·, ' 

N-5 

·xr. A:D.drew L. Stoler 

for the United states of, 

A:merica· 

• 

APPENDIXO 

RECORD OF UNDERSTANDING 

BETWEEN THE REPUBLIC 0 KOREA 

AND THE UNITED STATES ON BEEF 

MARKET ACCESS IN THE URUGUAY 

ROUND 

0-1 
UNITED STATES TRADE REPRESENTATIVE 

1·3 AVENUE DE LA PAIX 

, 1201 GENEVA, SWITZERLAND 

The Honorable Seung Ho 

Permanent Representative to GATT 

Republic of Korea 

Dear Ambassador Ho: 

I have the honor to confirm the following understanding reached 

between the deleqations of the Republic of Korea and the United 

states of America with respect to aqricultural products under the 

auspices of the Uruguay Round trade negotiations: 

1. Korea shall provide an annual combined base access quota for 

potato flour.and meal, tariff line HS 1105.lO, and potato flakes, granules and pellets, tariff line HS 11os.20, of 60 

MT. 

2. Consistent with the intention of the December 13, 1993 

Record of Understanding on Uruquay Round market access 

regarding ice cream mix powder, from January 1, 1995 Korea .. shall not apply a tariff higher than 40 percent to ice cream 

mix powder enterinq under tariff line HS 2106.90.9030. 

Consistent with the implementation schedule for agricultural 

products in the Uruquay Round, this tariff ceiling shall be 

reduced in 10 equal annual installments to 36 percent. 

3. Korea shall make its best efforts to expedite the final 

approval of the U.S. kiln-dried method for preventing the 

infestation of softwood lumber with pinewood nematode. 

4. Korea shall beqin immediate bilateral consultations with the 

United States to develop an approach to meet the 

phytosanitary requirements for exportinq apples from the 

United states to Korea. 

5. In accordance with the December 13, 1993 Record of 

Understanding on Uruguay Round market access, Korea shall 

provide duty reductions according to the attached schedules 

in Annex A. 

\<, For the tariff lines indicated in Annex B, Korea shall not 

apply ~ duty hiqher than the base rate used for calculating "credit." These credit base rates are indicated in Annex B. 

0-2 
I have the further honor to propose that this letter and its 

attachments (Annex A and Annex B) and your letter of confirmation 

in reply constitute a mutual understanding t>Eltween our two 

qoverruuents concerning the actions that the Korean Govern~ent has 

agreed to take with respect to importation of agricultural products into Korea. 

Andrew Stoler 

Deput;.¥ Chief of Mission 

Attachments 

0-3 
BEE[ 

QUOTA .PERCE.NT 

Y~R AMQIJNI DUTY MAB.K-llf SBS 

OORWE) (%) (%) <"> 

1993 99,000 20 100 15 

·1994 106,000 20 ( 95 20 

1995 123,000 43.6 70 30 

1996 147,000 . 43.2 (j() 40 

1997 167,000 42.8 40 so 

1998 187,000 42.4 20 60 

1999 206,000 42 10 70 

2000 225,000 41.6 0 70 

2®1 41.2 0 

2002 40.8 0 

2003 40.4 0 . 2004 40 0 

All balance-of ·payments resuictions on beef shall expire no later than December 31, 2000. 

in the yeat 2001, ti'leic ~hd..il be no quota, no mark-up, no Li'MU involvement. and complete 

private sector autonomy regarding product quantity, price, quality, and supplier. There shall 

be no government restrictions on product utilization. 

The current July J5, 1993 Record of Understanding (LJ7270) shall continue to apply except 

as modified to incorporate the provisions of the new understanding. 

,,,..---· ( '-• I I' • 

.. ..,, 

·-.. 

..,/ 

0-4 

4