Impacts Of The Uruguay Round Trade Agreement On U.S. Beef And Cattle Prices

The Uruguay Round trade negotiations completed in April 1994 reduced beef trade barriers. Trade barriers for beef products have historically been significant. The Uruguay Round essentially converts many nontariff barriers (quotas) to tariffs (tariffication), includes safeguards for import surges, establishes minimum access commitments, reduces domestic subsidy supports, and provides special tariff allowances for developing countries. These provisions, commensurate with a growing world demand for animal source proteins, will likely increase U.S. fed beef exports and ground beef imports. The United States is a major world producer as well as exporter of beef. In 1996, the United States represented 35 percent of world beef production (ranked first) and 28 percent of world beef exports (ranked second to Australia). U.S. quantity share of the annual world beef export market averaged 5.9 percent between 1980 and 1994 but has increased in recent years. In terms of beef and veal, the United States exports primarily higher-value beef cuts. The United States is the largest single-country beef importer. The U.S. annual quantity share of the world fresh beef import market averaged 16.5 percent between 1980 and 1994. U.S. beef imports primarily consist of lower-quality, manufacturing-grade (ground) beef which is primarily used by the fast-food service industry. The Uruguay Round Agreement will reduce trade restrictions gradually over an implementation period (1995–2000). Specifically, Japan is to reduce its beef tariffs and South Korea will increase its beef import quota by the year 2000. In 2001, South Korean import quotas will be replaced by a tariff. The European Union has agreed to reduce quantities of subsidized exports. In 1995, the United States replaced import quotas with a tariff and a tariff-rate quota. The reduction in trade barriers will increase U.S. beef imports and exports. Because U.S. beef imports are primarily ground beef and exports are primarily table cut beef, beef trade liberalization will have different impacts on producers and consumers of these products. In general, increased imports decrease the price of ground beef and increase per capita ground beef consumption. However, increased beef imports reduce nonfed cattle prices and slaughter. Increased exports cause the prices of table cut beef, fed cattle, and feeder cattle to increase. Per capita consumption of table cut beef declines slightly, and fed cattle slaughter and feeder cattle production both increase. Researchers have estimated that the Uruguay Round Agreement could increase U.S. beef imports by 6–19 percent and U.S. beef exports by 10–75 percent over 1990–1994 average levels. For example, the ground beef price could decline by $0.01–$0.04/lb from average 1990–1994 levels because of increased imports. Thus, the price of nonfed cattle (which generally produce ground beef) could decline by $0.71–$2.55/cwt. Conversely, because the United States exports primarily table cut beef, the table cut beef price in the United States could increase by $0.01–$0.09/lb. Increased foreign demand for table cut beef would cause the price of boxed beef to increase by $0.05–$0.10/lb and the price of fed cattle to increase by $0.62–$5.46/cwt relative to average prices received during the 1990–1994 period. B extension, increased demand for fed cattle would increase feeder cattle price by $0.61–$5.40/cwt over average prices received during the 1990–1994 period.