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Hog Producers Initiate Action to Reduce Threat of Future Trade Action
Farmscape Staff

Hog Producers Initiate Action to Reduce Threat of Future Trade Action

Farmscape Article 1773-April 9, 2005

 

Following its successful effort to abolish U.S. duties on imported live Canadian swine, the Canadian pork industry is promising to work toward improved relations among Canadian and U.S. producers in an effort to avoid similar future trade actions.

 

ITC Finds Live Canadian Swine Do Not Injure US Producers

On Wednesday, in a unanimous 5-0 decision, the U.S. International Trade Commission (ITC) issued a final determination that imported live Canadian weanling pigs, feeder pigs and slaughter hogs imported into the US do not harm American producers. That ruling effectively repeals U.S. antidumping duties that were imposed by the Department of Commerce (DOC) in October and then revised in March.

 

Duties Resulted From US Action Launched Over One Year Ago

The import duties were the result of countervail and antidumping investigations launched by the DOC in response to petitions filed in March, 2004 by the Des Moines, Iowa-based National Pork Producers Council (NPPC). In its complaint the NPPC alleged illegally subsidized live Canadian pigs being dumped into the US were depressing the U.S. market causing harm to American producers. Although the Commerce Department found no evidence of illegal subsidies and threw out the countervail action, it did find evidence that Canadian pigs were sold into the U.S. at below their cost of production and imposed antidumping duties.

 

As a result of the International Trade Commission’s final injury determination, the action ends and the collection of duties will stop later this month, once the ruling has been formally communicated to the Department of Commerce and, in turn, it instructs customs offices to liquidate entries and issue refunds. An estimated $25 million in duties, held on deposit, will be returned to the importers of record, with refunds expected within approximately three months.

 

Ruling Expected to Boost Canadian Live Hog Prices

Brad Marceniuk, industry and policy analyst with Sask Pork, expects the ruling to have a positive effect on Canadian hog prices. “The removal of the dumping duty will be positive for Canadian hog prices as the basis between US and Canadian hog prices is expected to narrow over the coming weeks,” says Marceniuk.

 

“With small growth in hog production estimated for the US and Canada in 2005, slaughter capacity and demand for pork will continue to be key factors in maintaining strong hog prices for 2005.” Marceniuk says the value of the Canadian dollar will also be a determining factor in Canadian hog prices but the Canadian dollar has been stable and is not expected to change significantly in the next few months.

 

Similar Trade Action Unlikely for At Least One Year

The legal firm that headed Manitoba Pork Council’s efforts to overturn the duties says further similar actions are unlikely for a least a year.

 

Daniel Porter, who headed the team from Washington, DC-based Willkie, Farr and Gallagher, says, “Legally they can launch a new case at any time. Legally they could walk in tomorrow with a whole new petition. Practically though, with respect to the International Trade Commission's injury analysis, they would have a very difficult time. Practically our experience is, when petitioners come back again, they wait at least a year.”

 

“Since the swine industry is cyclical, right now the expectation is 2005 will be good and we won't start seeing the down part of the cycle till 2006. They need to get at least a couple of quarters of depressed prices and profitability so I would be surprised if they filed earlier than the middle to fall of 2006. As a practical matter, I think it would be difficult to convince the ITC that enough has changed to change their determination but, by then, if they wait a year, they can say "it's been a whole year, there's been a lot of change," and they could re-file at that time.”

 

Porter says the fact that the ruling was unanimous is quite significant and makes the prospects of a successful appeal unlikely. “If you go back and look at prior cases you will see, especially when the exporters win, it's not usually unanimous. It's usually 4-2, maybe sometimes when there's six commissioners 5-1 or 4-1 or something. The fact that we got all five commissioners indicates they thought our case was quite strong. The reason it's important is because it will be very difficult for the US industry, the petitioners to appeal to the court and get it overturned.”

 

He says when the decision is 4-2 the court will often see merit in reviewing the decision but the idea that a court would overturn a unanimous determination is very unlikely.

 

Canadian Producers Committed to Improved Canada-U.S. Cooperation

Canadian Pork Council President Clare Schlegel says, with the ITC decision now behind them, Canadian producers can get back to the business of farming and of working with their counterparts in the U.S. to make the North American industry a larger success. He emphasizes that understanding is critical and is encouraging individual producers to “encourage and have relationships with individual producers in the United States. I think state organizations and provincial organizations need to relate to each other and we will continue to build our relationship with the National Pork Producers Council. It's strong right now. We have a number of joint efforts that we're working at together. We meet twice a year and that will continue.”

 

Manitoba to Initiate Cross Border Dialogue

Manitoba Pork Council is already taking concrete steps to expand the level of dialogue between Canadian and U.S. pork producers in an effort to head off future trade actions.

 

Chair Karl Kynoch says, “You've got to remember that this isn't over. We've been victorious in this one but there's always the risk of future trade actions. The one thing we're going to move forward in trying to prevent that is more trade advocacy.”

 

Adding that April 12-14 will see himself and Council’s General Manager, Andrew Dickson, heading to Nebraska, Iowa and Minnesota to meet with the state producer organizations. “We're actually heading to Nebraska, Iowa and Minnesota. We will do a short presentation there but our goal is really to get them talking to us and asking questions of us.”

 

“We have a lot of producers on both sides of the border doing trade back and forth, like selling the little weanlings to producers in the US. They have the benefit to feed them there with the cheaper feed grains. They have more access to packers down there.”

 

“We have to get a better understanding of the industry on both sides of the border and show why this expansion is there and we have to get a better understanding of what the risks are of putting these trade restrictive duties in place. I guess, in all, we need to build a relationship and a better understanding with our North American producers.”

 

CPC Confident ITC Determination Will Help Smooth Relations

Schlegel expects the ITC ruling to encourage producers to continue to think in terms of an integrated U.S.-Canadian market. “The facts are going to work in our favor in terms of encouraging the U.S. industry to firstly to not appeal this decision hopefully. Secondly that, with the weakening U.S. dollar, the strengthening Canadian dollar I believe that the competitive edge has swung back to the American hog industry thus you've see growth last year. You've seen major exports.

 

“I think the numbers, over time if they can be patient and wait for them, will indicate the U.S. industry will start to grow perhaps. I would expect the Canadian industry to plateau and that would then allow American farmers to understand the Canadian industry does in fact respond to market signals,” concludes Schlegel.

 

Farmscape Staff

Keywords: tradecountervailantidumpingmarketprice
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