Free-Trade Agreements Worry Poultry Industry

The chicken industry is keeping an eagle eye on what the United States government is doing with foreign free trade agreements.

Perhaps no corner of the country is impacted as dramatically as Northwest Arkansas each time the Bush Administration negotiates such a pact that includes poultry. What takes place in Central America, South America and Asia could affect businesses in Springdale, Siloam Springs and Decatur.

An announcement in December that the United States and Chile had reached an agreement on a free-trade accord has been viewed by some in the poultry industry as a threat to business as they know it today. The pact is a possible first step in creating a 34-country Free Trade Area of the Americas by 2005 that then-President George Bush Sr. began discussing in 1990.

According to the Poultry & Egg Export Council, the Free Trade of the Americas would eliminate tariffs on about 75 percent of agricultural products traded between the United States and Chile within four years, and it would phase out duties and quotas on sensitive products over 12 years. Poultry is considered a sensitive product.

Watched especially close will be how the U.S. governs imported poultry. While Chilean officials have installed a zero-tolerance salmonella policy, many Central and South American countries do not face the strict standards the United States puts on its poultry industry before a chicken actually makes it to the supermarket shelf.

“If our government holds [other countries] to the same standards, there will be no chicken from Brazil and others because their standards are not as strict,” said Bill McClellan, vice president/sales and marketing at George’s Inc. in Springdale. “All of our chicken has to be USDA inspected. The USDA inspects every chicken and every hog. Now, if you get into fruits and vegetables that’s a big gray area because they’re not inspected specifically by the USDA. They only do spot-checking with fruits and vegetables.

“If I was looking for one country that would really hurt the situation here, it would be Brazil. Brazil is a major competitor. They could be a major problem for us if they bring their product into the United States. But I don’t think that’s going to occur unless we lower the standards for them. And if they do that there’s going to be an upheaval in this country like you’ve never heard before.”

However, some industry officials believe the costs for a country such as Brazil — with two major poultry companies — to upgrade to USDA standards would be minimal considering the profits it would receive in return for getting into the U.S. market.

The beef and pork industries are accustomed to competing against imported meat, but this could all be a new ball game for the people in poultry.

The chicken producers in the United States are having a difficult enough time competing against themselves. Revamping efforts have helped, but there continues to be a surplus of chicken. The export market has suffered major setbacks, particularly in Russia, and likely will never be as solid as it once was. And the average yearly consumption of chicken by U.S. citizens is already at an all-time high.

There will have to be cuts somewhere regardless of whether or not the free-trade pacts include poultry. In an ironic twist, technology has caused the U.S. market problems because high-tech poultry houses keep the birds’ death rates down in the harsh summer and winter months.

There are numerous other free-trade agreements that could come into play, including NAFTA (North American Free Trade Agreement), CAFTA (Central American Free Trade Agreement) and the Australia Free Trade Agreement.

“There is a lot of concern that agriculture may gain little and give up a lot if our negotiators don’t put a high priority on addressing agricultural trade barriers,” said Rob Robertson, vice president of governmental relations at the Farm Bureau.

Natural Industry

In Arkansas, one in every three jobs is directly or indirectly associated with the agricultural industry. Northwest Arkansas is home to several poultry companies, including giant Tyson Foods Inc. of Springdale, George’s, Peterson Farms Inc. of Decatur and Simmons Industries of Siloam Springs. Those companies have spurred many food brokers in the area. Also, the trucking industry is tied closely to the area’s chickens.

Poultry and poultry products make up Arkansas’ second largest agricultural export — $278 million in 1999 — trailing only rice at $466 million. More than 18,000 Arkansas citizens hold jobs related to agricultural exports. Arkansas ranks 10th nationally in agricultural exports — about $1.2 billion in 1999.

So if free trade becomes as free as possible, Arkansans will have to make some major adjustments.

“I don’t think some people realize how much the agriculture industry contributes to the state’s economy,” said Walter Bottje, interim director of the Center of Excellence for Poultry Science at the University of Arkansas.

In fact, 12.3 percent of Arkansas’ gross state product comes from the agriculture sector, the highest in all facets in the United States. The U.S. average is 4.6 percent.

Bottje said low labor and shipping costs and even lower environmental standards of some countries would make it almost impossible for the U.S. poultry companies to compete with imported poultry.

Other Factors

Poultry companies such as Tyson Foods could also be affected by the proposed agreement between the United States and Mexico that will extend trade protection of Mexico’s $2 billion chicken industry. The proposal was born from complaints in Mexico that NAFTA was hurting that nation’s farm sector.

McClellan said NAFTA has never worked as promised.

“We shipped as much [to Mexico] before as we have since,” McClellan said. “All the importation tax in Mexico was supposed to be lifted this year, and they haven’t done that. And all they do is come up with some phony ruling that bans you. We’re supposed to be going in there with free trade, but they keep banning us one way or another.

“Most of the free trade agreements are not worth it. If it’s good for you, [other countries will] ban you. They’ll say we had an outbreak of lysteria or something somewhere in the U.S. so they’re not going to take our chickens. And our government’s always just caved in to them.”

A key for U.S. poultry companies could be expansion of poultry production in eastern China similar to what was done in Japan.

“There’s a lot of interest in China, and there is a mass of people there,” Bottje said. “If each person increases his or her consumption by one chicken per year, that’s a lot of chicken.”

Bottje said the UA has yet to change its advice to poultry science students.

“Not at this point,” Bottje said. “We encourage students find their niche and what their interest is in. But, we used to say all along that a good language to learn was Spanish. Now, there’s a subtle change in the wind. They might want to start learning Portuguese.”