November 15, 2010

China's traceability request poses barrier to US beef talks

Traceability of US beef exports to the cattle from which that beef comes and the farms where those cattle were raised is one among China's 22 conditions that may pose the greatest hurdle in the countries' bilateral talks.

China is demanding that exported cattle must "have a complete record that ensures trace back to the cattle's birthplace," according to a translated copy of the list of demands, which were rejected by the Bush administration but which the Obama administration is now weighing. China currently does not accept any US beef exports after an outbreak of Bovine Spongiform Encephalopathy in the United States.

Industry groups are particularly worried about the traceability requirement because the US does not have a mandatory traceability system in place. The USDA last year dropped its efforts to put such a mandatory system in place, partly due to the opposition of ranchers.

At the same time, other beef-producing countries like Canada and Australia already have traceability systems in place. Some US packer groups, such as those represented by the American Meat Institute or the National Meat Association, fear that failure to move ahead on traceability could mean the loss of export sales, sources said.

While the US does not have a national mandatory system, individual beef packers can choose to pay a premium to producers in order obtain full information on cattle history. Some packers do this to serve higher-end niche US markets, and also to satisfy some overseas purchasers, sources said.

However, a requirement by China for full traceability could complicate efforts to export beef to that market and impose extra costs on US producers, making it uneconomic to ship to China, sources said.

USDA originally favoured a national traceability system in order to protect human and animal health. For instance, such a system would allow USDA to trace a diseased cow back to its herd of origin within days, and would also enable USDA to determine with which other cattle a particular cow commingled, one source said.

However, USDA last year scaled back its plans and is now in the process of developing a scaled-back traceability system. Sources disagreed on whether this more modest system would meet Chinese demands on traceability, but agreed that such a system will not be implemented in the US for many months at least.

That system, a proposed rule for which could come out by next April, would only cover cattle 18 months or older that cross state lines. Moreover, it would only allow the federal government to trace cattle back to its state of origin, at which point state authorities could trace it back to a more specific location, one source said.

USDA is in the process of reviewing China's demands, including on traceability, in order to whittle down the list by identifying China's key priorities, according to a USDA spokesperson. One source said USDA is hoping to have a sense of Chinese priorities by the next Joint Commission on Commerce and Trade (JCCT) meeting in December.