November 24, 2008
US poultry producers and exporters want an extension of the six-year Russian tariff rate quota (TRQ) for imports that ends after 2009, and they are willing to support a trade reduction in return, said industry officials.
The current Russian TRQ for US imports is set at 931,490 tonnes for 2009. It will expire after that, but neither US producers nor Russian buyers are ready for that to happen, said Toby Moore, vice president for the US Poultry & Egg Export Council.
However, the Russian government is pressing the US to agree to a reduction in the 2009 quota, said the US government and industry officials.
The US portion of the Russian chicken import quota has been over 74 percent since 2004, sending 30 percent of all US chicken exports there.
The Russian government wants to lower imports as the country builds up its domestic production capacity, but that is no reason to do away with the TRQ completely after 2009, said US industry representatives such as Richard Lobb, spokesman for the National Chicken Council.
"Ultimately Russia still needs protein from other countries," Lobb said. "We obviously can't compete in the fresh chicken market over there, but there are still plenty of people on limited incomes that really need the frozen US product. So we hope they'll keep that in mind and allow trade to continue."
Government negotiators just began trying to work out a 2009 TRQ reduction deal, but industry leaders saw this situation coming months ago. Representatives of the largest chicken companies in the US, representing 90 percent of US production, flew to Moscow in July, said Moore at the US Poultry & Egg Export Council.
There the US and Russian industry leaders produced a memorandum of understanding that recommends there should be a quota for US poultry meat "in the coming years," but also recognises that: "The final decision on the key points of the partnership, agreed by the memorandum parties, will be taken by the government authorities of the Russian Federation and the Unites States of America."
Moore, summarising the need for the memorandum, said Russia wants to maintain some stability in their market for another few years until their domestic poultry production gets on track.
Since that July meeting, Moore said, the Russian Poultry Meat Market Operators have said they have been recommending to the Russian government an extension of the TRQ for three more years - through 2012 - with the understanding that US producers have agreed to support a government reduction in the 2009 TRQ.
The reduction of the TRQ for US chicken is the first step and that's why Russian officials visited the US Trade Representative offices on November 13 and 14. No agreement was reached last week during those meetings, said a USTR official, "but we anticipate another meeting soon."
And the pressure for a resolution increased several fold after Russia announced it was cutting its overall global TRQ for poultry by 300,000 tonnes.
That would drop the overall 2009 TRQ sharply from 1.252 million tonnes to 952,000 tonnes, seemingly necessitating a cut in the quota for US poultry, which was set at 74.4 percent of the total.
There are concerns here that Russia is also seeking to cut the TRQ for US pork in 2009 and that's something that National Pork Producers Council (NPPC) Vice President Nick Giordano said the US government should not allow.
Russia cannot change the pork quota unilaterally, which will be in violation of the 2004 US-Russia meat agreement, said Giordano.
US pork exports to Russia have slowed over the past couple of months because of a weakening of the ruble in relation to the US dollar and the global credit crunch, but trade was booming up until at least August.
By August, US pork exports to Russia reached 96,085 tonnes - nearly double the 2008 tariff rate quota of 49,800 tonnes allowed by Russia, according to NPPC data.
The 2009 TRQ for US pork is, as of now, scheduled to rise to 50,700 tonnes, but Russia has announced that it will cut its overall global pork TRQ.