Saturday, February 18, 2012

Beef Bull

Don Shapiro of the American Chamber of Commerce writes at Brookings on The Beef Beef that is impairing progress in US-Taiwan relations, with background:
Although it considered itself well-versed on the beef issue, an American Chamber of Commerce in Taipei delegation that visited Washington last autumn was still surprised by the vehemence of the criticism of Taiwan it heard from American officials on the subject. One high-level official described Taiwan flatly as “an unreliable trading partner,” for example, while another said the disagreement over beef had “cast a pall” over the entire bilateral relationship. Beef had taken on a symbolic importance far out of proportion to its monetary value of less than 1 percent of U.S. exports to Taiwan.

The background is that the two governments signed a protocol in October 2009 lifting most of the remaining restrictions on U.S. beef products that Taiwan had put in place following the discovery of a case of mad cow disease in 2003. Just two months later, however, the Taiwan legislature – in which Ma’s Kuomintang controlled some three-quarters of the seats – enacted a law that reversed some of those very provisions. Despite resentment at what it regarded as Taiwan’s reneging on the protocol, the U.S. government by early 2011 was willing to start preparations to resume TIFA talks. Then another obstacle arose when Taiwan rejected some shipments of beef found to contain traces of the leanness-enhancing feed additive ractopamine. Though ractopamine, widely used by American ranchers, had long been a banned substance in Taiwan, inspectors had not previously tested for its presence. Random inspections, and the rejection of many shipments, have continued over the past year, and the uncertainty has caused some big buyers such as Costco to switch to other sources of supply.

Whenever questions were raised last year about finding a solution to the impasse, Taiwan officials responded that nothing could be done before this January’s elections, for fear of sparking protests from consumer and farming groups that could escalate into a campaign issue. Although no promises were made about what might happen after the election, this month has seen a flurry of public comments from government officials and scholars that appear to be preparing the groundwork for a change in policy. Inter-agency discussions are currently taking place among the Council of Agriculture, Department of Health, and Ministry of Economic Affairs.

The likely way forward would be to replace the current zero tolerance of ractopamine with a defined limit on the amount permitted. In fact, in 2007 Taiwan had notified the World Trade Organization (WTO) of its intention to set such a Maximum Residue Level (MRL), though it never followed through. But a major question mark would be whether Taiwan would propose – and the United States agree to – a compromise in which an MRL would be set for beef but not pork. Taiwan has no beef industry to speak of, but hog-raising is big business, and the pig farmers, who are politically well organized, are adamantly opposed to opening the door to competition from American pork.

Although the U.S. government and meat industry insist there is no scientific basis for a total ban on ractopamine, the Taiwan public may not be so easily persuaded, especially after several major food-safety scares in recent years. And the political delicacy of the whole issue was driven home two years ago when Su Chi, one of Ma’s most trusted lieutenants, was forced to resign as head of the National Security Council after his efforts to resolve the matter through the protocol with the U.S. were undercut by the legislature. It would therefore require a measure of political will and some skillful maneuvering to reach a solution, though acting four years before the next presidential election is perhaps the best time to risk taking a political hit.
The reason the public may not be so easily persuaded is that ractopamine is banned in 150 countries, including the EU. This suggests that there is no reason the US couldn't fall in line with the world and ban the stuff, thus improving the healthiness of its food products, opening up new markets, and removing a potential trade issue, but that would be too intelligent.

As Shapiro notes, the use of ractopamine also makes it easy for local pork producers to argue that US pork should be kept out of the market. This means that a proposed compromise, setting a defined limit on ractopamine exposure, may fail because pork producers would demand zero tolerance (not that local pork producers mind inundating locals with their untreated pig waste but god forbid we have trace amounts of ractopamine), meaning that the beef issue would simply be replayed over pork.

Fortunately the US has not held the beef issue against Taiwan in other areas. Arms, for example. Taiwan was nominated for the visa waiver program, but an extradition treaty has stalled since it would mean that Taiwan would have to hand over criminals residing in Taiwan with US citizenship -- who might also have Taiwan citizenship.

Shapiro lists some of the areas where the US and Taiwan could make progress, one of which is IP protection, where China once again rears its mercantilist head: apparently US business secrets are stolen by Chinese firms by poaching Taiwan employees of US firms in Taiwan.
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Lorenzo said...

I saw a page in Google+ just the other days. A research compared the subsidy each food category (in the pyramid chart) get from US government with the amount recommended for daily meal. Beef and meat industry get the most from US government but meaf is not so much favore for daily meals.

Anonymous said...

Off-topic, but I wrote for Manga Bookshelf a piece called "The Geeky Heart of Taipei" -

-Sara K.

Willy said...

I remember they allowed US chicken / turkey products in back in the late 80s caused a huge uproar amongst chicken farmers in Taiwan back then. Vincent Siew (then head of foreign trade bureau) got an egg on his face in one of these protests. Yet chicken farming continued to thrive in Taiwan until this day. Consumers aren't stupid - whats wrong with letting the free market sort things out by itself? Its sad that Taiwanese consumers can't enjoy USDA prime dry aged steak like Americans - its some of the best tasting meat in the world!!!

Griffin said...

This is ridiculous that the agricultural lobby in the US is being allowed to drive US-Taiwan policy. While Obama and the US Navy get a bit of a win with a new permanent base in Darwin, Australia, and amid all the grand talk of refocusing the military on China, the career diplomats of the State Department believe it is their utmost mission to sell Taiwanese American beef raised with pharmaceuticals. This is utterly Linsane.

Anonymous said...

I'm a little disappointed in the Commonwealth article as well as your highlighting of it. So somehow the fact that Chinese workers are demanding and earning higher wages is a crime? Right, because the profits of Taiwan business-owners trump the welfare of ordinary Chinese.
Please focus on passages such as the one below from that article.

As Liu describes it, "early on, Taiwanese companies only made money off China's 'social capital,'" with the whole of Chinese society undertaking the social costs of the tax avoidance, environmental pollution and underpayment of social welfare contributions that allowed Taiwanese businesses to operate.

Michael Turton said...

So somehow the fact that Chinese workers are demanding and earning higher wages is a crime? Right, because the profits of Taiwan business-owners trump the welfare of ordinary Chinese

I only linked to the article and my comments take no position on it. It discusses an issue I've commented on before and I'd like to come back to later as the situation develops -- Taiwanese firms moved to China so that they could preserve their boss-centric, worker exploitative operating style. Now that edge is eroding as wages rise and workers get more power. I'm point to a fact, not making a judgment about it.

But lets not blame Taiwanese firms entirely. Foreign firms exploit chinese workers because the government permits it and encourages it as part of its development strategy.


Anonymous said...

Michael, you're right, I shouldn't have criticized you in the previous post.
Actually it's media articles like that very Commonwealth one that have a very biased view toward rising Chinese wages, almost as if somehow it's a tragedy that ordinary Chinese workers can earn a little more than before.

For examples, just look at some of these phrases:

"with the long-established Taiwanese companies left no alternative but to retreat to the sidelines, reduced to the role of rent collectors. As this scenario plays out, it's almost enough to make a guy like Tsai Cheng-fu weep."

"Rapidly rising wages in China have been squeezing the life out of Taiwanese companies there, a dilemma that profoundly touches Tsai..."

This isn't the first time I've seen shady anti-China writing in Commonwealth, which is a shame because it's usually a good magazine.