Ruffled feathers: U.S. escalates fight over China's poultry penalties

McClatchy NewspapersSeptember 20, 2011 

WASHINGTON — The Office of the U.S. Trade Representative brought an unfair trade complaint against China on Tuesday for allegedly locking U.S. poultry exports out of the world's second-largest economy, the latest action in a widening gulf between the two trading partners.

"Let me be clear, the United States does not arbitrarily seek disagreements with China. Nor is it our desire to be disagreeable," Trade Representative Ron Kirk said, urging China to "live up to its commitments and play by the rules to which it has agreed."

Lawyers filed an official complaint to the World Trade Organization, seeking consultations within 30 days. If that fails to yield capitulation, then within 60 days the United States could seek a formal arbitration through a dispute-resolution panel.

The USTR alleged that Chinese policies threaten poultry processing jobs, of which there are 300,000 nationwide. Industry officials said that China has harmed poultry producers from Delaware to Texas and across the Southeast, including the Carolinas and the Gulf Coast.

The complaint comes on the heels of similar actions by the United States over the past year to protest alleged Chinese subsidies of green technologies, Chinese restrictions on U.S. credit card companies and U.S. exports of high-tech steels.

In a speech to businessmen in Beijing on Tuesday, the new U.S. ambassador to China, former Commerce Secretary Gary Locke, said bluntly that relations have soured.

"China's current business climate is causing growing frustrations among foreign business and government leaders, including my colleagues in Washington," Locke said.

The USTR action also comes at the start of a U.S. presidential campaign in which Barack Obama and the Republicans who want his job all vow a tough line with China for its trade and currency policies.

That explained Tuesday's rare show of bipartisanship, when in a statement the top two Republicans in the House of Representatives with jurisdiction on trade voiced support for the USTR action.

"I applaud Ambassador Kirk for taking this important step to enforce our trade rights in China. Reopening the Chinese market for U.S. chicken exporters has the potential to support thousands of good U.S. jobs," said Ways and Means Committee Chairman Dave Camp, R-Mich.

Texas Rep. Kevin Brady, chairman of that panel's trade subcommittee, added that "China's action to block U.S. chicken exports has gone on for years now, and I commend Ambassador Kirk for beginning a WTO dispute settlement action to resolve this long-running trade dispute."

The USTR alleged that unfair trade penalties levied by China on Sept. 26, 2010, have harmed U.S. poultry exporters Tyson Foods Inc., Pilgrim's Pride and Perdue. The penalties have effectively handed the U.S. market share to competitors such as Brazil and Thailand.

Kirk and his team said that about $1 billion in exports were affected, but statistics from the USA Poultry & Egg Export Council show the amount is under $700 million.

U.S. poultry exports to China in 2008 were valued at $676.7 million and $647.3 million in 2009. Export values dropped to $135.4 million in 2010 amid China's imposition of penalties. Through July this year, there were paltry poultry exports to China, valued at just $37.2 million.

The USTR's complaint centers on the methodology used by China to determine that U.S. exporters were selling at less than normal value.

"The China case used 'average cost of production' to determine normal value rather than using domestic U.S. market prices for comparable sales as is customary," the USA Poultry & Egg Export Council and National Chicken Council said in a joint statement.

There's a bigger issue at stake, said William Reinsch, president of the National Foreign Trade Council, which advocates free-trade policies.

"While the complaint focuses correctly on the details of this particular case, it appears that the larger issue is the extent to which the Chinese actually conduct a fair, impartial, fact-based investigation versus the extent to which they use these cases — and determine the outcomes_ based on achieving political or trade policy objectives of their own," he said.

A senior USTR official, who briefed reporters on condition of anonymity in order to discuss the case more freely, said that China has publicly stated that it would use trade penalties to retaliate against U.S. trade actions. The official said China has repeatedly "misused" its legitimate authority to probe unfair trade.

Penalties it imposed last year on U.S. poultry were widely seen as retaliation for U.S. moves against imports of steel products and tires from China. But there's also a less-known reason for China's unhappiness, one that's grounded in legitimate concern.

China has been trying to export cooked poultry products to the United States for several years, but after investing time and money in order to meet U.S. Department of Agriculture standards, it saw Congress pass legislation that yanked funding for the USDA's share of the effort after several high-profile problems with tainted food products in China.

(Tom Lasseter contributed to this article from in Beijing.)

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