Maintaining

Competitiveness
in the face of
Globalization

Don Buhl
Past President
National Pork Producers Council

Law of Comparative
Advantage
• Under free trade, counties will export the
products that use intensively those factors
that are in relative abundance
• In other words we all come out ahead when
we specialize in what we do best and then
trade with each other
• For example, if a country has a relatively
large amount of land and capital then it will
export land and capital intensive products
• Many countries such as the U.S. the U.K
Singapore Hong Kong Singapore and Ireland
have used this law to their advantage
• Others such as Brazil, Argentina, Cuba, and
North Korea have fought these forces and
have fallen behind

1
 Share of World Population Share of World Arable Land

South America South America

1.80% 5.60% 4.00% 6.60%

Africa Africa
12.60% 12.60%

Other Asia
24.30%

Other Asia
34.20%
Former Soviet Union
5.10%

Former S
Europe
Vietnam 16
9.00%
0.40%
Japan
0.30% China
6.90%
USA and Canada
Vietnam 5.10% Mexico
1.30% 1.70%
Mexico
Japan 1.60% Europe
2.20% 9.10%
USA and Canada
China 17.20%
21.50%

What should the U.S.

Export
• We have abundant land and
enormous resources of capital,
we also have skilled people
• We should export products that
use these resources (i.e. grains
and meats) and import labor
intensive goods, i.e. textiles and
shoes

2
 U.S. Pork Exports
• In 2006, the United
States exported
1,262,499 metric tons
of pork valued at
$2.864 billion.
• This is a 9 percent
increase over 2005
exports in volume
terms and 8.7 percent
in value terms.

15 Years of Record-Breaking
U.S. Pork Exports
Volume (000 MT)
1400 + 452%
1200

1000 Pork Pork Variety Meats

800

600

400

200

0
1992 1994 1996 1998 2000 2002 2004 2006

3
 Pork Exports as a Percent Of
Domestic Production are Rising
18%
16%
• Exports accounted for only
14%
3% of domestic production
12% as recently as 1990.
10% • Exports have doubled in
8% the past 6 yrs to over 16%
6% today...
4%
2%
0%
1999
2000
2001
2002
2003
2004
2005
2006
2007

Top 10 Volume Markets for U.S.

Pork and Pork Variety Meat Exports-
2006 Mexico
Japan
Canada

RU 7% Mexico Korea
CH 7% 31% China/Hong Kong
Korea 8%
Canada Russia
Japan
11% 28% Oceania
C/S America
Taiwan
Caribbean

Source: USDA/USMEF

4
 U.S. Pork Exports
$437 million to $164 million to
Canada Russia

$1 billion to
Japan

$232 million to
South Korea

$558 million to $126 million to

Mexico China

$38 million to $62 million to

Taiwan Australia

U.S. Pork Exports

Loins and
Tenderloins
to Japan
Bellies and
Hams to
Butts to
Mexico
South Korea
Picnics and Variety
Trimmings Meats
To Russia to China
Boston Loin
Butt U.S.
U.S. Pork
Pork Ham

Picnic Belly

5
 Overall U.S. Trade
• 2006 exports to the nine countries with which the United States has entered
into new free trade agreements since Trade Promotion Authority was
restored in 2002 grew by a remarkable 19% over the previous year (roughly
50% faster than the overall growth in U.S. exports).

2006 U.S. Goods Exports

42%

FTA Partners
58%
Non-FTA Parnters

Current FTA Partners: Australia, Bahrain, Canada, Chile, El Salvador, Guatemala,

Honduras, Israel, Jordan, Mexico, Morocco, Nicaragua and Singapore

U.S. Pork Exports

1,400,000
U.S. Pork Exports
U.S. - Canada FTA
U.S.-Taiwan
Pork Deal
China and Taiwan
WTO Accession
1,200,000
NAFTA
Russia Pork
(Mexico)
1,000,000
TRQs
WTO Uruguay Round
Australia FTA
Metric Tons

(Japan & South Korea)

800,000

600,000

400,000

200,000

0
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90

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99

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01

02

03

04

05

06
19

19

19

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20

Year

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2007 Trade Policy Issues
• Multilateral Trade Initiatives
– WTO Doha Round
– WTO Accession Agreements
• Russia
• Kazakhstan
• Free Trade Agreements (FTAs)
– Peru
– Colombia
– Panama

2007 Trade Policy Issues

• FTAs (cont)
– South Korea
– Malaysia
• Bilateral Issues
– EU SPS Barriers
– Mexican Trade Cases
– Canadian Carbodox Issue

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 South Korea
• By the end of the period total U.S. exports are
almost 600,000 tons (CWE), this is about twice
the current U.S. export level to Japan
• The U.S. has never had preferential duty free
access to a heavily populated Asian country
before
• South Korea would absorb 5% of total U.S.
pork production
• The sudden loss of this market, once fully
established in 2020 would cause live hog
prices to fall by 10%

Free Trade Agreements

Peru TPA
• According to Iowa State University
economist Dermot Hayes, PTPA,
when fully implemented will cause
live hog prices to be 83 cents
higher than would otherwise have
been the case. That means the
profits of the average U.S. pork
producer will expand by 7 percent.

8
 Free Trade Agreements
Colombia TPA
• According to Iowa State University
economist Dermot Hayes, the
Colombia agreement, when fully
implemented, will cause live U.S. hog
prices to be $1.63 higher than would
otherwise have been the case. That
means that the profits of the average
U.S. pork producer will expand by 14
percent, based on 2005 data.

Free Trade Agreements

Panama TPA
• Negotiations completed mid-December 2006 but
the agreement has not yet been signed.
• According to Iowa State University economist
Dermot Hayes, the Panama agreement, when fully
implemented, will cause hog prices to be 20 cents
higher than would otherwise have been the case.
Therefore exports to Panama will be worth
approximately $20.6 million to the U.S. pork
industry in additional revenue than otherwise
would have been the case.

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 Bilateral Pork Trade Issues
Mexico
U.S. Pork Exports to Mexico
50,000
NAFTA Phase-In Period
45,000

40,000

35,000
Metric Tons

30,000

25,000

20,000

15,000

10,000

5,000

0
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92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07
19

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20
Year (monthly)

U.S. Pork Export Forecasts (000 MT)

1,600 ASEAN
Caribbean
1,400
C/S America
1,200 Taiwan
1,000 Oceania
800 Europe

600 Russia
Korea
400
HK / China
200 Canada
0 Mexico
2005 2006 2007 2008 2009 2010 2011
Japan

10
 U.S. is the World’s Largest Pork Exporter
Over 26% Share
100% Others
90% China
80% Brazil
70%
60% Canada
50%
40%
EU-25
30%
20%
10% United States 27%
18%
0%
2000 2001 2002 2003 2004 2005 2006 2007 (f)

Source: USDA

What will the next 5 years bring?

• Well-managed operations will survive
• Lower profit margins but not much red ink
• How many will give up hogs for cash grain?
• The U.S. hog industry will be smaller than it
would otherwise have been
• DDGS gives beef and dairy (?) an advantage
• Exports will be threatened if we
import corn

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Exports are vital to U.S. Pork
Industry
• Eliminate trade barriers
• Watch regulations
• Quality product
• Maintain competitive position

Thank You

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