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The Long Road To Trading Beef In East Asia

The globalized economy doesn t lend itself to doing things slowly. We wake up some morning and our customers on the other side of the world have created trade barriers which change the game completely. So we are not inclined to sit back with a cup of tea and reflect on how things have gone over the decades.

But that is exactly what the fascinating career of John Longworth compels us to do. Longworth, an emeritus professor in agricultural economics at the University of Queensland, has been studying agricultural trade in East Asia for 40 years in a career that has taken him from government offices in Tokyo to 3,000-metre altitude villages in China. The story of how the fruits of his research slowly floated upwards to decision-makers in Australia is an instructive one for Canadian trade officials.

When the NIKKEI, Japan s national business newspaper, runs a photo showing Japanese elementary school children wearing Meat and Livestock Australia aprons, enthusiastically learning about food safety in the classroom, it is tempting to be resentful that the Australians waltzed into the vacuum created by the 2003 BSE crisis in North America. However, Longworth s experience reminds us that over the past 40 years, Australia has been forced to do the same kind of firefighting we have been doing in East Asia over most of the past decade.

He first went to Japan in 1975 as a visiting professor at Kyoto University where he reactivated an extensive set of Asian academic contacts established during a sabbatical at the University of Chicago in 1969. He was in Kyoto because in October 1973 Japan had placed a complete embargo on the import of beef from Australia, which flattened the Australian beef industry. Exports to Japan dropped from 140,000 tons a year to zero overnight and prices at home fell by 60 to 70 per cent. Many Australian beef producers, including feedlots in which the Japanese had invested money, went out of business. Longworth wanted to figure out what the heck was going on.

To understand the Japan beef story, it is worth first stepping back to try and understand the research Longworth was doing in Japan back in the 1970s. He might term it trade policy intelligence, as distinct from market intelligence.

Market intelligence involves finding out how consumers both domestically and overseas want stuff graded, packaged and distributed. The private sector can make money by gathering market intelligence. But trade-policy intelligence is gaining an understanding of the historical, cultural, or socioeconomic phenomena that lie behind the trade policies that other nations impose. This kind of information is a public good, the gathering of which needs to be undertaken collectively by exporting industry groups and/or the government of an exporting country, in Longworth s view.

Nowhere was trade-policy intelligence more crucial than in Japan in the 1970s. When Australian beef exports were cut off in 1973, the Japanese government said it was because of the threat they posed to small beef producers in Japan. But in 1975, when Longworth visited many of these small beef producers he found they were largely rice growers who sold one or two cattle every other year. There were very few specialized beef producers to be protected. So he started asking questions of his Japanese colleagues; then he rephrased the questions and asked them again until finally, a clearer picture began to emerge.

The beef market was actually closed because Japanese wholesalers and supermarkets were importing Australian beef and selling it through the newly emerging supermarkets in competition with small retail butchers. These corner-store butchers were all from the burakumin class, an underclass in Japan which once controlled undertaking, basketry, and of course abattoirs and the beef-distribution industry. The burakumin were very sensitive to the threat that supermarkets posed to their beef markets, particularly in the retail shops in the Kansai region, which included higher beef-consuming areas of Japan such as Kobe and Osaka. The Japanese government knew it had to protect this vulnerable and, behind the scenes, very politically powerful group.

These insights started to bear fruit in the last half of the 80s when Australian negotiators who went to Japan armed with Longworth s 1983 book BEEF IN JAPAN were startled to find their Japanese counterparts sitting across the table with a Japanese translation of the same book. This led to a very worthwhile set of negotiations, because now everyone was on the same page. The Australians could ask the Japanese if the book had it right; if they had it right, then the Australians could ask the Japanese what could be done about it. Instead of one side demanding that quotas be relaxed and the other side saying they couldn t relax them, the two parties talked about why the quotas were there, and why they had to be relaxed slowly.

If you look at the historical and cultural framework through which agricultural policies in importing countries are developed, you can understand what the constraints are to modifying them. Understanding what makes those hard constraints hard is the first step to trying to negotiate them away, Longworth observes.

China unveiled

The story of how Longworth and his collaborators began studying the beef industry in China and how Meat and Livestock Australia got a toe-hold in Beijing and Shanghai is another story with another set of insights.

Longworth s early research interests in China initially had nothing to do with beef. He himself had grown up on a wool farm, becoming a certified wool classer from Sydney Tech., and in the 1980s the owner of a large sheep farm. So it was natural that his eye wandered to the emerging wool trade between China and Australia.

During the 80s, China had gone from virtually no trade to being a massive importer of Australian wool. This intrigued Longworth as China was also home to a sheep population two-thirds that of Australia that were all producing wool. Even more interesting, the wool was raised in the predominantly Muslim areas of Northwestern China. Here we have a minority group not unlike the burakumin in Japan, Longworth says, producing poor-quality wool in direct competition with ours. The Chinese may well put embargoes or significant barriers on trade to protect their minorities in the remote areas.

Longworth first took his doomsday story to the Australian Woolgrowers Corporation, the pinnacle body of the wool industry in Australia, trying to sell them on the idea of the need for policy intelligence research in China. The reply was what you might expect. The Chinese are totally dependent on our wool industry, and they can t produce wool like us, he recalls the reply being. We aren t interested in funding your sort of research.

That was until late 1989 when China drastically curtailed its wool imports and thus killed off Australia s Wool Reserve Price and Buffer Stock Scheme which ultimately cost the Australian wool industry $4 billion. Even today, the Australian wool industry is half as big as it was in 1989, primarily due to a disaster industry leaders said just couldn t happen.

Longworth eventually did get funding from the Australian aid budget to study pastoral minorities (and hence wool growing) in China. That work led to three books and many papers. But it also primed Longworth and his colleagues for an exhaustive survey of the Chinese beef industry.

The growth of beef production in China was interesting in its own right for Australian researchers because it was providing ancillary income sources for millions of farm households throughout China, particularly low-income farmers in the heavily settled triple cropping zone extending from Nanjing north.

Longworth and his colleagues were phenomenally successful in producing research about China s rural development and beef industry that could also make interesting reading for bureaucrats back in Canberra. His books Rural Development in China, and Beef in China: Agribusiness Opportunities and Challenges not only charted the rise of a new beef mega-industry, but also laid out the framework for industry development in rural China, a key future target for foreign direct investment.

He received some money from Meat and Livestock Australian but much of the funding came from the Australian government through the Australia Center for International Agricultural Research which guaranteed support from the Chinese Ministry of Agriculture. So on a trip to China, the first port of call would be the relevant director in the ministry. Over the years, long-standing relationships have been developed with officials in government and scientists in the Chinese Academy of Agricultural Sciences and the prestigious Academy of Social Sciences.

Their government contacts allowed Longworth and his colleagues to do all the muddy boots policy research they wanted. Much of China, especially the remote areas in western China, are off limits unless you have a Ministry of Agriculture official or Animal Husbandry Bureau official with you to not only guarantee access but also gain co-operation.

The story of John Longworth s engagement with China and Japan has some of the exoticism of the Adventures of Tintin, but the important take-away points are more fundamental. Over the years, Longworth has watched Australian trade attaches and people stationed by industry in Tokyo and Beijing become seriously sidetracked by endless trade delegations and individual tax payers wanting introductions to certain groups. Space must be made for trade policy research, not just short-sighted market intelligence gathering.

His story also tells us this type of research takes time. John Longworth has been collecting business cards from the Academy of Agricultural Science in China for 25 years now. These relationships are much broader than just researcher-to- researcher. They have become institutionalized.

These friendly relationships often start simply by being curious. John Longworth has been carrying a map of China in his back pocket for 40 years, which he pulls out whenever he meets someone new. Sometimes all it takes is to put down the map and ask, Hey, where is your home town?

BornonaSaskatchewanfarm,PaulSinclairhasaPhDfrom OsakaUniversityforForeignStudiesandhasworkedinTaiwan. CurrentlyheisenrolledintheMBAprogramattheUniversityof Albertaandmaintainsaninterestinthefamilyfarm.

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