TPP ratification is crucial for Canada’s beef industry

Prime Cuts with Steve Kay, from the November 2015 issue of Canadian Cattlemen

TPP ratification is crucial for Canada’s beef industry

Beef exports are the lifeblood of the North American beef industry, especially for Canada. The majority of its exports goes south to U.S. customers but it also depends on key Asian markets. So too does the U.S. It exports only 10 per cent of its annual production of muscle cuts but this is vital in adding money to the value of a live animal.

Japan has long been the U.S.’s most important export market. So the weaker sales to that destination this year have been keenly felt by exporters. Through August, exports were down nine per cent in volume at 146,575 metric tons and down 11 per cent in value at US$906.4 million. That’s because lower prices for short plates and other popular cuts failed to stimulate demand.

For the first eight months of 2015, total U.S. exports of beef cuts and variety meats were down 11 per cent in volume year on year to 703,231 mt and down five per cent in value to US$4.31 billion. Export value per head of fed slaughter has averaged US$286.51 this year, up US$9.28 from the same period in 2014. Exports accounted for 13 per cent of total production and 10 per cent for muscle cuts, down one percentage point from the same period last year.

Prior to the recent slowdown in Australia’s beef production, Japanese importers continued to stock up on Australian beef, benefiting from lower tariffs through the Japan-Australia Economic Partnership Agreement and the weak Australian dollar. Japanese frozen beef stocks thus remained at very high levels. In contrast, U.S. and Canadian beef still face tariffs as high as 38.5 per cent.

That’s why completion of the landmark Trans-Pacific Partnership (TPP) trade agreement last month was so important to the North American beef industry. It will progressively lower Japan’s and other countries’ tariffs on beef over 15 years. But this won’t happen any time soon. The Canadian Parliament and the U.S. Congress each has to ratify the TPP. There’s more likelihood this will happen in Canada than in the U.S.

That’s because the TPP agreement immediately became a political football as Republican and Democrat presidential hopefuls vied for voter support. Leading Democrat contender Hillary Clinton, once a TPP supporter, said she cannot support the agreement, and her opposition will complicate the White House’s efforts to get Congress to ratify it. This has increased the odds that Congress might not vote on the deal until after the 2016 elections.

Even if Congress eventually approves the TPP, U.S. agriculture and the beef industry won’t start to see any benefits from it until 2017. Implementation of the TPP is huge for U.S. agriculture, as exports of agricultural products to the 11 other TPP countries totalled US$63 billion in 2014. This was 42 per cent of total U.S. agricultural exports. The TPP region took US$3.9 billion worth or 55 per cent of total U.S. beef exports in 2014.

Beef exports will benefit from lower tariffs most in Japan and Vietnam. Japan will reduce its tariff from 38.5 per cent to nine per cent over 15 years. Duties on 74 per cent of tariff lines will be eliminated and reductions on the remaining lines include a 77 per cent cut for fresh, chilled and frozen beef. In Vietnam, tariffs currently as high as 34 per cent will be eliminated in three to eight years.

Canadian beef exports to Japan will see the same reduction in tariffs. Canada exported C$1.3 billion of beef to TPP markets from 2012 to 2014. Much of that was to Canada’s NAFTA partners and exports to Japan are only C$100 million per year. TPP will be far more beneficial for Canadian pork exports to Japan, as they total C$1 billion annually. But a reduction in Japan’s beef tariffs will still be important.

About the author


A North American view of the meat industry. Steve Kay is publisher and editor of Cattle Buyers Weekly.

Steve Kay's recent articles



Stories from our other publications