Commentary by Bill Bullard, CEO, R-CALF USA
The most recent U.S. Department of Agriculture data show that total beef imports during the 2024 period January through November were up 24 percent compared to the same period in 2023. The largest surges in imports this last year came from three countries: Australian beef imports were up 67 percent, Brazilian beef imports were up 60 percent, and Uruguayan beef imports were up 76 percent.
The United States has free trade agreements with Australia and Mexico and Canada, so beef from these countries can enter the U.S. with zero tariffs and with no quantity limits.
But the U.S. has both tariffs and quantity limits for imported beef entering from Brazil and Uruguay.
The tariffs that beef from Brazil and Uruguay are subject to are minimal, amounting to only about 2 cents per pound, so these tariffs alone are ineffective at discouraging large quantities of imports from these countries.
However, both Brazil and Uruguay are subject to a U.S. tariff rate quota that is supposed to discourage large quantities of imports that can displace domestic beef production.
Uruguay is subject to a tariff rate quota of about 44 million pounds and Brazil is among a group of countries that together share a tariff rate quota of about 143 million pounds. Now these tariff rate quota levels are supposed to discourage unlimited imports because any beef imported above these quantity limits is subject to the over quota tariff rate of 26.4 percent.
So, using Uruguay as the example, importers in the U.S. can import 44 million pounds of Uruguayan beef for only 2 cents per pound, but if they import more than 44 million pounds, they have to pay a tariff of 26.4 percent of the value of all the beef imported above the 44-million-pound limit. The purpose of the 26.4 percent over quota tariff rate is to ensure that imports from Uruguay do not undercut our domestic beef production in such volumes as to harm our industry.
During the first 11 months of 2024, importers had already brought in about 284 million pounds of Uruguayan beef, which is 240 million pounds more than what the U.S. had established as an equitable limit for Uruguayan imports. Thus, importers have exceeded the tariff rate quota for Uruguayan beef imports by a factor of over five.
During the same period in 2024, Brazilian imports exceeded the tariff rate quota that Brazil is subject to by over half a billion pounds. Thus, importers have exceeded the tariff rate quota for Brazilian beef imports by a factor of almost four.
And remember, this is only for the first 11 months of 2024 as the entire year’s data is not yet available from the USDA.
There are several truths that we can glean from simply analyzing these numbers: First, is that the 26.4 percent over quota tariff rate is way too low to serve its function of discouraging the importation of lower-cost beef above the level deemed necessary to protect our domestic beef supply chain.
Second, is that importers are trying to capture more of the United States’ domestic beef market. And third, the U.S. has failed to update its beef tariff rate quota system despite the fact that both Uruguay and Brazil have exceeded their respective tariff rate quotas for many years.
And while imports are soaring to new record levels, exports are not, leaving the U.S. with a mounting beef trade deficit, which is even worse as we’re not even considering the beef derived from imported cattle in this discussion.
During the 2023 calendar year, we had a beef trade deficit of about 687 million pounds. But during just the first 11 months of 2024, that deficit has ballooned to nearly 1.5 billion pounds.
So, what is the risk to our domestic beef supply chain from not putting meaningful limits on lower-cost imports?
Obviously, if importers are allowed to capture more and more of our domestic beef market with lower-cost imports, those imports will displace domestic beef production, and more and more U.S. cattle producers will exit the industry and America’s dependency on imported beef will likewise grow.
The latest agriculture census shows we’ve lost about 107,000 beef cattle operations between 2017 and 2022, and that trend will most likely continue if meaningful steps to limit imports are not taken soon.
Just look at what’s happened to our U.S. sheep industry that has been subjected to unlimited imports for several years. Imported lamb meat from Australia skyrocketed, thousands of domestic sheep producers went out of business, domestic lamb production fell, and now imports have captured about 70 percent of our domestic lamb meat market.
I hope we can learn from our mistakes before it’s too late for both our cattle and sheep industries.