When authorities discovered a case of mad-cow disease in California last year, Indonesia angered U.S. cattle producers by becoming the first nation to ban beef from the United States.
The fallout was immediate, and U.S. beef sales to Indonesia plummeted to nearly nothing.
Much to the satisfaction of cattle producers in states such as California and Texas, the U.S. government has decided to fight back: In the latest case to go before the World Trade Organization, the Obama administration is pressing Indonesia to open its markets and its estimated 240 million consumers to more American exports or face consequences.
“There’s no scientific basis for turning away U.S. beef,” said John Harris, owner of Harris Ranch Beef Co., a family-run operation in California’s Fresno County since the 1930s.
Kevin Kester, a fifth-generation rancher from Parkfield, Calif., called Indonesia’s action a “knee-jerk political action.”
And with U.S. beef exports accounting for nearly 13 percent of the industry’s market last year, cattle producers say they rely on selling meat to foreigners to make a living.
Industry officials say that foreign markets have become particularly important for meat cuts that won’t sell here. The Japanese, for example, have shown an affinity for cow tongue, helping drive up the value of U.S. beef sold to Japan by 19 percent in 2012. On Monday, U.S. Trade Representative Ron Kirk said the United States had reached a new agreement with Japan to remove some of the restrictions on selling beef, a move that he said would result in hundreds of millions of dollars of additional sales in coming years.
“We’re not subsidized by the federal government at all – so we live and die by the marketplace,” said Kent Bacus, associate director of legislative affairs in Washington for the National Cattlemen’s Beef Association, a trade group that represents 230,000 breeders, producers and feeders.
The stakes are high for the U.S. economy, with the beef industry supporting 1.4 million jobs, according to industry statistics. And in 2011, the 742,000 beef herds roaming the nation’s pastures resulted in $44 billion of economic activity in the United States, the beef association said.
The Indonesian Embassy in Washington would not discuss the case but said in a statement that Indonesia “takes note” of the U.S. action and will respond in a timely manner.
“The government of Indonesia’s aim is not to restrict imports, but to ensure that all imported goods are safe for consumption by consumers and safe for the environment,” said the statement, released by Ni Made Ayu Marthini, a commercial attache.
Along with rejecting American beef, Indonesia has upset other segments of the U.S. agriculture industry with new regulations that make it harder to sell a wide array of products, including fresh fruits and vegetables, juices, flowers and dried fruits.
It’s causing unease in Washington state, with Indonesia ranking among the top five importers of its prized apples and a $57 million market for cherries, pears and other fruit from the Pacific Northwest.
During a trip to Indonesia three years ago, Mark Powers, the vice president of the Northwest Horticultural Council in Yakima, Wash., recalled seeing street vendors in Jakarta selling Red Delicious apples from Washington state. Now, he said, exports to Indonesia are down 67 percent since November, representing a loss of at least $2 million for the state’s growers.
The push to gain more access to Indonesia comes amid hard times for the U.S. cattle industry, the world’s largest supplier of beef.
Even in Texas, by far the largest beef-exporting state, there are signs of trouble.
Earlier this month, Minnesota-based Cargill said it would indefinitely idle its beef processing plant in Plainview, Texas, throwing 2,000 people out of work, mainly because of a declining cattle supply caused by years of drought. In making the announcement, John Keating, president of the company’s Cargill Beef division, based in Wichita, Kan., noted that the size of the U.S. cattle herd is now at its lowest point since 1952.
It’s a familiar story for Kester, 57, who owns a ranch in Monterey County, with more than 20,000 acres between the San Joaquin Valley and California’s Central Coast. He has spent all his life in the cattle industry and has watched it shrink, with the average age of a rancher now approaching 60.
“It’s harder and harder for ranchers and farmers to be in business because of high regulatory costs and high land prices across the nation, especially places like here in California,” said Kester, former president of the California Cattlemen’s Association in Sacramento. “As time marches on, we just have less and less people in the business and less production.”
Overall, beef exports hit a high of $5.4 billion in 2011 and were expected to set another record in 2012, though year-end figures are not yet available.
But while the value of U.S. beef exports rose by 2 percent during the first 11 months of last year, the amount of beef sent to other countries declined by 11 percent, according to the U.S. Meat Export Federation.
And the amount of U.S. beef exports to Indonesia dropped by 91 percent from January through November 2012, compared with the same period in 2011.
The National Cattlemen’s Beef Association said that only two countries – Indonesia and Thailand – moved to ban U.S. beef after the discovery of a California dairy cow infected with bovine spongiform encephalopathy, or BSE.
While the disease has come to commonly be known as mad-cow disease, industry officials say that has become an inflammatory term. They prefer calling it BSE. The disease is deadly to cattle and also can kill humans who eat tainted beef.
Industry officials say the ban in Indonesia now has been replaced with tight quotas and requirements that force U.S. exporters to apply for licenses, making it nearly impossible for cattle producers to sell their products.
U.S. cattle producers now face so much risk and uncertainty in trying to sell meat to Indonesia that they’ve all but given up, said Bacus of the National Cattlemen’s Beef Association.
“There’s really no incentive,” he said.
While cattle producers are most worried about the import quotas, they face other complications in selling meat to the world’s largest Muslim country. Indonesia requires imported beef to be slaughtered according to Islamic religious requirements. And for U.S. exporters, that means obtaining a “certificate of Islamic slaughter” certifying that the animals have met those conditions. Industry officials say that’s simply the price of doing business in a niche market.
But with the new quotas in place, U.S. officials say Indonesia has violated global trade rules by protecting its domestic agriculture industry from competition. If the two sides can’t resolve their dispute on their own by March, the office of the U.S. Trade Representative can ask the World Trade Organization in Geneva to create a special dispute-settlement panel.
When he announced the action Jan. 10, Kirk complained that Indonesia had created a “complex and discretionary import licensing regime” that hadn’t been addressed despite repeated requests.
“We will continue to make clear to our trading partners that we will fight to support each job here at home affected by unfair restrictions abroad,” said Kirk, who is quitting his job effective next month.
Many members of Congress had pushed Kirk to act. In June, two Washington state members of the House of Representatives – Republicans Dave Reichert and Doc Hastings – wrote a letter signed by 19 other lawmakers, urging the U.S. government to “pursue all available resources” to force Indonesia to accept more American products. (Others signing the letter included California Democratic Reps. Laura Richardson, Sam Farr, Jim Costa, Lois Capps, John Garamendi, Dennis Cardoza, Mike Thompson, California Republican Reps. Reps. Elton Gallegly, Jeff Denham, Dan Lungren, Devin Nunes, Kevin McCarthy and Mary Bono Mack, Washington Republican Reps. Cathy McMorris Rodgers and Jaime Herrera Beutler, Washington Democratic Reps. Adam Smith and Rick Larsen, Oregon Republican Rep. Greg Walden and Oregon Democratic Rep. Kurt Schrader.)
It’s not the first time the two economic giants have battled.
After Congress banned flavored cigarettes as part of a tobacco regulation overhaul in 2009, Indonesia complained to the World Trade Organization, saying the law discriminated against its cigarettes.
And Gulf Coast shrimpers now are taking on Indonesia, asking the U.S. government to impose tariffs on the shrimp the country sends here.