Deadline Nears for Costa Rican Ratification of CAFTA
Deadline Nears for Costa Rican Ratification of CAFTA
If Costa Rica ratifies the Central America Free Trade Agreement (CAFTA) as expected by October, U.S. beef exports to that Central American nation could begin seeing annual growth rates in excess of 15 percent while pork exports could nearly double.
While the export numbers to Costa Rica do not compare with some of the United States’ largest markets, the profitability of shipments there would increase under CAFTA with the immediate elimination of some tariffs and the gradual reduction of others.
“If Costa Rica ratifies CAFTA, U.S. pork exports will expand rapidly to fill the quotas available (1,100 metric tons or 2.4 million pounds) for fresh, chilled and frozen cuts for the processing industry,” said Ricardo Vernazza-Paganini, USMEF director, Central & South America, “and U.S. beef exports should grow by 15 percent to 20 percent annually.”
The people of Costa Rica voted yes last October in a referendum to join the Central America Free Trade Agreement (CAFTA) despite intense and emotional campaigning from the opposition. Nine months later, the Costa Rican National Assembly has yet to pass three of the 13 pieces of legislation required to implement CAFTA provisions by the CAFTA ratification deadline, Oct. 1, 2008. The agreement was first ratified by El Salvador on March 1, 2006, which meant Costa Rica had two years after the initial agreement ratification — March 1, 2008, but the deadline later was extended to October.
Analysts, including the USDA’s Foreign Agricultural Service, think Costa Rica will meet the deadline, and USMEF has prepared for Costa Rica’s joining CAFTA by researching the best possible marketing strategies, and building relationships with meat buyers and importers likely to purchase U.S. red meat products. In addition, USMEF is reassuring the Costa Rican agriculture industry that the United States does not intend to supplant its industries and production.
“We expect to capture a significant share of Canadian exports of pork variety meat, although intense competition from the Costa Rican industry will slow export growth in the long term or even the medium term,” said Vernazza-Paganini. Canada currently pays import duties of 30 percent to 44 percent on most pork products compared to 47 percent duties on U.S. pork.
Costa Rica’s Pork Imports (including variety meat) in Metric Tons
From
2004
2005
2006
2007
Worldwide
1,985
1,633
2,423
2,100
Canada
1,435
961
1,747
1,150
United States
237
319
297
640
Tariffs on U.S. pork
Before CAFTA
After CAFTA
Fresh, chilled & frozen cuts
47%
Tariffs are phased out over 15 years according to back-loaded reduction schedule
A duty-free TRQ of 1,100 MT (2.4 million pounds) growing to 2,725 MT (6 million pounds) in the 14th year is introduced during the phase-out period. Out-of-quota duty starts at 46 percent
Pork variety meat
47%
Tariffs on fresh and chilled offals are phased out over 15 years in equal annual installments, beginning at a rate of 47%
Tariffs on frozen pork offal items are eliminated immediately
“After ratification, U.S. beef export growth will be concentrated in livers and tongues,” said Vernazza-Paganini. “These accounted for 75 percent of total U.S. beef exports to Costa Rica in 2007. We also can expect moderate growth exports of choice middle meat cuts.”
For U.S. beef, Costa Rica’s entry into CAFTA will mean that all U.S. inspected plants will be approved to export to Costa Rica, replacing the current system of plant inspections by veterinarians from Costa Rica. Under CAFTA, U.S. beef muscle meat graded as prime or choice will have duty-free access, replacing the current 18-percent duty. There will be no quotas.
Costa Rican beef production is declining and, although it produces more beef than it consumes, its beef is very different from U.S. grain-fed product. Nicaragua, which currently has an advantage because it does not pay any import duties, is the No. 1 exporter of beef to Costa Rica. However, Nicaragua’s beef is not comparable to U.S. beef, and high quality U.S. beef is expected to compete well in Costa Rica’s better establishments. U.S. offals also will compete with Nicaraguan offals, since CAFTA removes the duties on U.S. beef variety meat.
Costa Rica’s Beef Imports (including variety meat) in Metric Tons
From
2004
2005
2006
2007
Worldwide
1,910
2,549
4,993
5,916
Nicaragua
942
759
1,486
3,423
United States
21
571
1,877
1,420
Products
Before CAFTA
With CAFTA
Fresh, chilled & frozen prime and choice cuts
18%
0%
Fresh, chilled & frozen select and no-roll cuts
18%
Phased out over 15 years, beginning at a rate of 15%, according to a back-loaded reduction schedule
Fresh, chilled & frozen offals
18%
0%
Seng Featured on AgriTalk
On July 15, USMEF President and CEO Phil Seng was a featured guest on AgriTalk, a live, nationwide radio program that focuses on the top agricultural issues of the day. Listen as Seng discusses the factors driving this year’s record-high pork exports and surging beef exports with AgriTalk host Mike Adams. (The interview is 12:30 in length.)
Deadline Nears for Costa Rican Ratification of CAFTA
If Costa Rica ratifies the Central America Free Trade Agreement (CAFTA) as expected by October, U.S. beef exports to that Central American nation could begin seeing annual growth rates in excess of 15 percent while pork exports could nearly double.
While the export numbers to Costa Rica do not compare with some of the United States’ largest markets, the profitability of shipments there would increase under CAFTA with the immediate elimination of some tariffs and the gradual reduction of others.
“If Costa Rica ratifies CAFTA, U.S. pork exports will expand rapidly to fill the quotas available (1,100 metric tons or 2.4 million pounds) for fresh, chilled and frozen cuts for the processing industry,” said Ricardo Vernazza-Paganini, USMEF director, Central & South America, “and U.S. beef exports should grow by 15 percent to 20 percent annually.”
The people of Costa Rica voted yes last October in a referendum to join the Central America Free Trade Agreement (CAFTA) despite intense and emotional campaigning from the opposition. Nine months later, the Costa Rican National Assembly has yet to pass three of the 13 pieces of legislation required to implement CAFTA provisions by the CAFTA ratification deadline, Oct. 1, 2008. The agreement was first ratified by El Salvador on March 1, 2006, which meant Costa Rica had two years after the initial agreement ratification — March 1, 2008, but the deadline later was extended to October.
Analysts, including the USDA’s Foreign Agricultural Service, think Costa Rica will meet the deadline, and USMEF has prepared for Costa Rica’s joining CAFTA by researching the best possible marketing strategies, and building relationships with meat buyers and importers likely to purchase U.S. red meat products. In addition, USMEF is reassuring the Costa Rican agriculture industry that the United States does not intend to supplant its industries and production.
“We expect to capture a significant share of Canadian exports of pork variety meat, although intense competition from the Costa Rican industry will slow export growth in the long term or even the medium term,” said Vernazza-Paganini. Canada currently pays import duties of 30 percent to 44 percent on most pork products compared to 47 percent duties on U.S. pork.
Costa Rica’s Pork Imports (including variety meat) in Metric Tons
From
2004
2005
2006
2007
Worldwide
1,985
1,633
2,423
2,100
Canada
1,435
961
1,747
1,150
United States
237
319
297
640
Tariffs on U.S. pork
Before CAFTA
After CAFTA
Fresh, chilled & frozen cuts
47%
Tariffs are phased out over 15 years according to back-loaded reduction schedule
A duty-free TRQ of 1,100 MT (2.4 million pounds) growing to 2,725 MT (6 million pounds) in the 14th year is introduced during the phase-out period. Out-of-quota duty starts at 46 percent
Pork variety meat
47%
Tariffs on fresh and chilled offals are phased out over 15 years in equal annual installments, beginning at a rate of 47%
Tariffs on frozen pork offal items are eliminated immediately
“After ratification, U.S. beef export growth will be concentrated in livers and tongues,” said Vernazza-Paganini. “These accounted for 75 percent of total U.S. beef exports to Costa Rica in 2007. We also can expect moderate growth exports of choice middle meat cuts.”
For U.S. beef, Costa Rica’s entry into CAFTA will mean that all U.S. inspected plants will be approved to export to Costa Rica, replacing the current system of plant inspections by veterinarians from Costa Rica. Under CAFTA, U.S. beef muscle meat graded as prime or choice will have duty-free access, replacing the current 18-percent duty. There will be no quotas.
Costa Rican beef production is declining and, although it produces more beef than it consumes, its beef is very different from U.S. grain-fed product. Nicaragua, which currently has an advantage because it does not pay any import duties, is the No. 1 exporter of beef to Costa Rica. However, Nicaragua’s beef is not comparable to U.S. beef, and high quality U.S. beef is expected to compete well in Costa Rica’s better establishments. U.S. offals also will compete with Nicaraguan offals, since CAFTA removes the duties on U.S. beef variety meat.
Costa Rica’s Beef Imports (including variety meat) in Metric Tons
From
2004
2005
2006
2007
Worldwide
1,910
2,549
4,993
5,916
Nicaragua
942
759
1,486
3,423
United States
21
571
1,877
1,420
Products
Before CAFTA
With CAFTA
Fresh, chilled & frozen prime and choice cuts
18%
0%
Fresh, chilled & frozen select and no-roll cuts
18%
Phased out over 15 years, beginning at a rate of 15%, according to a back-loaded reduction schedule
Fresh, chilled & frozen offals
18%
0%
Seng Featured on AgriTalk
On July 15, USMEF President and CEO Phil Seng was a featured guest on AgriTalk, a live, nationwide radio program that focuses on the top agricultural issues of the day. Listen as Seng discusses the factors driving this year’s record-high pork exports and surging beef exports with AgriTalk host Mike Adams. (The interview is 12:30 in length.)