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. Last Updated: 07/27/2016

Key Deal Struck on Import of U.S. Meat

APZoellick, right, and Johnson announcing the meat deal in Washington on Monday.
In what appears to be an attempt to spin some good news beyond the backslapping bonhomie of the recent summit between Presidents George W. Bush and Vladimir Putin, U.S. Trade Representative Robert Zoellick announced late Monday that Russia and the United States have reached a deal on quotas for imports of U.S. chicken, beef and pork.

Zoellick said a last-minute agreement to preserve the United States' historic import market share in these goods had been hammered out at a meeting in Tokyo between Allen Johnson, the chief U.S. agriculture trade negotiator, and Deputy Economic Development and Trade Minister Maxim Medvedkov just before the Camp David summit.

Zoellick said the deal could help Russia's case in Washington for entry into the World Trade Organization and for the lifting of Soviet-era Jackson-Vanik trade restrictions, which have been a thorn in the side of Russian-U.S. ties.

"This is a very good agreement that ensures that we will maintain our historical access to Russia's market and adds room for growth," he told reporters.

"This moves us a key step in one aspect," he said, referring to WTO accession.

"This will remove three of the most important stumbling blocks that Al and I have heard from members of Congress that made it quite clear that they were unwilling to move forward with Jackson-Vanik as long as Russia had restrictive policies toward our poultry, our pork and our beef," he said.

Under the agreement, the United States will once again have a 74 percent share of the poultry import market, 4 percent of the beef import market and 9 percent to 11 percent of the pork import market, Johnson said at the same news conference.

The two officials did not say, however, how long the agreement, which is in principle only and has yet to be approved by Moscow, would be in place.

U.S.-Russian trade ties have been snarled over Russia's attempts to stem a tide of U.S. chicken that began to flood its market soon after the collapse of the Soviet Union. As a result of a trade deal clinched by former President George Bush, Russia has been the biggest market for the U.S. poultry industry for the past 10 years.

In 2002, Russia placed an embargo on U.S. poultry, claiming it was substandard, and in May this year imposed a restrictive new quota system in an attempt to stimulate the domestic industry.

As a result, U.S. poultry imports to Russia have been plummeting. In 2001, they reached a peak of 1 million tons, worth $700 million. By 2002, they were down to 690,000 tons, and in January through July this year they were at 371,000 tons, a drop from the same period in 2001, said Toby Moore, spokesman for the USA Poultry and Egg Export Council.

But even though Zoellick touted the deal Monday as a big step forward, it remains far from clear whether it will help boost import volumes to previous levels. Crucial questions regarding volume quotas and tariffs have yet to be decided.

Under the restrictive quotas imposed by Russia in May, the U.S. allocation for poultry was set at 74 percent -- no different from what Zoellick announced Monday -- with an overall cap for imports set at 1.05 million tons, which as a result led to a vast reduction on the U.S. 2001 record. Meanwhile, under the May quota system, there were no country allocations for beef and pork imports, which were capped overall at 420,000 tons and 450,000 tons, respectively.

At the news conference, a transcript of which was obtained by The Moscow Times, Zoellick was vague on the details of what the new agreement would actually mean, conceding that the details still had to be decided.

Konstantin Bogdanov, a spokesman for Economic Development and Trade Minister German Gref, said Tuesday that the government was still negotiating over whether to change that overall cap, meaning that U.S. poultry imports could stay at current levels or even drop.

Nevertheless, he also said he hoped the agreement would help appease lobbyists in Congress and ease the way for Jackson-Vanik restrictions to be lifted and WTO entry to be cleared. "We hope that this agreement will help us move forward on these matters," he said.

Dorothy Dwoskin, assistant U.S. trade representative for the WTO and multilateral issues, arrived in Moscow on Tuesday for talks on WTO accession.

The USA Poultry and Egg Export Council said it was unclear whether the latest agreement would change things much. "I don't think it's going to have much of an impact, but it does lend a certain amount of stability to the situation," Moore said.

He said the U.S. poultry industry and the government have been concerned about growing debate in Russia about getting rid of the country allocations in the import quotas -- a move that would open the way for other suppliers such as the European Union and Brazil.

"Talk about doing away with country allocations [meant] there was no way for the U.S. industry to plan," Moore said. "This agreement will help stabilize the market and allow companies to plan a little better."

He said his council was expecting information on possible changes to import quota volumes by the end of the week.

Russia's National Meat Association said the United States apparently has been granted new quotas for pork and beef. The U.S. share of the import market was at about 2.7 percent for pork and lower for beef last year, it estimates.

The head of the association's executive committee, Sergei Yushin, warned Tuesday that a new country allocation for these products could push up meat prices.

Broiler prices have already soared 60 percent this year as a result of country allocations for poultry skewing the market, while beef and pork prices that are not yet weighted by country are up just 12 percent and 20 percent, respectively, he said.

"If this agreement goes through, then it is a high price to pay for WTO accession," he said. "This could lead to higher prices, meaning that the population will eat less meat. The country will pay for this with its health."

Domestic poultry producers, meanwhile, said the new agreement would have little impact on their businesses but warned that it might open the way for increasing overall import quotas, a move that would eat into domestic producers' market share.

"The new quota system [imposed in May] has given domestic producers only a tiny boost," said Nikolai Khaustov, head of chicken production at privately owned Razgulyai-Ukrros. "If the government lowers the barriers now, we won't have time to do anything. We are only a few months into the system. Everyone has only just started putting money into the sector, and we need at least a year to get going."

Privately owned businesses have started to plow millions of dollars of investment into developing domestic poultry production, a market that has notched up double-digit growth over the past two years.

Razgulyai so far has invested $5 million into developing four chicken farms and plans to invest tens of millions of dollars to boost production from 5,000 tons -- when production started six months ago -- to 60,000 tons per year. Vladimir Potanin's Agros is investing money, too. It plans to spend $35 million over the next five years to boost production from the current 20,000 tons to 60,000 tons per year.