U.S. presses Indonesia to open beef market

By Rob Hotakainen

McClatchy Newspapers

WASHINGTON -- 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 is fighting 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 move 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 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, the former Dallas mayor, said the U.S. has reached agreement with Japan to remove some restrictions on selling beef, a move that he said will result in hundreds of millions of dollars in 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 of the National Cattlemen's Beef Association, a trade group for 230,000 breeders, producers and feeders.

The stakes are high for the U.S. economy because the beef industry supports 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 in economic activity in the U.S., the association said.

The Indonesian Embassy in Washington, D.C., 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," it said.

Although Indonesia has Southeast Asia's largest economy, U.S. trade figures show that it bought just 0.6 percent of U.S. beef exports in 2011 -- worth about $17 million.

And American imports account for about 20 percent of beef consumed by Indonesians.

Along with rejecting 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. Indonesia ranks among the top five importers of the state's prized apples and offers a $57 million market for cherries, pears and other fruit from the Pacific Northwest.

During a trip to Indonesia three years ago, Mark Powers, 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 Texas, by far the largest beef-exporting state, is showing signs of trouble.

Last month, Minnesota-based Cargill said it would indefinitely idle its beef-processing plant in Plainview, leaving 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 Cargill Beef division, based in Wichita, Kan., said the U.S. herd is the smallest 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 available.

While the value of 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 beef sent 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 only two countries -- Indonesia and Thailand -- moved to ban U.S. beef after a California dairy cow was found to be infected with bovine spongiform encephalopathy, or BSE.

Industry officials say the ban in Indonesia 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 have all but given up, the association's Bacus said.

"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 requirements. And for U.S. exporters, that means obtaining a "certificate of Islamic slaughter." 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 the dispute on their own by March, the U.S. can ask the World Trade Organization in Geneva to create a dispute settlement panel.

When he announced the action Jan. 10, Kirk complained that Indonesia has created a "complex and discretionary import licensing regime" that hasn't been addressed despite repeated requests.

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