041101 Hog Duties Spotlight Policy Shift

Washington, DC - A trade fight over importation of hogs from Canada has brought new attention to a controversial law that would award U.S. hog producers any money collected from duties on Canadian pigs.

To settle an anti-dumping case filed by the Iowa Pork Producers Association and other state pork associations, the Bush administration has proposed imposing duties averaging 14% on Canadian hogs.

The biggest potential winner? Pork giant Smithfield Co., which controls 15% of U.S. hog production.

Other U.S. companies and individual farmers would receive payments based on the sizes of the operations.

"It's definitely not fair," said Randy Van Landingham, general manager of Corn Advantage Cooperative, based in Oyens, Ia., which imports young Canadian pigs for fattening in Iowa. The duties would likely raise the cost of the pigs. "The whole thing is not fair."

One leading economist estimates the duties could raise more than $60 million, with the money being divided among producers roughly according to their relative market shares.

The pork groups that asked the Bush administration for the tariffs say the prospect of profiting from duties had nothing to do with their decision to pursue the case.

In any case, it's too soon for any producers to be counting on collecting any of the duties. Experts say it would take three years before the appeals process could be completed. During that time the case could be settled, or the 4-year-old law changing where the duties go could be repealed or altered by Congress.

The World Trade Organization has ruled that the law, known as the Byrd amendment, is unfair under its rules.

U.S. producers claim Canadian producers have an unfair advantage because of their domestic subsidies. Imports of Canadian hogs rose to 7.4 million last year, up from 5.7 million in 2002. In Iowa alone, farmers imported 2.7 million young Canadian pigs.

"Byrd had nothing to do with our filing this case," said Nick Giordano, international trade counsel for the National Pork Producers Council.

"Iowa pushed for this. It was the smaller guys in Iowa that were very worked up about this."

Officials of the National Pork Producers Council briefed state producer groups, including the Iowa Pork Producers Association, on the possibility that they could receive payments from the duties.

But Rich Degner, the Iowa group's executive director, said that did not figure into the association's decision to support the trade case.

"We never entered into this thing with the idea of a distribution," he said. "We entered into it with an idea of making the playing field fairer."

At one time, anti-dumping duties would have been deposited in the U.S. treasury. Now the money goes, instead, to the companies that petition the government to impose the tariffs.

To qualify for a share of the payments, companies or farms must be supportive of the case. Smithfield is one of at least 170 producers officially backing the case, including Premium Standard Farms Inc., the second-largest producer of hogs in the nation. Also on board are producer groups in 19 states besides Iowa.

Dermot Hayes, an Iowa State University economist who is advising the National Pork Producers Council on the trade case, estimated the duties would total $62 million a year, even with expected cutbacks in imports.

Smithfield's portion, based on its share of U.S. production, would be about $9 million. Smithfield owns 808,000 sows, nearly four times as many as Premium Standard Farms, according to a survey by Successful Farming magazine.

"We would support the tariffs even if there weren't the Byrd amendment," Smithfield spokesman Jerry Hostette said. "We think there is an inordinate number of hogs being imported into the United States." The Byrd amendment is named for West Virginia Sen. Robert Byrd, the senior Democrat on the Senate Appropriations Committee.

Critics of the law say it gives U.S. companies an incentive to initiate trade cases and amounts to a subsidy protecting businesses from overseas competition.

About $1 million in duties have been distributed since the law's passage. The beneficiaries range from steel companies to honey producers.

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