Momentous, world-changing events often have modest beginnings. Think of Archduke Franz Ferdinand, heir to the throne of the fading Hapsburg Empire, being assassinated in Serbia. This, of course, led to the Great War. In a similar way, these seemingly small conflicts over the export of poultry products may finally force a long-awaited showdown between the US and China. The first salvo as of late was China dragging the US to the WTO over a ban on PRC poultry exports that has persisted since the avian flu outbreak in Asia. In response to the US taking China to the WTO over limitations on the export of key commodities to foreign firms, the PRC has recently requested that a dispute settlement panel be formed since the matter of chicken exports couldn't be resolved bilaterally.
The Wall Street Journal now brings news of a more aggressive Chinese action concerning poultry. In response to American bans on the importation of chicken parts from China, the PRC will return the favor by not no longer issuing import permits to US agribusinesses starting today. With China being the largest export destination for American poultry, this is no small beer:
China is expected to ban imports of U.S. chicken in coming days, a move likely to deliver a blow to the struggling American chicken industry and escalate trade tensions between the two nations. James H. Sumner, president of the Georgia-based USA Poultry & Egg Export Council, said he learned Tuesday from "several importers" in China that the U.S. wouldn't receive any import permits from the country's ministry of commerce starting July 1...This stuff is very fascinating to trade watchers. What is interesting to me is that unilateral actions by the US and China demonstrate less willingness to resolve matters through formal channels like the WTO. The WTO has, of course, been a fora for setting sanitary and phytosanitary standards (SPS) that are a point of contention here.
Mr. Sumner says the potential ban appears to be tied to a provision in the most recent U.S. spending bill that prohibits the USDA from allowing Chinese chicken plants to send poultry products to the U.S. Lawmakers question whether China's chicken processing plants meet U.S. standards...
The potential ban could be a big blow to the U.S. chicken industry, which has been struggling with high grain prices and a price-depressing oversupply of chicken. Exports had been a bright spot for the industry, and last year China surpassed Russia as the largest destination for U.S. chicken, according to the USA Poultry & Egg Export Council.
"We have gone to great lengths over the past few years to explain to the Chinese that we are not behind this effort and that in fact we are opposed to any restrictive language," said Mr. Sumner, the council's president. "We think the decision should be based on sound science, but apparently we have not convinced everyone because now we are falling victim to their actions."
U.S. chicken exporters will lose about $370 million over the next six months if China doesn't resume imports, Mr. Sumner said. A spokesman for Springdale, Ark.-based Tyson Foods Inc., a big exporter to China, said the company has "heard rumors" of a Chinese ban, but "we have not received formal confirmation."
Food-safety advocates are holding their ground. China's potential ban on U.S. chicken is "unfortunate," says Tony Corbo, legislative representative at Food and Water Watch, a nonprofit consumer group based in Washington. But "this is really about public health."
Chinese chicken has been a longstanding issue between the U.S. and Beijing. In April 2006, the USDA issued a rule that allowed China to export cooked poultry products to the U.S. as long as the raw poultry meat originated in the U.S. or Canada. The rule caused an uproar among U.S. food-safety advocates, and in 2007 lawmakers inserted a provision in the 2008 fiscal-year spending bill that prohibited the USDA from allowing chicken processed in China to be imported. The same prohibition was included in the spending bill in the next two fiscal years.
Trade tension between China and the U.S. heightened earlier this week when the U.S. International Trade Commission recommended imposing punitive duties of as much as 55% on low-cost Chinese tire imports because they are disrupting the U.S. market, in a move that could sharply increase costs for consumers. GITI Tire, China's largest tire manufacturer, has called the move "decidedly protectionist" and said it would take its case to President Barack Obama.
If matters degenerate further, expect more avoidance of institutions like the WTO as these two countries prefer to go mano a mano in the realm of trade disputes. The accelerating pace of tit-for-tat responses suggests they are on a collision course. After all, are you chicken?