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US/China Trade Dispute over Chicken Feet

21 December 2011, at 10:55am

US & CHINA - The US and China have involved the World Trade Organization (WTO) to resolve a dispute on chicken feet.

For years chicken feet in the US were considered as worthless, and mostly ground into pet food, reports The Washington Post.

But in China, those same feet are a popular snack, often washed down with a beer. And so, a few years ago, a kind of trade synergy began, with the United States shipping to China all those otherwise worthless chicken feet.

The trade grew rapidly, from virtually nothing a decade ago to 377,805 metric tons worth $278 million in 2009.

Then suddenly last year, it all went awry. China began imposing stiff duties — including a tax of more than 100 percent — on those American chicken parts. The move was in response to a request by Chinese chicken farmers and processors, who claimed the US government was unfairly subsidizing the American poultry industry through low feed prices and then selling the “chicken paws,” as they’re known in industry parlance, into China at below-market cost.

The Chinese move raised an interesting legal question: How can the United States be dumping an item at below cost in China when that item is considered virtually worthless at home? “It’s taken what used to be a part of the bird that had to be disposed of in the United States and turned it into a revenue stream,” said Scott Sindelar, the Agriculture Department’s attaché at the US Embassy in Beijing.

The Washington Post reported that on December 8, the Obama administration’s trade representative asked the World Trade Organisation to resolve the issue. In a statement, US Trade Representative Ron Kirk said: “We are serious about holding China accountable to its WTO commitments and ensuring that there is a level playing field for American businesses — including our farmers.”

The US action comes at the same time China is staging ceremonies celebrating the 10th anniversary of its ascension to the WTO.

Retaliatory strike?

The American poultry industry said it backed the administration’s latest move, and has been in close consultation with the trade representative’s office. But poultry officials said they regretted that the showdown over chicken feet had to come to this.

“Our industry cannot allow something as unjust as this to stand because of the precedent it sets for other countries,” James H. Sumner, president of the USA Poultry and Egg Export Council in suburban Atlanta told The Washington Post.

But he added: “We hope this does not negatively impact a lot of other areas of cooperation we have going with the Chinese poultry industry.”

Many here and in the United States suggested that the duties were really the Chinese government’s retaliation for the Obama administration’s decision in 2009 to slap tariffs on Chinese tires, fulfilling a 2008 campaign pledge while trying to bolster the ailing US tire industry.

Since the imposition of the tariffs, American chicken parts exported to China have collapsed 90 per cent, and the industry has lost an estimated $1 billion in exports to China, according to the council and other analyses. The blow comes as poultry farmers and manufacturers say they are already feeling financially squeezed between high grain prices and the depressed American economy that has seen lost restaurant sales and lower prices for breast meat.