Pork Industry

By the end of 1998, pork producers had increased production by more than 700,000 metric tons over the previous year, resulting in a surplus of pork products. As a result, the prices for hogs sold in the open market fell 36 percent-from an average of $54 per hundredweight in 1997 to an average of $35 per hundredweight. At the same time, the overall value of pork products fell from $13 billion in 1997 to $9 billion in 1998. The Department of Agriculture (USDA) launched several programs to help pork producers, especially those with small operations. These programs generally involved some form of direct federal payment to producers. This report discusses the (1) extent to which other countries' trade practices and U.S. cargo preference laws are barriers to exporting more pork products, (2) extent to which existing federal programs could be used to increase pork exports, and (3) potential for increased pork exports to strengthen the U.S. agricultural trade balance and improve producer prices.

GAO noted that: (1) other countries' trade practices are important factors that impede increased U.S. pork exports; (2) among the trade practices constraining U.S. pork exports are various types of import tariffs, which raise the price of imported products, and nontariff barriers, such as import quotas, which prevent or limit imports; (3) export subsidies paid by other countries to their pork exporters also make U.S. pork less price-competitive in world markets; (4) however, some reduction in these trade barriers and export subsidies have occurred, which helps to increase U.S. pork exports; (5) the Office of the U.S. Trade Representative and the Department of Agriculture continue to work for further reductions during ongoing international trade negotiations within the World Trade Organization; (6) the U.S. cargo preference law has generally not been an impediment to exporting pork because pork has seldom been used as a food aid; (7) the four principal types of federal export programs offer limited potential for increasing pork exports; (8) $3 billion in unused export credit guarantees could have been used for pork exports, however, the use of credit guarantees are limited by certain factors, which reduce pork exporters' profit margins, according to officials in the meat-exporting industry; (9) humanitarian food aid programs could be used to export pork, but these programs' potential usefulness for pork is limited by insufficient infrastructure for countries to safely handle and efficiently distribute meat products; (10) export subsidy programs offer even less potential for pork exports because of limits imposed by the Agreement on Agriculture, which bases allowable export subsidies on 1986-1990 levels, thereby limiting the United States' and other qualified countries' current pork export subsidies; (11) while export promotion programs could be used to promote U.S. pork, ascertaining the potential benefits from these programs would be problematic because producers, exporters, and others often conduct promotion activities without government assistance, making it difficult to isolate the program's influence; (12) large increases in pork exports would not have a major impact on the overall agricultural trade balance because the pork export trade surplus averaged less than 1 percent of the value of the overall agricultural trade surplus from 1995-1998; (13) even if pork trade tripled, the effect on the agricultural trade balance would be small; and (14) research indicates that large, sudden 1-year increases in pork exports would be needed to significantly increase domestic pork prices.