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In Global
Food-Trade Skirmish,Safety Is the Weapon of Choice
Chicken Fight
In Global
Food-Trade Skirmish, Safety Is the Weapon of Choice
As Tariffs
Carry Less Weight,
Standards Play
Bigger Role;
Russia Sends 'Napoleon'
Chipping Away
at 'Bush's Legs'
By GREGORY L.
WHITE in Moscow; Scott Kilman, Ark.; and ROGER THUROW in Ptitsegrad,
Russia
Staff
Reporters of THE WALL STREET JOURNAL
December 15,
2004; Page A1
The gray van
carrying the Russian inspector arrived at dawn outside a complex in
Springdale, Ark. Uniformed American guards stood outside as Major
General Vitaly Romensky toured the facility. He had come to verify
that America was living up to an agreement reached between high-level
U.S. and Russian negotiators.
After 2½
hours, the poker-faced inspector came striding out of the building.
The metal security gate rattled open and the van whisked him away.
Mr. Romensky's
checklist included a section on radioactive fallout. But he wasn't
inspecting nuclear weapons. He is a Russian government veterinarian.
The facility is a chicken-slaughtering plant. He was inspecting drumsticks.
This
cloak-and-dagger routine is more than just Cold War leftovers in the
freezer section. As new food powers emerge, the drive for free trade
around the world is blunting the traditional tactics governments once
employed to shield their domestic industries. Now, food safety is
becoming the stealth weapon of protectionism in the $522 billion
market for global agricultural exports.
"As
quotas and tariffs become less important trade barriers, sanitary
measures are becoming a relatively much bigger problem," says
J.B. Penn, an under secretary of the U.S. Agriculture Department.
Russian
veterinarians with military-style ranks -- one earned the nickname
"Chicken Napoleon" from U.S. executives -- have blacklisted
scores of U.S. poultry plants from exporting to Russia. They are
among the world's most aggressive in using their power to close off
markets, trade experts say. Russian officials concede their stringent
standards don't necessarily improve the meat's quality and some are
blunt about the inspectors' real purpose.
"The only
tool of trade policy the Agriculture Ministry has left are our
veterinarians," then-First Deputy Minister of Agriculture Sergei
Dankvert told an industry meeting in late 2002, according to Russian
press reports. Mr. Dankvert is now head of Russia's state veterinary
agency. A spokeswoman confirmed his comments, adding: "That's
why we don't let him talk to the press anymore."
The
U.S.-Russian "chicken war" is the most intense example of a
growing number of food-safety skirmishes. When Brazilian soybean
prices soared last spring, Chinese government inspectors said they
detected a deadly fungicide in some shipments. China temporarily
blocked imports from Brazil, helping Chinese merchants get out of
their commitments, Brazilian grain groups say. Japan has shut down
imports of U.S. apples by requiring that American growers adopt
expensive measures to combat fire blight, a plant disease U.S.
officials say isn't spread through apple shipments.
Such tactics
"are becoming a constant battle," grumbles Jeffrey D.
Gargiulo, chief executive officer of Sunkist Growers Inc., a big U.S.
citrus cooperative. Sunkist was stung last April when South Korea
blocked imports of oranges grown in two California counties. Korean
plant inspectors said they detected a fungal disease in some U.S.
imports. USDA scientists, investigating the complaint, found nothing
amiss. American growers suspect the move was designed to pressure
Washington to allow imports of Korean Unshu oranges. Jaesoo Kim,
agriculture counselor in the Korean embassy in Washington, says the
issues aren't linked.
The U.S.,
which is fast becoming one of the world's biggest importers of food,
uses similar tactics. Bush administration officials imposed a ban on
Canadian cattle 19 months ago when Canada discovered its first case
of mad-cow disease. Canada now has nearly identical safety measures
to those in the U.S., but administration officials have been slow to
complete the regulatory procedures for lifting the ban. Privately,
they concede the delay is due to opposition from U.S. ranchers who
want to protect cattle prices.
Alisa
Harrison, a USDA spokeswoman, says the U.S. wants to resume the
cattle trade. "Any delay is not based on our desire to
manipulate the issue, but is based on our regulatory process."
New Risks
The
globalization of agricultural trade, which now embraces more than 200
countries, has indeed created new food-safety risks. Governments are
anxious to protect consumers and farms from a cornucopia of threats
including avian flu, exotic bugs and terrorists. Since mad-cow
disease materialized in Britain in the 1980s, the fatal bovine
brain-wasting disease has spread to 26 nations and territories
through the trading of cattle and feed.
The World
Trade Organization, based in Geneva, is leery of tackling this proxy
protectionism,not wanting to undermine its members' ability to close
their borders to dangerous food. It has procedures that allow
countries to challenge bans, but these disputes can take years to litigate.
"It is
very hard to separate the real safety concerns from the ones made up
for protectionism," says Julio Cardoso, chairman of the
Brazilian Association of Chicken Producers and Exporters, whose
members are blocked from the U.S. by Washington's sanitation rules.
He worries consumers will stop paying attention to legitimate
food-safety concerns "if countries cry wolf too often."
Moscow threw
open the gates to imports in the early 1990s when the Soviet system
of collective farms collapsed. Today, Russia imports about 20% of its
food, including a lot of American chickens.
Unlike
Americans, Russians don't turn up their noses at the back end of the
bird. Frozen chicken legs and thighs from the U.S. became a critical
source of protein after the Communist regime collapsed. Chipped off
huge frozen blocks at open-air markets where the only refrigeration
was the Russian winter, the imports quickly became known as
"Bush's legs," named for then-President George H.W. Bush.
In 2001 --
when exports to Russia hit a high -- 8% of the chicken meat produced
in the U.S. was sold to Russians, making it the biggest foreign
consumer of U.S. chicken. Russia is still the biggest foreign
customer for U.S. companies such as Tyson Foods Inc.
Russian
tycoons, after making fortunes in banking and oil, were attracted to
the food business after the devaluation of Russia's currency in 1998
and the country's subsequent economic recovery. They have pushed
Moscow to damp foreign competition by installing tariffs and quotas,
but with limited success. Vladimir Putin's government has been
cutting trade barriers as it negotiates to join the WTO.
Enter the
veterinary inspectors.
The first
volley in the "chicken wars" was fired with little warning
in early 1996 when the Russian government banned American chicken
imports on the grounds that they were contaminated with chemicals and
bacteria. U.S. officials ridiculed the safety concerns, but wanted to
keep selling to a big market.
After a few
days of the ban, Washington agreed to adopt special rules and
standards for exports to Russia, which would be enforced by periodic
visits from Russian vets. It was a big concession.
Different Approaches
The Russians
visited roughly 400 U.S. facilities during the initial inspection,
grilling their owners on how they screen for diseases and drug
residues in chicken. U.S. regulators take a different tack: They want
to know that their counterparts in the countries shipping food to the
U.S. are equivalent to them in authority and resources, and do their
jobs. While U.S. meat inspectors each year visit a representative
number of foreign plants doing business with the U.S., the Russians
inspect every U.S. plant that sells poultry to Russia.
As more and
more U.S. plants made the changes needed to meet the Russian
standards, Moscow imposed new demands covering everything from where
walls should be located to the state of garbage-can lids. Factory
grounds had to be free of mud and workers were to wear special rubber
boots that could only be used inside plants. Records had to be kept
on everything from the level of chlorine in the water used to wash
bird carcasses to the level of beta and gamma radiation in randomly
selected chicken legs.
In an apparent
effort to show they meant business, in early 2002 Russian vets shut
down all U.S. poultry imports for about three weeks, citing bacteria
contamination. The move came as Washington was deciding whether to
impose tariffs on steel, which happened to be Russia's top export to
the U.S.
Executives at
Tyson, America's biggest meat company, were outraged when a Russian
inspector flunked one of its newest facilities. Tyson won't say when
that happened. "Their findings for delisting plants in our
opinion were very arbitrary and without merit," Greg Lee,
president of Tyson's international operations, told a congressional
hearing in May.
U.S. poultry
companies squawked mightily. The 2002 ban helped to create a glut of
chicken meat in the U.S. and cut the price of legs and thighs in
half, to about 14 cents a pound. The $30 billion U.S. chicken
industry was forced to close some plants to tackle the oversupply.
Viktor
Gushchin, director of Russian Institute for Poultry Processing, a
government research center set up under the Soviets, was part of an
inspection team that traveled to the U.S. in 2003. He recalls plants
trying to hide fetid drains and other sources of bacteria. At one
North Carolina operation, he says he saw gloves and other trash mixed
in with meat scraps to be made into processed meat. "I stopped
eating hot dogs after that," he says.
Mr. Gushchin
says the U.S. would probably be just as strict if it were the
importer. "The one who's paying is the one who gets to choose
the music," he says, using a Russian expression roughly
equivalent to "the customer is always right."
With the
economic stakes so high, these contretemps quickly sprung to the top
of the geopolitical agenda. At their September 2003 Camp David
summit, Presidents Bush and Putin made time amid questions about war
in Iraq and nuclear proliferation to resolve a thorny chicken
problem. Diplomats say they made a breakthrough on the key
"footwear issue." Russia agreed to drop its demand that
U.S. poultry-plant workers wear special boots in return for
assurances that factories install special shoe-washing baths.
During this
fall's inspection, five Russian teams fanned out across the U.S. for
four weeks to check on 125 chicken facilities. This time, Tyson,
which owns the Springdale, Ark., plant, wasn't taking any chances.
Springdale had earlier been delisted by the inspectors. In
preparation for the Russians, the company staged a mock inspection
that was headed by a retired USDA official familiar with their methods.
Russian vets,
in recent months, have also slammed the door on chicken imports from
Brazil and the EU, prompting top officials to complain to Mr. Putin,
diplomats say.
In Russia, the
poultry industry is taking off as falling imports have helped lift
local prices and spur domestic production. Russian producers now
provide roughly half of the country's chicken, compared with less
than one-third a few years ago.
At Assortment
Ltd.'s chicken operations in Ptitsegrad -- Russian for Birdville --
the potholed parking lot is awash in mud, which soaks the welcome mat
and seeps into the entrance hall of the administrative building. Even
as construction begins on a new processing plant, part of a broad
industry overhaul, the Soviet-era factory continues to operate with
the approval of inspectors. Vasily Kurilov, a director of the
meat-processing company, is happy to show off his modern hatcheries
and chicken houses. But he stops the tour at the old plant. "Wait
to see the new one," he says.
Vladimir
Fisinin, head of the Russian Poultry Union, a trade group, concedes
that the actual safety level of Russian and American chicken is
"identical." Wearing a blue tie decorated with embroidered
images of day-old chicks, he defends the veterinarians' strictures
but allows that protectionism has played a role "to a certain
extent." Mr. Fisinin says the last time he recalls Russia
shutting down one of its own plants for sanitary violations was in
the 1970s.
Other Russian
officials say their veterinary interventions are necessary to ensure
the safety of the food supply and to prevent the spread of disease.
With relatively little support from the government and no system of
insurance, Russian farmers would be devastated if they had to destroy
large numbers of animals, industry officials say.
"These
are elementary requirements, and business -- both American and
Russian -- simply has to follow the rules," Agriculture Minister
Alexei Gordeyev said in an interview earlier this year. He denied
that Russia uses veterinary restrictions as a trade barrier.
He regularly
decries food imports as a threat to Russia's "produce
security." In a television documentary broadcast in October, he
railed: "Take a look at what we give our people in the form of
imports. They made us into a garbage dump."
At an outdoor
Moscow market, Bush's legs are 20% cheaper than Russian poultry.
"They sell very well," says Piotr Roshchin, a butcher who
says he sells about 440 pounds of Bush's legs a day in his four kiosks.
The market
often fills with rumors whenever Russian inspectors ban U.S. imports:
Bush's legs are pumped full of steroids; they cause impotence;
they're not good enough for Americans to eat.
"We never
heard such stories before, but recently this is what the scientists
and veterinarians talk about," said Konstantin Gorlov, a
59-year-old retired economist, as he shopped for chicken at the
market. "I understand it is a normal thing in global trade to
have such propaganda. Unfortunately, I don't have a laboratory at
home to check for myself."
Write to
Gregory L. White at greg.white@wsj.com, Scott Kilman at
scott.kilman@wsj.com, and Roger Thurow at roger.thurow@wsj.com.
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