The US-China Trade War Spills Over Onto SEA’s Animal Protein Markets

The ongoing US-China trade war may have consequences for animal protein trade in South-East Asia. US exports of pork, broiler, and beef products to China need new markets – and South-East Asia is an area which could see more US exports. In 2017, the US exported 41,487 tonnes of pork products, 36,635 tonnes of beef products, and 199,614 tonnes of broiler products (all including offal) to South-East Asia (i.e. the Philippines, Thailand, Indonesia, Malaysia, and Vietnam), valued at ±USD 467m (see Table 1). Based on USDA export data, we estimate that there may be an extra 87,000 tonnes cwt of pork, 4,300 tonnes cwt of beef, and 70 tonnes cwt of broiler products – initially destined for China – that may be offered to South-East Asia for the remainder of this year... and doubling next year.

UN Comtrade data suggests that there may be opportunities for the US to boost its pork, beef, and broiler exports to South-East Asia, provided that US products can out-compete other origins on price. These products include frozen swine offal/meat for Vietnam and the Philippines, along with frozen broiler cuts/offal for Vietnam, the Philippines, and Malaysia. There is little opportunity for US beef products in our view, as South-East Asian demand is focused on cheaper carabeef imports from India.

In South-East Asia, animal protein products outside of free-trade agreements have tariff rates, and it remains difficult to gain access due to various non-tariff measures (NTM). These NTM are applied in addition to quotas and applicable tariff rates. Below are some of these measures, according to the 2018 National Trade Estimate Report on Foreign Trade Barriers report issued by the Office of the United States Trade Representative (see Table 2).

Ignoring NTM and assuming no price change, we estimate that US pork, broiler, and beef landed prices have different competitive levels compared to local prices (see Table 3). For example, the US pork ham landed price in the Philippines would be below local prices, but US whole-bird chicken would be above local prices. Also, landed prices of US frozen chicken cuts would be below locally-produced cuts in Indonesia, Thailand, and Vietnam. US beef brisket would not be able to compete against local Philippine prices, as US beef prices reflect higher quality.

US producers may opt to compete on price in order to shift more exports to South-East Asia. Based on our current assessment, there would be opportunities for cuts of both chicken and pork in a number of markets. Such opportunities could yet be negated by a strengthening US dollar and by an unfavourable risk/reward profile, given the relative size of the market opportunities. The US may pursue more open market access, given goods trade deficits with Indonesia, Malaysia, the Philippines, Thailand, and Vietnam (most exposed). The US may also leverage on its Generalized System of Preferences (GSP), pressuring Indonesia, the Philippines, and Thailand. Whether it will motivate these countries to open their markets is unclear, as revising or eliminating various NTM may not be possible or take time. Pressure could pave ways for some concessions for the US. But this depends on alternative markets for exports to the US under the GSP – which are currently under review.

Author: Ben Santoso