US-China trade war: chicken paws anyone?

PITTSBURGH — In the $63 billion American chicken market — where lean white breast meat is king — there is no appetite for the delicacy at the center of the ongoing chicken trade wars between the U.S. and China: paws and wing tips.

A $648 million annual export market, these parts command premium prices in China where they are used to flavor soups and stews and provide a chewy snack. They have grown so popular that they account for much of the 709,801 metric tons of poultry sent to China last year from the United States.

So, when China finally decided at the end of September to slap a tough tariff on poultry exports from the U.S., chicken companies found themselves virtually locked out of a market that can bring more than $1 a pound for parts that sell for pennies in the U.S. and are used in animal feed, pet food, chemicals, fertilizers and other products.

“We sell these things at very attractive prices in China,” said Richard Lobb, spokesman for the National Chicken Council, a trade association that represents U.S. producers and processors. “We have had a really good market over there.”

Chinese are attracted to U.S. chicken paws because of their size. U.S. producers grow broilers that are jumbo sized, with jumbo-sized feet that dwarf those of Chinese chickens.

Like most trade disputes, this one has a tortured political history, with both sides feeling aggrieved. The chicken parts have become part of the ongoing trade skirmishes that have involved Chinese tires, China’s valuation of its currency and what the U.S. says is unfair support of green technology in China.

“Everybody picks on poultry,” said James Sumner, president of the USA Poultry & Egg Export Council in Stone Mountain, Ga., whose trade group already has spent $2 million in legal fees fighting the chicken tariff.

Trade in tips and paws goes back to the day when U.S. producers shipped the product uninspected, mainly through Hong Kong. The boxes landed stamped “Not Fit for Human Consumption.” The Chinese decided in 2005 they preferred inspection of the parts, so the U.S. came up with a certification system to make sure the feet did not have ammonia burns, bruises or bad smells.

That worked until last February when the Chinese government decided to impose temporary duties that became permanent at the end of September.

Depending on the company, the anti-dumping duties range from a rate of 50.3 percent to 105.4 percent of the value of the shipment. In addition, there is a tariff for alleged illegal subsidies by the U.S. government from 4 percent to 30.3 percent. On top of that is the 4 percent regular duty that U.S. companies have paid all along.

This action, many believed was a response to tariffs the U.S. imposed on Chinese tires in the fall of 2009, as well as actions in Congress to keep Chinese cooked chicken out of the U.S. market.

Responding to concerns about the safety of Chinese chickens — cooked or raw — Rep. Rosa DeLauro, D-Conn. got a bill passed in 2007 that banned Chinese chicken imports. That ban was recently eased, but not in time to avert the current round of tariffs on U.S. companies or let Chinese chicken meat into the U.S.

“It was a slap in the face to the Chinese, frankly,” said Sumner of the import ban. He said U.S. food industry groups sided with the Chinese.

Even though the World Trade Organization at the end of last month said the U.S. could not continue to restrict imports of Chinese poultry, it’s not likely the Chinese will win the game of chicken.

“The political climate isn’t very favorable for letting Chinese breast meat in,” said Paul Aho, a poultry consultant and economist in Storrs, Conn. “The real problem is tires. We cut off their tires and they cut off our paws. It’s hard to see how it will be resolved.”

The industry hopes the Obama administration will take its appeal to the World Trade Organization, the trade dispute arbitrator.

The administration has made no commitment.

“We are very disappointed that China has imposed duties on imports of chicken products from the United States. The United States is carefully reviewing China’s actions, and we are considering our options,” said a spokeswoman at the Office of the United States Trade Representative.

Should that happen, the wheels of trade justice turn slowly.

Paul Blustein, an expert on the WTO and a nonresident fellow at the Brookings Institution, said it can take a year-and-a-half for a ruling and even if a judgment stops the offending practice in the future, the winning country is not compensated for losses it suffered in the interim.

“Even a U.S. victory may not help U.S. chicken producers much,” said Blustein.

In the meantime, paws, anyone?