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USTR Announces Agreement With European Union In Beef Hormones Dispute

WASHINGTON, D.C. – Today United States Trade Representative Ron Kirk announced the signing of a Memorandum of Understanding (MOU) between the United States and the European Commission (EC) in the beef hormones dispute.  The agreement, which was signed in Geneva, will provide U.S. producers significant additional access, at zero duty, to the European Union (EU) market for high-quality beef produced from cattle that have not been treated with growth-promoting hormones.  The EU import quota would be set at 20,000 tons in each of the first three years, and this would increase to 45,000 tons in the fourth year.  Under the MOU, the United States and the EC will seek to use experience gained in the first phase to enter into the second phase.  Before the end of the second phase, they would seek to conclude a follow-on agreement that will extend the arrangement for a number of additional years.

“I am very pleased that we’ve found a way to get substantial quantities of high-quality U.S. beef back into an important market that has been largely closed for far too long,” said Ambassador Kirk.  “This agreement will give U.S. beef producers substantially increased access to the EU market.  And in contrast to the existing access, which is subject to a 20 percent duty, the new access will be duty-free.

“The agreement gives us an opportunity to add the EU to the leading export destinations for high-quality U.S. beef, which will provide a substantial boost for U.S. ranchers and meat packers and their employees.  The EU remains one of the few markets to ban beef from cattle given growth-promoting hormones – beef that is perfectly safe to eat – but we see this agreement as a pragmatic way forward,” said Ambassador Kirk.

“This agreement also shows what we can accomplish when we adopt a practical, problem-solving approach to trade barriers,” continued Ambassador Kirk.  “Our ability to conclude this agreement was enhanced by the excellent cooperation of the U.S. beef industry.  I appreciate the industry’s engagement and support.  I’m also grateful for the strong work of the U.S. Department of Agriculture, which was our partner in these negotiations, and for the skilled contributions of EU Trade Commissioner Catherine Ashton, who worked hard to get this agreement done.”

U.S. Secretary of Agriculture Tom Vilsack also applauded the beef agreement.  “The agreement signed today will provide America’s cattle producers with critical new market access to one of the world’s most affluent markets,” said Secretary Vilsack.  “After 20 years of disputes over this issue, it appears we have found a way forward that creates economic opportunity here at home and benefits consumers in Europe.  I commend the USTR-USDA team for their tireless efforts to reach this agreement, which I am hopeful will lead to a long-term agreement that will benefit us for years to come.”

Background on the Memorandum of Understanding

The new MOU provides for three phases.

Phase 1:  In the first phase, which will last three years, the EU will open an annual TRQ of 20,000 tons, at zero duty, for beef produced without growth-promoting hormones.  The United States may maintain the additional import duties currently applied to certain EU products, and will not impose the new duties that were announced in January 2009.

Phase 2:  The agreement provides for the opportunity to enter into a second phase, lasting one year, in which the EU would further expand the TRQ to 45,000 tons.  During this phase, the United States would suspend the application of all additional import duties imposed on EU products.  For the United States, a decision on whether to move to Phase 2 would depend on the existence of conditions at the end of Phase 1 that would allow the U.S. beef industry to make full use of the additional quota.

Phase 3:  The agreement provides for the opportunity to enter into a third phase at the end of the fourth year.  In this phase, the EU would maintain the 45,000-ton TRQ and the United States would continue not to apply any increased import duties.  A decision on whether to move to Phase 3 would be made following negotiations on several issues, including duration, withdrawal, and the status of WTO litigation on the EU’s compliance with the WTO ruling in the Beef Hormones dispute.

Suspension of Litigation:  For at least the first 18 months of the agreement, neither party will move forward with WTO litigation on the EU’s compliance with the WTO’s ruling in the Beef Hormones dispute.  After 18 months, either or both parties would be free to request a WTO panel.  If either party makes this request, compliance litigation would commence and move forward until the panel is ready to issue its interim report (i.e., the report that reveals to the parties for the first time the panel’s findings and reasoning).  At that point, the parties would instruct the panel not to issue the interim report to the parties and request that the panel suspend its work until at least the end of the fourth year.  The status of any such interim report, including whether it would ever be disclosed, and the status of the panel would be the subject of the consultations that occur at the end of     Phase 2.

Background on U.S. Import Action

On May 8, USTR announced that, in light of the provisional agreement with the European Commission on the MOU, the United States was delaying until August 15 the imposition of additional duties on a modified list of EU products and member States that had been scheduled to enter into effect on May 9, 2009.  Now that the provisional agreement with the European Commission has been signed, USTR will take further steps to prevent the application of those additional duties for the duration of the agreement.  As noted above, the agreement provides for an initial period of three years, with the opportunity to extend for a fourth year and then to negotiate a more lasting extension.  The duties that have been in effect since March 23, 2009, on a reduced list of EU products (products for which additional duties were initially imposed in 1999) may remain in effect for the first three years of the agreement, after which they may be suspended.  The products that were removed from the retaliation list on March 23 will not be affected.

The details of the delay in the trade action are set out in a notice that has been posted on the USTR website and published in the May 13, 2009 edition of the Federal Register.