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The Poultry Dispute Between Russia and The U.S.

  • Robert Lyle

Washington, March 8 (RFE/RL) - U.S. trade officials are putting a "best face" on the message from Russian Prime Minister Viktor Chernomyrdin this week that there will be no interruption of the import of American poultry meat, but U.S. business people privately say the episode sends strong signals of caution to anyone doing business with Russia.

U.S. Commerce Department Counselor Jan Kalicki, just returned from a week in Russia, says Moscow and Washington are making "very significant and positive" progress in their economic and trade relations "despite the headlines."

He told reporters on Wednesday that the U.S. is talking with Russian officials about recent official comments that Moscow may substantially raise tariffs on a number of imports, perhaps before the Presidential elections in June. Kalicki says U.S. officials are voicing concerns about any possible import duty increases and what they would do to bilateral trade.

The U.S. already buys much more from Russia than it sells there. Any significant drop in Russian imports of American goods caused by increased tariffs could prompt the U.S. to reconsider Russian participation in the GSP, or General System of Preferences program, which allows over 4,000 Russian products to enter the U.S. market duty free.

The issue came into focus with the flap over poultry meat, which began several weeks ago when Russia said that it would no longer allow the importation of U.S. chicken and turkey meat after March 16 because American processors were not meeting Russian health and cleanliness standards.

U.S. agricultural officials dismissed the contention as a ploy to impose measures to protect Russia's fledgling poultry industry.

It's a significant issue because the U.S. sold $600 million worth of poultry meat to Russia last year and expects to sell even more this year. It's a perfect sort of market situation for U.S. producers because while Americans prefer the white meat of chickens and turkeys, Russians prefer the dark meat.

Shortly after Russian officials said they would impose the ban, three major U.S. producers announced they would begin cutting back production. Tyson foods, the world's largest poultry producer, and Hudson foods, both in the southern state of Arkansas, and Pilgrim's Pride corporation in the state of Texas, all said they would reduce their output by seven to 8.5 percent in anticipation of reduced exports to Russia.

U.S. Vice President Al Gore became involved in the dispute through his role as co-chairman with Chernomyrdin of the U.S.-Russian Joint Commission on Economic and Technological Cooperation, a body designed to act as something of an ombudsman to help clear obstacles to bilateral trade and investment.

Chernomyrdin sent word to Gore via Economics Minister Yevgeny Yasin on Tuesday. The Vice President's office said he accepted Chernomyrdin's invitation to send "senior U.S. officials to Moscow for high-level discussions of outstanding issues related to U.S. poultry exports."

U.S. Agriculture Secretary Dan Glickman welcomed the Chernomyrdin message as "constructive," but acknowledged that there was still "some cloudiness in the picture."

The Vice President's office says the makeup of a U.S. delegation and the timing of Moscow meetings have not been finalized yet, although all could be ready by next week.

Still, while the stock prices of the three big poultry producers rose on the news of the Chernomyrdin message, business people whose money and enterprises are directly involved say they are taking a wait and see attitude.

A spokesman for the National Broiler Council in Washington, Bill Roenigk, characterized it only as a "framework for agreement." The council is an association of poultry raisers and processors.

He notes that Russia last month increased its tariffs on imported poultry from 25 to 30 percent, retroactive to February 1, and says U.S. producers are wary.

The Hudson company's Chief Financial Officer, Charles Jurgensmeyer, told Bloomberg Business News that his company was sticking with its decision to cut back production "indefinitely." He said rising feed costs and a surplus of poultry in the U.S. were also factors in the decision.

Clifford Butler, an official of Pilgrim's Pride, said just the threat of the ban sent dark meat prices down. "This Russian thing's not completely done yet," he told Bloomberg. "We'd like to see prices restored to the same level."

Even when the issue is fully resolved, business people say, they will be far more cautious in their future moves to supply the Russian market. They say each processor must make major financial commitments months and even years ahead of when the final sales will be made and suddenly imposed bans can cause these companies to lose millions of dollars. It adds a risk that many business people say they are reluctant to accept in generally uncertain times.