Consumption pattern of imported beef changes

By Kang Hyun-kyung

Staff reporter

In the forthcoming negotiations, U.S. negotiators may be able to persuade their South Korean counterparts to believe that the two sides will benefit more if Korea opens up the local market further for American beef.

The possible removal of restrictions, however, appears not to be a panacea for the market share of American beef here, given that many consumers are still suspicious of the safety of American beef.

A World Research poll of 511 housewives, which was conducted in July, 2008, found that about half of them would never consider

purchasing American beef, while 34 percent said they would wait to see if the beef is registered safe, while not buying it in the meantime.

These consumers displayed little confidence in the safety of American beef, partly explaining its low current market share of 28.1 percent in May 2010, compared with 70 percent in 2003.

A shift in consumers purchasing Australian beef instead is behind the relatively poor sales of American beef in Korea.

Given the market share of Australian beef among imports was only 15 percent in 2003 and it soared to about 60 percent in 2010, the beef consumption pattern here has shown a distinct change over the past seven years.

In an effort to regain confidence in the safety of American beef, ranchers and trade associations in the United States launched a consumer awareness campaign, dubbed the "Trust Campaign," last December to convince Korean consumers to believe U.S. beef is safe.

"After the candlelight vigil in the summer of 2008, the U.S. Meat Export Federation (USMEF) did see a need to reach out directly to consumers and communicate to them regarding the safety and quality of U.S. beef," said Jim Herlihy, vice president of communications at USMEF headquarters based in Denver, Colorado.

Cable channels aired commercials featuring three American mothers who have a role in the industry - a rancher, scientist and inspector who all feed their families the same beef that they help produce for export.

"From our measurements, the campaign has been very positively received," Herlihy told The Korea Times, while declining to give details of their measurements.

Local trade experts, however, observed consumer confidence in the safety of American beef has not been fully regained.

"The overall atmosphere is that Korean consumers don't want to eat American beef, and I guess major consumers of American beef are lower income families because it is cheaper," Kim Hyung-joo, research fellow at LG Economic Research Institute, told The Korea Times over the phone last week.

During a press conference in Seoul last week, Trade Minister Kim Jong-hoon made a similar remark, saying he thinks "there was no evidence to support that Korean consumers have rebuilt their trust in the safety of American beef."

Falling market share

The declining share of American beef in the market indicates low consumer confidence in American beef.

Korea was the second largest market for U.S. beef in 2003, following Japan. But Korea dropped to the fourth largest importer in 2009.

Korea imposed an import ban on American beef in December 2003 after a cow in the state of Washington was tested positive for bovine spongiform encephalopathy (BSE) or mad cow disease.

The import ban was lifted in October 2006 and boneless beef cuts from cows 30 months or younger were allowed to be imported.

But Korea soon suspended imports of U.S. beef after banned vertebrae were found in a shipment shortly after the decision.

Negotiators representing Korea and the United States agreed in April, 2008 to open up the local market further for American beef, expanding imports of beef cuts ― both boneless and bone-in cuts ― from cows 30 months or younger.

According to the Ministry for Food, Agriculture, Forestry and Fisheries, the market share of American beef stood at 28.1 percent in May.

Considering that the share was at 70 percent of imported beef back in 2003, the current figure hints that many Korean consumers are still anxious about the safety.

As to the market share, Herlihy from the USMEF, however, presented a different interpretation of the data.

"Regarding why Korean consumers have been eating less U.S. beef than in 2003, we have to realize that there was a virtual five-year absence from the market for U.S. beef," he said.

"While Korean consumers have recently been purchasing and enjoying U.S. beef in increasing quantities, consumer buying habits don't change overnight."

In an e-mail interview with The Korea Times, Jeffrey Schott, senior fellow of the Peterson Institute for International Economics, also presented an optimistic view of the market share of American beef.

"U.S. beef exports to Korea already have grown markedly since the Korean market was substantially reopened to U.S. shipments of most beef products," Schott observed.

'Misinformed' mobs

Consumers' suspicion of the safety of American beef was influenced partly by the collective action of vocal activists who were largely misled by inaccurate information of mad cow disease on the Internet.

Hundreds of thousands citizens took to the streets in downtown Seoul in the spring of 2008 shortly after the government agreed with the U.S. government to fully open up the local market for American beef.

In the initial deal, both bone-in and boneless beef cuts from cows of 30 months or older were allowed for import.

The anti-U.S. beef rallies saw a new generation of activists, middle and high school students who described themselves as citizens concerned about the safety of American beef.

These young activists made up approximately 60 percent of the protestors.

The spread of exaggerated, inaccurate, unverified information about mad cow disease had made the young generation feel extremely uneasy.

They were concerned about their school lunches as they thought they could be served beef infected with mad cow disease, prompting them to join the collective action.

Breach of agreement

American exporters' breach of the agreement also played a role in shaping the negative public perception of the safety of American beef.

Since Korea resumed the imports of American beef in 2006, U.S. shipments to Korea of beef contained bones or bone fragments.

As negotiators from Korea and the United States agreed that only boneless cuts from cows of 30 months or younger were allowed to import at the time, the shipment of boned fragments was considered a violation of the agreement.

Korea suspended imports of American beef temporarily after the incident until July 2008.

Linking beef and automobiles

The United States has linked the beef deal to the free trade agreement signed with Korea (KORUS FTA) in April, 2007. The legislatures of the two countries have not ratified the trade deal yet.

Political analysts speculated that the politics of the mid-term elections has had an effect on the U.S. government's linking the beef deal to the trade agreement.

Ahead of the crucial elections, lawmakers from auto-manufacturing states such as Michigan, Ohio and Indiana, in collaboration with politicians representing the interest of ranchers, wanted to fix the two deals, which according to them hurt U.S. manufacturers and cattle growers, in an attempt to curry favor with their constituents.

"President Obama faces a difficult domestic political challenge because of the economic depression in the auto-producing areas of Michigan and Ohio and is trying to find ways to bring new employment opportunities to that region," Schott of Peterson Institute for International Economics said.

He made the remark after U.S. President Barack Obama informed President Lee Myung-bak last week of his plans to ask U.S. Trade Representative Ron Kirk to initiate new discussions with Korean Trade Minister Kim to resolve the "outstanding issues" before Obama's visit to Seoul in November for the G-20 Summit.

Michael Froman, deputy assistant to President Obama at the White House, clarified shortly after the meeting that "the outstanding issues include non-tariff measures related to autos and beef."

Schott at the Peterson institute said various groups worry that protectionist measures could undercut the expected gains of the free trade deal.

"The new initiatives should provide an insurance policy against such problems and thus ensure that firms and workers and ranchers will be able to compete freely," he said.

Schott added, "Resolving differences over the small share of additional US beef exports still covered by import restrictions is the remaining, albeit sensitive, task facing the trade negotiations."