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Chicken Feet Lead to International Trade Dispute

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Last week, reports came in of smugglers attempting to move butter over the Norwegian border. Today, food stories managed to get a little weirder, thanks to the growth of a Chinese black market for chicken feet.

Chicken feet, along with, really, all animal feet, aren’t considered a delicacy in the United States. In general, they’re more a cost of doing business, a piece of the animal that’s thrown out before it’s sold.

China, however, loves them. According to the Washington Post, US chicken foot exports to the country hit $278 million in 2009, after growing steadily for over a decade.

And then, last year, the honeymoon ended when China imposed a tax of more than 100% on American chicken parts. Since, exports have fallen nearly 90%, costing the industry close to $1 billion.

On December 8th, the US responded by requesting that the WTO resolve the trade issue. Trade Representative Ron Kirk said in a statement that: “We are serious about holding China accountable to its WTO commitments.”

Of course, the issue goes a little bit deeper than chicken feet. Many observers have pointed out that the Chinese foot tariff may be a response to Obama’s 2009 duty on Chinese tires. Yesterday, the Atlantic Wire pointed out that these tariffs are only a small part of an ongoing back and forth between the US and China that has grown to include credit cards, wind power and many other industries.

Unfortunately, it’s not just Tyson (TSN), Smithfield (SFD), Pilgrim's Pride (PPC) and their counterparts who are suffering. Chinese consumers apparently prefer the fatter US chicken feet to both local and international competitors. Since March, officials in Nanjing have investigated four incidents of chicken smuggling and arrested a dozen people.

Recently, another US-China dispute has spread to nearby India. According to Bloomberg, Indian solar panel manufacturers are complaining about dumping and preferential financing by both Beijing and Washington. Last June, the nation’s biggest solar cell manufacturer went out of business after a 62% decrease in cell price. Indian manufacturers are currently asking for a 15% tax on imported thin-film panels and for the government to waive duties on raw materials.

Meanwhile, China continues to celebrate the 10th anniversary of its acceptance into the WTO.
POSITION:  No positions in stocks mentioned.