Why the chicken crossed the ocean -- twice
A new government rule will soon allow American chicken meat to be exported to China to be processed, then shipped back.
By Parija Bhatnagar, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - American chicken could soon be making plenty of round-trip visits to China.

The Department of Agriculture last month certified China as eligible to export processed chicken meat to the United States -- but with one caveat. The chicken has to be American.

In other words, American chicken will travel across the ocean once and return cooked and canned - to be sent on its way to a supermarket shelf near you.

The U.S. is the world's largest poultry producer. Almost all of the chicken consumed by Americans last year, valued at $50 billion, was produced domestically at about 30,000 chicken farms across the country. Total chicken production in 2005 totaled about 35 billion pounds.

If the U.S. is already self-sufficient in meeting its own chicken demand, what's the economic rationale behind this China deal?

A bird-brained idea?

Some trade experts said the chicken deal could have been an effort by Washington to offer something to Beijing as U.S. officials keep pressing the Chinese on the value of their currency and other trade issues. The U.S. runs a bigger trade deficit with China than any other country.

Parr Rosson, an agricultural economist with Texas A&M University, said he was hard-pressed to spot the benefits to U.S. consumers and producers.

Paul Aho, an economist who studies the poultry industry, agreed. He said canned chicken represents less than 1 percent of the poultry industry. "On the U.S. side, this deal doesn't even matter," he said.

Even the DOA acknowledged in a report that the volume of trade stimulated by the deal - estimated at 2.5 to 6 million pounds of processed American chicken - was so small as to have "little effect on supply and prices." But the deal could affect U.S. producers "in the form of greater competition from China."

Aho said he doesn't see many advantages to the U.S. but there are some potential benefits to China.

"The Chinese tend to think long-term. This certification almost acts as a stamp of approval and gives them leverage to negotiate trade for their chicken with other countries," Aho said, noting China cannot currently export chicken products to the United States.

What does the U.S. poultry industry think?

Richard Lobb, spokesman for the National Chicken Council, said the council isn't "opposed to the deal or in favor of it" although he did disclose that the group has gotten more calls recently about the chicken deal than about the Avian Flu.

"This is not an idea that we proposed nor was it proposed by any of our members," he said. "It came from the Chinese government."

China was the third-largest export market for U.S. poultry last year behind Russia and Mexico, importing some 156,000 tons of chicken. Given the sizeable import volume, Lobb said, China was probably interested in trying to level the playing field somewhat by exporting more to the U.S.

Ruffled feathers in Congress

Steven Cohen, spokesman for the Agriculture Department's Food Safety and Inspection Service (FSIS), said the agency undertook an evaluation of China's certification after China's requested approval to export poultry products to the United States.

The rule takes effect on May 24. Technically, China can start to crank up its processing plants soon. But word of the deal has ruffled a few feathers in Congress.

Rep. Rosa DeLauro (D-Conn.) sponsored an amendment to the 2007 agricultural spending bill to block any government spending that would support implementing the new rule.

"Despite warnings from FSIS's own inspectors of the safety of Chinese plants, and the possibility that we could bring a pandemic into our borders, imports will soon be coming into our country," DeLauro said in a statement this month. "The reasoning is completely inconsistent - this policy should not move forward. We need to stop this rule and we can do so with this amendment."

In an interview with CNNMoney.com, DeLauro said it "didn't make sense at all to bring in food products that have the potential for risking the public health of the people of the United States."

Patty Lovera with consumer interest group Food and Water Watch, said her group has been lobbying against the deal.

"We're very concerned about the equivalency measures being used. We're not currently importing chicken meat from China. So what systems do we have in place to check their systems?" she said. "The other issue is about safety. Do we really want to process our meat in a country where Avian Flu is a concern?"

Cohen at the FSIS dismissed the Flu concern. "Under the rule, China will process chicken that comes only from a country free of Avian Flu. Currently, that meat will come from the United States and Canada. The meat is also cooked and canned which should eliminate the food safety issue," he said.

Tyson Foods (Research), the nation's biggest poultry processor, couldn't immediately be reached for comment.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.