A US-Russian Chicken Fight Foretells Trade Battles to Come
MILLIONS of Russian consumers may have breathed a sigh of relief last week when they heard that their government had ended threats to ban cheap chicken imports from the United States. But one man was not happy.Skip to next paragraph
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Sitting in his drab Soviet-style office, a portrait of Vladimir Lenin on the wall and back issues of the trade magazine Poultry International on the desk, Magomed Gitinov was convinced that there is only one way to save his struggling broiler firm.
''Stop all imports, that's the answer, nothing else,'' he said emphatically. ''The price of Russian chickens would increase ... and there would be government subsidies, too.''
Mr. Gitinov, deputy head of a company that groups three-dozen chicken farms in the Moscow region, is typical of Russian industrialists hit hard by the transition to a market economy. They are growing increasingly vocal this election year in their demands for government bailouts.
To the dismay of Western officials, they seem to be winning some sympathy in the Kremlin. ''We are giving too much freedom to foreign goods in our domestic market,'' President Boris Yeltsin told light-industry workers here last week. ''We can no longer tolerate this situation, to ruin domestic producers and encourage foreign ones.''
Such sentiment has been rumbling in senior circles for some time: Prime Minister Viktor Chernomyrdin warned last November that imports accounted for half the Russian market in consumer goods. But matters came to a head over a Russian threat to halt imports of American chicken parts on March 16, because of hygiene concerns.
That ruffled feathers in Washington. Sales of American chicken legs - known here as ''Bush legs'' after then-President Bush who first sent them here as food aid - earned America $500 million last year and made up 19 percent of all US exports to Russia.
US trade representative Mickey Kantor weighed in, Deputy Treasury Secretary Lawrence Summers branded the move ''blatant protectionism,'' and Vice President Al Gore wrote to Mr. Chernomyrdin to demand that the decision be revoked.
Moscow was clearly taken aback. ''We were surprised that such high-level officials should raise a simple question like chicken exports,'' said Viktor Konnov, the prime minister's spokesman. In a telephone conversation with Mr. Gore, Chernomyrdin did away with the deadline.
The flap revealed the depth of international concern that, in the face of a Communist resurgence in Russia, President Yeltsin might try to curry favor with the industrial and agricultural lobbies by resorting to protectionist trade measures. That would weaken the economic links that Western leaders hope will underpin political stability.
So far, the only concrete measure has been a new import duty on chicken parts, the proceeds of which are to help revive the local broiler industry. Yet experts doubt that it will help the industry, which was never designed by Soviet central planners to survive in an open market and which has suffered dreadfully from the Soviet Union's collapse.
''If we could raise a cheaper chicken domestically, people wouldn't go abroad to buy,'' says Viktor Anenkov, who runs a chick- breeding center 30 miles west of Moscow.
Then-Soviet leader Nikita Krushchev ordered the development of a broiler industry in the early 1960s after a visit to the United States, and poultry farms were built around all the Soviet Union's large towns.
That was fine when chicken feed came from other parts of the Soviet empire, like Kazakstan or Ukraine. Moscow set the prices, and fuel to heat the henhouses was artificially cheap. But today, Kazakstan and Ukraine are independent, and their feed producers will sell only for a profit. Also, energy costs have risen so much that it makes no sense to raise chickens in the frozen north.
In the face of such economic realities, Russia's broiler industry has nosedived. Three of Gitinov's farms that produce broilers have closed, the other four are losing money, and his output this year is expected to be only 15,000 tons, down from 45,000 tons in 1990.
That is a reflection of the gloomy picture in Russian agriculture in general, according to officials here.
A recent report from the Agriculture Ministry warned that Russia will this year be able to feed itself only with potatoes and other simple vegetables, and will have to rely on imports for everything else. The country will be importing 40 percent of its food within two years, the report predicted.
Under these circumstances, protectionism might please agro-industrial bosses, but they would be unlikely to win the hard-pressed president reelection this June.
Yeltsin is sure to win more votes by allowing the sale of cheap chicken to consumers than by protecting the Russian poultry industry, whose products no one can afford.