COMMISSIONER STEPHEN KOPLAN
STATEMENT OF RECOMMENDATIONS ON REMEDY
INV. NO. TA-201-68, LAMB MEAT

Pursuant to Section 202 (e) of the Trade Act of 1974, I recommend that the President impose a four year quantitative restriction on the importation of lamb meat into the United States. In my view, such a remedy is the most appropriate, particularly in light of the Commission's unanimous finding that the recent surge in imports threatens serious injury to the growers, feeders, packers, and breakers who collectively constitute the domestic lamb meat industry. In rendering that decision, we found that the imports are entering the United States in such increased quantities as to be a substantial cause of the threat of serious injury. For several reasons, I believe that my recommendation will provide the most effective relief to facilitate the efforts of the domestic industry to make a positive adjustment to the increased import competition.

Specifically, the recommended quantitative restraint is a straightforward method of countering and delaying the import surge that threatens the industry. It is tailored to directly offset the very surge that threatens serious injury. At the same time, it ensures that the relief provided is not more than that necessary to prevent the serious injury. I am mindful that petitioners have proposed a tariff rate quota. I considered the alternative of recommending some type of tariff but determined that the nature of this industry made it infeasible to determine the probable economic effects of such a relief measure. This industry is composed of distinct segments, several of which are highly fragmented. Consequently, there were a broad range of variables to consider in connection with a tariff and this naturally resulted in a broad range of possible outcomes regardless of the tariff level selected. Moreover, the available pricing data demonstrates that the imports from Australia and New Zealand generally undersold the domestic industry. Thus, it is unclear to what extent those exporters could pass along any tariff without affecting domestic price levels. I was therefore unable to assess the likely effects of a tariff- based remedy on the industry as a whole within an acceptable margin of certainty.

As to the specific recommendation, I find that calendar years 1995 through 1997 are the most recent three years that are representative of lamb meat imports. That three year period is equally divided between a time the industry was receiving payments under the Wool Act and when it was not receiving any such payments. That period also does not include the substantial increase in imports that occurred in 1998. I recommend a quantitative restriction of 52 million pounds as necessary to prevent the serious injury. This restriction is slightly in excess of the average carcass-weight equivalent of total imports for the three most recent representative years, which was 51,471,000 pounds. I further recommend that this restriction be phased down by increasing the quota to 56 million pounds in the second year and to 61 million pounds in the third year. In the fourth year, the restriction would be 70 million pounds. That amount is based on the average annual increase in imports for the representative period applied to the 1997 import level. Thus, my recommendation phases down the quantitative restriction on imports in a predictable manner, so that the industry would have time to implement its adjustment plan.

I have recommended that the quantitative levels increase disproportionately at the end of the remedy period because, while all segments of the industry will benefit from the remedy, it will take growers about two years to adjust production in response to the temporary relief. I also recommend that the quantitative restriction be allocated on a country-by-country basis, with separate allocations for Australia, New Zealand, and "all other" countries in proportion to their average share of imports into the United States during the representative three year period. I recommend that this import relief not apply to imports of lamb meat from Canada, Mexico, Israel, and beneficiary countries of the Caribbean Basin Economic Recovery Act or the Andean Trade Preference Act.

In addition, in 1996, Congress established the National Sheep Industry Improvement Center and authorized a total of $50 million for that Center. This Center was established to promote the development of the sheep industry. Of the total authorization, $20 million has been appropriated but has not yet been made available to the domestic industry. I recommend that the President take all action necessary to ensure that the Center is fully operational as quickly as possible. I also recommend that the President make available, either through the Center or directly to the industry, the full measure of Federal assistance programs, including those administered by the U.S. Department of Agriculture.

Finally, for any recommended remedy to be effective, the domestic industry must collectively undertake significant efforts to promote a positive adjustment to the import competition. The industry submitted an adjustment plan to the Commission in the course of this investigation. In this regard, I note that in the event the President takes action and provides import relief, the Commission is required to monitor developments in the industry, including the industry's efforts to adjust to import competition. With that observation, I conclude my statement. I will provide more detailed views with the opinion that will issue in this investigation.