A lot of the hogs raised in the United States end up as pork going to Mexico — the largest volume export market for the U.S. pork industry. In 2009, the United States shipped 503,503 metric tons of pork worth more than $762 million to Mexico. That’s now in jeopardy.
The Mexican government has placed tariffs on 99 U.S. products, including a 5 percent duty on many pork products, such as unprocessed hams, and a 20 percent tariff on pork rinds. It’s all in retaliation for the United States’ decision to prohibit Mexican trucks from entering America. Mexico first retaliated over the issue in March 2009, shortly after the U.S. Senate decided to remove funding for a pilot program that allowed a limited number of Mexican freight trucks into the country beyond a 25-mile U.S. commercial zone. Pork wasn’t on that first retaliation list of goods, but 89 other U.S. products, representing an estimated $2.4 billion of exports to Mexico, were included.
Allowing Mexican trucks into the United States has been a subject of debate almost since the North American Free Trade Agreement among the United States, Mexico and Canada was signed by the leaders of those countries in late 1992. NAFTA includes a provision that opens the borders between the countries to trucks as long as the vehicles comply with all regulations applicable in the country of destination.
Unfortunately, just days before the NAFTA trucking provision with Mexico was to become effective in December 1995, the United States requested an indefinite postponement. After years of delay, Mexico sought to resolve the trucking issue and took its case to a NAFTA dispute-settlement panel. In February 2001, the panel ruled that by excluding Mexican trucks the United States violated its obligations under NAFTA. The ruling gave Mexico the right to retaliate against U.S. products that were entering its country.
To appease Mexico, the United States in 2007 implemented the Cross-Border Trucking Pilot Program, which allowed a limited number of Mexican trucks to go beyond the commercial zone.
U.S. critics of the NAFTA trucking provision have claimed that Mexican trucks are unsafe. But Mexico has safety protocols for its truckers that are comparable to those for U.S. truckers, including drug and alcohol testing as part of the licensing process and random drug testing. Mexican trucks that were allowed into the United States under the 2007 pilot program were held to the same safety standards as U.S. trucks and were examined and cleared by U.S. inspectors. Additionally, Global Positioning Satellite systems would be installed in Mexican trucks that enter the United States to enforce hours-of-service standards.
Criticisms also ring hollow given that since 1995 many Mexican trucks have traveled through the United States on their way to Canada, and several Mexican trucking companies have had U.S. permits for cross-border trucking since the 1980s.
While safety shouldn’t be an issue, costs should. Allowing Mexican trucks to long-haul goods into the United States saves fuel and time, and that means money. With the demise of the pilot program, cargo from Mexico headed to U.S. destinations has had to be off-loaded and transferred at the border to U.S. trucks, a process the U.S. Department of Transportation says is “highly inefficient.”
The recently updated retaliation list from Mexico gives new impetus to the United States to resolve the trucking issue and to fully implement NAFTA, which has been a boon to U.S. pork producers. Since 1993, the year before it was implemented, U.S. pork exports to Mexico have grown 580 percent, and all U.S. agricultural exports moving south of the border have increased 257 percent. The value of pork shipments to Mexico has increased from $112 million in 1993 to more than $762 million last year, making the Mexican market the U.S. pork industry’s second largest in value terms.
While it is uncertain whether that pattern will continue to be the case given the new tariffs on U.S. pork, the duty will place U.S. pork at a price disadvantage in Mexico’s market compared with its domestic pork, as well as pork from Canada and Chile. Pork from both of those countries enter Mexico at a zero tariff under negotiated free-trade agreements. That’s certainly not a good thing for producers like me.
Beyond the retaliation, another problem related to the trucking debacle is the effect it could have on future trade agreements that the United States wants to enter with other countries. The decision to keep Mexican trucks out of the United States smacks of protectionism, and trading partners will question whether America is committed to free and fair trade and willing to live up to all trade obligations.
The National Pork Producers Council is leading a coalition of agricultural, business and manufacturing organizations urging the Obama administration and Congress to live up to its NAFTA obligations and to allow Mexican trucks into the United States.
Failure of the United States to comply with its trade obligations on the Mexican trucking issue already has cost U.S. agricultural and manufacturing jobs — at a time when the country can ill-afford to lose them — and now has put U.S. pork industry jobs at risk.
In the current global economic climate, the United States must promote trade, not turn inward and erect obstacles. Resolving this issue would strengthen the United States’ relationship with one of its more significant trading partners. It also would prove to the world that America stands for free and fair trade — and stands by the agreements it signs.
Sam Carney, a pork producer from Adair, Iowa, is president of the National Pork Producers Council.