The threat of disrupting the United States’ No. 2 pork export market looms large. Some Mexican pork producers have presented an anti-dumping case to the country’s government, alleging the United States had been flooding the market with U.S. pork at a reduced price.
“This is a serious matter that could result in export restrictions,” says Nick Giordano, trade counsel for the National Pork Producers Council. “It could result in the cessation of all U.S. pork exports to Mexico, if the duties price us out of the market.”
Under World Trade Organization rules, each country can enforce its own trade laws, which means the outcome of this case rests with the Mexican government. A preliminary decision is expected on or before July 16, with a final determination coming next year. After that, it could be appealed to the WTO, or companies could appeal individually to the Mexican government.
“We don’t want to wait to go to the WTO, we want the case terminated now,” says Giordano. “We’re fighting tooth and nail, and we’re acutely aware that after 18 months of losses U.S. producers can’t take anymore setbacks.”
There are two basic scenarios that could unfold. Either the Mexican government will decide to impose an anti-dumping duties tariff on U.S. pork exports, or it finds the case has merit and rules against the Mexican industry.
The tariff amount holds the key to how it might impact U.S. pork. Lynn Heinze, vice president U.S. Meat Export Federation, says the maximum tariffs could be more than 100 percent of the product cost, which would price U.S. pork out of the market. Canada would likely fill that market.
Any disruption in exports to Mexico would be significant to the U.S. pork industry. Last year 19.4 percent of the pork exported from the United States went to Mexico. That’s up from 7.2 percent in 1996, says Ron Plain, University of Missouri agricultural economist.
Last year, the United States exported nearly 218 million metric tons of pork and pork variety meats, valued at $252 million to Mexico. That was the No. 2 export market, with Canada accounting for $176 million at No. 3. From there, the numbers drop-off dramatically, says Heinze.
“More meat will likely continue to go south, with a big factor being the Mexican economy,” says Plain.
“Meat demand in Mexico has increased, as wages and the desire for better diets have increased,” says Heinze. “Mexico actually wanted more further-processed products than the United States could provide.”
As for the allegations, Heinze says Mexico is basing its dumping case on the prices of pork it receives compared to the prices of U.S. pork sent to Japan. While the product for Japan is priced much higher, it also is a higher valued product with different specifications, says Heinze.
“The case was illegally initiated and politically motivated,” says Giordano. “President Vicente Fox was catering to his country’s rural areas and peasant class. The situation was not handled properly.”
Playing the trade-dispute card is old hat for Mexico, which has brought similar cases against U.S. live hogs, beef, rice, apples and corn syrup.
As previously mentioned, Mexico took action against U.S. hog exports a few years ago. When U.S. lightweight hogs began to flow into Mexico in the late 1990s, Mexico responded by initiating a dumping case and imposing trade-stopping antidumping duties. The U.S. government went to the WTO for consultations with Mexico in 2000. As a result, Mexico agreed to exempt slaughter weight hogs from the scope of the antidumping duties. While U.S. lightweight hogs are preferred, Mexico is a hog deficit country and can utilize some heavyweight hogs. This has resulted in some heavyweight U.S. hogs going to Mexico.
As a result of the WTO consultations, Mexico also agreed to conduct a changed circumstances review of the dumping order on lightweight hogs. This changed circumstances review was completed last year. According to Giordano, the Mexican government has told U.S. officials that it was going to terminate the antidumping duty order on hogs. Giordano says that U.S. trade officials are agitated that Mexico has not carried through and terminated the hog antidumping order and that a trip to the WTO may be on the way.
Mexican pork producers and many of Mexico’s other agricultural organizations have demanded renegotiations of the North American Free Trade Agreement’s agricultural chapter. Giordano says that these farm organizations threatened to hold demonstrations to close border crossings and otherwise disrupt Mexican commerce.
While the Fox Administration has resisted comprehensive renegotiations of NAFTA’s ag chapter, Mexican officials have made it clear that they will “armor-plate” Mexican agriculture by proactively using the country’s trade laws and border practices to restrict pork and other U.S. agricultural exports to the country.
In addition to the dumping case, Mexico has illegally stopped U.S. pork at the border for alleged sanitary conditions. In December 2002, large quantities of U.S. pork were rejected at the border for unjustifiable sulfamethazine concerns, costing the U.S. pork industry millions of dollars in losses.
The U.S. pork industry is not the only loser in such activities. Costs of blocking U.S. pork would be high to the Mexican consumer as well. Depending on the restriction imposed, Mexican consumers would face immediate price increases, by as much as 20 percentage points, for pork.
Because the stakes are so high, NPPC has joined forces with USMEF, and the American Meat Institute to fight the case. That team must now fight to ensure that free trade agreements – like NAFTA – that they worked so hard to get, are enforced.