US pork fears losing Mexican market to Mexico

 

By Bill Tomson, AgriPulse

05/08/19

 

It’s not competing pork producers in Europe or Canada who are the biggest threat to the U.S. share of Mexico’s market. It’s producers already in or moving to Mexico.

 

Mexican tariffs on U.S. pork — retaliation for U.S. tariffs on steel and aluminum — are making the meat the U.S. sells across its southern border expensive enough to create new competition from within, top officials with the National Pork Producers Council say.

 

The situation has put NPPC in a tough spot. The group, like most farm organizations, is a strong supporter of the current North American Free Trade Agreement as well as the renegotiated U.S.-Mexico-Canada Agreement, but the tariffs effectively nullify the benefits of either pact.

 

“The problem for us is that if these metal tariffs don’t go away, that’s the same thing as not having free trade in North America for us,” said Nick Giordano, an NPPC trade lobbyist.

 

And without free trade, the incentive to replace imported pork with domestic pork is growing.

 

“They have a growing herd in Mexico and very efficient producers,” said NPPC President David Herring. “They’ve been more profitable over the past five years than American producers.”

 

Even so, the U.S. exported about $1 billion worth pork to Mexico last year, making it the largest market by volume for U.S. producers.

 

“Trade works for U.S. pork producers … and Mexico has been a great customer,” said Herring, who is also a North Carolina farmer. “We probably export about 40 percent of our hams to Mexico. They like U.S. pork.”

 

Those sales came despite the Mexican tariffs that have been in place for nearly a year, but it’s not a sustainable situation in the long run, Herring added.

 

That’s because Mexican consumers also like cheap pork, and Mexican producers are already looking to expand, he said. The longer Mexico’s 20 percent tariff remains on U.S. pork, the quicker domestic producers will expand their operations, and the more U.S. producers will be tempted to set up shop south of the border.

 

NPPC members are already vocal about moving some of their operation into Mexico, Giordano said. “We’ve had producers discuss it with us.”

 

And Mexican operations are already world-class pork producers, so expansion is not unthinkable.

 

“They’ve got very efficient domestic production in Mexico,” Giordano said. “Mexico is a pork exporting nation. Mexico exports to Japan, Korea and China.”

 

Private industry and government officials in the U.S., Mexico and Canada had all expected the Trump administration to lift the steel and aluminum tariffs last year when the leaders of all three countries signed the USMCA, but that still hasn’t happened yet. U.S. Trade Representative Robert Lighthizer has been in talks for months with Mexico and Canada on the issue, seeking quotas to replace the tariffs, but it's unclear if there has been any progress.

 

What is clear is that the Mexican, Canadian and possibly the U.S. legislative bodies will not ratify USMCA while the tariffs are still in place.

 

“From the Mexican point of view, I can tell you we will never dream of completing the USMCA … if that problem has not been resolved,” Jesús Seade, Mexico’s top North American negotiator, said recently about the steel and aluminum tariffs...

 

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