Tariff slows US pork exports to Mexico
November 22, 2010
by Bryan Salvage
Mexico is the leading destination for U.S. pork exports by volume and the second-largest market next to Japan in terms of value. Exports to Mexico set an all-time record in 2009 and appeared to be headed for another record performance this year. But export activity slowed in September, and one major factor may have been the 5% tariff imposed by Mexico as a result of the North American Free-Trade Agreement (NAFTA) trucking dispute.
In comparing September to August, total US pork and pork variety-meat exports to Mexico fell by approximately 12%. But exports of hams and shoulders – the cuts subject to the new tariff – dropped by more than 20%. Meanwhile, Canada’s pork exports to Mexico – which are not subject to the tariff – increased by more than 30%.
It is difficult to draw solid conclusions based on only one month’s results, but those who downplayed the significance of the tariff may have underestimated its impact, said Philip Seng, US Meat Export Federation president and CEO.
“Mexico right now is the leading market as far as our total pork export volume is concerned,” Seng said. “On the other hand, this imposition of this duty on trucking that was imposed last August at 5% does have an impact. For example, you’re talking about a market that’s very price-sensitive and anything that would raise our prices vis a vis Canada would be a setback. Basically, that 5% nullifies the trade advantage we have in dealing with Mexico. In many ways, this is a disadvantage to US industry and I think the numbers in September versus August is starting to bear that out.”
The US’s main pork competitor to Mexico is Canada and Canada’s exports rose sharply this September. Seng points out this came at a time when the Canadian dollar actually gained strength compared to the US dollar.
“Although the Canadian dollar has increased vis a vis the dollar and the peso increased vis a vis the dollar, still the fact that you’ve had an increase in the duty that has probably been more pronounced as far as impacting the trade situation,” Seng said. “It’s unfortunate, but this is a situation we’re dealing with right now. And as we look at this, just August vs. September the number is down 20% from where we were so that is a significant impact in just a month’s time.”