Action Taken on Mexican Trade Dispute

Pork board approves use of research checkoff fund to help fight Mexico's anti-dumping levy. Compiled by staff

Published on: Aug 17, 2004

The National Pork Board has approved the use of pork checkoff funds for research to help fight Mexico's claims that the United States is selling hams below fair market value in Mexico. Mexico seeks to impose an anti-dumping levy, similar to a tariff, on U.S. pork imports.

Although hams account for just over 20% of the revenue earned on a hog, Mexican officials who filed the anti-dumping claim assert that the profitability of hog producers is completely attributable to ham prices, says Steve Meyer, a pork industry economist who advises the National Pork Board. The Mexican officials have ignored the impact on hog producers' profitability of the 80% of revenue earned on pork products other than ham, including loins and bacon, Meyer says.

Both the National Pork Producers Council and the National Pork Board are working through the American Pork Export Trading Company (APEX) to resolve the Mexican trade issue.

"Fighting this is so important for U.S. pork producers, because Mexico is our second largest trading partner," says Dave Culbertson, president of the National Pork Board. Culbertson, a Geneseo, Ill, pork producer says, "If we lose this market, it could be a huge setback."

The U.S. shipped 219,000 metric tons of pork to Mexico in 2003. Through June of 2004, U.S. exports to Mexico increased 85% in volume from the same period the previous year.

Hams constitute a large portion of the increase in exports to Mexico, Meyer says. Weekly data for July 2004 show that prices of 17- to 20-pound hams were about $24/cwt higher than in 2003. Because ham accounts for roughly 24% of the carcass, this price increase has raised pork cutout values by $5.76/cwt, adding nearly $10.95 to the value of a market-weight barrow or gilt.

"Maintaining access to this market has the same effect as successfully promoting pork to U.S. consumers - it increases demand for pork and hogs," Meyer says.

Since the North American Free Trade Agreement (NAFTA) took effect in January 1994, Mexican hog farmers have sought to impede imports through a series of antidumping investigations on live hogs and pork, Meyer says. Although the U.S. pork industry has ultimately succeeded in defending each of these investigations, the cases have caused U.S. producers to lose tens of millions of dollars in sales and profits.

Most recently, the U.S. pork industry fought for 17 months against an antidumping investigation of U.S. pork exports. The Mexican government agency that administers Mexico's trade laws terminated that investigation on May 31, based on a finding that there was insufficient evidence of injury to warrant imposing duties.

"This latest case involving hams comes at a time when pork producers are enjoying record success with exports," Culbertson says. "By using checkoff funds to support fact-based research, we can help U.S. pork producers resolve this important trade issue."