Study Says Import Duty to Penalize Mexican Consumers

An Iowa State study notes that new duties on U.S. chicken imports would push up prices in Mexico, but local poultry providers would benefit.

Published on: May 15, 2012

In this global trade environment, a duty or tariff can have a range of consequences. That idea may impact Mexican consumers soon if the country imposes a duty on U.S. chicken leg quarter imports. A new study released this week, conducted by Dermot Hayes, professor of economics and finance at Iowa State University, notes that the Consumer Price Index in the country could jump by 7.2% and retail chicken prices could rise as much as 22.4%.

In early 2011 three Mexican poultry companies petitioned the Mexican government to begin an anti dumping investigation of imports of chicken leg quarters from the United States, claiming U.S. companies were exporting leg quarters to Mexico at below-market prices. The Mexican ministry announced its preliminary results with imposed duties on U.S. poultry ranging from 64% to 129%.

CHICKEN DUTY: An Iowa State study notes that new duties on U.S. chicken imports would push up prices in Mexico, but local poultry providers would benefit.
CHICKEN DUTY: An Iowa State study notes that new duties on U.S. chicken imports would push up prices in Mexico, but local poultry providers would benefit.

Loss of this big market could damage the U.S. chicken industry and competing meats. Mexico is the largest customer of U.S. poultry exports. If these tariff rates are imposed in Mexico's final determination, U.S. exports of chicken leg quarters to Mexico would decrease from about 250,000 metric ton per year to zero and could result in lost jobs, and a $275 million loss for the poultry industry, according to the National Chicken Council, which released the report this week.

According to the release, the Iowa State Study examined what implementation of the duties would mean for Mexican consumers. Results from the study indicate that in the short run, on an annualized basis, the duties will eliminate 250,000 metric tons of chicken leg quarters from the market and replace them with 79,000 tons of imported whole chicken. Domestic consumption will fall by 163,000 tons, in part because chicken prices will rise by 22.4%. A 22.4% increase in chicken prices will increase the meat CPI by 7.2%, the food CPI by 1.9% and the overall CPI by 0.4%.

The study notes that the Mexican chicken industry will be the biggest benefactor of the duty when it is applied. "Mexico is an important trading partner for the U.S. chicken industry and we hope that this frivolous antidumping case will be dropped as soon as possible," says Mike Brown, president, National Chicken Council. "The negative ramivcations of imposing these duties are clear, for the U.S. chicken industry and for Mexican consumers."

A public hearing is scheduled for May 15-16 in Mexico City arranged by the Mexican Unit of Foreign Trade Practices about the Mexican anti-dumping investigation against U.S. chicken leg quarters.  Expected to take part in the hearing are the petitioners in the case, U.S. exporters and Mexican importers. Under Mexican law, the hearing will provide participants an opportunity to recap information they have provided to UPCI during the course of the investigation, or to provide supplemental and supporting material. The hearing is one of the last steps before UPCI renders its final determination in the case, which will have to be reached by August under Mexican law.