A recent decision by the Mexican government to end anti-dumping duties on beef products from the U.S. is good news for Mexican consumers and U.S producers. While trade between the U.S. and Mexico has been free for all products since January 1, 2008, lingering trade disputes remain. Mexico is the number one export market for U.S. beef and the removal of duties should further enhance trade.

The announcement was the end of a process that began last November when the Secretary of the Economy published a notice regarding the conclusion of the duties and asking beef producers for comments and justifications for continuing the duties. In April 2010 the government began a formal sunset review process by seeking further input from beef producers concerning continuing, eliminating or modifying the duties.

The duties began in April of 2000 and were ratified for another five years in April of 2006. In July of 1998 some cattle producers and beef processors petitioned the Mexican government to investigate the U.S. for allegedly dumping (selling below costs) of beef into the Mexican market. In August 1999 the Commerce Secretariat announced preliminary anti-dumping duties. Mexico modified the duties in 2004 after a NAFTA panel determined the Secretary of the Economy did not sufficiently demonstrate U.S. beef imports had damaged Mexico’s beef industry. The final duties ranged from $0.03 to $0.29 per pound and applied to about half of U.S. beef production. The 2007 National Trade Estimate Report on Foreign Trade from the U.S. Trade Representative (USTR) reported industry representatives asserted the duties caused a loss of $100-500 million in revenue each year.

When NAFTA began in 1995, U.S. exports of beef and veal to Mexico totaled only $86 million compared to $364 million to Canada and $1.7 billion to Japan. By 2000 when the duties were imposed, U.S. exports to Mexico had risen to $512 million and declined to $299 million for Canada and to $1.5 billion for Japan. The discovery of BSE in the U.S. in December 2003 caused turmoil in all U.S. markets, but the Mexican market recovered the quickest. In 2009, the Mexican market for U.S. beef and veal reached $746 million and Canada $622 million, while Japan recovered to only $411 million. According the USTR’s March 2010 Report on Sanitary and Phytosanitary Measures, after the discovery of BSE Mexico was the first country in March 2004 to accept U.S. deboned beef less than 30 months old and in early 2006 accepted bone-in beef less than 30 months of age. In October 2008, Mexico agreed to import beef breeding animals born after 1999. Despite those decisions, Mexico still refuses to accept beef over 30 months of age and ground beef.

The decision by the Mexican government to end the beef anti-dumping duties is consistent with other government action on trade issues over the last five years. In January 2006 the Secretary of the Economy ruled there was not sufficient evidence that domestic pork producers were hurt by imports from the U.S. A similar conclusion was reached in September 2006 on rice imports from the U.S. In December 2007 a NAFTA safeguard tariff-rate quota on chicken leg quarters was allowed to expire. In the latest action before the beef decision, the government ended compensatory duties on red and golden delicious apples. U.S. Meat Export Federation Regional Representative Chad Russell commented after the beef announcement, “In recent years, the interested parties in Mexico have concluded that the duties offer them no advantage…This really shows how far the U.S. industry has come in developing a strong trade relationship with Mexico.”

The Mexican cattle industry is integrated with the U.S. industry. According to estimates for 2010 from the U.S. Agricultural Attaché in Mexico City, Mexico has about 7.0 million beef cows and 3.3 million dairy cows. The calf crop is estimated at 6.8 million with 1.0 million calves moving live to the U.S., 14.7 percent of production. Total slaughter for 2010 is estimated at 6.03 million, with 1.55 million cows, 0.33 million calves and 4.15 million other beef animals. Slaughter on a carcass weight basis is estimated at 1.74 million metric tons (MMT) with another 0.33 MMT imported, mostly from the U.S. and Canada. About 55,000 MT are expected to be exported, up from 45,000 MT last year and 42,000 MT in 2008. Total domestic beef consumption is estimated at 2.0 MMT, with 16.5 percent of that imported. The Mexican beef industry is also integrated into the U.S. feed grains market. Those one million head of calves that move north are fed out on U.S. corn and grain sorghum and corn exports to Mexico for feed use and processing for the current market year are estimated at 8.0 MMT. Sorghum exports are estimated at 2.6 MMT.

The decisions in recent years by the Mexico government and industries to move away from import restrictions based on price is not the end of trade policy disagreements. The lingering restrictions due to BSE concerns are evidence of that condition. All three NAFTA countries have controlled risk status for BSE from the World Organization for Animal Heath, and Mexico has become a modest exporter of beef, including to some Asian markets. Sanitary and phytosanitary issues will become more important as identified in NAFTA AT 15: Building On Free Trade, a March 2009 Congressional mandated report from the Economic Research Service of USDA, “The NAFTA governments have long been aware of the importance of regulatory coordination to agricultural trade. Over the past 15 years, they have finne-tuned many of their sanitary, phytosanitary, and other regulatory measures in ways that have opened doors to new trading opportunities.”

Country of origin labeling (COOL) will remain an issue. NAFTA and WTO agreements recognize the right of countries to apply some type of “origin marking” or “mark of origin.” Unless the three countries work out an understanding, dispute resolution panels will ultimately decide if the current COOL requirements are consistent with U.S. obligations under those agreements. In early May 2010 the WTO composed a panel to investigate a complaint from Canada, Mexico and other countries.

Disagreement will occur as trade increases because old ways of doing business will be disrupted. The policy activities under NAFTA for the past 15 years show that governments can work through issues and arrive at understandings that work to the benefit of producers and consumers.