The 20^th anniversary of the North American Free Trade Agreement (NAFTA) gives us the opportunity to look back on this pivotal international trade agreement and evaluate its effect and benefits.

While assessments of NAFTA’s impact will vary industry by industry, the United States’ pork industry has seen clear benefits from the expansion of trade opportunities with both Canada and Mexico.  Both countries were envisioned to be leading export destinations for U.S. pork when NAFTA was approved, and each has grown at a substantial rate since its passage.

Over the past 20 years, U.S. pork production also increased dramatically – up nearly one-third while consumption grew just 1%.  For that reason, exports have been the key to growth in U.S. pork production. Over that time span, U.S. pork exports grew from just 3% of production to about 26%, including variety meat.

U.S. pork exports to Mexico and Canada have increased steadily over the past two decades, from less than $190 million in value to more than $2 billion last year – more than a 10-fold upswing.  Due to dramatic differences between the U.S. and Mexican pork industries, it took a few years for exports to Mexico to gain momentum, but exports took off in 2000 and neared $1.2 billion in 2013, marking six consecutive years of record-breaking export values.

Former U.S. Meat Export Federation-Mexico Director Homero Recio, who now serves as president of Agri-West International, Inc., was front and center as NAFTA took effect in Mexico.  He notes that the traditional wet markets dominated the Mexican protein market in the early 1990s, accounting for roughly two-thirds of all fresh pork sales.  Pork was sold primarily from the carcass rather than the standardized cuts familiar to U.S. consumers.

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What the U.S. pork industry brought to Mexico was a quality product produced consistently and with an emphasis on food safety.  While pork has always been popular in Mexico, its reputation called for pork to be “cooked well-done, and then cooked some more,” according to Recio.  Part of USMEF’s educational process was to show that pork could be prepared safely and still be juicy and delicious.

There is still room for expansion as Mexico’s per-capita pork consumption remains relatively low.  While modern supermarkets are growing in popularity, wet markets are still an important outlet for fresh meat.  At the same time, Mexico’s domestic pork production, growing 41%, has not been able to keep pace with the booming demand. 

While Mexico’s importance as an export market for U.S. pork continues to grow, the Mexican pork industry is seeing its own NAFTA benefits.  Mexico’s pork exports to the United States have grown from a minimal annual value to about $25 million.

For Canada, exports to its NAFTA partners grew from less than $450 million to more than $1.17 billion in 2013, with the United States as its top export market. Although the United States is a net importer of pork from Canada, U.S. exports have been growing steadily and set a record at $856 million in 2012, and ended just shy of that record in 2013. This growth has been impressive considering that Canada’s pork consumption has actually declined slightly over the past 20 years while production grew more than 60%.

Canada’s pork exports are diversified and domestic production growth has been driven by export growth to Asia and Russia as well as to North America. Canada exports about 68% of its pork production without accounting for live hog exports. 

On the live hog side, the U.S. and Canadian industries became increasingly integrated as imports of Canadian hogs grew steadily from less than one million head in 1994 to 10 million in 2007, falling more recently to about five million head.  

Looking Ahead: TPP and TTIP

The United States is currently engaged in discussions for two free trade agreements: the Trans-Pacific Partnership (TPP – 12 countries including our NAFTA partners, Japan, Australia, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam) as well as the Transatlantic Trade & Investment Partnership (TTIP – with the European Union).    The United States already has FTAs with all TPP member countries except Japan, Vietnam and New Zealand.  Thus the negotiations with Japan, the largest value market for U.S. pork, are the most critical. 

The EU does not currently import significant volumes of pork, but TTIP could provide new opportunities.  Composed of 28 countries with just 7% of the world’s population, the EU accounts for about 20% of global imports and exports, and is the second-largest pork-consuming region in the world. 

If there is one important lesson for us to take away from the NAFTA experience, it is the benefit the domestic pork industry (as well as other industries) receive from our enhanced ability to export products to the broadest possible range of international markets.  Agriculture is one of the few areas of the U.S. economy that has a positive balance of trade – a $37 billion surplus in FY 2013 – and it supports nearly 1.2 million American jobs.  Expanding our ability to export through free trade agreements has a very direct, beneficial impact on the U.S. economy.

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