In December, with strong bipartisan support, the U.S. House of Representatives approved legislation ratifying the U.S.-Mexico-Canada Agreement on a vote of 385-41. While the U.S. Senate and Canadian Parliament must also approve USMCA before it enters into force, clearing the U.S. House was a major step toward ratification. The U.S. Senate Finance Committee approved the trade agreement on Jan. 7, setting the stage for the full Senate to vote.
"House members' emphatic support for USMCA was very encouraging, not only for the U.S. meat industry but also for our customers in Mexico and Canada," notes Dan Halstrom, president and CEO of the U.S. Meat Export Federation. "Through what has been a long and often frustrating process, we appreciate the bipartisan effort by House leaders and the Trump administration to keep USMCA on track for implementation."
Since Mexico removed its 20% retaliatory duty on imports of U.S. pork in May 2019, U.S. pork exports have again enjoyed duty-free access to both Mexico and Canada under the North American Free Trade Agreement. But the U.S. industry is still feeling the impact of Mexico's duties, which were first imposed in June 2018 in response to U.S. tariffs on steel and aluminum.
"Pork exports to Mexico rebounded after the duties were removed, but certainly not to the record-breaking levels we saw in 2017 and early 2018," Halstrom says. "To fully rebuild and expand demand for U.S. pork in Mexico and reestablish our reputation as a reliable supplier, long-term trade relations with Mexico must be on a positive trajectory. Ratification of USMCA will go a long way toward achieving that."
Mexico is the largest volume destination for U.S. pork exports and second to Japan in export value. Exports to Mexico peaked in 2017 at just over 800,000 metric tons valued at more than $1.5 billion. When full-year data is available for 2019, export volume will likely reach about 705,000 mt, valued at about $1.2 billion.
"U.S. pork exports to Mexico set a new volume record for the sixth consecutive year in 2017 and were actually ahead of that pace in early 2018, prior to the impasse over steel and aluminum tariffs," Halstrom says. "For the U.S. industry, getting exports back to that level is a top priority."
Canada is also a top five destination for U.S. pork, with exports in 2019 projected to reach about 215,000 mt valued at nearly $800 million. But Halstrom notes that in addition to being high-volume markets, the product mix exported to Mexico and Canada is an excellent complement to leading Asian markets such as Japan and South Korea.
"The best example of this is the strong demand for U.S. hams in Mexico and Canada," he explains. "Japan has a terrific appetite for loins and, along with Korea, great demand for shoulder butts and picnics, but their need for hams is not as strong. Moving bone-in hams to Mexico is also very cost-effective, as they can be trucked fresh to processors and make their way into commercial channels within a few days of slaughter. This is especially important given the tight U.S. labor supply."
Even with trade being down from the recent peak, Mexico still dominates U.S. exports of bone-in hams and shoulder cuts. Through October 2019, these shipments to Mexico totaled nearly 360,000 mt, accounting for 80% of the worldwide total. China was a distant second, taking about one-tenth of the volume exported to Mexico.
Mexico is the second-largest market for U.S. pork variety meat, trailing only China/Hong Kong. Through October, pork variety meat exports to Mexico were steady with the previous year's pace at 110,239 mt, more than one-fourth of the worldwide total. These shipments were valued at $171.5 million. (Note: pork variety meat was not subject to the retaliatory duties imposed by Mexico in 2018 and 2019.)
The category in which the Canadian market excels is processed, value-added pork products. Through October, Canada accounted for 50% of U.S. processed pork export value at $316 million. Mexico ranked second at $95 million, accounting for 15%. Canada was also the leading destination for U.S. sausage exports, which are charted separately because the data combines beef and pork sausages into one category. Canada accounted for 46% of U.S. sausage exports at $164 million, followed by Japan ($78.5 million) and Mexico ($34 million).
"Demand for processed pork products in Canada and Mexico has definitely captured the attention of competitors — especially European suppliers," Halstrom says. "So it is especially important to solidify duty-free access for these items."
Another key benefit of the USMCA for the U.S. pork industry is the agreement's chapter on sanitary and phytosanitary measures, which strengthens the parties' commitment to science-based trade. The USMCA increases transparency in the development and implementation of SPS measures and import checks, and establishes a new mechanism for technical consultations to resolve trade conflicts.
"Fortunately the U.S. industry doesn't currently face any major technical obstacles when exporting pork to Mexico or Canada," Halstrom says. "But if such issues surface in the future, USMCA offers a better path to resolution than we currently have under NAFTA."