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US, Mexico See Benefits of Landmark Agreement

29 January 2014

US - This year, the North American Free Trade Agreement (NAFTA) celebrates a major milestone – 20 years in existence.

Signed in force on 1 January 1994, NAFTA has provided a significant economic boost to the poultry and egg industries in the US and Mexico. In the two decades of NAFTA, Mexico has risen to become the number one export market for US chicken, turkey, duck and eggs in 2013, with annual sales exceeding $1.3 billion, according to US government trade data.

During this period, total US poultry exports to Mexico have grown by 358 per cent in volume and 415 per cent by value. Export volume of chicken meat has increased by five-fold, while value has increased more than eight times.

For turkey meat, export volume and value to Mexico during the 20 years of NAFTA have increased by 135 per cent and 198 per cent, respectively.

For the US and Mexico, NAFTA has contributed to unprecedented growth in poultry production. Since the implementation of NAFTA in 1994, US poultry production has grown by more than four-and-a-half times, while egg production has more than doubled. Mexico’s poultry and egg production, meanwhile, has increased at an average annual rate of 4.3 per cent and 2.8 per cent, respectively.

Meanwhile, Mexico’s per capita consumption of chicken increased during the period by nearly 285 per cent, while egg consumption grew by 120 per cent, solidifying Mexico’s position as the global leader in egg consumption.

After an initial NAFTA 10-year phase-in period, during which import tariffs were reduced incrementally to zero, US poultry and eggs have duty-free access to the Mexican market. Even though Mexico continues to work on gaining entry to the US for its raw poultry products, its industry has unfettered access to US feed grains, poultry genetics and other inputs, which has helped to make the Mexican industry much more efficient.

Much of the US poultry meat is shipped to Mexico fresh, in the form of mechanically separated chicken and turkey meat. These products are used extensively by the Mexican meat processing industry in the manufacture of a variety of further processed products, such as sausages, hams and deli meats, often as a more cost-effective alternative to pork. US producers also export a significant amount of other fresh chicken and turkey parts for retail sale, mainly in the cities located along the border between the US and Mexico.

"The US is the only country that produces sufficient quantities of mechanically separated poultry (MSP) that can supply the demands of Mexican meat processors," said USA Poultry & Egg Export Council President Jim Sumner.

Imports of US poultry meat have been a boon to Mexican processors, which have helped to contribute to Mexico’s increasing consumption of poultry. Over the past 20 years, Mexico’s per capita consumption of poultry has grown by an average of nearly 3 per cent annually.

Mexico also imports a significant amount of processed US egg products, which are in high demand by commercial bakeries, confectioners, and processed food manufacturers. And, in the wake of a severe outbreak of highly pathogenic avian influenza in its main egg-producing region in the state of Jalisco, in 2012 Mexico began importing table eggs from the US to boost dwindling supplies that were curtailed during the outbreak.

The road has not always been a smooth one, however. "One of our main concerns on both sides is that Mexico has not been able to take the proper steps to gain access to the US market for its poultry," Mr Sumner said. "USAPEEC has long supported Mexico’s efforts to have access to the US for its products. By definition, trade means that goods move in both directions, and it would be disingenuous of us to be an advocate for free and open trade without supporting Mexico’s efforts."

To this end, in 2000 USAPEEC and its Mexican counterpart organisation, the Union Nacional de Avicultores (UNA), laid the foundation for dialogue on issues of common interest, such as two-way trade, by forming the NAFTA Egg and Poultry Partnership (NEPP).

"I believe that overall, NAFTA has been a successful free trade agreement to Mexico. The Mexican poultry industry needs to be part of this success. Since we are part of the NAFTA región, we must finish our process to get access to the US market," said Sergio Chavez, executive president of UNA.

Essentially a memorandum of understanding aimed at promoting cooperative dialogue between the US and Mexican industries and to provide a forum for both sides to discuss issues of mutual interest, NEPP has enabled the two industries to reach consensus on numerous issues.

"We do not always agree on everything, but NEPP has served both industries well during the years of NAFTA," said Cesar de Anda, a Mexican egg producer and processor who is a former chairman of UNA, and was one of the early advocates for NEPP on the Mexican side. "We see it as a vehicle, as a tool, to help bring about a more integrated North American poultry and egg industry. Now is the time to look forward, after 20 years of a common agenda; we need to help our governments to create the new phase of NAFTA, beyond the actual status quo."

USAPEEC and UNA used the NEPP industry-to-industry platform to develop a safeguard agreement that ran from 2003 to 2007 for the export of US chicken leg quarters.

When import duties for poultry expired under NAFTA in 2003, the Mexican industry feared that its market would be overwhelmed by a flood of imports of low-priced leg quarters, for which it was admittedly unprepared to handle.

The safeguard took the unprecedented step of asking both governments of extend the duties for leg quarters for an additional five years to provide a cushion to avert swamping the Mexican market with leg quarters and causing economic distress for the Mexican industry.

Although the safeguard was an unorthodox approach to amending an existing trade agreement, both governments approved it, which allowed the Mexican industry to become better prepared when the extended duties on leg quarters were eliminated in 2007.

Looking to the future, with Mexico and the US both members of the Trans-Pacific Partnership (TPP), the potential for Asia as one of the most dynamic market regions worldwide, the Mexican and US poultry industries believe they should work together to develop new marketing opportunities by jointly exporting high-value poultry meat products from the NAFTA region. USAPEEC and UNA are convinced that US and Mexican poultry industries have a tremendous opportunity for both poultry industries to jointly prosper in years ahead.

First, however, Mexico must gain approval by USDA to export its raw poultry to the US. For that to happen, Mexico needs to be recognised by the USDA’s Animal and Plant Health Inspection Service as free or at low risk for exotic Newcastle disease (END).

Also, the Food Safety and Inspection Service must recognise the Mexican Federal Inspection System for Poultry Meat as equivalent to US standards, and must approve at least one slaughter plant in an END-free state as complying with its standards.

Currently, the states of Yucatan, Quintana Roo, and Campeche are recognised as free of END by APHIS, with Sonora and Sinaloa being deemed to be low risk. No slaughter poultry plant that can comply with FSIS standards is located in these states, however.

USAPEEC maintains its support for Mexico’s quest to be able to ship poultry to the US Since 2000, USAPEEC has worked with UNA on its industry’s efforts to gain access to the US market, including providing for an external consultant to assist UNA in expediting the recognition of the Mexican Poultry Meat Inspection System by FSIS.

TheMeatSite News Desk

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