It's Time to End Trade Disputes
Retaliatory tariffs from major U.S. trading partners are wreaking havoc with American agriculture and other sectors of the U.S. economy. Pork producers have taken a big financial hit because of punitive duties on their products.
The U.S. pork industry now is on three retaliation lists: two from China and one from Mexico.
As a result, U.S. pork exports to Mexico during the July-September period fell by more than $61 million.
Mexico’s tariff on U.S. pork has been particularly detrimental for pork producers. That country is the pork industry’s No. 2 export market. Mexico in early June 2018 placed a 10 percent duty on U.S. pork in retaliation for U.S. tariffs on its steel and aluminum exports to America. The Mexican tariff was raised to 20 percent in early July 2018.
As a result, U.S. pork exports to Mexico during the July-September period fell by more than $61 million from the same period in 2017. Iowa State University economist Dermot Hayes calculated that the Mexican tariff is costing each U.S. pork producer $12 per animal, meaning industry-wide losses of $1.5 billion annually.
The Mexican tariff – and ones from China – came during what was expected to be a profitable year and amid record U.S. hog and pork production fueled by rising exports and the expectation of more trade deals.
The U.S. and Mexico concluded free trade agreement negotiations in August, and Canada joined the deal about a month later -- the United States-Mexico-Canada Agreement (USMCA). The USMCA preserves the zero-tariff access for U.S. pork shipped to Mexico, access that has been in place for 24 years through the North American Free Trade Agreement (NAFTA). Consequently, NPPC supports USMCA.
However, the expectation in the private sector in all three nations was that the metal tariffs – and the punitive Canadian and Mexican tariffs levied in retaliation for them – would be lifted by the time of the formal signing of the USMCA on November 30. Unfortunately, the metal issue has not yet been resolved, and the Canadian and Mexican retaliation remains in place, including the 20 percent Mexican tariff on pork.
In addition to pork, many sectors are being hurt by the Canadian and Mexican retaliation. Other food and agriculture products such as cheese, yogurt, apples, potatoes, processed foods and whiskey are under retaliation. Many fabricated steel products, aluminum products, washing machines, personal care products, boats and sailboats are under retaliation. Separate from the economic impact on pork and the other products under retaliation, aluminum and steel consuming sectors in the United States are complaining bitterly because of much higher input prices, which make them less competitive. Indeed, the aluminum industry, concerned about the impact of higher prices on demand for its product, opposes U.S. import tariffs on aluminum.
The Mexican tariff on pork imported from nations with which it does not have preferential trade deals is 20 percent, the same rate currently being applied punitively on U.S. pork. So, pork producers are getting a glimpse of how things will start to look if NAFTA goes away and/or the USMCA is not passed by the Congress.
NPPC and the other affected sectors of agriculture have been joined not only by the aluminum industry but by many steel-consuming sectors such as autos and energy in raising deep concerns about the negative financial impact of the metal tariffs. Many members of Congress, from both political parties, have engaged on the metal issue arguing that the negative impact of the metal tariffs far outweigh any benefit to the U.S. economy. Indeed, the metals issue now has become a significant issue in Congress, diverting attention and support from getting the USMCA passed. NPPC and other groups that depend on North American free trade are concerned that the financial pain inflicted on their members from the metal tariffs may undermine grassroots support for the USMCA.
The irony is that the Mexican tariff on pork iported from nations with which it does not have preferential trade deals is 20 percent, the same rate currently being applied punitively on U.S. pork. So, pork producers are getting a glimpse of how things will start to look if NAFTA goes away and/or the USMCA is not passed by the Congress. The longer the 20 percent tariff remains in place – either because the U.S. metals tariff isn’t rescinded or the USMCA isn’t approved and the current North American trade agreement is terminated – Iowa State’s Hayes forecasts that the U.S. pork industry will lose the entire Mexican market to domestic Mexican pork and, to a lesser extent, to pork from Canada and other nations that have zero-tariff access to Mexico.
The U.S. pork industry losses from the Mexican retaliation are compounded by the tariffs China imposed on U.S. pork in early April and in early July. The punitive 50 percent duties – 25 percent related to U.S. tariffs on Chinese steel and aluminum and 25 percent to U.S duties put on other Chinese products over China’s theft of U.S. intellectual property and forced transfers of U.S. technology – have cost American pork producers $8 per hog, or $1 billion industrywide on an annualized basis, according to Hayes.
The urgency of resolving the trade issues with China and, more importantly, with Mexico become even greater in early 2019 because of implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes Japan and 10 other Asia-Pacific nations, and the trade agreement between Japan and the European Union.
The U.S. pork industry will lose the entire Mexican market to domestic Mexican pork and, to a lesser extent, to pork from Canada and other nations that have zero-tariff access to Mexico.
The CPTPP and the Japan-EU deal reduce tariffs on pork going to Japan – the U.S. pork industry’s No. 1 export market – from several of the industry’s major competitors.
While the United States and Japan are expected to soon begin negotiations on a trade agreement, a deal likely wouldn’t be concluded and implemented before the U.S.
pork industry starts losing market share in the Asian nation.
The only trade issue that realistically can be resolved now is NPPC’s top priority: the metals tariffs. NPPC is leading the charge in the private sector on the issue and has several important initiatives underway.
Nick Giordano is Vice President and Counsel, Global Government Affairs for the National Pork Producers Council (NPPC). He leads NPPC’s D.C. office and is involved in all aspects of policy issues as they impact the interests of U.S. pork producers. Those issues include, but are not limited to, agriculture, economic, energy, environment, food, immigration, production, science & technology, tax and trade.
Giordano’s specialty and most significant work for NPPC is in international trade policy. Among other things, Giordano represents U.S. pork producers in all U.S trade negotiations. On behalf of NPPC, he has taken a leadership role in working for congressional passage and implementation of every major trade agreement over
the past 20 years. He has chaired various food and agriculture trade coalitions, including the Agriculture Coalition for U.S.-Colombian Trade, which was formed to help secure congressional passage of the FTA with Colombia, and the Agriculture Coalition for U.S.-Korean Trade, which was formed to help get the Korean FTA passed by the
Giordano received his bachelor’s degree in political science from Gordon College, a master’s degree in international affairs from American University and a law degree from George Washington University’s National Law Center.