Texas To Be Biggest Loser
Under Mexican Beef Tariffs

By David Bowser

AMARILLO — According to the Texas Cattle Feeders Association, the Lone Star state stands to lose the most under the import duties imposed on U.S. beef by the Mexican Commerce Department known as SECOFI.

According to SECOFI, more than 80 percent of U.S. beef exports to Mexico move through Texas.

The Mexican government imposed tariffs on U.S. beef effective Aug. 3.

The Texas Beef Council says those tariffs will negatively affect the profits of more than a dozen family-owned Texas exporting companies. About 149,810 metric tons of U.S. beef worth around $361.3 million go to Mexico from Texas.

But a Texas A&M economist says it shouldn't affect the cross-border cattle trade, and Mexico, despite the tariffs, should continue to be a good market.

The duties, however, stand to significantly disrupt the market for small packers by pricing U.S. beef out of reach for most Mexican consumers, says Burt Rutherford with the TCFA. The duties will allow foreign competitors to benefit from millions of checkoff dollars spent to promote grain-fed beef in Mexico.

According to TCFA, this sets the stage for the Canadian Meat Export Federation, which bases its entire Mexican program on the U.S. model, to take a share of the market built with U.S. dollars. Some in the industry contend the duties are in response to an anti-dumping action filed against Mexico by R-CALF, a Montana group. The R-CALF action was subsequently disallowed.

Dr. Ernest Davis, professor and extension economist for livestock marketing at Texas A&M University, says antidumping complaints aren't that unusual.

"We've got one against Canada because Canada was dumping cattle on us, and we were dumping beef on Mexico," Davis says.

According to the economist, "dumping" simply means the product is being sold on the market for less than its production cost.

As a practical matter, Davis explains, "We've been 'dumping' cattle for the last three years." That's not to say it's been a deliberate effort, just that the market throughout the period has been so poor that cattle and eventually beef have sold for less than it cost to produce them.

"I call it subsidizing the consumer. They say dumping."

He says the Mexican government should rethink its position because the "dumping" is subsidizing their consumers.

Essentially, Davis says, the situation that led to dumping charges against the U.S. by Mexico stems from extra meat in the packers' inventory. They didn't have a market for it, Davis says, so they lowered the price to get rid of it.

"That's what they did," he says.

The National Cattlemen's Beef Association and other cattlemen's groups, Davis says, agreed with Mexican cattlemen's associations that they wouldn't let the beef trade affect cattle.

"They said, 'we're not going to put any tariffs on cattle,'" Davis explains. "They export a million head a year to the U.S. We send back to them 60,000."

Nevertheless, he says, Mexico is important to the U.S. and becoming more important.

Most of the tariffs the Mexican government has started imposing, he says, are not large. While there are certain tariffs of 200 percent, Davis says most of them are closer to two to eight percent.

"For certain products that we don't sell that much of down there, it gets pretty high," Davis says.

Hotel, institute and restaurant tariffs are high.

"It's not going to affect us that much," Davis says. "The important thing is there are 100 million people in Mexico."

Three years ago, there were only 92 million people in Mexico.

"It's growing fast," Davis points out.

In addition to births, he says there is a migration into Mexico from Central America.

While the NAFTA partner reviews its tariffs on U.S. beef imported into Mexico, a decision is expected early next year. The Mexican Department of Commerce has 130 business days to complete its investigation of alleged dumping of U.S. beef in the Mexican market, so the duties announced in early August will remain in effect until sometime early next year, according to the U.S. Meat Export Federation. If SECOFI concludes that the preliminary duties are appropriate, the duties will remain in effect until 2005.

However, the duties should be reviewed and could be lifted early, Rutherford notes. The actual figures vary widely, ranging from zero to 215 percent. Under Mexican law, SECOFI set separate preliminary duties for different U.S. exporters based on information supplied by those companies. Large packers, which ship about 80 percent of the U.S. beef exports to Mexico, responded to the dumping complaint and received lower or no duties, according to the TCFA.