Tariffs temporarily removed from beef exports to Mexico
23 March 2017
The Mexican government recently announced an agreement establishing detailed provisions on unilateral tariff rate quotas (TRQ), which had originally been proposed in June of last year. What will the potential implications be for Australian beef exporters?
The new unilateral TRQ will allow 200,000 tonnes of beef to enter Mexico duty-free from any exporting country until 31December 2017. The current non-quota tariff rates for beef are 20% for chilled and 25% for frozen product, but the United States and Canada are able to trade duty free under the North American Free Trade Agreement (NAFTA). The allocation of the unilateral TRQ will be on a ‘first-come, first-served basis’ which looks to guarantee the distribution of the quota under fair conditions of competition, transparency and economy.
The official report published in Mexico’s federal register (Diario Oficail) attributed the justification for implementing the unilateral TRQ to a number of key reasons:
- To guarantee supply and contribute to the stability of the national market which will positively impact consumers.
- According to the National Institute of Statistics and Geography (INEGI) Consumer Price Index, beef prices increased by over 50% between 2011 and 2016, mainly from a reduction in domestic availability – the result of growing exports to the US and a decline in the level of imports.
While Mexicans only consume about 8.8kg of retail weight beef per year (OECD 2015 estimate) – compared to the 24.7kg consumed by their US neighbours – the population stands at 122 million and is relatively young.
Steiner Consulting Group also commented that the unilateral TRQ looks to further diversify the number of markets in which Mexico currently sources its beef from, particularly with countries outside of NAFTA, in order to mitigate any potential trade disruptions with the US. Furthermore, Business Monitor International (BMI Research) highlighted the Trump administration appears intent on implementing protectionist measures, with prospective trade scenarios being discussed likely to have a significant impact on agricultural trade with Mexico – in particular the possible scenario of changes or a breakup of NAFTA.
Australian beef exports to Mexico have been negligible for a significant period of time; export volumes over the last 20 years hit a peak in 2001, totalling 6,114 tonnes shipped weight (swt), but in 2016 exports reached only 96 tonnes swt. Beef offal exports have performed marginally better over the last decade, totalling 1,026 tonnes swt in 2016 but at this stage there is no clear indication as to whether offal will be included in the new unilateral TRQ. Competition for the duty free quota is likely to be strong and any exporter looking to send shipments to Mexico will also need to be Mexico listed. Despite the duty free quota, Australian exports could be restricted by currency fluctuations, principally when considered against the highly devalued Mexican Peso.
For the latest Mexican trade, economic and productions statistics, please click here to Monthly Mexico Meat Market Report by Steiner Consulting and commissioned by MLA.
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