What is in this article?:
- Mexican trade policy could hinder consumer choice
- Open border
- Mexican poultry meat producers accuse U.S. producers of “dumping” chicken meat (selling below U.S. selling prices) into the Mexican market. The Mexican government has proposed import duties of 63-130 percent on leg quarters. The duties will force up the price of chicken in Mexico to the benefit of Mexican producers who brought the case to the government.
International trade allows consumers to access supplies of goods in other countries where local consumers may place a lower market value on those products. U.S. consumers place different values on some pork and beef products than consumers in Asian countries. U.S. producers of pork and beef earn additional incomes by selling into those markets and Asian consumers have additional supplies of popular products at reasonable prices.
A similar situation exists in the U.S. and Mexican chicken meat markets where U.S. consumers prefer white breast meat and Mexican consumers prefer dark leg and thigh meat. A logical outcome is to produce chickens in the U.S., consume the breast meat here and sell the leg quarters into the Mexican market where demand is stronger. This is occurring, but Mexican poultry meat producers accuse U.S. producers of “dumping” chicken meat (selling below U.S. selling prices) into the Mexican market. The Mexican government has proposed import duties of 63-130 percent on leg quarters. The duties will force up the price of chicken in Mexico to the benefit of Mexican producers who brought the case to the government.
A recently released study, Impact of Proposed Mexican Duties on U.S. Leg Quarters on Mexican Consumers, by Iowa State University Professor Dermot Hayes analyzes the consequences of such policies. Low prices for dark chicken meat have allowed consumers in northern Mexico to include muscle meat in their diet. There is no other source of dark meat on the international market because South American and Asian consumers also prefer dark meat. Duties imposed would not be on whole birds from the U.S., so the trade off is between whole bird imports and leg quarters preferred by Mexican consumers. Whole birds now sell for 68 percent more per pound than leg quarters. Since Mexican consumers do not have a preference for white meat, they would have to pay more for something they prefer less.
On an annual basis imports of 250,000 metric tons of leg quarter will be replaced by 79,000 metric tons of imported whole birds as chicken prices increase by 22.4 percent. If Mexican producers see this as a permanent change in demand they will expand production by 156,000 metric tons per year because of the higher market prices, but consumers will continue to be less well off. Chicken prices will eventually settle at 11.3 percent higher, and consumers who cannot afford those high prices will consume 86,000 metric tons per year less chicken.