A quantitative analysis of the effects of tariff and non-tariff barriers on U.S. - Mexico poultry trade

Date

2005-11-01

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Texas A&M University

Abstract

Since the inception of the North American Free Trade Agreement (NAFTA) in 1994, tariff restriction to U.S. poultry products entering the Mexican market has decreased significantly. While poultry trade from the U.S. to Mexico has increased considerably, Mexican chicken exports to the U.S. face a sanitary restriction. This concerns chicken producers in Mexico. Consequently, the Mexican government negotiated with the U.S. government an extension, from 2003 to 2008, of the tariff rate quota (TRQ) on U.S. chicken leg quarters entering the Mexican market. The purpose of this study was to estimate the economic impact of trade policies restricting the chicken trade between Mexico and the U.S. Two trade policy scenarios were analyzed: (1) a removal of the Mexican tariff rate quota (TRQ) on U.S. chicken leg quarters, and (2) a removal of the TRQ and, in addition, a removal of the U.S. sanitary restrictions to Mexican chicken. A cost minimization mathematical programming model was used to estimate the optimum levels of production, consumption and trade, subject to policy restrictions. The study found that if the Mexican TRQ on U.S. chicken leg quarters is eliminated, chicken production in Mexico would shrink by 51% compared to the actual level of production as of 2003. A less drastic effect on Mexican production of chicken was found when, in addition to the TRQ removal, the U.S. sanitary restriction on Mexican chicken is eliminated. In this second scenario total production in Mexico would decrease by 24%. Under both scenarios chicken production in the U.S. is estimated to have an increase, 8% and 4% for the first and second scenarios, respectively. These new levels of production would affect trade levels and prices for chicken and chicken parts in both countries.

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