March 2, 2018

 

'NAFTA is driving force behind US' lucrative dairy trade with Mexico'

 

 

The US' current free trade agreement with Mexico under NAFTA is the driving force behind its $1.2-billion dairy exports to its southern neighbor, according to an analysis released on Tuesday, Feb. 27, by research and consulting firm Informa Economics.

 

In 2016, the most recent year examined by Informa, the US shipped $1.2 billion worth of dairy products to Mexico, up from $201 million in 2002.

 

According to the analysis, for every $1 of sales associated with dairy exports to Mexico, an additional $2.50 in output (industry sales) is supported elsewhere in the US economy.

 

Thus, including impacts to industries that are linked to US dairy exports to Mexico, the aggregate output value of $6.7 billion covering the period 2012-2016 is magnified to $23.3 billion in economic output.

 

Mexico is the No. 1 market for US dairy product exports, accounting for roughly one-fourth of total US exports. It is also the world's third-largest dairy-product exporter as of last year.

 

Importance of NAFTA

 

"This analysis not only illustrates the importance of preserving existing market access to Mexico under North American Free Trade Agreement, but also demonstrates why we are urgently pursuing new opportunities via US free trade agreements around the globe", said US Dairy Export Council (USDEC) President and CEO Tom Vilsack.

 

"Virtually every US free trade agreement to date has yielded positive results for dairy, and current negotiations hold great potential for the industry", he added.

 

The authors of the analysis noted that under NAFTA, US exports of dairy products to Mexico are duty-free, providing a significant advantage to the US because export competitors shipping to Mexico are subject to MFN (most favoured nation) tariff rates of 20-45% on cheese, 45% on skim milk powder and 10% on whey products.

 

"Without NAFTA, the United States would be paying higher tariffs in terms of MFN tariff rates of 20 to 45 percent, or the same levels as its competitors," the authors wrote.

 

Some competitors, including the European Union, are already negotiating trade agreements with Mexico that could make their exports more competitive in the Mexican market. Rick Alberto