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Increased U.S. export demand will raise U.S. prices, unless there is a corresponding increase in supply. Consumers of some products will be worse off if higher prices are passed on to them. More imports increase the supply available to consumers and prices will drop, unless domestic suppliers reduce production in the face of these lower prices. The net benefits from trade depend on the balance between trade gains and losses and the resulting impacts on prices, jobs, income, taxes and social costs.

Beef and Cattle. Mexican duties of 20 percent on fresh and chilled beef, and 15 percent on live cattle, were eliminated on January 1, 1994. U.S. exports of beef were up 84 percent in 1994, to 72,000 tons. The Mexican market represents about 5 percent of all U.S. beef exports. Exports declined to 29,000 tons in 1995 because of the devaluation of the Mexican peso, but recovered to 59,000 tons in 1996. Mexican demand for imported beef could reach 200,000 metric tons by the year 2004. Over the long term, NAFTA will have a positive impact on U.S. beef producers as more meat and fed steers are exported to Mexico.

Higher prices for beef and beef by-products will have a small positive impact on cattle prices, on balance. These changes will be small because U.S.-Mexico livestock and meat trade is largely complementary, with the U.S. exporting meat and meat products and Mexico exporting live cattle. Meat exports boost beef and cattle prices but imports of feeder steers reduce them.

U.S. imports of Mexican feeder and stocker cattle have expanded from 500,000 head in 1980 to 1.2 million head in 1994 and a record 1.6 million head in 1995. Only 431,000 head were imported in 1996, compared to 650,000 head in 1997. Constraints to increased cattle imports are limitations on herd size due to drought and herd liquidation, undesirable breed characteristics, increased demand for meat in Mexico, and compliance with some U.S. animal health regulations.

Poultry. U.S. poultry exports to Mexico have quadrupled from 51,000 tons in 1990 to 237,000 tons in 1996. Mexican imports account for 8 percent of total U.S. poultry exports. About 55 percent of these exports are broilers and 34 percent are turkeys. U.S. exports are expected to continue to increase as trade barriers are lowered and economic development proceeds. Moderate gains in U.S. employment should occur as poultry output increases, mainly in the processing and service sectors, because growers can add capacity without much additional labor.

Feed Grains. A 15 percent seasonal tariff on grain sorghum was eliminated on January 1, 1994. Corn trade is being liberalized more slowly due to its political and social importance in Mexico. Under a tariff-rate quota, a minimum of 2.8 million tons of corn may now enter Mexico duty free each year. The quota was exceeded by more than 3.0 million tons in 1996 due to drought in Mexico and a short crop. The duty free quota will grow 3 percent annually, and the 180.6 percent duty on over quota corn imports will be eliminated over 15 years. During 1996, 6.3 million tons of corn and 2.0 million tons of grain sorghum were exported to Mexico. Mexican demand for U.S. feed grains has increased as more grains are fed to cattle, hogs and poultry. However, supply and demand conditions in the rest of the world are the dominant factors affecting U.S. prices.

Wheat. U.S. wheat exports have expanded from 321,000 tons in 1990 to 1.5 million tons in 1996. NAFTA will result in gains for input suppliers and grain elevators as trade volume expands. Intense competition from Canada has curtailed U.S. export growth in recent years. Price impacts will be small because U.S. wheat prices are determined by many global factors.

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