WASHINGTON – The United States announced today that it has successfully worked to ensure that U.S. poultry exports will continue to be exported to Mexico with preferential access, forestalling possible Mexican action that could have resulted in significant trade disruption.

On January 1, under the North American Free Trade Agreement (NAFTA), Mexican tariffs on U.S. poultry exports fell to zero. However, under NAFTA, Mexico could have taken action to impose a "safeguard" or emergency import tariff of up to 240 percent on U.S. poultry exports, which is the tariff that countries without a preferential arrangement with Mexico pay. Instead, Mexico will allow 50,000 metric tons of U.S. chicken leg quarters into Mexico duty-free over the next six months and will impose a temporary, or provisional, safeguard tariff of 98.8 percent on imports of chicken leg quarters above that level. All other U.S. poultry exports will continue to enter Mexico duty free.

"By working with Mexico, in consultation with the U.S. poultry industry, we've been able to ensure that U.S. poultry will continue to flow to Mexico at levels comparable to the last few years, while we continue to work on larger issues related to NAFTA's implementation," said U.S. Trade Representative Robert B. Zoellick. "Under NAFTA, Mexico could have imposed a safeguard tariff to protect its industry that could have seriously disrupted our poultry trade. Because of factors unique to the poultry industry, we preferred, in this case, to work on positive and practical solutions to keep poultry exports flowing. I'm pleased that the U.S. poultry industry supports our efforts and that Mexican consumers will have continued access to high-quality U.S. poultry."

"We have been working hard to keep the Mexican market open for U.S. poultry exports in the face of a number of recent challenges," said Agriculture Secretary Ann M. Veneman. "This provisional safeguard will help to preserve preferential access for U.S. poultry in our third largest market. While the safeguard is in place we will continue to work with the Mexican Government and the poultry industry to ensure long-term access for U.S. exports."

The provisional measure will take the form of a tariff-rate quota (TRQ). The first 50,000 metric tons of chicken leg quarters exported in the next six months – approximately the same rate at which the United States exported chicken leg quarters to Mexico in 2001 – will enter Mexico duty free. Additional U.S. exports of chicken leg quarters in this six month period will be subject to a 98.8 percent tariff, which was the 2001 tariff level. Mexico's most-favored-nation (MFN) tariff rate for U.S. chicken leg quarters is 240 percent. Citing "critical circumstances," Mexico has decided to impose the provisional measure for six months, effective immediately, while its full safeguard investigation continues. The United States will continue to work with Mexico on a longer term measure, which under NAFTA rules would require Mexico to provide offsetting trade compensation.

The U.S. is fully committed to the effective implementation of NAFTA because of the benefits it provides to families, farmers, workers, businesses, and consumers on both sides of the border. The issue of the NAFTA poultry tariffs and the Mexican safeguard is a novel and complicated situation, involving close cooperation between the U.S. government with the U.S. poultry industry. Therefore, it should be viewed as a unique approach designed to ensure that trade flows continue at high levels, and not as any new across-the-board approach to implementing NAFTA.

Unrelated to the safeguard action taken by the Mexican Ministry of Economy, the Mexican Ministry of Agriculture (SAGARPA) maintains certain restrictions on imports of U.S. poultry due to animal health requirements. On January 21, SAGARPA announced that poultry from California and Nevada was banned due to an outbreak of Exotic Newcastles Disease.

Background:

Under NAFTA, Mexico, the United States and Canada have the right to take emergency "safeguard" action and temporarily increase the rate of duty on a product to MFN tariff rates if, as a result of reducing or eliminating a duty, increased imports of the product constitute a substantial cause of serious injury, or a threat of serious injury, to a domestic industry producing a like or directly competitive product. NAFTA also requires that the affected parties mutually agree on trade liberalizing compensation equal to the trade effect resulting from the safeguard.

Under NAFTA, Mexico maintained a TRQ on imports of U.S. poultry until December 31, 2002. As of January 1, 2003, all U.S. poultry has entered Mexico duty free. However, on September 10, 2002, the Mexican poultry industry filed a petition requesting the imposition of a safeguard measure on U.S. chicken leg quarters. The Mexican Ministry of Economy initiated a safeguard investigation on November 21, 2002. After concluding that eliminating tariffs on U.S. poultry has resulted in "critical circumstances," Mexico announced on January 22, 2003, that is has decided to impose a provisional safeguard while the full investigation continues.

The U.S. poultry industry, represented by the USA Poultry and Egg Export Council and the National Chicken Council, fully supports the U.S. approach to this matter.

Two-way trade created by NAFTA has benefited the U.S. and Mexican agricultural sectors immensely. Bilateral trade in agricultural products has increased substantially since NAFTA's implementation. NAFTA has also contributed to increased agricultural earnings and jobs in the rural sector. For example, increased exports of U.S. agricultural products to Mexico have provided the Mexican livestock sector with a low-cost, high quality, sustainable supply of inputs such as feed grains, thus lowering Mexican farmers' production costs over time.