Dominguez, Enrique

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Research Papers in Economics

Discussion
Consejo  Mexicano  de  Porciculura
Enrique Dominguez
The  Rice  and  Meyer  comments  coincide  when  giving  value  to free
trade, and at the time touching some concepts of a structural nature in the pork
sector in Mexico, and referring little to their own countries. Substantial changes
have been observed in Mexico's market structure, as indicated by my colleagues
from NPPC and the Canadian Pork Council.  To a large extent we have consoli-
dated  the procurement of grain and soybean meal both in the domestic market
and in the United States and Canada. At the same time, great progress has been
made in the consolidation  of pork marketing.  In  some regions of the country,
the  integration has been vertical involving the best producers  in the world.
As  a result  of the  major economic  setback  in  the Mexican  banking
system, the modernizing process  of the pork industry stopped in 1995 and took
the economic disaster to an important number of producers.  The slaughter and
processing of pork has been strongly concentrated as a consequence  of the lack
of commercial  modernization.  At  the packers  and meat processors  level,  this
concentration  has been alarming  and to a great degree  supported by meat im-
ports (without paying import duties) which the government delivered  in a dis-
cretionary  way to  a couple  of countries,  thus  creating  a problem that  is  ana-
lyzed from  a perspective  of corruption  and economic  competence.
Mexican  producers  never  expected protection  within NAFTA  due  to
any lack of productivity. They merely demanded equality in the access and cost
of inputs as a new trade partner.  However, three structural problems arose which
we  hope  will  be  understood,  and in  this  case,  analyzed  from  a  conciliatory
perspective  within the  framework of NAFTA-WTO.
1.  The market structure of pork, as well as the perception of quality,
is different  in each  country.  This  allows  some cuts  to subsidize
others  with a  residual  value  since  they  are  not  demanded  in the
original market.  These products have a different price/ quality per-Dominguez  223
ception in the Mexican market,  thus harming the price structure in
our market.
2.  Recently,  prices  in the U.S.  market,  due to structural  conditions,
have  shown  predatory  levels  derived  from the  lack of  slaughter
capacity,  and  due to the lack of barriers  these products  enter the
Mexican market  independently  of the volume  of imports  of pork.
These  predatory  prices  can be  legally  compensated  under  the
NAFTA-WTO.
3.  The  industry's high concentration  due  to the economic  level is  a
great concern. Our experience has proven that costs and profitabil-
ity  are  not necessarily  associated  with the  size of  farms.  In  this
sense, each country has the right to decide what is considered best
for its producers.
We  are  a  country  with  a pork deficit,  and the market  conditions  are
favorable,  as demonstrated by the level of imports of meats.  Nevertheless,  the
Mexican  producer is concerned,  not  about  the volume of  imports, but about
prices  below  the normal  value  that  are  imposed  in their market  as  a  conse-
quence of free trade.  With the tremendous  drop  in prices in December  1998,
Mexican producers sought protection  against the threat of damages. The legal
procedures  (associated  with  this trade action)  required documentation  of im-
ports,  securing  testimonies  of damages,  and the presentation  of a formal re-
quest for investigation.  The legal time agreed  for these proceedings at NAFTA
and WTO are extenuating  and finally, no one was satisfied.  I consider that we,
as  producer  organizations,  should have  a better  way  to use our  time  and our
money  in legal  proceedings  if we could  implement  a  real  system  to resolve
disputes.
Facing  a new federal administration,  we are working hand in hand on
sanitary issues regulations,  and on the need to establish quality standards which
will in some way be equal,  as far as possible, with those of our NAFTA part-
ners.  It has taken a long time, but we will gradually seek better understanding
in these  work areas, following examples  that have achieved progress.
223 Dominguez224  Structural Changes as a Source of Trade Disputes under NAFTA
After accepting the terms of the negotiations,  and what can be consid-
ered as compensated within the agreement,  we must seek alternate mechanisms
to resolve conflicts.  Our governments  have already subscribed the terms, each
Senate has  agreed,  and we are interested  in strengthening  a growing and con-
structive  relationship.  Let  us now initiate this  committee  to  solve disputes  so
that producer organizations  can find the time and economic resources  to sup-
port producers  in each of our countries.

DISCUSSION: CONSEJO MEXICANO DE PORCICULURA

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