The Impact of NAFTA on U.S. Dairy Exports to Mexico e Site/Trade...¢  2019. 2. 7.¢  Under NAFTA, U.S

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Text of The Impact of NAFTA on U.S. Dairy Exports to Mexico e Site/Trade...¢  2019. 2....

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    Prepared for:

    January, 2018

    The Impact of NAFTA on U.S. Dairy Exports to Mexico

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    This Page Intentionally Left Blank

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    Table of Contents

    EXECUTIVE SUMMARY ........................................................................................................ 1

    A. IMPORTANCE OF MEXICO DAIRY IMPORT MARKET ............................................................................. 1

    B. MEXICO IS A DEFICIT PRODUCER OF DAIRY PRODUCTS ........................................................................ 1

    C. IMPORTANCE OF NAFTA TO U.S. DAIRY EXPORTS ............................................................................. 2

    D. POTENTIAL MEXICO TRADE AGREEMENTS CAN INCREASE EXPORT COMPETITION ..................................... 2

    E. U.S. LOGISTICS ADVANTAGE .......................................................................................................... 3

    F. ECONOMIC CONTRIBUTIONS OF U.S. DAIRY EXPORTS THREATENED BY THE U.S. LEAVING NAFTA .............. 3

    G. CONCLUSIONS ............................................................................................................................. 4

    INTRODUCTION ................................................................................................................. 5

    U.S. EXPORTS TO MEXICO ARE VITAL................................................................................ 6

    A. U.S. EXPORT TRENDS .................................................................................................................. 6

    B. TAKEAWAYS ................................................................................................................................ 7

    C. IMPORT TRENDS .......................................................................................................................... 7

    D. TAKEAWAYS ............................................................................................................................. 11

    MEXICO, A DEFICIT PRODUCER ....................................................................................... 12

    A. FLUID MILK .............................................................................................................................. 12

    B. SKIM MILK POWDER .................................................................................................................. 12

    C. CHEESE .................................................................................................................................... 13

    D. BUTTER ................................................................................................................................... 14

    E. DRY WHOLE MILK POWDER ......................................................................................................... 14

    F. TAKEAWAYS .............................................................................................................................. 14

    MEXICO’S DOMESTIC USE OF DAIRY PRODUCTS ............................................................... 15

    A. FLUID MILK .............................................................................................................................. 15

    1. Processors ......................................................................................................................... 15

    B. SMP ....................................................................................................................................... 15

    C. CHEESE .................................................................................................................................... 16

    D. BUTTER ................................................................................................................................... 16

    E. TAKEAWAYS .............................................................................................................................. 17

    MARKET ACCESS TO MEXICO .......................................................................................... 18

    A. U.S. MARKET ACCESS TO MEXICO WITHOUT NAFTA ..................................................................... 18

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    1. MFN Tariffs ........................................................................................................................ 18

    2. MFN Tariff Rate Quotas .................................................................................................... 20

    B. OTHER TRADE AGREEMENTS ........................................................................................................ 20

    1. EU-Mexico FTA Update Negotiations ................................................................................ 20

    2. TPP Re-negotiations .......................................................................................................... 20

    3. Mexico-Argentina FTA ....................................................................................................... 22

    C. TAKEAWAYS .............................................................................................................................. 23

    US TRANSPORTATION ADVANTAGES ............................................................................. 24

    A. SHIPPING DRY MILK POWDER ...................................................................................................... 24

    B. SHIPPING CHEESE & BUTTER ........................................................................................................ 25

    C. TAKEAWAYS .............................................................................................................................. 26

    ECONOMIC CONTRIBUTION OF DAIRY EXPORTS TO MEXICO TO THE OVERALL U.S.

    ECONOMY ........................................................................................................................... 27

    A. INPUT-OUTPUT MODELING AND IMPLAN METHODOLOGY .............................................................. 27

    B. CONTRIBUTION TO THE OVERALL U.S. ECONOMY ............................................................................ 28

    1. Aggregate Contribution Over the Last Five Years ............................................................. 28

    2. Detailed Contribution of 2016 ........................................................................................... 29

    CONCLUSIONS ................................................................................................................ 33

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    List of Exhibits Exhibit 1: U.S. Dairy Product Exports to World and Mexico .......................................................... 6

    Exhibit 2: Mexico Dairy Product Imports ........................................................................................ 8

    Exhibit 3: Mexico Dairy Product Imports ........................................................................................ 8

    Exhibit 4: Mexico Dry Skim Milk Powder (DSMP) Imports ............................................................. 8

    Exhibit 5: Mexico Whey Product Imports ....................................................................................... 9

    Exhibit 6: Mexico Cheese Imports .................................................................................................. 9

    Exhibit 7: Mexico Cheese Imports .................................................................................................. 9

    Exhibit 8: Mexico Blue-Veined Cheese Imports ............................................................................ 10

    Exhibit 9: Top 25 Mexico Total Cheese Imports by Type, Metric Tons ....................................... 10

    Exhibit 10: Mexico Total Cheese Imports by Type ....................................................................... 11

    Exhibit 11: Mexico Fluid Milk Supply and Demand, 1,000 MT .................................................... 12

    Exhibit 12: Mexico SMP Supply and Demand, 1,000 MT ............................................................. 13

    Exhibit 13: Mexico Cheese Supply and Demand, 1,000 MT ........................................................ 13

    Exhibit 14: Mexico Butter Supply and Demand, 1,000 MT .......................................................... 14

    Exhibit 15: Mexico Whole Milk Powder Supply and Demand, 1,000 MT .................................... 14

    Exhibit 16: Dairy Products Classification, Mexico MFN Rates for 2017 ........................................ 18

    Exhibit 17: Current Mexico Tariff Schedule .................................................................................. 19

    Exhibit 18: Mexico MFN Tariff Schedule ....................................................................................... 19

    Exhibit 19: Projected New Tariff Schedule for TPP Members ...................................................... 21

    Exhibit 20: TPP Country Specific Quota (CSQ) .............................................................................. 22

    Exhibit 21: Freight Comparison, Dry Products ............................................................................. 25

    Exhibit 22: Freight Comparison, Refrigerated Products .............................................................. 26

    Exhibit 23: Example of Back