Impact of COVID-19 on Agriculture

Expanded Opportunities for U.S. Poultry in Guatemala

Market Intel / April 6, 2017

Credit: Christopher William Adach / CC BY-SA 2.0 

On Friday, the U.S. and Guatemala announced that Guatemala would unilaterally accelerate the elimination of its out-of-quota tariff on chicken leg quarters. This means the tariff and the tariff rate quota (TRQ) will be eliminated in 2017, five years early.

Obviously, this is great news for U.S. poultry exporters. They would have otherwise faced a 12.5 percent tariff on leg quarters into Guatemala this year. But how did this happen? And even more importantly, how can we replicate it?

Certainly, a lot of hard work by the U.S. Trade Representative’s Office was involved. But some elements of the agreement itself, as well as efforts by USDA and others, played a significant role as well.

The Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) was the first agreement to include trade capacity building efforts. The goal of these efforts was to improve the ability of other government authorities to implement, execute and manage institutions that impact trade.

In Guatemala, one of the agricultural objectives was to improve their sanitary and phytosanitary system by avoiding environmental contamination, simplify waiting times and standardizing procedures and methods. Since the agreement went into force in 2005, the U.S. has helped Guatemala complete training on the inspection of bovine, porcine and poultry slaughter houses and conduct safety audits of such facilities, as well as put in place mobile, phytosanitary laboratories and improve their inspection and sampling techniques.

There are several signs that these capacity building efforts, combined with expanded market access through TRQs and lower tariffs, have been successful for all involved. 

For U.S. poultry growers, Guatemala has become a major export destination. In 2005, the year before the agreement went into effect, Guatemala was the 16th largest export destination for U.S. poultry. Last year, it was sixth. U.S. market share rose from 53 percent to 93 percent over the same period, Figure 1.

Importantly, the agreement has not led to the collapse of the Guatemalan poultry industry, as some predicted. In fact, domestic production of poultry increased by 32 percent between 2005 and 2016. Rather than replacing locally grown poultry with imported poultry, Guatemalan consumers, more confident in the safety of the product, ate more --- of each! Per capita consumption has risen to slightly more than 40 pounds in 2016, a 20 percent increase from 2005, Figure 2. 

This is not to say that the trade capacity building efforts have solved all trade issues with Guatemala. In fact, the 2017 National Trade Estimate Report on Foreign Trade Barriers released by the Office of the United States Trade Representative on Friday contained three-and-a-half pages on ways trade with this nation of about 17 million people could be better. But, the March 31 announcement is a sign that we’re moving in the right direction.

Contact:
Veronica Nigh
Senior Economist
(202) 406-3622
veronican@fb.org
 

Share This Article

Credit: iStockPhoto 

Today we face a different sort of inflation (September’s consumer price index was up 5.4% from last year), with specific disruptions cascading throughout the economy, leading to general shortages and price increases. This is similar in many ways to inflation during wartime, when governments take dramatic economy-distorting steps to deal with the crisis, the shape of demand changes suddenly, and certain production and trade flows are interrupted.

Full Article
Credit: Arkansas Farm Bureau, used with permission.  

Released on Sept. 30, USDA’s Quarterly Grain Stocks Report showed that as of Sept. 1 old-crop corn and soybean inventory levels had dropped, compelling USDA to update supply and demand expectations in the October World Agricultural Supply and Demand Estimates, released on Oct. 12. Much higher-than-expected soybean stocks and the subsequent adjustments made for old and new crop supply and demand pushed soybean prices for the 2020/21 marketing year average and the 2021/22 marketing year down sharply.

Full Article