As recently as 25 years ago, the U.S. pork industry did not think much about foreign customers. The U.S. market was big enough for the pork we produced. In addition, pork was perishable; you just could not ship products like that over long distances. The U.S. only sold about 2% of its production in foreign markets.
That thinking began to change in the 1990s as pork producers realized they could expand production if they could sell more to foreign consumers. By the year 2000, the U.S. was selling 7% of production to foreigners. The trend toward globalization was also important over the past 25 years as more countries opened their borders to trading with each other. Today, we’re selling the pork from one out of every five hogs in the export market. In 2016, foreign countries are the destination for 21% of our production.
Globalization has been good for most pork producers and the broader pork industry. We have increased national production by about 20%, used more bushels of U.S. corn to raise those hogs, and created many more U.S. jobs in production, processing, packaging and transportation.
We sold much more pork to countries like Japan and China, and more to our neighbors like Canada and Mexico. In turn, our citizens purchased more goods and services from these and other trading partners. Globalization helped reduce trade barriers, resulted in increased trade and enabled world incomes to grow more rapidly. More income meant more pork consumption.
When the United Kingdom voted to leave the European Union — known as Brexit, for British exit — it voted to leave a trading block and move back to trading on its own. This can be viewed as a movement away from globalization and toward nationalism and greater protectionism.
The U.S. sells very little pork to the European Union, so any loss of U.S. sales there will be tiny. However, the European Union is the world’s largest pork exporter, with the U.S. being second. Therefore, the EU is our largest competitor for global pork sales. Market turmoil over the exit increased the value of the dollar and weakened the value of the euro. A weaker euro automatically makes the pork from EU countries cheaper relative to our pork.
That same market turmoil may also reduce the world economic growth rate. Lower income growth will probably mean slower growth in global pork consumption.
Is the world shifting from globalism to protectionism? Brexit could be the first sign of that shift. Globalization has been a decadeslong trend. If countries shift toward more nationalism and more protectionism, then the big gains the pork industry has made from globalization could begin to go the other way.
While Brexit is going on in Europe, it has important implications for the pork industry right here at home.
Hurt is a Purdue University Extension ag economist. He writes from West Lafayette.