NAFTA + US Farm Subsidies Devastates Mexican Agriculture

  December 20, 2010

NAFTA + US Farm Subsidies Devastates Mexican Agriculture

Why Do Mexican Workers Head North Pt.2 - Tim Wise: US corn exported to Mexico at 19% below cost of production, based on his study
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Timothy A. Wise is the director of the Land and Food Rights Program at the Small Planet Institute. He also directs the Policy Research Program at the Global Development and Environment Institute at Tufts University. He is the former executive director of Grassroots International, a Boston-based international aid organization. He holds a Masters in Public Policy from Tufts' Urban and Environmental Policy and Planning Department. Tim is the author of Hogging the Gains From Trade: The Real Winners from U.S. Trade and Agricultural Policies


Why Do Mexican Workers Head North Pt.2 - Tim Wise: US corn exported to Mexico at 19% below cost of production, based on his study. Click here to read Agricultural Dumping Under NAFTA


NAFTA + US Farm Subsidies Devastates Mexican AgriculturePAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay at Tufts University in Boston. As we discussed in an earlier segment, in the immigration debate, not a heck of a lot gets discussed about why the Mexican economy is in such lousy shape. Now joining us to talk about the role of American agribusiness in the Mexican economy is Timothy Wise. He's director of the research and policy program at the Global Development and Environment Institute at Tufts University. Thanks for joining us.


JAY: So talk about how American agribusiness dumps food in Mexico.

WISE: Well, I did a recent study that looked--for the Woodrow Wilson Center in Washington, that looked at the--at the way--asked the simple question: to what extent have US agricultural policies, agricultural subsidies, and other forms of support given to US agriculture, what effect have those had on Mexican farmers with exports increasing dramatically to Mexico from the United States under NAFTA? We looked at eight products, eight different--five crops and three meats and--that have all seen huge increases in exports.

JAY: Which crops? Which meats?

WISE: He looked at corn, soy, wheat, cotton, rice, and then we looked at pork, chicken, and beef. All have seen dramatic increases in exports, all over 100 percent, some as high as 700 percent increases.

JAY: Increases during the period post-NAFTA.

WISE: From the early '90s until recent years, which is basically the NAFTA period. And all of those are products that in one form or another get significant support from the US government.

JAY: In terms of farm subsidies.

WISE: Farm subsidies and other sorts of policies. So we calculated what we call the dumping margin. That is the extent to which US exports are leaving the country and being sold at prices below their actual production costs in the United States. That's one of the definitions of dumping under the World Trade Organization.

JAY: And they do that to wipe out local competition. Is that the main objective?

WISE: Well, they do that--the US government is doing that, is subsidizing those products in part to provide very cheap products to agribusiness, 'cause it's the raw materials for agribusiness, both in the United States and in Mexico. The exports go because the United States is looking--US companies are looking for market share and looking to expand their market share in Mexico, and NAFTA gave them that opportunity by decreasing protection.

JAY: So when you say below the costs of production, it's because of the subsidies.

WISE: Because of the subsidies. And it's actually more complicated than that, because of a variety of other policies that essentially encourage overproduction of, say, corn. So corn is probably the most important example here, because it's such an important product.

JAY: So what did this do to Mexico? What did you find?

WISE: Well, so what we found was that in the case of corn, corn was going into Mexico at 19 percent below the cost of production in the 9-year period we looked at, 1997 to 2005, and that cost Mexican corn farmers $6.6 billion over 9 years. That's $700 million a year. And if you figure it out on a per-acre basis, just sort of what does that mean to a Mexican farmer, it's more than the value of the basic Mexican subsidy program to those farmers. So it's a devastating loss and one that is clearly--owes to US policy.

JAY: So you have public money used to help subsidize American agribusiness, who are then dumping products, destroying Mexican agriculture. So--and they're making money on both ends because they're capturing Mexican market.

WISE: That's right. And it wasn't just corn. I mean, we found overall that the costs to Mexican farmers were $12.8 billion over this nine-year period. And to put that in perspective, from a development perspective for Mexico, that's $1.4 billion a year. That's more than the value of the entire tomato export market from Mexico to the United States, NAFTA's greatest agricultural success story, and 10 percent of the value of Mexico's entire set of agricultural exports to the United States. So it's a huge loss for Mexico.

JAY: So on the agricultural side, it's been a net loss to Mexico free trade. The theory was they were going to start manufacturing goods because labor was cheaper, and more manufacturing developed, and access to the US market would help industrialize Mexico. So did that happen?

WISE: That happened to a small extent. They did increase the size of their manufacturing economy. They increased their manufacturing exports to the United States. They did not create very many jobs in that process. And now a lot of those jobs and operations that were created are under threat, have either already moved to China in search of even cheaper wages or they're under threat to move to China.

JAY: So did it create cheaper food in Mexico? I mean, is there any net benefit in this to Mexico?

WISE: In theory the net benefit to Mexico would have been that all food got cheaper or all of these agricultural raw materials got cheaper. They did get cheaper. The extent to which that was passed on to Mexican consumers is widely questioned. Mexican--the cornflour market for tortillas in Mexico is controlled 90 percent by two companies. They were two companies that came out of the breakup of the government monopoly on basic grains marketing, and they are widely considered to manipulate prices.

JAY: These are Mexican-owned companies?

WISE: These are Mexican-owned companies.

JAY: So you wind up having--US agribusiness controls the farming side of it, and the breaking up of what used to be a lot of state-owned enterprises into privately owned enterprises. You now wind up with such monopolization that they're able to manipulate the market.

WISE: You get the big grain traders from the US--Cargill, ADM, and others--interlocking corporate relationships with some of the biggest traders in Mexico, and they're clearly in a position, certainly, with their market power, to capture the gains from those low commodity prices and not pass them on to consumers.

JAY: So a supposed liberalization of trade and liberalization of Mexican law as it regarded to business actually just led to more monopolization and concentration of ownership.

WISE: It definitely led to that. And the other thing it led to, which has now raised much greater concerns with, in recent years, the rise in commodity prices and tortilla riots in Mexico.

JAY: Well, that was my next question. So what are Mexicans doing about this?

WISE: Well, the issue of food dependency, the dependency for basic food products on imported goods, is of grave concern, because it's gotten much, much worse since NAFTA. In corn it went from relying for 7 percent of Mexicans' corn, relying on imports to--now 34 percent comes from imports. And so a disruption in the import supply and corporate control over those supplies, which allows them to manipulate the markets, can result in dramatic price swings.

JAY: So is this, like, where you--is a real counter-policy to this likely to be a big issue in coming Mexican elections?

WISE: Could be. It could well be. The agricultural dynamics in Mexico are still very much a live issue. And when I was in Mexico in September speaking to one of the larger independent farm groups, they're as strong as ever and as vociferous as they've ever been in demanding a change in these sorts of policies, despite the fact that NAFTA has basically legalized all US imports coming in.

JAY: Thanks for joining us.

WISE: My pleasure.

JAY: Thank you for joining us on The Real News Network.

End of Transcript

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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