As NAFTA removes final agricultural tariffs, Mexican farmers protest against US subsidies
On 1 January 2008, the governments of Mexico and the United States removed all remaining cross-border tariffs on agricultural products between the two countries. The move, required under the North American Free Trade Agreement (NAFTA), has been heavily criticized by agriculture interests on both sides of the border. Mexican farmers have protested the loudest, arguing that without the tariffs they cannot compete with their American counterparts given the disproportionate subsidies that the United States provides to its farmers.
When NAFTA first came into force in 1994, non-tariff barriers to agricultural trade between Mexico and the United States were eliminated, along with tariffs to some agricultural products. Other products, such as corn and beans coming into Mexico and sweeteners coming into either country retained their tariffs. These remaining tariffs were to be phased out in stages over 5 to 15 years.
The rationale given at the time was that producers of certain key agricultural products needed time to adapt to the increased competition that freer trade would bring. Fifteen years later, as the final agricultural barriers come down, it is subsidies that are being blamed for distorting competition.
A December 2007 study by the Mexican Congress' Centre for the Study of Public Finance (CEFP, by its initials in Spanish) estimated agricultural subsidies in the NAFTA countries and found that in 2006 the United States provided its farmers with an average of US$ 150 per hectare in direct and indirect subsides. In contrast, Mexico and Canada paid their farmers US$ 45 and US$ 52 US per hectare, respectively.
According to the CEFP, the "enormous disadvantage" faced by Mexican farmers as a result of the subsidy imbalance has already led to the displacement of Mexican farmers and forced the country to become more dependent on food imports.
On 2 January, a day after the trade barriers came down, a demonstration was held outside the US embassy in Mexico City, as Mexican farm groups denounced American subsidy policy and called for a renegotiation of NAFTA's agricultural provisions.
A larger demonstration took place at Mexico City's Plaza of the Constitution on 31 January, where some 150,000 farmers and sympathizers gathered. At the rally, speakers again demanded a renegotiation of NAFTA's chapter on agriculture and threatened a 7 February blockade of Palacio de San Lázaro, where Mexico's lower house of congress sits.
Mexican President Felipe Calderon has so far refused calls for renegotiating the ending of tariffs, and the governments of Canada and the United States have expressed similar views. It would not be politically feasible to renegotiate the agreement, said James Holbein, a specialist on NAFTA and president of Global Trade Consulting LLC, in an interview with Subsidy Watch. Mr. Holbein says that Mexican farmers were expected to have taken advantage of the last fifteen years since NAFTA came into force to become competitive in the North American market.
With a renegotiation of NAFTA unlikely, Mexican Secretary of the Economy Eduardo Sojo announced last year the introduction of a transition plan that would provide purchase guarantees to small producers of corn, beans, sugar and milk. The program is expected to be included in the 2008 budget.
Secretary Sojo also promised to attack US farm subsidies by initiating World Trade Organization complaints targeting dumping practices that occur when US farm subsidies allow its farmers to export their products to Mexico at prices below the production costs. Similar complaints can be initiated under NAFTA, but Mexico must wait for one productive season to take place without the tariffs in order to gather the data necessary to launch a NAFTA complaint.
The United States, for its part, denies claims that Mexican farmers will suffer due to the recently removed barriers. In an interview with Reuters, US Undersecretary for Farm and Foreign Agriculture, Mark Keenum, said that Mexican farmers had little to fear these days due to high corn prices. He points out that US exports of beans and white corn have been relatively small compared to domestic production in Mexico.
"The idea of there being heavily subsidized, cheap commodities coming in and flooding the markets is just nonexistent," said Keenum.
The US sugar industry is also calling for the re-instatement of certain barriers in the US-Mexico sweetener trade. Given the pro-trade stance of the Bush administration, the industry is focusing on the subsidy-laden Farm Bill as a way to protect itself from the unrestricted imports from Mexico.
The CEFP study is available in Spanish for the CEFP website at: