Wise, T.A. (2011). Mexico: the cost of U.S. dumping (excerpts)

  1. What are the losses for Mexican farmers brought on by the US corn, and why?

U.S. dumping on Mexico after NAFTA

1997-2005: 9 years –

•Mexican farmers on average lost more than $1 billion per year

•Corn farmers suffered more than half the losses

  1. Why did NAFTA not change US policy on agriculture?

Subsidies to support agriculture at the same level as before, continued due to farmers’ lobby in the Congress

  1. What are U.S. key agri exports to Mexico?

Under NAFTA, exports of 8 key agricultural commodities—

  • corn, soybeans, wheat, cotton, rice, beef, pork, and poultry increased dramatically
  • Soybeans: "low" increase of 159%
  • Pork: astonishing increase of 707%
  • Corn, (the most sensitive product given that 3 million Mexican farm families grow it), increases of 413% (since the early 1990s).
  1. What is "dumping margin”?

The percentage by which U.S. export prices were below its costs of production

Dumping margins ranged from:

•12% to 38% for the five crops

•Between 5% and 10% for the meats (calculated on the basis of their access to below-cost feed grains)

•U.S. corn was on average dumped at 19% below production costs.

  1. Assess the losses that Mexican farmers incurred under NAFTA:

•Corn farmers suffered the highest losses due to dumping margins of 19%

•3 million Mexican producers were affected by the import surge

•9 year period: Losses to Mexican corn farmers totaled $6.6 billion

•Yearly loss of more than $700 million

•Losses were a crushing blow to struggling small farmers

  1. What are Mexico's Own Non-action Or Bad Agricultural Policies?

•Until 2008, the Mexican government had the right under NAFTA to impose relatively steep tariffs on high corn imports, part of the agreement's supposed transition to open borders.

•But it never enforced the so-called tariff-rate quota that allowed such measures,

•Abandoned its producers to unfair competition with their US competitors who were highly subsidized

•In 2000, the Mex government could have counteracted U.S. dumping with tariffs, when dumping margins reached 50%.

Why are Mexico’s programs to buffer the impact of NAFTA on farmers turned out to be ineffective?

Instead, Mexico resorted to agricultural subsidies.

• Subsidizing Inequality, documents: Extreme inequalities in the distribution of Mexico's agricultural subsidies, which disproportionately help the country's largest industrialized farmers compete with their U.S. counterparts.

•Some programs are designed to reach small-scale farmers - the Procampo subsidy program--put in place as part of the transition to NAFTA to cushion losses for small-scale farmers and to help them become more competitive

•But they had a regressive impact: Subsidizing Inequality shows that Procampo excluded the vast majority of the poorest farmers and allowed some of the largest farms to get two payments a year per hectare.

•The average payment of 858 pesos to Mexico's small-scale corn farmers was more than gobbled up by the 958-peso losses to dumping.

•Instead of helping Mexico's farmers compete, Procampo payments partly compensated for U.S. dumping.

•Mexico now imports almost half of its basic grains, including more than one third of its corn.

•This has prompted new demands in Mexico for the country to regain its lost self-sufficiency in corn production.

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