Mexican Agriculture after NAFTA: Are New Policies Needed?

1. Mexican Agriculture after NAFTA: Are New Policies Needed? Jaime Malaga and Eduardo Segarra Texas Tech University

2. “We will apply all the mechanisms established in the law to reduce the impact on our farmers of “asymmetries” caused by subsidies and agricultural support measures in other countries.” President Vicente Fox (4/28/03) (signing the “Acuerdo Nacional Para el Campo”)

3. Overview • 10 Years of NAFTA: Mexican perspective • Remaining Liberalization: Concerns • Mexican Policies Under Consideration • Implications for Future Trade

4. Background • NAFTA was part of a substantial agricultural policy change program in Mexico • 1950-1982: Strong policy intervention • 1982/83 Debt Crisis- • 1986 –Mexico joins GATT • 1990-91 Most important changes occurred • 1994 NAFTA implementation begins • 2003 Most of Tariffs Barriers eliminated • 2008 Free Trade

5. Mexican Domestic Policy Changes • 1991 Conasupo Direct price support eliminated (except corn, beans) • 1991 Ag. Input subsidies drastically reduced. • 1994 All price supports abolished- ASERCA created. (“indifference price”) • 1994 PROCAMPO – Direct (decoupled) support to farmers to be affected by NAFTA • 1999 Conasupo liquidated • 2003 “National Agreement for the Countryside” ?

6. US-Mexico Agricultural Trade(US Million $) NAFTA

7. Openness of Mexican Agricultural Sector(Ag.Trade/Ag. Production) NAFTA

8. Mexican Dependency by Main Crops (Imports/Consumption)Before and After NAFTA NAFTA

9. Mexican Average Dependency Coefficients Before/After NAFTA

10. Mexican Annual Average Production NAFTA

11. Mexican Annual Average Production Levels 91-93= 1.00Major Importable Crops NAFTA

12. Mexico after NAFTA:(Based on a World Bank Study) • Domestic real prices for major ag. importable commodities have decreased AND followed more closely international prices. • Domestic production levels have not collapsed and in some cases increased (corn, sorghum, beans). • No dramatic rise in rural-out migration • Increasing yields for major importables and exportables (concentrated in irrigated lands)

13. 2003 Mexico’s “Acuerdo Nacional para el Campo” • Background: • 2003: NAFTA’s most tariffs/TRQs eliminated • 2002: US New Farm Bill • 2008: All barriers will be gone (including corn and beans) • 2002/03 violent protests and social unrest in Mexico • Details: • 8 months of discussions • 12,000 participants • 4 Mexican Ministries (Secretaries) • Signed by President Fox : April 28, 2003 • Budget: 11.7 US Billions (Highest in Mexican history)

14. 2003 Mexico’s “Acuerdo Nacional para el Campo” • Main Aspects • 287 points. Ambiguous and too ambitious • Goals include: enhance competitiveness, support prices, subsidize inputs, rural development issues, reduce food dependency, protect environment, food security. • Use of language more political than technical. • Concern about 2 million small farmers to be affected by future NAFTA implementation.

15. 2003 Mexico’s “Acuerdo Nacional para el Campo” • Key Points • Calls for “renegotiation” of NAFTA agricultural terms • Defend Mexican farmers from unfair subsidies from “other countries” • “Comprehensive Evaluation” of NAFTA impacts by Dec 03 • Request for a Mexican GMO legislation.

16. Ranking of Mexico as US Export Market Before and after NAFTA

17. Summary • NAFTA and Domestic Policy Changes effects are combined in Mexico • Ag. Trade has considerably increased and “Openness” of the Ag. Sector has doubled since NAFTA. • Prices declined and move with international prices • Ag. production has not collapsed (importables) and some yields have increased. • Mexico is now a key market for most US agricultural commodities. • Concern about small corn/bean farmers • Acuerdo para el Campo signed in April: 11 US Billion, vague language, potential impact on US/Canadian exports if protective domestic policy implemented.