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

President Vicente Fox (4/28/03) “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”)

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

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

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” ?

US-Mexico Agricultural Trade (US Million $) N A F T A

Openness of Mexican Agricultural Sector (Ag.Trade/Ag. Production) N A F T A

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

Mexican Average Dependency Coefficients Before/After NAFTA 83-90 91-93 97-00 CORN 20.2 5.2 19.2 WHEAT 10.3 23.0 45.7 SOYBEAN 63.0 76.0 96.0 BARLEY 11.2 16.5 30.0 SORGHUM 27.0 49.0 39.0 BEANS 12.5 1.2 11.0

Mexican Annual Average Production NAFTA

Mexican Annual Average Production Levels 91-93= 1 Mexican Annual Average Production Levels 91-93= 1.00 Major Importable Crops NAFTA

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)

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)

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.

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.

Ranking of Mexico as US Export Market Before and after NAFTA Commodity Rank in 1989-93 Rank 1999-2001 Cotton 5 to 18 1 Sorghum 1 to 2 Vegetable Oils 3 to 6 Rice 3 to 9 Dairy Corn 5 to 10 2 Wheat 16 to 19 2 to 4 Beef 4 Fresh Fruits 5 to 6 Soybeans 4 to 6 2 to 3

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.