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campo, Mexico created its Alliance for the Countryside program (Alianza para el Campo, or Alianza) in 1995 to improve agricultural productivity with modern equipment and technology. In 2002, Alianza provided $903 million to 4.3 million producers.27 A third program, Produce Capitaliza, provides infrastructure and extension-type assistance and support to live- stock producers for upgrading pastures. Counting all three subsidy pro- grams, together with recent protective measures (discussed below), Mex- ico has significantly augmented its support programs since the late 1990s.28 However, there remains a huge disparity in subsidy levels between the United States and Mexico. During 1998–2000, for example, average US subsidies given to each agricultural producer amounted to $20,803 per year; the comparable Mexican figure was an average $720 for each pro- ducer.29 Of course the disparity reflects the fact that on average, US firms are large, run like modern business firms, whereas Mexican firms are small, operated as family enterprises. Relative to farm sales, the level of public subsidies is about the same in both countries. During 2001–03, an- nual average US farm support measured in producer support estimate terms reached $44.2 billion, about 20 percent of gross farm receipts; the comparable Mexican figure was $7.3 billion, or 21 percent of gross farm re- ceipts (table 5.3).

Until 2002, agricultural trade disputes were addressed only under NAFTA Chapters 19 and 20. This changed when, in January 2002, US Corn Products International filed a Chapter 11 claim against the Mexican gov- ernment’s decision to impose a tax on high fructose corn syrup (HFCS). In addition to the HFCS case, another active agriculture case was initiated under Chapter 19, concerning the final antidumping (AD) duty determi- nation by Mexico on US exports of bovine carcasses.30 As of January 2004,

27. Alianza provides payments to first-hand buyers of wheat, corn, and sorghum in certain Mexican states. Other Alianza-based initiatives include liquid fertilization irrigation sys- tems, quality seeds, livestock genetics and management practices, mechanization, and train- ing programs. See USDA (2002a) and Larre, Guichard, and Vourc’h (2003).

28. Mexico’s overall direct agricultural support, as measured by the OECD producer sup- port estimate, increased from $4.5 billion in 1999 to $6 billion in 2000. Under pressure from the farm lobby and with the prospect of mid-term congressional elections in June 2003, the Mexican government provided an additional $1.3 billion in agricultural subsidies and pro- tection. (This figure includes new import barriers on agricultural goods, especially US ex- ports of apples and chicken parts.) See Larre, Guichard, and Vourc’h (2003) and OECD (2003). See also David Luhnow, “Of Corn, NAFTA, and Zapata,” Wall Street Journal, March 5, 2003, A13.

29. See Sarmiento (2003) and “NAFTA Crisis Worsens,” Latin American Economic and Busi- ness Report, February 11, 2003. See also David Luhnow, “Of Corn, NAFTA, and Zapata,” The Wall Street Journal, March 5, 2003, A13.

30. While the US-Mexico HFCS dispute under Chapter 19 was settled in June 2002 (MEX- USA-98-1904-01), it was reopened under Chapter 11 by US Corn Products International. Par- allel to the NAFTA dispute settlement process, the United States also brought the HFCS case against Mexico under the WTO in 1998. Other agricultural product disputes initiated under

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NAFTA REVISITED: ACHIEVEMENTS AND CHALLENGES

Institute for International Economics | www.iie.com

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