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The Corn Saga

Newspaper stories frequently blame NAFTA for the plight of Mexican farmers, especially poor corn farmers.127 The implication is that NAFTA can be held responsible for destroying the rural way of life in Mexico and driving illegal migrants to US cities. Even the Carnegie Endowment for International Peace cites the liberalization of corn trade as a great NAFTA failure (Audley et al. 2003). But multiple adversities are behind the plight of rural Mexican corn farmers. In this section, we try to distinguish fact from fantasy in the Mexican corn saga.

The place to start is with the facts on corn production, acreage, and trade. Basically, there are two types of corn: yellow and white. Yellow corn—the kind that the United States produces in abundance—is predom- inantly used as livestock feed. White corn—the kind that Mexico mainly produces—is largely used for human consumption (though white corn is sometimes used as livestock feed in Mexico as well). Under NAFTA, yel- low and white corn are treated as the same commodity, even though Mex- ican farmers cultivate primarily white corn and US producers have the strongest advantage in yellow corn.

Mexican tariffs on corn under NAFTA are supposed to be eliminated by January 1, 2008.128 Starting from the implementation of NAFTA in Janu- ary 1994, liberalization was to be achieved by gradually expanding the TRQ. The initial TRQ on corn in 1994 was set at 2.5 million tons per year. This figure was set to expand by 3 percent per year, reaching 3.8 million tons by 2008 (table 5.11).

The overquota tariff rate for US and Canadian corn exports to Mexico was set at 215 percent in 1994 ($206 per metric ton). This overquota tariff will gradually decline to zero by January 1, 2008 (box 5.3). But while Mex- ico’s corn import quotas under NAFTA reached only 3.1 million tons in 2001, Mexican corn imports actually surpassed 5 million tons annually from 1998 to 2003. In fact, the Mexican government allowed tariff-free corn imports to exceed NAFTA-mandated TRQs almost every year since 1994 (table 5.11), partly to satisfy the demands of the Mexican livestock and starch industries.129 The Mexican government waived at least $2 bil-

127. For example, one journalist recounted the trials of Domingo Tena, a corn farmer from Michoacan state, now working in Chicago. Hugh Dellios, “10 Years Later, NAFTA Harvests a Stunted Crop,” Chicago Tribune, December 14, 2003, A1.

128. According to Tim Josling, the Mexican government invoked the spirit of NAFTA both to phase out quantitative restrictions on corn more quickly than the letter requires and to push for agricultural reforms generally.

129. Under NAFTA, the Mexican government allocates TRQs directly to privileged users, often on a first-come, first-served basis. At one time, Conasupo indirectly allocated corn quotas to tortilla producers. See Yunez-Naude (2003) and Seidband (2004).

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NAFTA REVISITED: ACHIEVEMENTS AND CHALLENGES

Institute for International Economics | www.iie.com

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