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Friday, January 14, 2011

Agricultural Dumping Under NAFTA

Estimating the Costs of US Agricultural Policies to Mexican Producers

by Timothy A Wise

Mexican Rural Development Research Report Number 7 Woodrow Wilson International Center for Scholars (2010)

Also available GDAE Working Paper Number 09-08
http://www.ase.tufts.edu/gdae/Pubs/wp/09-08AgricDumping.pdf


With the opening of the Mexican economy under the North American Free Trade Agreement (NAFTA), Mexican agriculture came under new competitive pressures from US exports. High US farm subsidies for exported crops, which compete with Mexican products, have prompted charges that the level playing field NAFTA was supposed to create is in fact tilted heavily in favor of the United States. This paper assesses the costs of US agricultural policies to Mexican producers by examining the extent to which the United States exported agricultural products to Mexico at prices below their costs of production, one of the definitions of "dumping" in the Word Trade Organization.

We estimate "dumping margins" for eight agricultural goods - corn, soybeans, wheat, rice, cotton, beef, pork, and poultry - all of which are heavily supported (directly or indirectly) by the US government, were produced in Mexico in significant volumes before NAFTA, and experienced dramatic increases in US exports to Mexico after the agreement. We find that:

1. US exports of the eight supported commodities analyzed here have increased dramatically since the early 1990s, rising between 159% and 707%.

2. For supported crops, the "dumping margins" - the percentage by which export prices are below production costs - from 1997-2005 ranged from twelve percent for soybeans to 38% for cotton.

3. Assuming Mexican producer prices were depressed by the same percentage as the dumping margins, below-cost exports cost Mexican producers of corn, soybeans, wheat, cotton and rice an estimated $9.7 billion from 1997 to 2005, just over $1 billion per year.

4. Corn showed the highest losses. Average dumping margins of nineteen percent contributed to a 413% increase in US exports and a 66% decline in real producer prices in Mexico from the early 1990s to 2005. The estimated cost to Mexican producers of dumping-level corn prices was $6.6 billion over the nine-year period, an average of $99 per hectare per year, or $38 per ton.

5. Meats were exported at below-cost prices because US producers benefited from below-cost soybeans and corn, key components in feed. This so-called implicit subsidy to meat producers resulted in dumping margins of five to ten percent on exported meat. This cost Mexican livestock producers who did not use imported feed an estimated $3.2 billion between 1997 and 2005. The largest losses were in beef, at $1.6 billion, or $175 million per year.

6. We estimate total losses to Mexican producers from dumping-level US export prices at $12.8 billion from 1997 to 2005 for the eight products (in constant 2000 US dollars). To put these losses in context, the average annual loss of $1.4 billion is equivalent to ten percent of the value of all Mexican agricultural exports to the United States and greater than the current value of Mexican tomato exports to the United States.

Download "Agricultural Dumping Under NAFTA": http://www.ase.tufts.edu/gdae/Pubs/rp/AgricDumpingWoodrowWilsonCenter.pdf

Read the Policy Brief: http://www.ase.tufts.edu/gdae/Pubs/rp/AgricDumping.pdf

The paper is now part of the Center's project and report on Mexican agricultural policies, "Subsidizing Inequality: Mexican Corn Policy Since NAFTA" -
http://www.wilsoncenter.org/index.cfm?topic_id=5949&fuseaction=topics.item&news_id=631837

Read more from GDAE's "Beyond Agricultural Subsidies" research program at
http://www.ase.tufts.edu/gdae/policy_research/USAgPolicy.html

Read more on GDAE's ten years of research on Mexico under NAFTA at
http://www.ase.tufts.edu/gdae/policy_research/MexicoUnderNafta.html
_____

The Global Development and Environment Institute's Globalization and Sustainable Development Program examines the economic, social and environmental impacts of economic integration in developing countries, with a particular emphasis on the WTO and NAFTA's lessons for trade and development policy. The goal of the program is to identify policies and international agreements that foster sustainable development.

Global Development And Environment Institute
Tufts University
Medford, Massachussets 02155 USA
Tel 617-627-3530 - Fax 617-627-2409
email: gdae@tufts.edu

Copyright (c) 2002-2008 Tufts University

http://www.ase.tufts.edu/gdae/policy_research/AgNAFTA.html

Bill Totten http://www.ashisuto.co.jp/english/

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