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Tuesday, November 30, 2010

NAFTA and US Corn Subsidies

Explaining the Displacement of Mexico's Corn Farmers

by Rick Relinger (April 2010)

This paper intends to explicate the causal relationship between US federal subsidies for domestically produced corn and the post-NAFTA rural to urban migration in Mexico. While corn production has been central to the Mexican economy for centuries, it cannot economically compete with highly subsidized corn produced in the United States. In 1994 the implementation of the North American Free Trade Agreement (NAFTA) liberalized the markets of Canada, the United States, and Mexico, effectively eliminating nearly all trade barriers. Consequently, corn produced in Mexico now competes directly with American corn in North American markets. Competition with artificially distorted US corn prices has driven unsubsidized corn produced in Mexico out of its customary domestic market as Mexican consumers began to purchase American corn. Mexican corn farmers were no longer able to make a sustainable living due the plummeting demand for their produce and accordingly migrated from rural farms to urban centers in search of employment. Therefore, American corn subsidies are primarily responsible for the rural to urban population shift in Mexico that manifested following the NAFTA deal in 1994.


Since the 1994 implementation of NAFTA, massive rural to urban migration took place within Mexico as agrarian farmers moved to metropolitan centers. This tri-lateral free-trade agreement between the Canada, the United States and Mexico was unprecedented, particularly the relationship between the United States and Mexico, as states with such drastically different levels of development merged their economies. This paper will examine which factors are responsible for this massive internal migration within Mexico following the integration of the North American economies. There are two highly divergent explanations for the Mexican migration and subsequent urbanization that followed the signing of NAFTA, which I will detail in the literature review. The determination of the culpable factors for this migratory flow is crucial because the accepted interpretation will significantly influence how states will approach free-trade agreements and their inclusion of rules pertaining to the trade of agricultural commodities in the future. This study is particularly pertinent as the looming Panama and Colombia free trade agreements, modeled after NAFTA, are currently being debated by the United States Congress.

The paper's underlying hypothesis is that American corn subsidies, which led to the flooding of Mexican markets with American corn following the signing of NAFTA, is the primary factor responsible for the post-1994 internal displacement of rural farmers in Mexico. The trade agreement effectively eliminated all trade barriers and placed Mexico's domestically produced corn in direct competition with highly subsidized corn imported from the United States. Consequently, Mexican corn farmers, who comprise the majority of the country's agricultural sector, experienced drastic declines in the domestic price of their product and thus faced increasing difficulties to attain a sustainable living. Hence, we observe high levels of migration into Mexico's cities in the latter half of the 1990, and the beginning of the 21st century, as these displaced farmers abandoned their previous livelihood in search of employment.

Accordingly, this report investigates the relationship between American corn subsidies and rural to urban migration in Mexico. Specifically, the study will evaluate the migratory population shifts in Mexico and American agricultural subsidies with respect to data on quantities of US crop exports to Mexico, measures of Mexican internal crop production, levels of domestic crop prices, and rates of agricultural employment. To discern the specific impact of American corn subsidies, trends in the statistics delineated above regarding corn will be juxtaposed with avocado produce, which is contrastingly not subsidized by the American government. To preview this paper's findings, it is evident that the subsidization of American corn drastically lowers both the price of corn and levels of employment in the agricultural sector, triggering the out-migration of rural corn farmers to Mexico's cities. This report will commence with a literature review that situates the study's research in context of the historical discourse between proponents of free-trade deals and critics that call for the responsible regulation of trade expansion. Next, it will describe the rationale that guides the hypothesized relationship between federal subsidies for American corn and Mexican internal displacement and further explicate methods of statistical measurement. Lastly, the paper will detail the research findings and propose additional issues for future research.

Body of this Report

The body of this long report contains the following four sections not included this post:

* Literature Review

* Hypothesis

* Data and Methods

* Results

You can read them at


As the study's results demonstrate, billions of dollars of federal subsidies for American-grown corn are largely responsible for the economic displacement of Mexico's corn farmers. The impact of US corn subsidies has severely transformed the lives of people who have no influence on US policies. This economic vulnerability of Mexican farmers was initiated through the approval of the North American Free Trade Agreement. The inclusion of the agricultural sector within the agreement's broader agenda of trade liberalization exposed Mexicans employed in agriculture to US domestic economic policies. (It is important to note that US-Canada side of the agreement contrastingly maintains significant restrictions to protect the Canadian agricultural sector.) Although these subsidies produced an increase in the corporate ownership of corn production, a decrease in corn prices, and dwindling numbers of employed corn farmers - not to mention the displacement and forced migration of Mexican corn farmers - Mexican voters have no voice in congressional deliberations regarding the approval of federal subsidies for American-grown corn.

This paper's findings, and their centrality to economic vulnerability, must be acknowledged when considering the possibility of engaging in either bilateral or multilateral free trade agreements (FTAs). Currently, developing countries are refusing to reinitiate the World Trade Organization's Doha Round negotiations. Their governments are duly wary of the potentially disastrous consequences of a liberalized agricultural sector in an asymmetrical system of global trade, as exemplified by US corn subsidies and the displacement of Mexico's corn farmers (Anderson 2007). It is important that leaders of developing countries approach the recommendations of western trade negotiators cautiously, and consider the ramifications of agricultural liberalization for the welfare of their country's citizens.

Although this paper demonstrates the catalytic role of subsidies for American corn in the out-migration of Mexico's corn farmers, additional research is required. While this study examines Mexico's corn workers as a homogenous entity, these farmers are a heterogeneous group. Future studies which differentiate categories of Mexicans employed in corn production would contribute to this paper's findings. Specifically, it would be valuable to analyze how US corn subsidies respectively impacted the migration of corn farmers working on small-scale communal farms, known as ejidos, and those employed by high-production agribusinesses. Additional research is required on the consequences of NAFTA's elimination of Mexico's social service programs pertaining to agriculture. A study of the free trade agreement's dismantlement of CONASUPO, the state enterprise designed to maintain the stability of the agricultural economy and employment, would further the understanding of other culpable factors in the economic displacement of the country's corn farmers. Nevertheless, it is evident that by lowering both the domestic price of corn and employment levels of corn farmers, federal subsidies for American corn are primarily responsible for the post-NAFTA rural to urban migration of Mexico's corn farmers.


The views expressed are the author's and do not necessarily represent the views of Prospect - Journal of International Affairs at the University of California at San Diego.

Bill Totten


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