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Tariffs' End To Pressure Mexican Agriculture

posted on November 29, 2002

An Agriculture Department study reports country of origin labels could cost the food industry two billion dollars. Labeling is voluntary for two years after which it becomes mandatory. Opponents of the policy, many of them food processors and purveyors, have insisted the additional cost of labeling will be passed along to consumers. More troublesome to the food industry is the prospect that grocers and processors may have to eat some of those costs.

Be it country of origin, G-M-O, labor or environmental, labeling continues to be an issue in trade negotiations. Opponents insist labeling is a non-tarriff trade barrier and counter to World Trade Organization rules.

But, sometimes it's the prospect of increasing the flow of trade that generates controversy. A case in point is the evolving North American Free Trade Agreement.


Tariffs' End To Pressure Mexican Agriculture

On the economic front, NAFTA seems to be a win-win for both Mexico and the U-S. Mexican agricultural products dominate the cucumber and tomato markets, part of a 3 billion dollar increase in ag exports to the U-S. On the other side of the border, U-S exports have increased as well. Sales of rice, apples, cattle and dairy products to Mexico have risen by as much as fifteen percent a year.

But a closer look reveals some inequities. Large, capital intensive farms, technologically advanced equipment, cheap fuel, cheap loans, and a 180 billion dollar U-S government subsidy package has put Mexican farmers at a distinct disadvantage. Most Mexican farmers are subsistence agrarians living on an average of 13 acres and paying some 40 percent more for fuel than their U-S counterparts. Mexican producers receive an annual average of 722 dollars in subsidies compared to the twenty-thousand-eight-hundred dollars given to U-S farmers. As a result the Mexican agricultural trade deficit with the U-S has increased to four point one Billion dollars.

The situation is set to become more bleak for producers in Mexico. On January first, Mexican tariffs allowed under the North American Free Trade Agreement are set to expire on agricultural goods. Some 10 million Mexican farmers are expected to be impacted by the change which will allow prices to drop on some key U-S produced goods, including rice, potatoes, chicken and pork. Currently, some cuts of imported U-S pork can be bought for less than thirty cents per pound compared to more than a dollar per pound for pork grown domestically in Mexico.

Mexican President Vicente (vuh-SIN-tay) Fox has already pledged to use all legal protective mechanisms to armor-plate the Mexican agricultural sector against increased competition. This could include more anti-dumping measures like the nearly 50 percent duty on U-S produced Red and Golden Delicious apple varieties which was imposed in August, or non-tariff trade barriers such as sanitary restrictions.

The U-S Department of Agriculture has already stated it will not renegotiate on agricultural trade, but says it is willing to take on unemployed Mexican farmers to fill a shortage of cheap, seasonal workers in the U-S.


Tags: agriculture markets Mexico news trade