POLICY BRIEF NO . 7 Agricultural Trade Liberalization and Mexico

Executive Summary Mexico's experience of liberalization is a canary in the mineshaft for other agricultural economies in the Global South. Mexico's political and economic ties to the United States mean that it is subject, perhaps more than any other country in the world, to the direct political-economic intervention of its powerful northern neighbor. The effects of such interventions have unequivocally hurt the poorest people in the country: those who work on the land in rural areas. Following open market policies, we have seen increases in raw measures of economic change in foreign direct investment, aggregate GDP per capita, and export volumes. For example, Mexico's overall exports increased 7-fold between 1981, the year before liberalization, and 2001.1 Imports have matched this rise, with a 6.7-fold increase from 1981 to 2001.2 At an aggregate level, then, it would seem as if Mexico has profited from liberalization. Yet closer scrutiny of the figures show that the benefits have been divided very unequally. Some farmers have been able to take advantage of newly open markets in the U.S. Since the onset of NAFTA, exports of fruits and vegetables have increased 57 %.3Yet, given that tariff barriers in these products were already low, before NAFTA, it is more reasonable to attribute the shift to these crops as a response to " push factors " , foremost among which is the rapid fall in the domestic price of maize. Maize farmers have been particularly badly hit, and given the rural dependence on corn farming, this means that the poorest farmers have been hit the hardest. Subsistence farmers account for 45 % of all corn growing units in Mexico, and production for household consumption represents 38 % of total production. For the most part these farmers operate under inferior conditions with poor quality rain-fed soil, slopping terrain, irregular rainfall, and little if any access to technology, credit, storage facilities and marketing channels. These producers are often forced to sell their crops immediately after harvest, when local prices are at the lowest, because they are too poor to afford the appropriate storage facilities. These farmers were subject to the full onslaught of the US corn industry, a recipient of substantial US government subsidy. The opening of the Mexican market to US corn led to a massive influx of subsidized, and hence cheaper, US corn. Corn prices are currently $1.74 a bushel, and the latest US Department of Agriculture …