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Hogging the Gains from Trade:
The Real Winners from U.S. Trade and Agricultural Policies
by Timothy A. Wise and Betsy Rakocy
GDAE Policy Brief 10-01
In this policy brief, Timothy A. Wise and Betsy Rakocy summarize the ways in which multinational livestock firms have benefited from both trade and agricultural policies. The researchers highlight the U.S. multinational pork giant Smithfield, because Smithfield is the world’s largest pork producer, it has been expanding its operations in both the United States and Mexico, and it has been implicated in significant violations of U.S. labor law. As they show:
- Reforms in U.S. agricultural policies gave Smithfield a steady supply of cheap feed for its hog operations, which saved the firm an estimated $2.5 billion from 1997-2005.
- NAFTA gave Smithfield and other livestock companies the tariff-free exports of its pork, which it could export at 10% below production costs because of the “implicit subsidy” to its feed costs.
- NAFTA also provided a welcome investment climate in Mexico, which allowed Smithfield to expand to the point that it controls nearly one-fifth of the Mexican pork industry.
- NAFTA also gave the firm tariff-free importation of cheap feed from the United States for its Mexican operations.
- Finally, the displacement of corn and pork producers in Mexico from the flood of U.S. imports gave Smithfield and other meatpackers a steady supply of low-wage workers, not only for its expanding Mexican operations but also for its U.S. meatpacking plants, where a growing pool of undocumented workers allowed Smithfield to hold down wages and weaken unionization efforts.
“Hogging the Gains from Trade” is the latest in a series of publications from GDAE’s Feeding the Factory Farm Project, which documents the “implicit subsidies” to agribusiness from U.S. agricultural policies.
Download Hogging the Gains from Trade
Read more on GDAE’s work on Feeding the Factory Farm Project
Read more on GDAE’s Globalization and Sustainable Development Program
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Interview with Alan Guebert: Syndicated farm belt columnist Alan Guebert interviewed Timothy A. Wise about his policy brief with Betsy Rakocy, Hogging the Gains from Trade. The piece was picked up by several farm-oriented publications, including the Fort Wayne Sentinel which published the piece entitled, "Level the playing field of trade'? Just look out".
Why Do Mexican Workers Head North? Based on this Policy Brief, Timothy Wise was interviewed by the Real News Network on why NAFTA has undermined Mexican agriculture and caused many Mexican farmers to migrate North to seek employment. (November 2010)
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.