Agricultural Dumping Under NAFTA:
Estimating the Costs of U.S. Agricultural Policies to Mexican Producers
Timothy A. Wise
Mexican Rural Development Research Report No. 7, Woodrow Wilson International Center for Scholars, 2010
Also available GDAE Working Paper No. 09-08
With the opening of the Mexican economy under the North American Free Trade Agreement (NAFTA), Mexican agriculture came under new competitive pressures from U.S. exports. High U.S. 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 U.S. 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 WTO.
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 U.S. government, were produced in Mexico in significant volumes before NAFTA, and experienced dramatic increases in U.S. exports to Mexico after the agreement. We find that:
- U.S. exports of the eight supported commodities analyzed here have increased dramatically since the early 1990s, rising between 159% and 707%.
- For supported crops, the “dumping margins” – the percentage by which export prices are below production costs – from 1997-2005 ranged from 12% for soybeans to 38% for cotton.
- 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 1997-2005, just over $1 billion per year.
- Corn showed the highest losses. Average dumping margins of 19% contributed to a 413% increase in U.S. 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.
- Meats were exported at below-cost prices because U.S. 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 5-10% 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.
- We estimate total losses to Mexican producers from dumping-level U.S. export prices at $12.8 billion from 1997-2005 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 10% 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.”
Read the Policy Brief
The paper is now part of the Center’s project and report on Mexican agricultural policies, “Subsidizing Inequality: Mexican Corn Policy Since NAFTA,” The report is also available in Spanish, as is Wise's policy brief.
Who Pays for Agricultural Dumping? Farmers in developing countries, by Timothy Wise, GDAE Globalization Commentary, from Triple Crisis Blog, July 29, 2010.
Read more from GDAE’s “Beyond Agricultural Subsidies” research program.
Read more on GDAE’s ten years of research on Mexico under NAFTA.
Wise was quoted in two recent McClatchy news wire stories on corn in Mexico, based in part on his work on agricultural dumping. Mexico, cradle of corn, finds its noble grain under assault, Feb. 2, 2011, focuses on the contentious issue of genetically modified corn. In the Feb. 1 article, Free trade: As U.S. corn flows south, Mexicans stop farming, the author explores the impact of NAFTA on small-scale Mexican farmers. The articles appeared in the Miami Herald, Sacramento Bee, and Philippines Times, among many other McClatchy papers.
Wise was in Washington January 18-19, 2011 to present his research on agricultural dumping under NAFTA as part of the report, "Subsidizing Inequality: Mexican Corn Policy Since NAFTA" . Watch a webcast of the panel presentation. Read coverage of the Washington event in the Mexican daily Excelsior.
Subsidizing Inequality: Timothy A. Wise was interviewed by the Real News Network on his recent policy brief, “The impacts of U.S. agricultural policies on Mexican producers,” which appears as part of the report, “Subsidizing Inequality: Mexican Corn Policy Since NAFTA.” The report was recently released in English by the Mexico Institute at the Woodrow Wilson International Center for Scholars. (December 2010)
Wise was also interviewed by Institute for Agriculture and Trade Policy (IATP) on his paper in Mexico in September 2010.
El Universal publishes an artile by Wise
Subsidios a la deslealtad (Subsidizing Unfairness), October 04, 2010.
La Jornada publishes a summary by Wise
Mexico’s daily newspaper La Jornada, in its monthly supplement on farm issues, printed a special section on the project, including a summary by Wise, September 18, 2010.
Timothy A. Wise on the Triple Crisis Blog
Small-Scale Farmers and Development: Assume a different economic model, September 27, 2010.
Who Pays for Agricultural Dumping? Farmers in developing countries, July 29, 2010.
Agricultural Dumping and Mexico: In an interview he gave to the Institute for Agriculture and Trade Policy (IATP), GDAE’s Timothy Wise discusses the implications of US agricultural dumping in Mexico. (September 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.