|Friday, Nov. 15, 2002, CropChoice
news, via BusinessWeek Online,11/14/02: It was quite a parade.
Farmers in Mexico recently marched hundreds of squealing pigs through
La Piedad, a small town in Guanajuato state. The show of porcine heft
was a protest against an expected avalanche of U.S. bacon, ham, and
pork chops when import tariffs on a variety of farm products are eliminated
next year under the North American Free Trade Agreement. Some U.S.
pork cuts already cost just 27 cents a pound in Mexico, vs. $1.14
for domestic pork, and import prices will likely drop further. "If
our situation doesn't change quickly, Mexico's 15,000 pork producers
face complete collapse," says Carlos Ramayo, head of the Confederation
of Mexican Pork Producers.
Mexico and the U.S. are headed for a major food fight. Starting
on Jan. 1, Mexico must scrap tariffs on a dozen key products, including
rice, potatoes, pork, and chicken, that have enjoyed special protection
under NAFTA. To Mexicans, agriculture's importance is not measured
in dollars--in fact, the sector contributes 4% of gross domestic
product. But 10 million people, about one-quarter of the Mexican
workforce, still live off the land. And the dirt-poor campesino
remains a potent symbol of Mexico's revolutionary legacy.
No wonder this latest round of tariff cuts is fast turning into
a hot-button issue in Mexican politics. What especially galls the
Mexicans is that they have to fight with one hand tied behind their
backs. According to Mexico's National Agricultural Council [CNA],
the average Mexican farmer receives just $722 in annual subsidies,
while U.S. farmers stand to collect $20,800 a year as part of a
$180 billion farm bill approved earlier this year. Mexican President
Vicente Fox (news - web sites) in October warned fellow rancher
George W. Bush that the U.S. subsidies could push up unemployment
in Mexico's countryside and drive farmers across the border. "Many
farms are going to disappear," warns CNA President Armando
Paredes, who figures at least 750,000 jobs could go next year alone.
American farmers point out that Mexico's agricultural exports
to the U.S. have nearly doubled, to $6.3 billion, over the past
decade. "It's been a win-win situation for both countries as
far as increasing exports goes," says Terry Francl, a senior
economist at the American Farm Bureau (news - web sites) Federation.
Mexico has fared particularly well with labor-intensive crops: Today,
more than half the cucumbers and over one-third of all tomatoes
eaten in the U.S. are grown south of the border. But U.S. producers,
with their large, capital-intensive farms, superior technology and
infrastructure, have boosted their exports of rice, cattle, dairy
products, and apples by more than 15% a year since NAFTA took effect.
Mexico's agro deficit with the U.S. reached $4.1 billion last year.
Mexico has been reluctant to tarnish its free-trade credentials
by resorting to nontariff barriers such as anti-dumping duties,
and sanitary restrictions--means by which U.S. tomato and avocado
farmers have kept Mexican products out of some markets. But the
gloves are expected to come off as the country heads for midterm
elections in July, 2003. This month, Fox is due to announce a raft
of new measures to "armor-plate" the agricultural sector
from increased competition. Expect more anti-dumping measures, such
as the 46.6% duty officials imposed on U.S. shipments of Golden
and Red Delicious apples starting in August. "We will not hesitate
to utilize all of the protective mechanisms established by national
and international legislation," Fox told a gathering of Mexican
farmers in early November.
But no matter what Fox does, the countryside will suffer from
the new onslaught. Mexican farms average just 13 acres, a legacy
of a land reform introduced after the Mexican Revolution. Farmers
also pay 40% more for diesel fuel and face sharply higher interest
rates on loans. "If Mexico's farm sector is to survive, the
government is going to have to give out more subsidies," says
Juan Habermann, a prosperous grower of green beans and sorghum in
the state of Sinaloa. Fox might be happy to oblige. But there's
little room in the tight federal budget for such largesse. For Mexican
farmers, bringing home the bacon keeps getting harder.