U.S.-Mexico Agricultural Cooperation: Challenges Within NAFTA

Keynote Address: "Agriculture for Development: The Global Challenges"
Alain de Janvry, Director, World Development Report 2008: Agriculture for Development, World Bank, and Professor of Agricultural & Resource Economics at the University of California, Berkeley

Panel I: What are the Challenges?
Victor Suárez, President, National Association of Rural Producers (ANEC)
Katherine Ozer, Executive Director, National Farm Family Coalition
Carlos Vásquez, Minister for Agricultural Affairs, Embassy of Mexico
Moderator: John Burstein, Chair of the Board, Foro para el Desarrollo Sustentable

Panel II: Analyzing the Issues in the U.S.-Mexico Agricultural Relationship
Kirsten Appendini, Professor, El Colegio de México
Steve Zahniser, Researcher, U.S. Department of Agriculture
Timothy Wise, Deputy Director, Global Development & Environment Institute, TuftsUniversity
Antonio Yúnez-Naude, Professor, El Colegio de México
Moderator: Frederick deDinechin, Sr. Land Administration Specialist, World Bank

On January 1, 2008 the remaining provisions of NAFTA yet to be implemented will go into effect. The full implementation of these trade provisions has been a topic of contention both in the US-Mexico relationship and within each country individually. On April 13, 2007, the Mexico Institute hosted an event to discuss the agricultural implications of NAFTA on each country and on the relationship itself.

In his keynote address, Alain de Janvry discussed the World Bank's World Development Report 2008, which examines agriculture as a tool for development. He noted the heterogeneity of agriculture, even within regions and among countries, and therefore the need for varying policies. He emphasized that agriculture has important implications for human migration given the excess of people within that sector who are not able to succeed, and cited Mexico as a case in point.

De Janvry delineated three 'blocs' in describing the distinct roles agriculture plays for different countries: the 'agricultural base' countries, the 'transforming countries', and the 'urbanizing countries.' The latter includes Mexico and the majority of Latin America, where agriculture is not the main engine of growth and there exists wide scale rural poverty. In these countries, there is a duality in the agricultural economy, with highly successful commercial farmers who have inserted themselves successfully into the global market and more numerous small-scale farmers whose livelihood is declining. Among these Latin American urbanized economies there is a move towards subsidies in which the farm sector becomes a large source of distortions. For countries like Mexico with high levels of rural poverty that has not declined concurrently with growth, the challenge becomes how to insert these groups into the 'supermarket' economy. He noted that in these Latin American countries urban poverty has been increasing as well, in part because of rural-to-urban migration. Inequality, the lack of access to land and public goods, and the need for economies of scale are some of the reasons behind this.

Regarding the specific experiences of Mexico with the rural sector and development, de Janvry discussed Oportunidades, the money transfer program that promotes education. He commented that although it is a good program, it also subsequently prepares rural citizens to be better migrants than farmers or rural entrepreneurs. He added that the political will to change this situation is lacking, given the disconnect ministries in capital cities have with their rural populations. Finally, de Janvry said the greatest issue in Latin America is governance. He explained that ministries of agriculture in Latin America are not doing well and that decentralization has not been effective for agriculture.

Victor Suárez argued that the final implementation of NAFTA in 2008, when tariffs on corn and beans are phased out, will negatively impact maize and bean growers in Mexico. He noted that when NAFTA was passed in 1994, one of its promises was that illegal immigration to the United States from Mexico would slow. In addition, the treaty would provide Mexico with access to the largest market in the world. The changes, however, have not been so straightforward as expected. In particular, Suárez noted that NAFTA has had a strong negative impact on the poorest households since imports of cheaper U.S. corn and beans have driven down the price that small-producers receive for their crops. Furthermore, there has been a significant polarization between the northern and southern regions of the country, a growth in rural poverty, and an increase in malnutrition. Suárez warned that the liberalization of trade of white corn and beans in 2008 will cause a price increase in these basic staples, which are essential to Mexican cultural identity and national security, even though producers will see no benefits from this increased price.

Katherine Ozer noted that on the U.S. side the challenge is the debate around the proposed farm bill and U.S. trade policy. She argued that contrary to popular belief, there are still family farmers in the United States trying to farm full time, and for them it is essential to get a fair price for their produce both domestically and internationally. She encouraged the establishment of a price-based system instead of a subsidy-based one, where a ceiling is put in place that ensures stability by setting a fixed range of what prices will be. Ozer emphasized that the 2002 farm bill is not working, and that it is increasingly important that minority farmers have better access to land and resources.

Carlos Vásquez reiterated that there are many domestic agricultural problems in Mexico left to solve, especially the need to improve rural infrastructure and better allocate public resources. Moreover, Vásquez noted that the United States and Mexico will continue to be strategic partners, and that NAFTA is a beginning point for further negotiations rather than a final one.

Kirsten Appendini described the reality of many Mexican rural areas, where remittances from the relatives abroad are becoming the main source of local income. Households have transitioned from units of production to units of consumption, and in many rural localities there is a growing informal economy that is not linked with agriculture, leading to extremely low productivity. Among many policy recommendations for the Mexican government, Appendini emphasized the need for support of vulnerable and poor farmers on the local level through differential policies of credit and technical assistance, the protection of biodiversity, the strengthening of local and regional markets, and the establishment of criteria for the balance between domestic and imported supplies of maize.

Steve Zahniser noted that there is currently no broad support for a bilateral agricultural policy that would be similar to that of the European Union. He argued for the need for regulatory coordination, however, and the sharing of information. In pointing to the connection between NAFTA's effect on Mexican agriculture and Mexican migration to the United States, he discussed the potential for the USDA and the U.S. federal government to encourage rural development in Mexico.

Timothy Wise characterized the effect of NAFTA on Mexico's current agricultural situation as the cause of its "state of emergency," especially regarding the drop in price of maize, the lack of agricultural biodiversity and pressure on the environment. He connected the loss of biodiversity to the general decrease in household income, and increases in poverty and domestic and international migration. In the face of the globalization of market failure, Wise suggested that Mexico should consider pursuing anti-dumping remedies in international tribunals, especially on corn, or finding other administrative means to slow the implementation of the final provisions of NAFTA without violating the treaty itself. He also agreed with Kirsten Appendini's call for price differentials, technical assistance, crop failure insurance and credit for small rural farmers.

Antonio Yúnez-Naude pointed out that other factors besides NAFTA have affected the evolution of Mexican agriculture and the rural sector, specifically internal political and economic changes during the 1990s. Yúnez-Naude agreed with the challenges and issues surrounding agriculture and rural development mentioned throughout the panel, and further noted that there has not been enough collaboration between the United States and Mexico on these issues.