The Mexican Experience and Lessons for WTO
Negotiations on the Agreement on Agriculture
Laura Carlsen
June 13, 2003 Americas Program,
Interhemispheric Resource Center (IRC) www.americaspolicy.org
The following is the text of a speech delivered by the author as part of the "Hearing of Experts on WTO: Agriculture, TRIPS and Singapore Issues" before the Committee on Industry, External Trade, Research, and Energy of the European Parliament, June 11, 2003.
The Doha Round mandated that special
attention be given to the development needs of developing countries. Therefore,
a review of the Agreement on Agriculture must focus on the impact of
liberalization to date and the potential impact of new rules.
Mexico has been called the laboratory of
free trade, because the nation radically opened its borders beginning in 1986,
with entry into GATT.
Mexico carried out unilateral trade
liberalization and structural adjustments that accelerated in 1994, when the
North American Free Trade Agreement (NAFTA) went into effect. We can now draw
on nearly two decades of experience in agricultural free trade policies from
the perspective of a developing country. The lessons are illuminating for the
present WTO negotiations, and indicate the need to seriously question the
present focus on market access for developed countries, at the expense of food sovereignty,
livelihoods and rural development in developing countries.
The Mexican Experience: Displacement,
Poverty, and Food Dependency Under NAFTA, Mexico agreed to total trade
liberalization of all agricultural products by 2008. Although corn and beans,
the nation's staple food crops, were given a fifteen-year adjustment period, in
practice both have been liberalized before the adjustment period by government
decisions to permit tariff-free imports above quota. In effect, corn faced
zero-tariffs less than three years into the agreement.
The asymmetries between Canada, the
United States, and Mexico in agricultural production were profound at the time
of signing and have deepened since. Twenty-one percent of the Mexican
population depends on farming for their livelihood, compared to only 2.8% in
the U.S. Three-fourths of Mexican
producers work fewer than five hectares.
Important asymmetries exist in subsidies--the U.S. Farm bill authorizes over
$200 billion in the next decade--, productivity, credit, natural resources,
inputs, and transportation.
Corn is Mexico's most widely grown crop
and the major source of sustenance in both rural and urban sectors. Mexico is
the center of origin for corn, and the country's history and its 56 indigenous
cultures revolve around maize. Corn imports have nearly tripled since NAFTA,
and the price has dropped 64% since 1985. Genetically modified corn imports
have contaminated local varieties, leading to fears of loss of biodiversity and
increasing dependency on transnational seed and chemical companies.
Other crops have fared even worse.
Soybeans, wheat, poultry, and beef imports have risen over 500%, displacing
domestic production. Subsidized imports at dumping prices have also broken down
vertical integration in growing agro-industrial sectors, like beer production.
The Mexican countryside lost 1.7 million
jobs since NAFTA, in the context of little employment generation in other
sectors. During the same period thousands of Mexicans migrated to the U.S.,
many to work in agriculture as undocumented workers without labor guarantees or
benefits. Mexico has imported $78 billion worth of foods since 1994.
Promised compensation has not
materialized. Exports have risen, especially in fruits and vegetables, but fail
to compensate for imports. Agro-export crops cover only 8% of total cultivated
land, compared to the three million producers of basic grains and oilseeds on
70% of Mexican farmland that has been devastated by imports. Agricultural
niche-marketing, where the country is thought to have comparative advantages,
has little room to grow due to supply-side constraints (water, climate, and
soil conditions), lack of financing, and narrow markets. Agriculture has
received only 0.3% of direct foreign investment.
Mexico has registered a negative balance
of trade in agriculture over the decade of trade liberalization. Moreover, the
government lost nearly $3 billion in revenues by failing to apply tariffs
permitted under NAFTA.
In sum, two decades of agricultural trade
liberalization in Mexico have led to: an increase in rural poverty, malnutrition,
out-migration, and instability; increased workloads, particularly for women;
increased consumer prices; increased profits and market control by
transnational traders and processors at the cost of smallholder farmers; lost
national revenues that could have been applied to development programs; and
severe risks to the environment and biodiversity.
By reflecting the market access
priorities of developed countries that predominated in NAFTA, the Harbinson
draft does nothing to reverse the negative tendencies of trade liberalization
seen above.
First, because it fails to seriously take into account asymmetries in pursuing market access. The Agreement on Agriculture proposes "harmonizing," gradually or abruptly, market access on the foundation of enormous and unresolved asymmetries between nations, and between sectors within nations. Special and Differential Treatment - to the degree in which it has been defined - merely reduces tariff reduction requirements, often on the basis of already low tariff levels. The ability to exempt "Special Products" is severely limited by the fact that they would be determined by conflicting interests in the WTO rather than national rural development policies. Instead of creating a level playing field, this approach leads to the establishment of permanent disparities.
For all but a handful of heavily
subsidized, well-capitalized, and often transnational agricultural interests,
market access translates into market displacement. The food market is
relatively inelastic. When the global market expands for nations and
corporations with "comparative advantages," it expands based on the
conquest of markets wrested from farmers in developing countries. The
consequence is displacement of national food production and destruction of
subsistence production systems.
Second, the Agreement perpetuates dumping
practices while denying defensive tools to developing countries. Export
subsidies would be phased out, instead of ended. Little is done to prevent
indirect export subsides from being shifted to uncontrolled Green or Blue Box
measures that wind up having the same net effect of encouraging overproduction
and displacing developing country production within their own markets.
Income support payments also contribute to
dumping on world markets, but they have very different practical functions in
developed and developing countries. In net food-exporting countries, they serve
primarily to subsidize traders by lowering the price they have to pay to
producers, encouraging overproduction and enabling them to increase volumes
sold abroad. In countries like Mexico, where over half of farms produce for family
consumption, supports could mean the difference between a child starving or
not.
The debate in developing countries is
not, at root, a debate between free trade and protectionism. It is a debate
between the imposition of free trade rules at the cost of national development
and well-being. In the complex and difficult context of a globalization that
shows clear tendencies toward increasing inequity, and concentration and
polarization of wealth, developing nations need to respond with policies that
assure each citizen a basic standard of living. The Agreement on Agriculture, like
NAFTA, binds national policymaking in a straitjacket just when developing
countries must respond to new and dangerous challenges. At the same time, it
exacerbates threats to food sovereignty, and eliminates important strategies
for survival in the countryside that not only guarantee livelihoods but also
support cultural, agricultural, and biological biodiversity.
The United Nations Development Program
recently listed four principles of trade that have been largely forgotten in
current debates focused on market access: 1) Trade is a means to an end, not an
end in itself; 2) Trade rules must allow for diverse national institutional
standards; 3) Countries have the right to protect their institutions and
development priorities; 4) Countries do not have the right to impose their institutional
preferences on others.
These simple rules imply a complete
reorientation of the WTO, from trade promotion to a stronger focus on
development and equity issues. Organizations
of small farmers in developing countries have articulated a broad range of
recommendations that must be considered to address the basic inequities of
international trade in agriculture and protect the many roles rural production
plays in society, including employment, food sovereignty and security, foreign
exchange, and allocation of natural resources.
To end dumping, they call for an end to
export subsidies in all forms, and the right to safeguard mechanisms or
protective measures when deemed necessary. Mexican farmers associated with Via
Campesina assert that this requires exempting food production and markets from
the WTO to create new, more democratic mechanisms of regulation that respect
food sovereignty and help rebuild local and regional markets. It also requires
regulation of transnational trading oligopolies that create price distortion.
Other recommendations include:
Farm support and agrarian reform programs
based on human needs, that incorporate the goals of gender equity and respect
for farmers' rights--above all the right to farm. Legislation and enforcement
of national environmental and health standards, even when set higher than international
standards, or those of partner nations. Impact studies based on real experience
rather than theoretical modeling. Studies must take into account market
failures due to concentration of transnational corporations and non-trade
concerns. Commitment to preserving the multifunctional character of agriculture
in a real and global way. The EU commitment to multifunctionality so far has
been restricted to permitting measures that support developed country
agriculture. Although non-trade concerns are even more vital in developing
countries, no provisions have been made to support them where national
government funds are insufficient. Even more importantly, there is no
recognition of the impact of dumping on the ability of these countries to
maintain agricultural activities that ensure global values, such as
environmental conservation, employment, and food security. Democratization of
international trade regulation, including correction of the
under-representation of the Least Developed Countries--in most cases the most
reliant on agriculture. International
trade rules should promote human well-being and minimize conflict. They should
not impose a free-trade system, because there is no global consensus that this
is the only, or best, road to development and equity. Rather, experiences like
Mexico's indicate that it is a road fraught with perils and high human costs.
Even optimal international trade rules
will not solve the problems of rural development, due to the complexity of
local and regional conditions and non-trade concerns. Only national integral
development policies can do this. Domestic policy is a battle that must be
fought on its own turf by the rural citizenry in the context of a responsive
and democratic state. By tying the
hands of national governments, the WTO Agreement on Agriculture will only
exacerbate the crisis in the countryside and undermine democratic processes.
(Laura Carlsen directs the Americas
Program (online at www.americaspolicy.org)
of the Interhemispheric Resource Center (IRC, online at www.irc-online.org). She can be contacted
at <laura@irc-online.org>.)