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© Global Development and Environment Institute, Tufts University
© Global Development and Environment Institute, Tufts University
The Environmental Costs of Agricultural Trade Liberalization:
Mexico-U.S. Maize Trade Under NAFTA
Working Group on Environment and Development in the Americas
March 29-30, 2004
Alejandro Nadal and Timothy A. Wise
© Global Development and Environment Institute, Tufts University
U.S. Advantage on a Tilted Playing Field
U.S. vs. Mexico in corn production:•Nearly four times the area•Over three times the yield/hectare•Eleven times the production•At least three times the farm subsidies per hectare•Sold at less than half the price
Effect of NAFTA:•Accelerated tariff reduction, 3 years instead of 15•Tripling of U.S. exports to Mexico•47% drop in producer prices
© Global Development and Environment Institute, Tufts University
U.S. Maize in Mexico
Mexican Maize ConsumptionDomestic vs Imported, 1990-2002
0
5
10
15
20
25
30
1990 1992 1994 1996 1998 2000 2002
Mill
ion
met
ric t
ons
Domestic Production
Imports
Sources: Imports - FATUS USDA; Production - SIACON
© Global Development and Environment Institute, Tufts University
Decline in Real Maize Prices, 1993-2002
Mean Rural Maize Prices 1993-2002
300
400
500
600
700
800
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
1993
pes
os
Source: SIACON database, 2003.
© Global Development and Environment Institute, Tufts University
Mexico: Important Market for U.S. Corn
U.S. Corn Exports to Selected Countries 1990-2002
0
2
4
6
8
10
12
14
16
18
1990 1992 1994 1996 1998 2000 2002
Source: USDA, Agricultural Statistics Service (2003)w w w .usda.gov/nass/
Mill
ion
Met
ric T
ons Japan
S. Korea
EU
Mexico
Taiw an
Egypt
Canada
Mexico
Japan
EU
S. Korea
Taiwan
© Global Development and Environment Institute, Tufts University
An Analytical Framework Agricultural Trade Liberalization and the Environment
Pollution Haven:* Assumes North-South pollution flow* For agricultural trade, could be the reverse
Globalization of Market Failure:* Negative environmental externalities in North* Positive environmental externalities in South* Liberalized trade magnifies environmental harm* Environmental impact greater than sum of its parts
© Global Development and Environment Institute, Tufts University
Which crop uses the most chemicals?
Illinois: Chemical intensity of crops, 2000
0%
20%
40%
60%
80%
100%
nitrogen phosphate potash herbicides
kg/h
ecta
re a
s %
of
corn
soy
wheat
corn
Illinois is typical of other states
In every case, corn uses more chemicals than soy or winter wheat planted in the same state
© Global Development and Environment Institute, Tufts University
FertilizerRunoff
Excess nitrogen fertilizer runoff contributes to the dead zone in the Gulf of Mexico
Total Use (thousand
metric tons)Intensity
(kg/hectare)Nitrogen 4,424 148Phosphate 1,577 53Potash 1,716 57
Fertilizer Use in US Corn Production, 2000
Fertilizer Intensity of U.S. Corn 1994-2002
90
95
100
105
110
1994 1996 1998 2000 2002
kg fertilizer / hectare corn, 10 top states
19
94
= 1
00
Nitrogen
Phosphate
Potash
Source: USDA, NASS.
© Global Development and Environment Institute, Tufts University
PesticidesTotal Use (thousand
metric tons)Intensity
(kg/hectare)Herbicides 69.61 2.33Insecticides 4.45 0.15
Pesticide Use in US Corn Production, 2000
Pesticide Intensity of U.S. Corn1994-2002
30
40
50
60
70
80
90
100
1994 1995 1996 1997 1998 1999 2000 2001 2002
kg chemical/hectare corn, 10 top statesSource: USDA, NASS
19
94
= 1
00
Herbicide
Insecticide
Herbicide decrease: *real improvement *tech. change
Insecticide decrease: *misleading *potency still high *NOT a sign of positive impact of Bt corn use
© Global Development and Environment Institute, Tufts University
• 1997: 15% of US corn irrigated• 1992: 14% irrigated• Three-fourths is in four states
over the Ogallala aquifer
Irrigation % of corn irrigated, 1997
All other states: 5%
© Global Development and Environment Institute, Tufts University
Dry-State U.S. Corn ProductionDry State Corn Production and Planted Area
CO, KS, NE, and TX as a percent of US, 1965-2002
8
10
12
14
16
18
20
22
24
26
1965 1970 1975 1980 1985 1990 1995 2000
pe
rce
nt
Source: National Agricultural Statistics Service, USDA
planted acreage
production
© Global Development and Environment Institute, Tufts University
The Rise of Genetically Modified Corn
GM Corn Adoption Trends, 1996-2003
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1996 1997 1998 1999 2000 2001 2002 2003
Per
cen
t o
f U
.S.
Co
rn A
crea
ge
Benbrook (2001) 'When Does it Pay to Plant Bt Corn' USDA (2003) NASS Dataset www.usda.gov/nass/USDA (2003)Benbrook (2001) and USDA (2003)
Bt corn
herbicide tolerant corn
all GM corn
© Global Development and Environment Institute, Tufts University
US vs. Mexico Maize Subsidies1999-2001
0%
25%
50%
75%
100%
125%
US PSE% Mex PSE % Mex PSE %Subsidies
Only
US PSE/ha. Mex PSE/ha. Mex PSE/ha.Subsidies
Only
as p
erce
nt
of
US
Sources: OECD, FAO, Sagarpa-SIAP, author's calculations; current US dollars.
US PSE46%
US PSE/ha
$262/ha
Mex PSE 47%
Mex PSE/ha $160/ha
Mexico subs. only
28%Mexico
subs. only $93/ha
US vs. Mexico Maize Subsidies1999-2001
0%
25%
50%
75%
100%
125%
US PSE% Mex PSE % Mex PSE %Subsidies
Only
US PSE/ha. Mex PSE/ha. Mex PSE/ha.Subsidies
Only
as p
erce
nt
of
US
Sources: OECD, FAO, Sagarpa-SIAP, author's calculations; current US dollars.
US PSE46%
US PSE/ha
$262/ha
Mex PSE 47%
Mex PSE/ha $160/ha
Mexico subs. only
28%Mexico
subs. only $93/ha
Whose Subsidies Are Bigger?
US vs. Mexico Maize Subsidies1999-2001
0%
25%
50%
75%
100%
125%
US PSE% Mex PSE % Mex PSE %Subsidies
Only
US PSE/ha. Mex PSE/ha. Mex PSE/ha.Subsidies
Only
as p
erce
nt
of
US
Sources: OECD, FAO, Sagarpa-SIAP, author's calculations; current US dollars.
US PSE46%
US PSE/ha
$262/ha
Mex PSE 47%
Mex PSE/ha $160/ha
Mexico subs. only
28%Mexico
subs. only $93/ha
© Global Development and Environment Institute, Tufts University
US Corn: Declining Prices and Dumping
U.S. Corn: Export Prices vs. Costs
1.50
2.00
2.50
3.00
3.50
4.00
4.50
1990 1992 1994 1996 1998 2000 2002
US
$ p
er b
ush
el
US export prices
cost of production
Source: IATP (2004). Cost of production includes Iowa production costs (USDA), transportation/handling, input subsidies (OECD).
© Global Development and Environment Institute, Tufts University
Environmental Impacts in Mexico
• Rise in intensive farming* Geographically very concentrated: esp. Sinaloa* High chemical and water use
• Threats to traditional producers* Feared loss of maize diversity* Mexico center of origin; over 40 landraces* Important global resource; key to crop-breeding* Will economic pressure cause abandonment of
land, loss of stewardship and diversity?
© Global Development and Environment Institute, Tufts University
Images of maize planting
© Global Development and Environment Institute, Tufts University
Trends in Mexican Agriculture
Banrural: Credit for Agriculture
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
1994 1996 1998 2000
Mill
ions
of
peso
s fo
r to
tal c
redi
tCommercial Bank
Loans for Agriculture
0
10000
20000
30000
40000
50000
1994 1997 2000
Mill
ion
1994
pes
os
Total Agriculture Livestock
Declining government credit
Declining commercial credit
© Global Development and Environment Institute, Tufts University
New Irrigated Surface, 1991-2001
0.0
10.0
20.0
30.0
40.0
50.0
1991 1993 1995 1997 1999 2001
Tho
usan
d h
ecta
res
Trends in Mexican Agriculture:Declining Investment
© Global Development and Environment Institute, Tufts University
Declining Agricultural Subsidies
Real Agricultural Subsidies, 1994-2002
4,500
5,500
6,500
7,500
8,500
9,500
10,500
1994 1995 1996 1997 1998 1999 2000 2001 2002
mill
ion
s 19
93 p
eso
s
Source: OECD, Agricultural Policies in OECD Countries: Monitoring and Evaluation, 2003; author's calculations.
© Global Development and Environment Institute, Tufts University
Declining Subsidies for Maize
Real Maize Subsidies 1994-2002
1,500
1,750
2,000
2,250
2,500
2,750
3,000
3,250
3,500
1994 1995 1996 1997 1998 1999 2000 2001 2002
mill
ion
s 19
93 p
eso
s
Source: OECD, Agricultural Policies in OECD Countries: Monitoring and Evaluation, 2003; author's calculations.
© Global Development and Environment Institute, Tufts University
Savings for the Consumer?Rise in Tortilla Prices Despite Falling Corn Prices
Real Tortilla Prices in Mexico1994-2003 (2002 pesos)
0.50
0.75
1.00
1.25
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: Banco de Mexico, Informacion Financiera y Economica, IPC
© Global Development and Environment Institute, Tufts University
Foreign Investment: No Answer for Peasants
US Foreign Investment in Mexico, 1999-2002
Total US FDI $44,000,000,000
In agriculture 0.4% $172,000,000
Hog farming 69% $120,000,000
Horticulture, flowers 26% $45,000,000
All others 5% $7,000,000
Coffee .000025% $4,300
Sinaloa, Sonora 89% $154,000,000
All other states 11% $18,000,000
Oaxaca .00003% $5,400
© Global Development and Environment Institute, Tufts University
Map of Poverty Shadows Map of
Biodiversity
Threats to agro-biodiversity:
•Shift to more profitable crops
•Move out of agriculture
•Loss of traditional knowledge
•Migration, abandoning land
© Global Development and Environment Institute, Tufts University
Traditional Maize: No reason to worry?
Cultivated Maize Area in Traditional States 1990-2002
80
100
120
140
160
1990 1992 1994 1996 1998 2000 2002
Source: SIACON database
1990
= 1
00
Chiapas
Oaxaca
Guerrero
Not so fast: *peasant survival strategy *alternative crops depressed *alternative livelihoods few
Need closer analysis of: *migration trends *diversity impacts
Maize Production in Traditional States1990-2002
80
100
120
140
160
180
200
220
1990 1992 1994 1996 1998 2000 2002
1990
=10
0
Chiapas
Guerrero
Oaxaca
Source: SIACON database
Rise in planted area
Rise in production
© Global Development and Environment Institute, Tufts University
Marginalization by DDR, 2000
© Global Development and Environment Institute, Tufts University
Marginalization and International Migration, 2000
Relación entre marginación e intensidad de migración entre México y Estado Unidos, 2000.
-1.5000
-1.0000
-0.5000
0.0000
0.5000
1.0000
1.5000
2.0000
2.5000
3.0000
-2.0000 -1.5000 -1.0000 -0.5000 0.0000 0.5000 1.0000 1.5000 2.0000 2.5000
Índice de Marginación
Índ
ice d
e M
igra
ció
n
International migration rates highest not for poorest.Internal migration rates are highest for poorest producers.
© Global Development and Environment Institute, Tufts University
Diverse producers (DDRs with over 60% using native seeds):•Represent 68% of maize producers.•Suffer high levels of poverty (over 70%)•Show low levels of international migration•Show the highest levels of internal migration•Have expanded production and cultivation with fewer people
Level of Diversity
1990
Number of Producers
1990
% of total producers
1990
% Incomes Below Five Minimum
Wages, 2000 (1)
Index of Int. Migration, 1995-2000
Internal Migration Rate 1995-2000 (per
thou)
Change in cultivated area, 1990-
2000
Change in production, 1990-2000
Very high 684,147 25% 81.5 bajo -4.80 26.1% 12.7%High 1,157,916 43% 72.4 medio -2.16 32.6% 41.9%Medium 651,524 24% 74.5 bajo -1.50 14.6% 12.2%Low 158,476 6% 72.4 alto -0.96 24.5% 33.2%Very Low 62,374 2% 69.7 bajo 9.22 2.4% 0.1%
Sources: VIII Censo Agricola, 1991; Sagar/SIACON database; CONAPO.
Maize Diversity, Poverty and Migration, 1990-2000
© Global Development and Environment Institute, Tufts University
Policy Regime for Sustainable Corn Production in Mexico
Price differentials Credit NAFTA and WTO-compatible subsidies Technical assistance Crop failure insurance Trade fairs National Corn Institute In Situ conservation of corn genetic resources
© Global Development and Environment Institute, Tufts University
ConclusionsPollution haven: North not always more sustainable than South, especially in agriculture.
Globalization of market failure: Environmental externalities can be exacerbated by trade, with harm to both sides.
Environmental contributions of traditional agriculture: Need to assess non-market ecological values prior to liberalization; “inefficiency” may be beneficial.
Agro-biodiversity: Key concern in some areas.
Macroeconomic policies: Rising demand for some agricultural products could be harnessed to stimulate sustainable agriculture and in situ conservation.
Look beyond trade agreements: Important to not simply isolate NAFTA impacts from overall political economy.
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