© 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


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


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


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.


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


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


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


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.


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


• 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%


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


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


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


0%

25%

50%

75%

100%

125%


Only


Only

as p

erce

nt

of

US


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?


0%

25%

50%

75%

100%

125%


Only


Only

as p

erce

nt

of

US


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 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).


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?


Images of maize planting


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


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


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.


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.


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


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


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


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


Marginalization by DDR, 2000


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.


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


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


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.

Documents

© Global Development and Environment Institute, Tufts University