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Press Releases '03-'04

Response to Criticism of U.S. Agricultural Policy and NAFTA

Mexico City

Mexico City, Dec. 5 2002 -- Representatives from Mexican agricultural producers affiliated with various rural organizations delivered a document to the Embassy on December 3rd. protesting U.S. agricultural policy, and demanding the re-negotiation of NAFTA-mandated tariff reductions that will go into effect on January 1, 2003. Misperceptions and incorrect allegations about U.S. agricultural policies and practices are confusing this debate and may falsely lead observers to conclude that the NAFTA is the root cause of Mexico’s agriculture problems. The debate should not be about NAFTA, a treaty that has brought enormous benefits to producers and consumers of all three countries. The U.S. Embassy takes this opportunity to respond directly to these misperceptions.

Perception: The Mexican agriculture sector is suffering directly because of imports from the U.S.

Reality: The United States is Mexico’s single largest market for agricultural products, absorbing 78% of all Mexican agricultural exports, which have doubled since 1994. Two-way trade created by NAFTA has benefited the Mexican agricultural sector immensely. NAFTA has contributed to increased agricultural earnings and jobs in the agricultural sector. The U.S. recognizes that Mexican agriculture faces structural challenges that predate NAFTA. These include the high cost of credit, high producer costs, and lack of marketing, transportation, and cold chain infrastructure. The United States is actively cooperating with the Mexican government and the private sector through the Partnership for Prosperity and other bilateral programs to address these issues.

Perception: The U.S. has violated NAFTA, GATT, and WTO principles by increasing subsidies.

Reality: The NAFTA does not have any commitments on domestic subsidies. During the NAFTA negotiations, it was agreed that the best approach for disciplining domestic support was a multilateral one under the GATT (at the time) and now the WTO. Furthermore, the U.S. has not violated any of its commitments to the WTO. The U.S. Farm Bill is consistent with U.S. commitments made under the Uruguay Round. Moreover, the United States has put forth an aggressive and comprehensive proposal in the WTO to eliminate export subsidies, drastically reduce domestic support, and substantially increase market access opportunities that will benefit Mexico.

Perception: U.S. agricultural exports have doubled from 1993 to 2001, causing severe damage to Mexican farm production.

Reality: Opening markets has benefited both sides and U.S.-Mexico bilateral trade has indeed increased, reaching nearly 140 billion pesos in 2001. As U.S. exports of agricultural products have increased substantially since NAFTA’s implementation, Mexico’s exports of agricultural products to the United States have done the same.

Overall, Mexico now enjoys a trade surplus with the U.S. thanks to NAFTA. For example, increased access to U.S. agricultural products has provided the Mexican livestock sector (beef, poultry, and pork) with a low-cost, high quality, sustainable supply of inputs such as feed grains, thus lowering Mexican farmers’ production costs over time. Thus, the Mexican agricultural sector has been a beneficiary of two-way trade both on the export and import side. While some sectors have had challenges with liberalizing markets, NAFTA has offered a reasonable implementation period to allow both countries to adjust to the changing market conditions.

Perception: U.S. producer subsidies directly promote dumping.

Reality: Selling products abroad at competitive prices does not constitute dumping. U.S. producers absorb costs that Mexican producers do not, such as high labor costs, costs of compliance with strict environmental and worker safety regulations, and taxes. More omportantly, the Mexican commodities for which protection is being sought (i.e., pork, poultry) do not receive direct benefits from the U.S. Farm Bill

Perception: U.S. interests with international institutions such as the IMF and World Bank have caused a decline in real prices for producers.

Reality: It is not in the interests of the United States to cause declines in prices for producers. The United States and Mexico operate within a global market. Effects on agricultural prices in one market have implications for all others involved in that market.

Perception: With the January reduction in agricultural tariffs on all but four products, Mexican producers will be unable to compete with U.S. imports. For this reason, this provision of NAFTA should be suspended.

Reality: Most tariffs have already been gradually phased out. Approximately 90 percent of tariffs applied to U.S. agricultural products in Mexico are less than 2%. Tariff elimination on these products will not affect competition between U.S. and Mexican producers. In addition, for US products with higher tariffs and import quotas such as poultry and pork, the United States is actively engaged with the Mexican sectors, offering expertise, assistance, and financial resources for improving Mexican infrastructure. Many Mexican sectors are already very competitive with the United States such as tomatoes, avocados, live cattle, red meats, and fresh fruits and vegetables.

Perception: U.S. agricultural imports are unsanitary and have caused human, animal, and ecological damage.

Reality: There is no evidence of any damage caused to humans, animals, or the environment by imports of U.S. agricultural products. The United States has one of the safest food supplies in the world and does not distinguish between food for domestic use and food for export channels.

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