Increased farm subsidies in US another harsh blow to Mexico

by Diego Cevallos

MEXICO CITY: In the Mexican countryside, which concentrates 75% of the country’s extreme poverty, things are going from bad to worse due to a severe drought and the expected impact of the recent US decision to increase farm subsidies by around 80 percent.

Seventeen of Mexico’s 31 states are suffering from drought, and  4.2 million hectares of crops, nearly one-third of the country’s total, were lost this year due to the lack of rainfall, the National Small Farmers Confederation (CNC), representing a large proportion of the country’s farmers, reported.

Around 800,000 farms have already fallen into bankruptcy, the CNC warned.

The effects of the drought will be compounded by the negative impact of the US increase in farm subsidies that brings the total to be shelled out to agricultural producers in that country to $190 billion over the next 10 years.

Up to now, it has been difficult for Mexico’s agricultural production to compete with that of the US, but now, it will be simply impossible, Eladio Marcos, one of the heads of the CNC, told IPS.

The announcement of the subsidies prompted strong criticism from Mexico, especially as it came just one month after the two countries, partners in the North American Free Trade Agreement (NAFTA) with Canada, agreed to create a bilateral commission to discuss the elimination of farm tariffs in 2003.

The US Department of Agriculture reported that trade in farm products with Mexico amounted to $13 billion a year in 2001.

According to NAFTA, in effect since 1994, both Mexico and the US are to do away with nearly all import duties on farm products in 2003. However, the treaty makes no mention of subsidies.

The Mexican government hands out around $3 billion a year in aid to agricultural producers. The rural sector accounts for 26% of the country’s labour force, and pays the lowest wages in Mexico. By contrast, farmers in the US, who will receive over six times the Mexican payments in subsidies, account for less than 3% of the US labour force.

A report released in the week of 13 May by the Caracas-based Latin American Economic System (SELA), which links 27 Latin American and Caribbean nations, warned that the US decision to increase farm subsidies would check growth in international trade this year, after last year’s sharp drop, and could trigger  trade  wars  with  European Union and Latin American countries. SELA noted that 63% of the exports of Latin America and the Caribbean are farm products, and 36% of it goes to the US.

The Mexican government of Vicente Fox also criticized the new US farm bill. “The biggest problem is that Mexico’s farm exports to the United States will become less competitive,” warned Economy Minister Ernesto Derbez. However, “the solution is not for us to start handing out subsidies to our farmers, but for the US government to eliminate its own,” he argued.

The CNC urged the Mexican government and Congress to review the NAFTA clauses that refer to trade in farm products, complaining that local farmers are at a total disadvantage.

Marcos warned that the Mexican countryside is already in serious trouble, and this will only be worsened by the drought and the “unfair competition” from the US.

A study by Mexico’s Centre for Economic Research and Teaching found that in the past 10 years, the proportion of the workforce employed in agriculture shrunk around 10%. It also reported that rural wages are up to 30% lower than what workers earn in other sectors of the economy, like the construction industry.

After NAFTA went into effect, the total area planted under crops shrunk by more than 10 million hectares, and 15 million peasant farmers, mainly young men, abandoned the countryside for the cities or the US, said Jose Luis Calva, a researcher at the economy department of the National Autonomous University of Mexico.

The Mexican government department of agriculture reported that 60% of farm owners in Mexico are over 50, and half of them have at least one family member abroad.

Although Mexico exports a number of farm products, mainly to the US, local production does not cover domestic needs, and this country of 100 million imports over $5 billion worth of farm commodities, largely from its northern neighbour. Furthermore, the prices of most farm products have fallen since the mid-1990s, without any short-term recovery in sight due to the country’s abundant food reserves, say observers.

NAFTA did great harm to Mexico’s farmers, who will be even worse off now with the increase in subsidies granted to agricultural producers in the US, complained Marcos. (IPS)

From TWE No. 280 (1-15 May 2002)