Saturday, April 16, 2011

NAFTA and U.S. dumping: A very insightful quick read

NAFTA, as is well known by now, has had "winners" and "losers" on both sides on the border.

Here is an exceptionally noteworthy article by Timothy  Wise of Tufts University on the article of U.S. dumping of agricultural products in Mexico, originally published in NACLA Report of the Americas.

Some highlights:

* "Mexican farmers on average lost more than $1 billion per year during the nine-year period of 1997–2005, with more than half the losses suffered by the country’s embattled corn farmers"
* "Without exception, the United States exported {agricultural] products at prices below what it cost to produce them, one of the definitions of dumping under World Trade Organization rules."
* "The losses from U.S. dumping surpass the total value of Mexico’s annual tomato exports to the United States, widely touted as Mexico’s biggest NAFTA success story in agriculture."

I also highly recommend Wise's other excellent works, such as the co-written Rethinking Trade Policy for Development: Lessons From Mexico Under NAFTA, available directly as pdf here, as well as the new study Subsidizing Inequality: Mexican Corn Policy Since NAFTA, available here in English and here in Spanish.


  1. The losses for the Mexican farmers from NAFTA are definitely a problem. At the same time, however, the cheap corn inputs have been beneficial for pretty much everyone in Mexico who consumes corn-based products. In a sense trade policy led to a redistribution of purchasing power from farmers to everyone else. A focus on only the losers is thus not a proper analysis of NAFTA. Moreover, appropriate policies could have (but obvioulsy didn't) mitigated this redistribution.

    In a more general case, "dumping" benefits the country receiving the "dumped" goods (they essentially get stuff at below cost)...but of course there are distributional consequences.


  2. Thanks very much for your input. One of Wise's argument regarding corn, though, is that most of it has not gone to consumers, but rather has been used for animal feed - so Mexico imported more pork, but also was able to raise cheaper pork. Here I think it is clear that pork has become cheaper and more accessible, though at a possible collateral of causing severe hardships for Mexico's corn producers.

    And yes, I couldn't agree more - any analysis of NAFTA must include winners and losers on both side. It seems to be that both proponents and opponents seem to err here.

  3. Several years ago I spent a lot of time looking at the effects of NAFTA. The one conclusion that I came to is that it is next to impossible to derive the overall cost and benefit of a comprehensive trade agreement...which is probably why very few people attempt it. There are just too many linkages in an economy.

    What is obvious is that the losers from a trade agreement need to be compensated. But this is something policy makers often tend to forget.