Home / Talk / Views / Opinion / NAFTA's unintended consequences

NAFTA's unintended consequences

Agriculture.com Staff 02/11/2016 @ 12:32am

One of the certainties of policy work, whether it be public or private, agricultural or industrial, is the law of unintended consequences. Policies that are developed to solve one set of problems often create another set of problems -- the unintended consequences.

We recently read an article that drove that point home. A January 7, 2006, article in the Washington Post written by Peter S. Goodman was entitled, "In Mexico, People Do Really Want to Stay." In the article, Goodman made a connection between Mexican immigration into the U.S. and globalization, especially in the agricultural sector.

The North American Free Trade Agreement (NAFTA) was supposed to stimulate the Mexican economy, raise wages, increase job creation and reduce the incentive for people to leave Mexico for the U.S. Of the "6.2 million Mexicans now living in the U.S. illegally...two-thirds arrived after NAFTA," Goodman wrote.

NAFTA of course is not the only factor at play in the migration of job-seekers from Mexico into the U.S. In recent decades, the Mexican population has been booming, overwhelming the creation of new jobs in the Mexican economy. Mexico also experienced a financial crisis in the late 1990s that reduced the competitiveness of the Mexican economy just as NAFTA policies came into effect.

But prospective demographic changes and possibility of often-experienced currency valuation problems should not be used as excuses. That "state of affairs" was well known (or should have been known as lawyers are fond of saying) as the set of conditions under which NAFTA would be implemented. The crucial question is how did NAFTA perform under those given conditions.

It was expected that with lower cost labor Mexican exports of foodstuffs into the U.S. would increase, and that increase occurred. Mexican exports to the U.S. increased "from $2.7 billion in 1993 to $6.3 billion in 2003," Goodman reported. Much of that increase came from the export of fresh vegetables like artichokes, peppers and tomatoes.

At the same time, it is estimated that Mexico lost 2 million jobs in agriculture. The problem is that most Mexican farmers have small operations geared to the production of corn. By way of contrast, the fresh vegetables that are exported to the U.S. are produced on large farms, many of which are owned by U.S. investors. The wages these farms pay are far less than workers can earn by crossing the border into the U.S.

Even Mexican producers of fresh vegetables have been unable to compete with larger, better-financed operations who dump produce that does not meet export standards onto the local markets, driving down prices and forcing local producers out of business. Goodman quotes Reuben Riviera, a grower who used to grow tomatoes and onions on his seven acre farm, as saying "For people who can grow huge scale for export, NAFTA has been good. For people like us, it's been a bloodbath."

When it comes to the corn that has constituted the traditional production of Mexican farmers, the LDPs that allow U.S. corn to be sold into the Mexican market at well below the cost-of-production has devastated these farmers. One mayor estimated that "one-third of all agricultural jobs have been wiped out over the last five years."

CancelPost Comment

Farm and ranch risk management resources By: 07/07/2010 @ 9:10am Government resources USDA Risk Management Agency Download free insurance program and…

Major types of crop insurance policies By: 07/07/2010 @ 9:10am Crop insurance for major field crops comes in two types: yield-based coverage that pays an…

Marketing 101 - Are options the right tool… By: 07/07/2010 @ 9:10am "If you are looking for a low risk way to protect yourself against prices moving either higher or…

This container should display a .swf file. If not, you may need to upgrade your Flash player.
Ageless Iron TV: Tractors at War