This is a follow up to my review of Food Inc, where I mentioned that one of the issues raised by the movie was the negative impact on NAFTA on mexican farmers. Wikipedia has a rather comprehensive article on the North American Free Trade Agreement, and if you’re interested - check out the section on agriculture, and then the impact on mexican farmers.
To put it flatly, I am for less government regulation when it comes to tariffs on imports as I believe it only delays the inevitable downfall of a particular industry. (Look at the auto industry, which for years has been protected from foreign automakers in the form of taxes on imports. With an unfair pricing edge, the quality of their product has declined. Who needs to make a superior product when your competition is being taxed? But I digress…)
(photo courtesy of Ben Amstutz)
So NAFTA supposedly lowers trade barriers between the US, Mexico, and Canada. Seems like a great situation for Mexico whose products can now flow into the US with less taxation. However, there is one particular industry where this is a huge problem - corn. The following stat says it all:
In 2000, U.S. government subsidies to the corn sector totaled $10.1 billion, a figure ten times greater than the total Mexican agricultural budget that year.
Free american corn coming into Mexico now has a huge unfair advantage, to the tune of $10+ billion in government subsidies that allow farmers to sell corn BELOW the cost of production. The result is hard times for those trying to grow corn in Mexico.
The counter argument of course is: better to keep american farmers employed. Right? Well, why should we (the taxpayers) support an industry that cannot support itself? Removing the corn subsidies would restore corn to it’s true cost, at which point it might no longer be the cheapest way to feed cattle, or be integrated into the overwhelming majority of all products in the supermarket.
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The issue that should be addressed is subsidy on Corn, not taxes between trading nations. Also, what stops Mexican farmers from growing something else?
@stepan:
Mexican farmers are poor and changing crop requires major investment in equipment, something that is simply not feasible with the current state of affairs. The best thing Obama could do is remove the subsides, just as the post states. It would benefit both Mexico and the US, why should American taxpayers have to pay to allow for American corn to be sold abroad for under the production cost. If subsidies have to continue at least it would be good to limit subsidised corn for domestic consumption only, that way taxpayers get their money back in form of cheaper products, and Mexican farmers won’t be forces into bankruptcy by cheap US corn.