How much does US corn dumping cost Mexican farmers?

August 18, 2010

     By Duncan Green     

Remember dumping – the rich country farm subsidies that allow them to dump their products in poor countries at artificially cheap prices, thereby wiping out local agriculture? Tim Wise on the Triple Crisis blog has been running the numbers on the impact of NAFTA (US-Canada-Mexico Free Trade Agreement, in force since 1994). He calls it a the ‘controlled experiment’ “because NAFTA liberalized agricultural trade dramatically over a short period of time, Mexico imports most basic grains and meats almost exclusively from the United States, and Mexican farmers grow many of the crops that compete with the imports. In such a case, one can easily see the increase in U.S. exports, the drop in Mexican producer prices, and it is reasonable to assume that the U.S. export price is the reference price for these products in Mexico.”

To find out the damage done by dumping, he estimated the extent to which U.S. export prices to Mexico were below U.S. farmer costs of corn dumpingproduction (plus transportation and handling), then calculated the extent to which Mexican producer prices were lowered by U.S. dumping, and then estimated how much more Mexican producers would have earned if they had received non-dumping prices – at least high enough to cover U.S. costs of production.

Here’s the conclusion:

“We estimated the nine-year cost (1997-2005) to Mexican producers at $12.8 billion (in 2000 US$), $1.4 billion per year.  To put these numbers in context, the annual losses are more than 10% of the value of all Mexican agricultural exports to the United States (including beer, which Mexico, oddly, classifies as its most important agricultural export).  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.

Corn [that’s maize to us Brits] farmers suffered the highest losses. U.S. exports increased 413%, arrived at prices 19% below production costs, and real producer prices in Mexico declined 66%. We estimated losses to Mexican corn farmers of $6.6 billion over the nine-year period, over $700 million per year. These losses amount to $99/hectare per year, a crushing blow to struggling smallholders.”

Full paper here

August 18, 2010
Duncan Green