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The
U.S. challenges anti-dumping orders imposed by Mexico on U.S. exports of beef
and rice in front of the WTO.
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Only
the latest of a series of clashes between the two nations over agricultural
trade issues.
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If
left unresolved, these disputes threaten to undermine the credibility of the
proposed FTAA by convincing the rest of Latin America that for agricultural
products, free trade with the U.S. is not fair trade.
 On
June 16, the office of the U.S. Trade Representative Robert Zoellick announced
that it had filed a case before the World Trade Organization protesting
anti-dumping duties that Mexico had imposed on U.S. exports of beef and rice.
By enacting these duties, Mexico claimed that the U.S. was “dumping” its
products on the Mexican market—exporting them below their cost or home-market
price—in a manner that was injurious to Mexican producers. When dumping does
occur, the recipient country has the right under international trade law to bar
these underpriced imports from its domestic market; however, the exporting
country, in this case the U.S., can challenge the accusation of dumping before
the WTO in a process that may take up to eighteen months, beginning with a
60-day period of consultation and followed by the appointment of a panel that
will consider the complaint.
 Twice
before, when the U.S. filed WTO challenges to Mexican anti-dumping
investigations on high fructose corn syrup and swine, Mexico backed down,
withdrawing the investigations as a result of the U.S. challenge. This latest
clash, however, is by no means an isolated incident but only the most recent in
a series of disputes between Washington and Mexico City over trade in
agricultural products; thus it may prove to be far more acrimonious than has
been the case in previous encounters. Given that most of the conflicts stem
from provisions of the 1994 NAFTA agreement, the ongoing bickering threatens to
undermine the credibility not only of NAFTA but also of the proposed Free Trade
Area of the Americas. If the Bush administration wishes to preserve momentum in
already faltering FTAA negotiations, it must prioritize the rapid resolution of
disputes with Mexico in order to demonstrate to the rest of the hemisphere that
amicable free trade is possible on terms perceived as fair by both partners.
Mexican Agriculture:
A Sinking Sector Mobilizes
Many
of the latest disputes over agricultural trade between Mexico and the United
States—exacerbated by political differences over Iraq, immigration and other
issues—can be traced to the onset on January 1, 2003 of the second of three
phases of trade liberalization scheduled under the original NAFTA agreement.
This entailed the removal of Mexican tariffs on 21 agricultural products
imported from the U.S.; the only products for which any limitations remain are
corn, beans and powdered milk, scheduled to trade freely beginning in 2008.
With the onset of this next phase of liberalization, Mexico’s reeling
agricultural sector has begun to feel even more intense pressure as cheap U.S.
products flood its markets in ever greater volumes. Already, since the
implementation of NAFTA in 1994, Mexico has become a net importer of many items
previously produced domestically, including wheat, rice, soy and meat.
Moreover, its poorest farmers are suffering heavily in the face of overwhelming
competition from U.S. agribusiness: 75% of rural Mexican campesinos now
live below the poverty line and an estimated 600 peasants are forced off their
land every day.
The
most recent and most visible upsurge of protests against the deterioration of
such conditions for Mexican farmers began last November, when twelve independent
campesino organizations united to lobby the government under the slogan
“El Campo no aguanta más,” or “the countryside
can take no more.”
In
early December, protesting farmers rode horses and tractors in an attempt to
storm the Congress, setting their hats on fire and throwing them against the
barred doors.
Demonstrations continued through January: in San Cristobal De Las Casas in
Chiapas, in Ciudad Juárez-El Paso, and in the capital, where as many as a
hundred thousand farmers marched silently in the largest peasant demonstration
in Mexico City since the mid-1930s.
Mexico Defends Its
Markets
The
Fox administration, politically threatened by this rising tide of agrarian
discontent, attempted to meet the farmers’ challenge by initiating a series of
aggressive actions to limit the flow of American farm products into the
country. The anti-dumping orders currently being challenged before the WTO had
in fact been imposed earlier, with importations of U.S. beef limited starting in
April 2000 and rice starting in June 2002. This past January, Mexico began to
enact restrictions on a number of other commodities.
First, the government initiated yet another anti-dumping investigation against
U.S. pork. The Bush administration has been working through bilateral channels
to terminate this investigation, and has threatened that the imposition of
duties would be again met by a renewed U.S. challenge before the WTO. Also in
January, negotiators reached a temporary accord limiting imports of U.S. poultry
into Mexico, representing a serious blow to U.S. poultry producers, though there
has not been any final agreement on quotas for poultry. Washington’s ire only
increased when Mexican authorities began a crackdown on U.S. bean exports on the
grounds that some were not, in fact, of American origin. Allen Johnson, chief
agriculture negotiator for the office of the U.S. Trade Representative, then
threatened reprisals against Mexico if the agricultural trade situation did not
improve; Javier Trujillo, an official in the Mexican Department of Agriculture,
responded perhaps somewhat disingenuously that, “Since he [Johnson] did not
refer to anything in particular, I don’t know what he had in mind.”
 The
Mexican government also toughened its stance regarding current negotiations
aimed at concluding a “sweetener” trade agreement that would increase access for
Mexican sugar producers to the U.S. market in return for allowing American
exports of high fructose corn syrup (HFCS) to enter Mexico freely. This is a
longstanding dispute that originated when a proposed side agreement to NAFTA
capping Mexican sugar imports was never finalized. After rulings by
international trade panels repeatedly declared illegal Mexican anti-dumping
provisions aimed at HFCS, the Mexican Congress in January 2002 imposed a 20
percent tax on soft drink companies that use HFCS. This effectively made
imports of HFCS prohibitively expensive, which adversely affected the American
corn industry while simultaneously establishing a strong incentive for the use
of Mexican cane sugar in soft drinks. American negotiators have suggested that
the Mexican negotiators’ unwillingness to compromise is attributable to this
boost in the domestic fortunes of the Mexican sugar industry. The latest
upsurge of agrarian protest can only have rendered the Fox administration less
willing to make an already politically disadvantageous concession.
Seen
in this light, the latest WTO challenge filed by the U.S. serves only to
reinforce the point that the Bush administration is willing to fight tenaciously
for market access for U.S. products. The reason is obvious: President Bush has
been under increasing domestic pressure from powerful agribusiness groups to
force open the huge and potentially profitable Mexican market. On May 5,
Department of Agriculture officials met with U.S. farm groups, reassuring them
that the government shared their concerns about trade with Mexico and stating
that recently imposed trade restrictions were simply a ploy by the Fox
government to shore up its domestic support ahead of legislative elections in
July. But farmers were not to be so easily placated. Two weeks later, on May
16, seven agricultural producer groups sent a joint letter to President Bush
accusing Mexico of “unilaterally renegotiating” NAFTA and calling for decisive
action to rectify the situation. More ominously, the president of the U.S. Corn
Growers’ Association John Yoder obliquely suggested that the inability to
resolve trade disputes with Mexico (particularly the long-running sugar / HFCS
controversy) might lead to the evaporation of agricultural producers’ support
for any future free trade agreements.
Washington’s
Response
Seen
in this light, the latest WTO challenge filed by the U.S. serves only to
reinforce the point that the Bush administration is willing to fight tenaciously
for market access for U.S. products. The reason is obvious: President Bush has
been under increasing domestic pressure from powerful agribusiness groups to
force open the huge and potentially profitable Mexican market. On May 5,
Department of Agriculture officials met with U.S. farm groups, reassuring them
that the government shared their concerns about trade with Mexico and stating
that recently imposed trade restrictions were simply a ploy by the Fox
government to shore up its domestic support ahead of legislative elections in
July. But farmers were not to be so easily placated. Two weeks later, on May
16, seven agricultural producer groups sent a joint letter to President Bush
accusing Mexico of “unilaterally renegotiating” NAFTA and calling for decisive
action to rectify the situation. More ominously, the president of the U.S. Corn
Growers’ Association John Yoder obliquely suggested that the inability to
resolve trade disputes with Mexico (particularly the long-running sugar / HFCS
controversy) might lead to the evaporation of agricultural producers’ support
for any future free trade agreements.
While
the filing of the latest challenge announced on Monday does not directly respond
to these concerns, and addresses only the issue of conflicting interpretations
of WTO rules rather than NAFTA, it can nonetheless be considered the
administration’s response to this intensive lobbying and the increasingly vocal
discontent of U.S. agribusiness. It is clear evidence that President Bush feels
it is politically necessary to respond to this lobby by cracking down on
perceived Mexican trade transgressions. This judgment on the administration’s
part should, however, be qualified by two additional observations. First,
President Fox is also under considerable domestic pressure on the issue of
agricultural trade and is eager to shore up his increasingly faltering support
at home. Thus he may not be as willing to give way to U.S. pressure as he and
other Mexican presidents have previously been.
Second, and perhaps more importantly, Washington’s aggressive and insensitive
handling of trade disputes with Mexico has the potential to convince other Latin
American nations—particularly Brazil, Venezuela, and Argentina, where the
current governments have already expressed considerable skepticism as to the
real benefits of free trade for their economies—that the benefits of the
proposed Free Trade Area of the Americas lie entirely on the U.S. side.
Potential FTAA partners, especially the Lula government in Brazil, have
repeatedly articulated their position that until the U.S. cuts back on billions
of dollars of annual agricultural subsidies, free agricultural trade under the
FTAA is not fair trade. Brazilian officials quite rightly view the plight of
Mexican agriculture over the last decade and the recent surge of domestic unrest
there as a fate to be avoided. If Washington is to assuage these fears, and
convince other powerful hemispheric players that the FTAA is in their interest,
it must first demonstrate that it can be responsive to the concerns of its
trading partners with regard to agriculture. This means negotiating with, and
perhaps conceding to, Mexico City, and ending the guerrilla trade war of
agricultural products that up to now has continued with no truce in sight.
The
Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit,
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described on the Senate floor as being “one of the nation’s most respected
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June 24, 2003
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