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North American Trade Disputes: A Mexican Perspective. North American Trade Disputes: A Mexican Perspective. Sources of trade irritants Underlying cause of trade disputes What’s wrong with a little dispute Conclusions. Sources of Trade Disputes. Trans-border power Political sensitivity

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north american trade disputes a mexican perspective2
North American Trade Disputes:A Mexican Perspective
  • Sources of trade irritants
  • Underlying cause of trade disputes
  • What’s wrong with a little dispute
  • Conclusions
sources of trade disputes
Sources of Trade Disputes
  • Trans-border power
  • Political sensitivity
    • growing democracy
  • Differential policy mechanisms
  • Relative price differentials
  • Rapid structural change -- technology innovation
  • Foreign investment -- lack thereof
trans border power ratio

Size of markete * Concentration ratioe

*imports /

domestic production

*import share

= TBPR

Size of marketi * Concentration ratioi

Trans border power ratio
  • Size of market
  • Concentration ratio
  • Import market share
trans border power ratio and trade conflicts
Trans border power ratio and trade conflicts

Beef

Probability of trade disputes

Poultry

Trans border power ratio

trans border power ratio and political sensibility probability of disputes as trade grows
Trans border power ratio and political sensibility:Probability of disputes as trade grows

Trans border power ratio

Medium probability

High

Trade disputes

Trucking

HFCS

Hogs

High probability

Nobody cares

Avocados

Low

Low

High

Political sensibility

differential policy mechanisms
Differential policy mechanisms
  • Policy vision
  • Support mechanisms
  • Subsidies
slide9

SAGAR

US$ 16 200 million

US$1 474.3 th.

2).

-

Support to farmers

Procampo :$1 090.7 mill

and for export marketing

Mkt. Supt .$ 366.9 mill

Aserca Adm:$0.2414 mill

A.CampoExp$ 16.5 mill

US$ 778.8 th.

US$ 2 200 million

Alianza Ag: $ 321.8

4).

-

Rural Develop

Alianza Liv: $ 155.9

Alianza RD: $301.1

US$ 67.2 th.

US$ 750 million

6).

-

Ag health (sanitary)

Alianza Ag. health:$ 67.2 mill

Including storage

US$150 million

$0.00

Food safety

7).

-

Comparative budgetary expenditures

USDA

Source: Consjeo Nacional Agropecuario

11

slide10

USDA

Other Gov. agencies

US$ 5 503.2 th

(not operated by SAGAR)

US$ 36 100 million

Anti proverty program

Social and food programs, including nutrition

1).

-

Capital Hum.:$ 2 695.1 mil (Progresa)

Opciones Ingr:$ 906.3 mil (Pet,Fonaes)

Capital físico:$ 1 901.8 mil (State local gov)

US$ 4 700 million

US$ 82.4 th

3).

-

Natural resources

Water commission: $ 82.4 mil

US$ 2 100 million

US$ 205.4 th

Education and research including economic research

5).

-

Inifap:

$ 67.3 mil

UACh:

$ 69.8 mil

UAAANarro$ 32.0 mil

Col.Postgr: $ 30.0 mil

CEASAGAR:$ 6.3 mil

TOTAL MÉXICO: $ 8 509.6 million

TOTAL US: $ 62 200 million

12

Apoyos en otros países

Comparative budgetary expenditures

Source: Consjeo Nacional Agropecuario

agricultural development budget billion of 1994 pesos
Agricultural development budget(Billion of 1994 pesos)

Source: Various presidential informes; Banco de Mexico. !980 - 1994 refers to rural development

agricultural development budget as a percentage of the total programmed budget
Agricultural development budget as a percentage of the total programmed budget

Source: Various presidential informes; Banco de Mexico. !980 - 1994 refers to rural development

subsidy levels in nafta countries
Subsidy Levels in NAFTA Countries

U.S. Dollars per hectare

U.S. Dollars per full-time farmer

Source: Consjeo Nacional Agropecuario

you talk the talk but you don t walk the walk

You talk the talk, butyou don’t walk the walk

The Mexican view on their NAFTA partners agricultural policies

slide16

Apoyos en otros países

Canada

Comparative subsidy levels among NAFTA partners

(PSE’s)

Mexico

United States

15

relative price differentials
Relative price differentials
  • Undermines local markets
  • Opportunities for dumping
  • Strengthens exporter balance sheet
mexican beef market

Imports

Domestic

30%

83%

70%

Popular

Cuts

High end

cuts

Mid-range

Cuts

Mex

1.60

1.20

Wholesale

price

us$ / Lb

3.00

4.00

USA

1.50

1.00

Source: AMEG

Mexican Beef Market
slide19

Price structure: Hogs and Pork in the U.S. and Mexico

Source: Enrique Dominguez, WSJ, ASERCA, CMP elaboration

structural and technological change
Structural and technological change
  • Tomatoes - extended shelf life
  • U.S. beef market
  • Change in Mexican trade profile
u s beef market
U.S. beef market

Fuente: NCBA

u s beef trade balance million dollars
U.S. Beef Trade Balance(million dollars)

*

* Beef and variety meats

Fuente: NCBA

foreign investment
Foreign Investment
  • Stimulates trade
  • Creates interdependency
  • But can create competitive pressure
foreign investment in mexican food and agriculture number of firms
Foreign Investment in Mexican food and agriculture(number of firms)

Food Manufacturing

Source: Secretaría de Economía

so what s wrong with trade disputes
So what’s wrong with trade disputes?
  • When there is no trade there are no disputes
  • Keeps lawyers and economists busy
  • Absence of disputes could indicate collusion
    • Are consumers better off?
    • Are farmers better off?
  • Tomato case
    • U.S. and Mexican growers agreed to essentially a price floor in 1996, ending a trade dispute
u s imports of mexican tomatoes 000 tons
U.S. imports of Mexican tomatoes(‘000 tons)

Source: Bancomext, based on U.S. Department of Commerce data

prices per kilo of imported tomatoes in the u s market
Prices per kilo of imported tomatoes in the U.S. market

Source: Bancomext, based on U.S. Department of Commerce data

mexico s share of the u s winter tomato market volume
Mexico’s share of the U.S. winter tomato market(% volume)

Source: Bancomext, based on U.S. Department of Commerce data

conclusions
Conclusions
  • An ad hoc-type dispute resolution mechanism is needed
slide35

Legal time frame for an trade caseLive hogs

Heads

PROVISIONAL RESOLUTION Feb 99

DEFINITIVE RESOLUTIONOct 99

INVESTIGATION REQUESTJun 98

480 DAYS

INVESTIGATIONOct’97-Mar’98

Source: USDA, Enrique Dominguez

conclusions36
Conclusions
  • An ad hoc-type dispute resolution mechanism is needed
  • Need to incorporate more Mexican academics
  • Need to bring together private sector actors

Nevertheless

  • Probability for more trade conflicts in the near future
mexico s aggressive trade stance

1994 NAFTA

2000 EUFTA

1992 Chile

1995 Bolivia, Costa Rica, Colombia y Venezuela

1998 Nicaragua

Mexico’s aggressive trade stance
conclusions38
Conclusions
  • An ad hoc-type dispute resolution mechanism is needed
  • Need to incorporate more Mexican academics
  • Need to bring together private sector actors

Nevertheless

  • Probability for more trade conflicts in the near future
    • Mexico’s aggressive trade stance
    • Adjustment of domestic agricultural policy
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