By opening up trade with this backdoor scam still in place, those responsible for NAFTA must have known that it would prevent Mexican markets from facing prices that reflect the true cost of corn, and as a result that Mexican corn growers would suffer. Of course people/firms/countries often suffer from competition, but we economists generally think this is often a good thing because people stop doing things they’re not good/efficient at, and switch to other activities. The problem here is that because prices are distorted by subsidies from USA taxpayers, that market mechanism doesn’t work properly and there is a fair chance that overall efficiency is reduced.

None of this bodes well for a free trade deal between NZ (as a heavily agricultural economy) and the USA (as a blatant subsidiser of agriculture). Worse, the USA system will now be incredibly hard to change. Their food system is almost entirely geared towards using “cheap” corn in activities such as cattle fattening that are ridiculously inefficient from an energy balance perspective. Ask yourself why NZ beef farmers haven’t switched to this system en mass if its so smart – answer: its not; it only works if you get the corn for less than its cost of production.

Thank you for your comment. It’s nice to know the US State Department takes an interest in my writing!

To answer your question… no, I haven’t been surveying Mexican corn production recently. I didn’t mean to insinuate that all Mexican corn growers were out of business, but that production had dropped as a result of underpriced imports.

I’ve just spent some time researching this in a bit more depth. This website has statistics which show that the land area used to grow corn in Mexico has only slightly decreased since the introduction of NAFTA. The site has detailed overview of the causes of the “tortilla crisis” of early 2007. It says rising ethanol production, hoarding, and the final implementation stage of NAFTA all combined to raise the prices.

I still think it could be argued, though, that if the price of corn had not been artificially lowered by subsidies then corn production in Mexico may have been at a higher level at the time of the 2007 crisis, and the nation may have coped better.

On the main topic of my blog, I’d be interested to know what concessions you think NZ would have to make to be in the running for a trade deal.

Thanks again,

Katie