Gov't subsidies have nothing to do with the growing demand for corn.
Government subsidies for ethanol do increase demand for corn, as do government requirements that ethanol be used, and government tariffs on importing ethanol (from countries where they wouldn't use corn to make it).
Yes, but what does that have to do with anything. For an example, direct gov't subsidies encourage the use of airports.......is that the fault of the airlines? At least with corn its not a direct tie-in.
As for Mexico, it grows its own corn. The fact that it can't produce enough corn has more to do with its incipient corruption and inefficient farming methods than anything the US is doing.
We are part of a free trade agreement with Mexico. Unless there is an exception for corn, there would be one corn market between the two countries, and it wouldn't much matter where the corn is produced (except in terms of things like farm price supports). But maybe there is some sort of exception here, NAFTA hasn't eliminated all trade barriers between the US and Mexico. Does anyone have specific information about how corn is treated under NAFTA?
Here's some info:
"Trade liberalization has had a major impact on Mexican agriculture, and specifically on corn farming. Since manyof the poorest people in Mexico engage in corn produc-tion, it serves as a barometer for the condition of themost marginalized groups in Mexican society. After tenyears of NAFTA, results show that the poorest have faredexceptionally badly. "
"Green Giant recently moved one of its food pro-cessing plants from Watsonville, CA to Mexico and Cargillde Mexico has invested U.S.$184 million in Mexicanfacilities. This has resulted in a consolidation and signifi-cant concentration of transnational ownership in the foodprocessing sector. During this time, these companies’profits have skyrocketed. Cargill, which controls aboutone-quarter of the grain trade, posted profit increases from $350 million in 1992 to $597 million in 1999."
"A recent WorldBank paper found that greater openness to trade is nega-tively correlated with income growth amongst the poor-est 40% of the population.14 Inequality threatens theeconomic gains made in other sectors of society.Sustained economic growth cannot be achieved withoutequality—and the more unequal a society is, the morelikely it is to suffer from political and social unrest. In Mexico, the richest 10% of the population receives 42%of total national income, while the poorest 40% receivesjust over 11%.15 The Gini index ranking, a widely usedmeasure of inequality, has also been increasing since themid 1980s. Table 1 shows the results. (A Gini index of100 is perfect inequality, an index of 0 represents perfectequality.)Growing inequality has been joined by rising unemploy-ment in the Mexican countryside. The Mexican govern-ment predicted that “inefficient” farmers would reallo-cate production to horticultural crops and that that mar-ket would grow to absorb new producers."
"Corn in Mexico accounts for 60% of cultivated land,employs 3 million farmers (8% of Mexico’s population and 40% of people working in agriculture) and is thecountry’s main staple food crop.20There are a total of 18million people21dependent on corn production, includingfarmers and their families.22Seventy-two percent ofnational corn-producing units are organized into ejidos—mostly small-scale holdings that account for 62% of cornproduction. Corn production accounts for more than two-thirds of the gross value of Mexico’s agricultural produc-tion, while horticultural crops account for only 6%.23The most competitive corn producers are found in thenorthwestern and north-central states of Sonora andSinaloa. These states are mostly arid and semi-arid andproduction is highly dependent on irrigation, mechaniza-tion, fertilizer, and pesticide use. These were the largestrecipients of state investment in agriculture in the 1940sand have benefited the most from NAFTA since they areclosest to the United States and have higher yields. Butthe states with the greatest concentration of corn produc-ers are in the central and southern part of the country—Chiapas, Guerrero, Hidalgo, Oaxaca, and Veracruz. Thesestates have the highest incidence of poverty and are alsowhere the majority of subsistence producers farm sea-sonally on small plots of land, with no irrigation and lowyields.
There are considerable differences between corn pro-duction in Mexico and in the United States. First, the U.S.is the world’s largest producer of yellow corn, normallyused for animal feed, while Mexico is the largest produc-er of white corn, preferred by Mexican consumers.Mexico has also retained far more local varieties, whilethe U.S. has concentrated heavily in a few. Second, theU.S. uses technology-intensive production, includingheavy chemical use and mechanization. Mexico’s steepand mountainous terrain makes it difficult to introducemechanized production as used in the wide-open fieldsof the U.S. Midwest, and small farmers often use far lesschemicals on their land due to cost. Second, Mexico aver-ages 1.7 tons of corn per hectare while the United Statesaverages 7 tons. To produce one ton of corn in Mexico,on average, 17.8 labor days are required to the U.S.’s 1.2hours.24This average again hides a great deal of varia-tion, however—on some modern, irrigated Mexicanfarms, yields are comparable to the United States.Nonetheless, 80% of total area of corn cultivation inMexico is rain-fed and frequently difficult to cultivatebecause of steep slopes and poor soil.The Impacts of Free TradeWhile many of the arguments for NAFTA rested onassumptions around idealized free markets and theirbenefits, the reality on the ground has been rather differ-ent. Since Mexico began importing corn from the UnitedStates, Mexican producers have found themselves com-peting directly with U.S. producers selling at prices signif-icantly lower than those in Mexico. Low U.S. corn pricesset the international price because the U.S. is the largestproducer and exporter of the crop.25International cornprices are currently $1.74 a bushel and the latest U.S.Department of Agriculture figures show production costsat about $2.66 a bushel. This difference is compensatedto the farmers through direct and indirect subsidies. Toput this into perspective, U.S. farmers received $18 bil-lion in subsidies and account for less than 3% of thelabor force,26while Mexican agricultural support pro-grams contributed about U.S.$ 9 billion in 2002 to pro-ducers.27Graph 2: Corn Import Quantities and U.S. SubsidiesU.S. government subsidies move the relationshipbetween international supply and demand for corn faraway from the “apolitical” world of free trade economics.Low international prices have led to increased Mexicanimports, but the magnitude of subsidies provided by theU.S. government removes competition from the theoreti-cal field of comparative advantages into a far more com-plex political terrain. Graph 2 gives us an insight intohow market forces are directly manipulated by interna-tional political exigencies which have little to do with“free trade”. "
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