International Trade: U.S. Agencies Need Greater Focus to Support
Mexico's Successful Transition to Liberalized Agricultural Trade
Under NAFTA (25-MAR-05, GAO-05-272).
In 1994, the North American Free Trade Agreement (NAFTA) created
the world's largest free trade area and, among other things,
reduced or eliminated barriers for U.S. agricultural exports to
Mexico's vast and growing markets. As part of a body of GAO work
on NAFTA issues, this report (1) identifies progress made and
difficulties encountered in gaining market access for U.S.
agricultural exports to Mexico; (2) describes Mexico's response
to changes brought by agricultural trade liberalization and
challenges to the successful implementation of NAFTA; and (3)
examines collaborative activities and assesses strategies to
support Mexico's transition to liberalized agricultural trade
under NAFTA.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-272
ACCNO: A20138
TITLE: International Trade: U.S. Agencies Need Greater Focus to
Support Mexico's Successful Transition to Liberalized
Agricultural Trade Under NAFTA
DATE: 03/25/2005
SUBJECT: Agricultural products
Exporting
Foreign trade agreements
International trade
International trade regulation
International trade restriction
Tariffs
Agricultural industry
Grain and grain products
Agricultural production
Mexico
North American Free Trade Agreement
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GAO-05-272
United States Government Accountability Office
GAO Report to the Chairman, Committee on Finance, U.S. Senate
March 2005
INTERNATIONAL TRADE
U.S. Agencies Need Greater Focus to Support Mexico's Successful Transition to
Liberalized Agricultural Trade under NAFTA
a
GAO-05-272
[IMG]
March 2005
INTERNATIONAL TRADE
U.S. Agencies Need Greater Focus to Support Mexico's Successful Transition to
Liberalized Agricultural Trade under NAFTA
What GAO Found
U.S. agricultural exports have made progress in gaining greater access to
Mexico's market as Mexico has phased out barriers to most U.S.
agricultural products, and only a handful of tariffs remain to be
eliminated in 2008. Total U.S. agricultural exports to Mexico grew from
$4.1 billion in 1993 to $7.9 billion in 2003. Despite progress, some
commodities still have difficulties gaining access to the Mexican market.
GAO found that Mexico's use of antidumping, plant and animal health
requirements, safeguards and other nontariff trade barriers, such as
consumption taxes, presented the most significant market access issues for
U.S. agricultural exports to Mexico.
Mexico has put in place several programs to help farmers adjust to trade
liberalization, but structural problems, such as lack of rural credit,
continue to impede growth in rural areas, presenting challenges to full
implementation of NAFTA. Lagging rural development fuels arguments that
NAFTA has hurt small farmers, although studies, including some Mexican
studies, do not support this conclusion. Opponents of NAFTA want to block
further tariff eliminations and are demanding renegotiation of NAFTA's
agricultural provisions. Concerned about such opposition, U.S. officials
acknowledged the need to promote the benefits of NAFTA, while seeking ways
to help Mexico address its rural development issues.
Historically, U.S. agencies have undertaken many agriculture-related
collaborative efforts with Mexico. Since 2001, U.S.-Mexico development
activities have taken place under the Partnership for Prosperity (P4P)
Initiative to promote development in parts of Mexico where economic growth
has lagged. Recognizing the importance of rural development to the success
of NAFTA, Department of State and USDA strategies for Mexico call for
building on collaborative activities under the P4P to pursue the related
goals of rural development and trade liberalization under NAFTA; however,
the P4P action plans do not set forth specific strategies and activities
that could be used to achieve these goals.
Total Value of U.S.-Mexico Agricultural Trade, 1989-2003 2003 constant
dollars in billions
10
8
6
4
2
0
Source: GAO, based on USDA Foreign Agricultural Trade of the United States
database.
United States Government Accountability Office
Contents
Letter
Results in Brief
Background
U.S. Agricultural Exports Have Gained Greater Access to Mexico
under NAFTA, but Some Market Access Barriers Remain
Mexico Enacted Various Agricultural Programs in Response to Trade
Liberalization, but Structural Problems Impair Growth and Challenge NAFTA
Implementation
U.S. Agencies Undertake Collaborative Agricultural Efforts, but Do Not
Focus on Rural Development Challenges to Mexico's Transition to
Liberalized Trade
Conclusions
Recommendation for Executive Action
Agency Comments and Our Response
1 2 4
9
21
24 30 31 32
Appendixes
Appendix I: Appendix II:
Appendix III: Appendix IV:
Appendix V:
Appendix VI:
Appendix VII: Appendix VIII: Objective, Scope, and Methodology
Case Studies of Selected U.S. Agricultural Exports to Mexico
Three Major Mexican Agricultural Programs
U.S.-Mexico Collaborative Activities Benefit Agricultural Trade
(1994-2004)
Recent U.S.-Mexico Collaborative Agricultural Activities under Partnership
for Prosperity
Comments from the U.S. Department of State
GAO Comments
Comments from the U.S. Department of Agriculture GAO Contacts and Staff
Acknowledgments
GAO Contacts Acknowledgments
36
39 57
62
85
88 93
94
96 96 96
Tables Table 1: Conventional NAFTA Tariff Reduction Schedules 5
Table 2: Examples of SPS Controversies between the United States
and Mexico 18
Table 3: Animal and Plant Health Inspection Service (APHIS)
Assistance and/or Collaborative Activities in Mexico,
1994-2004 62
Contents
Table 4: USDA Economic Research Service (ERS), Collaborative Activities
with Mexico, 1994-2004 64 Table 5: USDA Agricultural Research Service,
Collaborative Activities with Mexico, 1994-2004 67
Table 6: USDA Foreign Agricultural Service, International Cooperation and
Development (ICD), Collaborative Activities with Mexico, 1994-2004 72
Table 7: USDA Agricultural Marketing Service (AMS), Collaborative
Activities with Mexico, 1994-2004 79 Table 8: USDA National Agricultural
Statistics Service (NASS), Collaborative Activities with Mexico, 1994-2004
81 Table 9: USDA Food Safety and Inspection Service (FSIS), Collaborative
Activities with Mexico, 1994-2004 82
Figures Figure 1: Total Value of U.S.-Mexico Agricultural Trade,
1989-2003 13
Figure 2: Figure 2: U.S. Agricultural Exports to Mexico by
Largest
Product Groups, 1994-2003 15
Figure 3: Total Volume of U.S. Fresh Apple Exports to Mexico,
1989-2003 39
Figure 4: Total Volume of U.S. Beef Exports to Mexico,
1989-2003 41
Figure 5: Total Volume of U.S. Corn Exports to Mexico,
1989-2003 44
Figure 6: Total Volume of U.S. Fructose Syrup Exports to
Mexico,
1989-2003 47
Figure 7: Total Volume of U.S. Pork Exports to Mexico,
1989-2003 49
Figure 8: Total Volume of U.S. Poultry Meat Exports to Mexico,
1989-2003 51
Figure 9: Total Volume of U.S. Rice Exports to Mexico,
1989-2003 54
Abbreviations
Alianza Alliance for the Countryside (Alianza para el Campo)
AMS Agricultural Marketing Service
APHIS Animal and Plant Health Inspection Service
ARS Agricultural Research Service
BSE bovine spongiform encephalopathy
CFP Cochran Fellowship Program
Contents
CIMMYT International Maize and Wheat Improvement Center (Centro
Internacional de Mejoramiento de Maiz y Trigo)
ERS Economic Research Service
FAO United Nation's Food and Agriculture Organization
FAS Foreign Agricultural Service
FATUS Foreign Agricultural Trade of the United States
FDA Food and Drug Administration
FMD foot and mouth diseases
FSI Food Safety Initiative
FSIS Food Safety and Inspection Service
GATT General Agreement on Tariffs and Trade
HFCS high-fructose corn syrup
NAFTA North America Free Trade Agreement
NASS National Agricultural Statistics Service
OPIC Overseas Private Investment Corporation
PROCAMPO Program of Direct Support for the Countryside (Programa de
Apoyos Directos al Campo)
P4P Partnership for Prosperity
SAGARPA Mexican Ministry of Agriculture (Secretaria de Agricultura,
Ganaderia, Desarrollo Rural, Pesca y Alimentacion)
SCRP Scientific Cooperation Research Program
SE Mexican Ministry of the Economy (Secretaria de Economia)
SENASICA Mexican National Service for Agriculture and Food Health,
Wholesomeness and Quality (Sevicio Nacional de Sanidad, Inocuidad y
Calidad Agroalimentaria)
SIAP Mexican Agricultural and Fisheries Statistics Service (Servicio de
Informacion y Estadistica Agroalimentaria y Pesquera)
SPS sanitary and phytosanitary
SRE Mexican Ministry of Foreign Affairs (Secretaria de Relaciones
Exteriores)
TCB trade capacity building
TRQ tariff rate quota
USAID Unites States Agency of International Development
USDA United States Department of Agriculture
USTR United States Trade Representative
WTO World Trade Organization
A
United States Government Accountability Office Washington, D.C. 20548
March 25, 2005
The Honorable Charles E. Grassley Chairman Committee on Finance United
States Senate
Dear Mr. Chairman:
In 1994, the North American Free Trade Agreement (NAFTA) created the
world's largest free trade area and helped Mexico become one of the
largest and fastest growing markets for U.S. agricultural products. U.S.
agricultural trade officials consider NAFTA a model for U.S. efforts to
liberalize free trade throughout the Western Hemisphere. NAFTA is an
ambitious undertaking, bringing together the United States and Canada, two
of the most competitive and advanced agricultural producing nations, and
Mexico, a developing country with a large rural population still
significantly dependent on traditional agricultural production methods.
Since the beginning of the negotiations, concern over these disparities
has provoked controversy in Mexico regarding the agricultural provisions
of NAFTA, and the debate continues over the benefits of the agreement for
Mexico's rural areas. This debate has significant implications for the
full and successful implementation of NAFTA and long-term prospects for
U.S. agricultural products in Mexico.
In response to your request for information on U.S.-Mexico agricultural
trade and NAFTA, this report (1) identifies progress made, as well as
difficulties encountered, in gaining market access for U.S. agricultural
exports to Mexico since NAFTA went into effect; (2) describes both
Mexico's efforts in response to changes brought by agricultural trade
liberalization and challenges to the successful implementation of NAFTA;
and (3) examines U.S.-Mexico collaborative activities and assesses
strategies to support Mexico's transition to liberalized agricultural
trade under NAFTA.
To address these objectives, we obtained and analyzed official data on
agricultural trade trends from both U.S. and Mexican government agencies.
We discussed the limitations and reliability of this trade data with U.S.
Department of Agriculture (USDA) officials and determined that the trade
data reported by USDA are sufficiently reliable for the purpose of this
report. We conducted an extensive literature search and identified the
most appropriate research and studies on Mexico's agricultural programs
and on
the impact of NAFTA on Mexican agriculture. We took several steps to
ensure the credibility of those studies we used for our report. We also
met with U.S. and Mexican government officials in Washington, D.C., and in
Mexico City. We contacted representatives of U.S. producer groups,
academia, and other experts on U.S.-Mexico agricultural trade and Mexican
agricultural sector development issues, and we reviewed extensive
documentation and academic research provided by these sources. We also
prepared case study analyses for seven agricultural commodities to
illustrate the type of market access problems confronting U.S.
agricultural exports to Mexico. While we describe Mexico's use of trade
measures, we did not evaluate the validity of their application. The
commodities we selected for the cases studies were representative of
products at various stages of the tariff elimination, different
agricultural sectors (e.g., grains, horticultural, and animal products),
various trade barriers, a range of dispute resolution mechanisms, and
varying levels of export value and volume. We performed our work from
February 2004 through February 2005 in accordance with generally accepted
government auditing standards. Appendix I contains a full description of
our objectives, scope, and methodology.
Results in Brief Since NAFTA went into effect in 1994, U.S. agricultural
exports have gained greater access to Mexico's market. Mexico has phased
out tariffs on all but a few agricultural imports from the United States
and has ended its system of import licensing requirements-a key nontariff
barrier. NAFTA also provided U.S. producers with additional recourse for
resolving trade disputes. As implementation of NAFTA has progressed over
the past decade, U.S. agricultural exports to Mexico have continued to
demonstrate rapid growth, rising from $4.1 billion in 1993 to $7.9 billion
in 2003. Yet some commodities still experience difficulties gaining access
to the Mexican market. We found that Mexico's use of antidumping actions,
sanitary and phytosanitary requirements, safeguards, and a tax on
beverages containing sweeteners other than sugar present the most
significant market access problems for U.S. agricultural exports. For
example, Mexico has applied special agricultural safeguard provisions on
imports of U.S. live swine, pork, potato products, and fresh apples, while
plant or animal health requirements have been applied to red meats,
apples, and dry beans.
Beginning in the early 1990s, Mexican authorities instituted several
programs to help farmers adjust to trade liberalization, including NAFTA,
but structural problems like tenuous land ownership and lack of rural
credit have impeded growth in rural areas, which presents challenges to
the success of NAFTA. Mexican agricultural programs have targeted a range
of farmers and objectives from income support to improved productivity.
Yet critics note that Mexico still needs to address structural impediments
to rural development. Lagging rural development has fueled arguments that
NAFTA has hurt small farmers, although trade liberalization has not
adversely affected Mexican agriculture as a whole. Opponents of NAFTA want
to block further tariff eliminations and insist on a renegotiation of the
agricultural provisions of the agreement. Both U.S. and Mexican officials
warned about considerable opposition to the next round of tariff
eliminations in 2008. One of the three remaining commodities scheduled to
have tariffs lifted in 2008 is corn, which is particularly sensitive
because it is the principal crop of small farmers. U.S. officials have
acknowledged the need to promote the benefits of NAFTA, while seeking
additional ways to help Mexico address its rural development issues.
Historically, U.S. agencies have collaborated with Mexico in support of
mutual agricultural interests, but these activities have not been intended
to address the challenges presented by lagging rural development to
Mexico's transition to liberalized trade under NAFTA. Although the United
States has provided technical assistance to recent free trade partners to
facilitate their adjustment to trade liberalization, no such assistance
was arranged for Mexico when the agreement was concluded. More recently,
since 2001 the United States has supported collaborative bilateral efforts
under a highlevel bilateral initiative, the Partnership for Prosperity
(P4P), to promote economic development in the parts of Mexico where
economic growth has lagged. Officials from both countries are working on a
broader approach to Mexican rural development under the initiative, but
they recognize that much still needs to be done in this area. Under P4P
the United States has provided some limited support for rural development
in Mexico, including technical assistance to the Mexican government's new
rural credit institution. The State Department's Mission Performance Plan
and USDA's Unified Export Strategy for Mexico call for building on
collaborative activities under P4P to pursue rural development and support
trade liberalization under NAFTA. However, P4P documents generally have
little to say about furthering the implementation of NAFTA, and P4P action
plans do not set forth specific strategies or activities that could be
used to support rural development in support of free trade.
To aid the full and successful implementation of NAFTA, we recommend that
the Secretary of State, as the head of one of the lead agencies for the
P4P initiative, work with the Secretary of Agriculture and other relevant
officials to develop an action plan under P4P that lays out specific
collaborative efforts on rural development that would support Mexico's
successful transition to liberalized agricultural trade under NAFTA. To
promote rural development in Mexico and enhance small farmers' ability to
benefit from NAFTA, which would also help shape a more positive perception
of the agreement, we also recommend that the Secretary of State work with
USDA and other relevant agencies to expand collaborative efforts with the
Mexican government to facilitate credit availability in the countryside.
The State Department and USDA generally agreed with our recommendations.
Background Mexico's accession to the General Agreement on Tariffs and
Trade (GATT) in 1986 initiated a process of market liberalization that
provided significant opportunities for U.S. agricultural exports.1 By the
early 1990s, Mexico had become the fastest growing export market for U.S.
agricultural products, and the United States enjoyed a substantial net
agricultural trade surplus with Mexico. U.S. agricultural producer groups
were generally supportive when the United States and Mexico entered into
negotiations aimed at creating a free trade agreement, which eventually
resulted in NAFTA.
NAFTA Commitments Designed to Eliminate Many Agricultural Trade Barriers
In negotiating NAFTA, the United States sought to gain additional market
access for its agricultural exports to Mexico by eliminating Mexican
agricultural tariffs. Mexico's agricultural tariffs averaged 10 percent,
compared to average U.S. tariffs of 4.5 percent at the time NAFTA was
being negotiated.2 NAFTA called for Mexico to eliminate tariffs on most
commodities immediately upon implementation of the agreement in 1994 and
to do away with nontariff trade barriers, most notably its system of
1The General Agreement on Tariffs and Trade (GATT) was created in 1947 to
encourage liberalized trade between member states by regulating and
reducing tariffs and nontariff barriers on traded goods. GATT, which was
succeeded by the World Trade Organization (WTO) in 1994, functioned as the
primary multilateral organization governing international trade.
2See GAO, North American Free Trade Agreement: Assessment of Major Issues,
Volume 2, GAO/GGD-93-137 (Washington, D.C.: Sept. 9, 1993).
import licensing requirements.3 Some products that Mexico considered to be
particularly sensitive commodities were granted transition periods for
tariff elimination to allow time for Mexican producers to adjust to
increased import competition.
NAFTA sets forth the specific schedules for tariff elimination and places
commodities in staging categories, or "baskets," that define when the
commodities should enter the market duty-free.4 In general, tariffs for
products that were granted transition periods were reduced in equal
increments over a specified time period (see table 1). However, for
certain sensitive commodities (such as corn and poultry) the greater part
of tariff reductions was postponed until the final years of the transition
period, a practice referred to as "back-loading."
Table 1: Conventional NAFTA Tariff Reduction Schedules
Staging categories for Date of implementation Rate of annual tariff
goods reduction
A - enter duty free January 1, 1994 Not applicable
B - five equal cuts January 1, 1998 20 percent
C - ten equal cuts January 1, 2003 10 percent
C+ - fifteen equal cuts January 1, 2008 6.67 percent
D - continue duty free Not applicable Not applicable
Source: NAFTA Chapter 3 and House Doc. 103-159, Volume 1.
3Before NAFTA, Mexico controlled imports of various commodities by
requiring prior import permits or licenses and limiting the number of
licenses issued for these commodities. Prior to NAFTA, about 25 percent of
the value of U.S. agricultural exports to Mexico were subject to licensing
requirements.
4The Statement of Administrative Action for NAFTA clarifies the tariff
reduction rates for each of the staging categories. The Statement of
Administrative Action is a document that was submitted to Congress along
with the implementing bill for NAFTA, and describes significant actions
proposed to implement NAFTA (House Doc 103-159, p. 450).
NAFTA also called for Mexico and the other NAFTA partners to replace
quantitative import restrictions with tariff rate quotas (TRQs). Products
subject to TRQs enter the importing market duty-free up to the level of
the quota. Once the duty-free level (quantitative limit) is reached, a
duty is imposed on the over-quota imports. NAFTA partner countries
committed to gradually expanding the duty-free quota for the commodities,
reducing the over-quota tariff charged during the transition period, and
ultimately eliminating the TRQs. As with the phasing out of tariffs, NAFTA
TRQs follow the same scheduled transition periods of 4, 9, and 14 years.5
Application of Trade Measures under NAFTA Are Subject to Disciplines
In addition to providing for the elimination of tariff and nontariff trade
barriers, NAFTA also established disciplines for the application of trade
measures to counter threats or harm to domestic producers and consumers,
such as sanitary and phytosanitary (SPS) requirements,6 antidumping and
countervailing duties,7 and safeguard actions.8 For example, NAFTA
requires that SPS measures must be science-based, nondiscriminatory, and
transparent, and that they are applied only to the extent necessary to
achieve a party's appropriate level of protection. Similarly, under NAFTA
the parties are required to follow their domestic legal procedures when
applying antidumping or countervailing duties measures in response to
unfair foreign trade practices. NAFTA also calls for safeguards to be
applied through fair and open administrative procedures and for
compensation to be provided for the affected countries. Under NAFTA, a
party's right to apply a safeguard terminates at the end of an agreed-upon
transition period. Thereafter, a party may apply the
5NAFTA was the first free trade agreement to include TRQs as a method of
eliminating quantitative restrictions on sensitive commodities.
6SPS requirements are measures that protect human, animal, and plant life
and health from risks arising from animal or plant pests or diseases, food
additives, or contaminants. Sanitary refers to human or animal health,
while phytosanitary refers to plant health.
7Antidumping duties are a trade remedy that may be imposed to offset the
injurious effect of unfair pricing practices known as "dumping." Dumping
refers to the sale of a commodity in a foreign market at a price lower
than its fair market value in the home market. Countervailing duties may
be imposed on imports that harm or threaten harm to the domestic industry
to offset subsidies provided to producers in the exporting country.
8Safeguards are temporary import barriers, usually in the form of duties,
which may be applied in cases where a domestic industry is determined to
be injured or threatened to be injured from increased imports. The
industry is required to make adjustments during a transition period while
the safeguard is in place.
safeguard only with the consent of the exporting party. Moreover, NAFTA
allows the party applying a safeguard to impose duties only up to the
level of its Most Favored Nation duties.
NAFTA Presented Challenges and Opportunities for Mexican Agricultural
Sectors
Many studies projected that Mexico would benefit from improved access to
U.S. agricultural markets for agricultural products under NAFTA. However,
some observers raised concerns about the difficulties Mexico's more
traditional agricultural producers might encounter as the country opened
up to U.S. products. With more than 22 percent of the population dependent
on the sector, but with many farmers unable to compete under free market
conditions, agriculture is a significant yet vulnerable area of the
Mexican economy. Differences in perceived opportunities and challenges
resulted from the three distinct types of agricultural producers present
in Mexico. Mexico's agriculture sector consists of a large number of small
traditional farmers, some medium size commercially oriented growers, and a
lesser number of large modern producers.9 These groups of farmers differ
in many respects including farm size, access to capital, types of crops
produced, and productivity. Small subsistence farmers produce primarily
corn (maize), often at subsistence levels for self-consumption, in small
parcels of less than 5 hectares of mostly rain-fed land.10 Corn is also
among the major U.S. agricultural exports to Mexico, which is perceived by
some to be in competition with the production of small subsistence
farmers. Medium size farmers are involved in commercial-oriented
operations, however, they face relatively high cost structures, which are
marked by scarcity of capital and insufficiently developed marketing
infrastructure. Some believe that medium size commercial farmers face the
greatest impact from import competition and structural change. On the
other hand, Mexico's large commercial farmers usually have larger plots of
irrigated land and a higher productivity level. They have better access to
capital, including direct investment and commercial lending from abroad.
Mexican commercial farmers are also typically involved in production of
9About 75 percent of all Mexican agricultural producers have farms of less
than 5 hectares.
10Subsistence farming refers to agricultural production that provides for
the basic needs of the farmer without surpluses for marketing. According
to Mexican government data, around 85 percent of corn producers have farms
of fewer than 5 hectares.
higher-valued commodities, notably fresh fruits and vegetables, which have
undergone dynamic export growth since the early 1990s.11
Agricultural trade expansion since NAFTA's implementation generally has
been consistent with expectations. While U.S. trade data indicates Mexican
agricultural exports have done well under the agreement, some observers
maintain NAFTA has had negative consequences for small farmers. For
example, one study asserts that employment opportunities for Mexican
subsistence farmers have declined under NAFTA.12 According to this study,
imports of cheaper corn have contributed to lower corn prices in Mexico,
which has led medium size farms to cut back their demand for labor
supplied by subsistence farmers. However, a December 2003 World Bank
report noted that NAFTA did not bring about many of the anticipated
negative effects on poor subsistence farmers and had not had a devastating
effect on Mexican agriculture as a whole.13 This research notes that as
consumers, Mexican farmers may have benefited from lower corn prices.14 In
addition, corn production in Mexico has not declined, but rather had
increased by about 14 percent since NAFTA was enacted, to a record high in
2003. Other research conducted by several Mexican academic institutions
concluded that NAFTA had resulted in benefits for the country's farm
sector, including increased agricultural exports and greater investment in
agricultural production.15
11The value of Mexican fruit and vegetable exports to the United States in
2003 real dollars almost doubled from about $1.7 billion in 1993 to $3.3
billion in 2003 according to U.S. Census data.
12The Environmental and Social Impacts of Economic Liberalization on Corn
Production in Mexico, study commissioned by Oxfam Great Britain and the
World Wildlife Fund International, September 2000.
13Daniel Lederman, William F. Maloney, and Luis Serven, Lessons from NAFTA
for Latin American and Caribbean (LAC) Countries: A Summary of Research
Findings, Office of the Chief Economist for Latin American and Caribbean,
the World Bank, December 2003, advance edition.
14USDA points out that rapid urbanization in Mexico has created great
political urgency for a low-price food policy; food imports help the
provision of low-cost food.
15Evaluacion integral de los impactos e instrumentacion del capitulo
agropecuario del TLCAN (Comprehensive Evaluation of the Impact and
Implementation of NAFTA's Agricultural Chapter), El Colegio de Mexico,
Universidad Autonoma de Chapingo, and Facultad Latinoamericana de Ciencias
Sociales, April 2004.
U.S. Agricultural Exports Have Gained Greater Access to Mexico under
NAFTA, but Some Market Access Barriers Remain
As implementation of NAFTA has progressed over the past decade, Mexico has
phased out tariffs on agricultural imports in accordance with the
agreement's scheduled transition periods of 4, 9, and 14 years and has
done away with a key nontariff trade barrier, import licensing
requirements. U.S. agricultural exporters have benefited both from this
process of continued trade liberalization under NAFTA and from the
additional assurances provided through the NAFTA dispute settlement
mechanism. Exports to Mexico have increased significantly since NAFTA,
continuing a trend of export growth that started in the mid 1980s.
However, despite the progress made, some U.S. agricultural products
continue to experience difficulties gaining access to the Mexican market,
typically due to antidumping, SPS requirements, safeguards, and other
trade measures Mexico has put in place. These difficulties are not unlike
challenges U.S. agricultural exports face in other major markets, such as
Canada or Japan.
NAFTA Increased Market Access and Provided Additional Recourse for
Resolving Disputes
Mexico Successfully Reduced Tariffs and Other Barriers
Although Mexico had taken several steps to allow greater access to its
markets prior to 1994, NAFTA provided a legal agreement and framework
through which further market liberalization could take place. Further,
NAFTA's dispute settlement mechanism provided U.S. exporters with
additional rules and processes for resolving disputes that did not exist
prior to NAFTA.
Mexico has thus far implemented its NAFTA commitments by reducing or
eliminating tariffs according to schedule and removing nontariff barriers,
resulting in greater access for U.S. agricultural goods. In the latest
round of tariff eliminations (on Jan. 1, 2003), Mexico eliminated tariffs
on more than a dozen commodity imports from its NAFTA partners, including
products important to U.S. producers such as rice, soy oil, and pork. On
January 1, 2003, in accordance with its commitments under NAFTA, Mexico
had eliminated tariffs or TRQs on all but three commodities: corn, dry
beans, and milk powder.16 Two of these commodities, corn and beans, are
considered particularly sensitive commodities for Mexican agriculture
because they are among the principal crops of small Mexican farmers and
are also staples of the Mexican diet. TRQs on these commodities are
16Mexico also maintains tariffs until January 1, 2008, on poultry imports
under a safeguard measure it imposed in July 2003. See discussion below on
Safeguards.
scheduled for full elimination by the end of the 14-year transition period
in 2008.17
In addition, Mexico has done away with import licensing requirements, a
key nontariff barrier. These import licensing requirements functioned, in
effect, as a type of quota, since only the volume of goods authorized
under the import license could be imported, and they were intended to
protect Mexican producers of agricultural commodities that were sensitive
to foreign competition. Prior to NAFTA, many major U.S. agricultural
exports to Mexico, such as poultry, dairy, wheat, corn, and dry beans,
were subject to import licensing requirements. NAFTA permitted Mexico to
use phasedin tariff elimination as a mechanism to transition away from the
use of import licensing requirements. Under the agreement, Mexico
immediately did away with import licensing requirements and converted them
to either regular tariffs or TRQs. Additionally, NAFTA set a schedule to
gradually eliminate both the tariffs and TRQs.
NAFTA Dispute Settlement NAFTA also benefits U.S. exporters by providing
them with a formal
Provides Additional Recourse for mechanism for resolving disputes.18 Under
the agreement, disputes that
U.S. Producers cannot be resolved through consultations between member
countries may be brought before impartial, independent panels. Since both
the United States and Mexico are members of the WTO as well as NAFTA, the
United States can file trade grievances under the dispute settlement
mechanism provided by either agreement. According to United States Trade
Representative (USTR) officials, the United States generally would utilize
the NAFTA dispute settlement mechanism if it determined that Mexico is in
violation of a provision that is specific to NAFTA and is not covered
under the WTO. These officials explained that the United States would rely
on the WTO's dispute settlement process if the matter also affected WTO
members that are not members of NAFTA. According to information provided
by USTR, to date, the United States has only brought one
17Similarly, the United States is expected to eliminate its remaining
tariffs on imports of sugar, peanuts, and orange juice from Mexico by
2008.
18NAFTA's dispute settlement procedures are set forth in four separate
NAFTA chapters: Chapter 11 (disputes related to investment), Chapter 14
(disputes related to financial services), Chapter 19 (disputes related to
antidumping and countervailing duties), and Chapter 20 (disputes related
to the general interpretation or application of the agreement).
agricultural dispute settlement case against Mexico under NAFTA, compared
to four under the WTO process.19
According to a U.S. Department of Agriculture (USDA) report, most trade
disputes are resolved through informal discussions or consultations
involving government and private sector representatives, rather than
formal dispute settlement procedures.20 For example, through
governmentto-industry negotiations, a minimum price agreement was
established for U.S. apples, and through government-to-government
negotiations, an agreement was reached to modify Mexico's dry bean quota
auctions. In addition, through industry negotiations, a dispute involving
U.S. and Mexican grape industry labeling regulation was resolved. The use
of industry negotiations also deterred the Mexican cattle industry from
filing an antidumping petition against imports of U.S. cattle. Another
alternative dispute settlement mechanism is the NAFTA Advisory Committee
on Private Commercial Disputes Regarding Agricultural Goods, which
recommends less adversarial resolutions to agricultural contract or
commercial disputes.21
19Under NAFTA, the United States requested consultations regarding
Mexico's application of TRQs to dry beans in 2000 (NAFTA 2020), which was
settled in 2001. In this case, Mexico and U.S. negotiations resulted in an
agreement of Mexico's TRQ allocation through an auctioned permit system
for dry beans. The United States has requested formal consultations with
Mexico through the WTO for the following disputes involving agricultural
products: antidumping investigation on high-fructose corn syrup in 1997
and 1998 (DS/101 & 132); antidumping duties on imports of hogs in
2000(DS/203); antidumping duties on beef and rice in 2003 (DS/295); and
tax on beverages in 2004 (DS/308). Mexico has revoked its antidumping
duties on hog imports and high-fructose corn syrup. Conversely, according
to USTR, to date Mexico has brought six dispute settlement cases against
the United States under NAFTA and one under the WTO dispute settlement
process. It is worth noting that a country's decision to initiate a case
under NAFTA or WTO dispute settlement proceedings does not necessarily
mean its trade partner's actions violate provisions of these trade
agreements.
20United States Department of Agriculture, Effects of North American Free
Trade Agreement on Agriculture and the Rural Economy, WRS-02-1
(Washington, D.C.: July 2002).
21The intent is to achieve prompt and effective resolution of commercial
disputes, with special attention to perishable items. The committee is
composed primarily of private sector representatives but also has
government participants.
U.S. Agricultural Trade with Mexico Has Continued to Increase since NAFTA
Since NAFTA's implementation, total U.S. agricultural exports to Mexico
have nearly doubled, rising from $4.1 billion in 1993-the last year prior
to NAFTA's implementation-to $7.9 billion in 2003 (adjusted for
inflation).22 Between 1993 and 2003, the value of U.S. exports to Mexico
grew on average by 17.4 percent annually. By comparison, U.S. agricultural
exports to the world grew at an average annual rate of 2.3 percent over
the same time period. U.S. exports to Mexico have comprised an
increasingly larger share of the United States' total agricultural
exports; Mexico's share grew from about 8 percent in 1993 to about 13
percent in 2003. Moreover, according to USDA's export strategy for Mexico,
the full implementation of NAFTA, a growing urban population, increasing
per capita income, and lack of arable land make Mexico an excellent
long-term prospect for U.S. agricultural products.
U.S. agricultural exports to Mexico already underwent significant growth
after Mexico joined GATT in 1986 and began opening its market to foreign
trade. By the early 1990s, Mexico attained its position as the third
largest importer of U.S. agricultural products, after Canada and Japan.
The overall increases in agricultural exports to Mexico since NAFTA began
came about despite the collapse of the Mexican peso in late 1994, which
harmed Mexican purchasing power for foreign goods and triggered an
economic downturn. Beginning in about 1996, Mexico's economy began a
recovery, and U.S. exports to Mexico expanded accordingly. Not all
increases in exports to Mexico can be attributed to NAFTA because factors
such as economic growth, weather, exchange rates, domestic supply, and
population growth also affect Mexico's demand for U.S. products.
U.S. imports of agricultural products from Mexico have also increased
since NAFTA, rising from about $2.9 billion in 1993 to $6.3 billion in
2003 (adjusted for inflation).23 Agricultural imports from Mexico
increased at an average annual rate of 8.5 percent over the same time
period. In 2003, agricultural imports from Mexico accounted for about 13
percent of the
22Export trade values are adjusted for inflation and are presented in 2003
U.S. dollars using the Bureau of Economic Analysis End Use Export Index to
filter out agricultural product price fluctuation. In nominal terms
(i.e.,unadjusted for inflation) U.S. agricultural exports to Mexico have
actually grown from $3.6 billion in 1993 to $7.9 billion in 2003. See
appendix I for additional information on our methodology.
23Import trade values are adjusted for inflation and are presented in 2003
U.S. dollars using the Bureau of Economic Analysis End Use Import Index to
filter out agricultural product price fluctuation.
total value of U.S. agricultural imports from the rest of the world.
Figure 1 shows the total value of U.S.-Mexico agricultural trade.
Figure 1: Total Value of U.S.-Mexico Agricultural Trade, 1989-2003 2003
constant dollars in billions 10
8
6
4
2
0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
2003 Year
U.S. agricultural imports from Mexico U.S. agricultural exports to Mexico
Source: GAO, based on USDA Foreign Agricultural Trade of the United States
database.
Notwithstanding the potential effects of external factors on trade,
NAFTA's impact on U.S. exports, particularly for certain key commodities,
generally appears to have been positive. Earlier studies generally
concluded that the agreement would increase U.S. export opportunities for
grains, oilseeds,
dairy products, tree nuts, and meats.24 Trends in the trade of the largest
groupings of U.S. agricultural products have been generally consistent
with these predictions. For example, the United States increased exports
of animal products, grains and feeds, fruits and vegetables, and oilseeds
to Mexico since NAFTA.25 From NAFTA's implementation in 1994 until 2003,
the value of exports of these key groups of products underwent average
annual increases of between 3.2 percent (oilseeds) and 16 percent (grains
and feeds) (see fig. 2).26
24Several studies conducted prior to NAFTA concluded that market
liberalization, combined
with the demands of a growing population and an expanding economy in
Mexico, would
provide opportunities for the United States to export greater amounts of
agricultural
products to Mexico. Our earlier work in a series of three reports on
U.S.-Mexico
agricultural trade also concluded that increased liberalization of
agricultural trade would
generally be beneficial for the U.S. agriculture industry. See GAO,
U.S.-Mexico Trade
Impact of Liberalization in the Agricultural Sector, GAO/NSIAD-91-155
(Washington, D.C.:
Mar. 29, 1991); GAO, U.S.-Mexico Trade: Extent to Which Mexican
Horticultural Exports
Complement U.S. Production, GAO/NSIAD-91-94BR (Washington, D.C.: Mar. 20,
1991); and U.S.-
Mexico Trade: Trends and Impediments in Agricultural Trade,
GAO/NSIAD-90-85BR
(Washington, D.C.: Jan. 12, 1990).
25In 2003, exports of these products accounted for 85 percent of the total
value of U.S.
agricultural exports to Mexico.
26Export trade values for these commodity groups are adjusted for
inflation and are
presented in 2003 U.S. dollars using Harmonized System Export Indexes to
filter out
agricultural product price fluctuation.
Figure 2: Figure 2: U.S. Agricultural Exports to Mexico by Largest Product
Groups, 1994-2003
2003 constant dollars in billions
3.0
Some U.S. agricultural products continue to experience difficulties
gaining access to the Mexican market due to the application of nontariff
trade measures. Although Mexico removed import licensing requirements, a
key nontariff trade barrier prior to NAFTA, it still applies several
nontariff measures that affect imports from the United States. According
to USDA, the nontariff measures that present the most significant barriers
to market access for U.S. agricultural exports have been Mexico's
application of antidumping duties, SPS requirements, and safeguards. In
addition to these trade measures, Mexico has put in place a product tax on
all beverages containing sweeteners other than sugar, which has basically
eliminated the Mexican market for high-fructose corn syrup (HFCS).27
However, these
2.5
2.0
1.5
1.0
0.5
0.0
Animals and products Oilseeds Fruits and vegetables
Source: GAO, based on USDA Foreign Agricultural Trade of the United States
database.
Despite Progress, Market Access Barriers Remain
27HFCS is a food sweetener derived from corn and is found in numerous
foods and beverages.
impediments are not unlike market access challenges experienced by U.S.
agricultural exports to other major trade partners, including Canada,
Japan, and the European Union.
The following section presents information on the key nontariff barriers
and examples of U.S. agricultural commodities that have encountered market
access challenges in Mexico. The information is based, in part, on our
analysis of market access issues related to seven selected agricultural
commodities: apples, beef, corn, HFCS, pork, poultry, and rice. Our
analysis of each of these commodities is presented in greater detail in
appendix II.
Antidumping Actions The use of antidumping duties continues to pose a
barrier to U.S. agricultural exports to Mexico. The United States has
raised complaints in the WTO regarding Mexico's application of its
antidumping laws on commodities such as hogs, rice, and beef.28 The United
States requested a WTO panel with respect to rice and has argued that
Mexico's imposition of antidumping duties is inconsistent with the WTO
Antidumping Agreement. Mexican officials at the Ministry of the Economy
(Secretaria de Economia) stated that Mexico's application of antidumping
measures to U.S. agricultural imports was based on an objective and
intensive investigation that determined harm. According to representatives
from some U.S. producer groups and a former senior Mexican government
official, however, there may also be other considerations that affect
Mexico's antidumping decisions. For example, U.S. apple producers question
the timing of Mexico's imposition of antidumping duties on apples in
August 2002, only a few months before NAFTA's tariff rate quota on apples
was scheduled to be lifted on January 1, 2003. Additionally, these
observers told us that Mexico's antidumping actions against certain U.S.
agricultural imports are, to some extent, a response to U.S. restrictions
on Mexican exports to the United States.
28WTO Cases DS/203 and DS/295.
Sanitary and Phytosanitary Measures
NAFTA establishes a number of general requirements to ensure that SPS
measures are only used to the extent necessary to protect plant, animal,
and human health and not as a means to protect domestic producers
fromcompetition.29 As mentioned earlier, NAFTA calls for these measures to
be science based, nondiscriminatory, and transparent and requires that the
measures be applied only to the extent necessary to achieve an appropriate
level of protection. Mexican officials responsible for plant and animal
health protection maintain that Mexico's SPS measures are based on sound
science. However, USDA officials and industry group representatives have
raised concerns about the legitimacy of some SPS measures imposed by
Mexico on U.S. agricultural imports as it eliminates tariffs and
tariff-rate quotas. U.S. producer groups told us that they believe Mexico
sometimes uses SPS measures as a means to retaliate for U.S. policies
against its agricultural exports to the United States. For example, some
U.S. producer groups contend that in order to protest U.S. phytosanitary
controls on imports of avocados from Mexico, Mexico's agricultural
authorities initiated a new policy against U.S. cherries requiring cherry
exports to Mexico to undergo a much more rigorous inspection process at
the border than is warranted. As a result, U.S. exports of cherries to
Mexico dropped significantly because U.S. exporters wanted to avoid delays
at the border that would pose risks with such a perishable commodity.
Moreover, the 2004 proposed work-plan of phytosanitary measures was not
signed. Table 2 illustrates examples of SPS controversies between the
United States and Mexico.
29The NAFTA partners also agreed to work through the NAFTA Committee on
Sanitary and Phytosanitary Measures to facilitate technical cooperation in
the development, application, and enforcement of SPS measures.
Table 2: Examples of SPS Controversies between the United States and Mexico
Item:
Importer/Exporter Description
Red meats Mexico recently changed the location of inspection of meat
Mexico/U.S. imports from the United States. Under the previous system,
Mexican inspectors had inspected the U.S. meat loads on the U.S. side of
the border. Now the loads are inspected in Mexico. Even though the loads
carry a U.S. Food Safety and Inspection Service export inspection
certificate, several loads, either whole or partial, have been rejected in
Mexico, creating a complex problem for disposal of the meat. The loads
must be re-exported to the United States or destroyed in Mexico.
Apples Mexico required preshipment inspection and approval of U.S.
Mexico/U.S. exports of apples to Mexico by Mexican inspectors in the
United States. U.S. packers and exporters pay the cost. Mexico delayed
withdrawing its oversight until 2004.
Dry beans Mexico denied entry to U.S. dry bean exports in early 2003 as a
Mexico/U.S. result of a new emergency standard governing the
phytosanitary, quality, and labeling requirements for imported beans for
human consumption.
Source: Proceedings of the Eighth Agricultural and Food Policy Systems
Information Workshop, January 2004, Puerto Vallarta, Mexico. The workshop
was sponsored by the Farm Foundation and organized by Texas A&M
University; the University of Guelph, Ontario, Canada; and Colegio de
Mexico.
U.S. officials explained that SPS measures are the most commonly used
nontariff measure affecting U.S. market access and may indeed, at times,
be applied to protect domestic producers. According to U.S. and Mexican
officials, determining when SPS measures are justified can be difficult
for several reasons, including different country standards and different
conclusions based on scientific data. Officials from USDA's Animal and
Plant Health Inspection Service (APHIS) and its Mexican counterpart
SENASICA (Servicio Nacional de Sanidad, Inocuidad y Calidad
Agroalimentaria) informed us that they are working to harmonize U.S. and
Mexican SPS standards to minimize disagreements. In addition, they are
collaborating to lift Mexico's ban on imports of citrus from Arizona and
areas in Texas due to concerns over fruit fly infestation, as well as to
design and implement a more satisfactory inspection process for U.S. apple
exports to Mexico.
SPS disputes stemming from differing interpretations of scientific data or
differences in regulatory standards illustrate the technical complexity of
plant and animal health protection regulations and their impact on trade.
U.S. officials told us that working through SPS issues with Mexican
authorities under NAFTA provided lessons for later negotiations. They
explained that as developing countries liberalize their markets and begin
to develop mechanisms to address health risks associated with increased
agricultural trade, they often need technical assistance. Thus, the United
States provided trade capacity building assistance to address SPS issues
for some Central American countries and the Dominican Republic in
connection with free trade agreement negotiations with those countries.30
The USDA Unified Export Strategy for Mexico notes that beyond addressing
individual SPS issues there must be broader cooperation with Mexico on
technical issues, such as the harmonization of standards, equivalency of
regulatory processes, and transparency in light of the increasing market
integration of the two countries.
Safeguards U.S. government officials and U.S. agricultural producer
groups told us that Mexico's application of certain safeguards to U.S.
agricultural products have been a trade nuisance. In the years following
NAFTA, Mexico has applied special safeguard agricultural provisions on
imports of U.S. live swine, pork, potato products, and fresh apples in the
form of TRQs as provided for in NAFTA. Mexico also applied a safeguard
under Chapter 8 of NAFTA on certain U.S. poultry products. Specifically,
under NAFTA, Mexico's TRQ on poultry products was to be eliminated on
January 1, 2003. However, in late 2002, Mexico's poultry industry
petitioned the Mexican government to impose a safeguard on U.S. chicken
leg quarters. The Mexican industry argued that the elimination of Mexico's
TRQ would result in a surge in imports from the United States which would
injure Mexican producers. USTR officials said the safeguard on poultry was
a unique situation and questioned whether a similar arrangement could be
achieved in other industries. For more information on U.S. poultry exports
to Mexico, see appendix II.
The poultry case also highlights difficulties encountered in the
implementation of a safeguard due to trade data discrepancies. The United
States and Mexico did not agree on the quantity of U.S. chicken leg
quarters
30Trade capacity building is assistance intended to help developing
countries benefit more broadly from a rules-based trading system. The
Bipartisan Trade Promotion Authority Act of 2002 (Title XXI of the Trade
Act of 2002, P.L. 107-210, Section 2102) declared that among the principal
negotiating objectives of the United States are to strengthen the capacity
of U.S. trading partners. Specific categories of trade capacity building
assistance included trade facilitation; human resources and labor
standards; agricultural development, such as promoting agribusiness;
financial sector development; and infrastructure development. See GAO's
recent report U.S. Trade Capacity Building Extensive, but Its
Effectiveness Has Yet to be Evaluated, GAO-05-150 (Washington, D.C.: Feb.
11, 2005).
that were exported to Mexico in the first half 2003. Mexican data showed a
much larger surge than U.S. data. One U.S. official told us that the main
reason for the large discrepancy was the way Mexico records its initial
import statistics, which is based on notifications of intended imports
filed by Mexican importers, rather than actual imports. After the TRQ on
poultry expired on January 1, 2003, Mexican importers filed large number
of entries, but some never crossed the border. In response to these
difficulties, Mexican officials informed us they have taken steps to clear
notices of intended imports from their database when imports do not
actually occur within a specified time frame.
Tax on Sweeteners Other than In addition to the trade measures discussed
above, Mexico has imposed a
Sugar tax on beverages made with sweeteners other the sugar, which has
led to a strongly contested dispute between the United States and Mexico
regarding market access for U.S. HFCS exports. Specifically, in January
2002, the Mexican Congress imposed a 20 percent product tax on soft drinks
and other beverages that use any sweetener other than cane sugar. This
action meant that Mexico taxes any beverage containing HFCS, no matter the
amount of HFCS present, at a rate of 20 percent, in addition to any other
taxes already imposed. U.S. importers and producers of HFCS were affected
immediately as Mexican beverage manufacturers switched to the use of
domestically produced sugar instead of HFCS imported primarily from the
United States. Although the tax was temporarily suspended by presidential
decision for a 4-month period, Mexico's Supreme Court of Justice
unanimously voted to nullify this decision in July 2002. As a result, the
tax was imposed once again. In December 2002, the Mexican Congress voted
to extend the tax. In 2004, the United States filed a dispute case in the
WTO against Mexico's product tax on HFCS.31 The case is still pending
resolution. See appendix II for more information on the HFCS case.
31WTO Case DS/308.
Mexico Enacted Various Agricultural Programs in Response to Trade
Liberalization, but Structural Problems Impair Growth and Challenge NAFTA
Implementation
Since the early 1990s, the Mexican government has enacted several
agricultural assistance programs to help farmers adjust to the changes
brought by trade liberalization, including NAFTA. Rapid urbanization has
also created political urgency to provide low-cost food by promoting
greater efficiency in domestic food production. The three main programs
had a total budget of over $2 billion in 2003, and their objectives range
from income support to improving agricultural productivity. However,
deepseated structural problems, notably tenuous land ownership and lack of
rural credit, continue to hinder growth and rural development. Opponents
of NAFTA have sought to link lagging rural development and rural poverty
in Mexico to growing imports of U.S. agricultural products. They oppose
further tariff eliminations as called for under NAFTA and demand a
renegotiation of the agricultural provisions of the agreement. This
opposition presents challenges to Mexico's successful transition to
liberalized agricultural trade under NAFTA.
Mexico Has Implemented Several Agricultural Programs and Polices
In response to the changes that market reforms and free trade would bring
to its agricultural sector, Mexico enacted various agricultural programs
and policies since the early 1990s to help farmers adjust to changing
economic conditions. Three of the most significant agricultural assistance
programs have been (1) a major cash transfer program, PROCAMPO (Programa
de Apoyos Directos al Campo); (2) an investment program, Alianza (Alianza
para el Campo); and (3) a marketing support program (Programa de Apoyos
Directos al Productor por Excedentes de Comercializacion para Reconversion
Productiva, Integracion de Cadenas Agroalimentarias y Atencion a Factores
Criticos, formerly Programa de Apoyos a la Comercializacion y Desarrollo
de Mercados Regionales). Besides these three programs, there are other
support programs in rural Mexico, such as Progresa, which was introduced
in 1997 to alleviate poverty through monetary and in-kind benefits, as
well as to invest in education, health and nutrition.
The three major agricultural assistance programs have different levels of
budget and distinct objectives. Appendix III provides a detailed
description of each program.
o PROCAMPO is the largest program in terms of annual budget, amounting to
over $1.2 billion in 2003. It provides direct payments to oilseeds and
grains (including corn) producers on a per-hectare basis. In 2001, it
supported 2.7 million producers on 13.4 million hectares. Its
objectives are to compensate farmers for expected losses under trade
liberalization and the elimination of price subsidies, to make the free
trade agreement acceptable to farmers, to alleviate poverty, and to reduce
migration from rural areas.
o Alianza has an annual budget of around $570 million and supports about
2 million farmers. The program provides matching grants to finance
productive investments and support services. The overall objective of the
program is to improve agricultural productivity by promoting a transition
to higher value crops, improving livestock health, facilitating technology
transfers, and attracting investment in infrastructure.
o The marketing support program had an annual budget of about $580
million in 2003 and benefits 240,000 producers. It provides payments to
producers of grains and oilseeds in certain areas, usually on a per-ton
basis. The Mexican government's evaluation suggests that the program
provides certainty to farmers' income and is an important factor in
mitigating migration from the countryside.
Lagging Rural Development in Mexico Fuels Concerns about the Long-term
Success of NAFTA
Notwithstanding various farm support programs including the ones discussed
above, some researchers and Mexican and U.S. government officials noted
that Mexico still needs to address structural impediments that hinder
rural development. Some of these problems are related to Mexico's tenuous
land ownership, known as the ejido system.32 Some economists argue that
the small size of farm plots under the ejido system does not make for
economically viable production units. In addition, the ejido system limits
farmers' ability to obtain credit using land as collateral because the
farmers do not have clear ownership of the land. Without access to credit,
farmers cannot shift to new technologies and increase productivity.
According to experts, the lack of rural credit has been a key impediment
to Mexican agricultural development. Mexico's financial crisis
32Ejido is a form of land tenure arrangement. It does not allow for full
property rights. In the aftermath of Mexico's revolution (1910-1917), the
Mexican government began to dismantle the country's large haciendas and
distributed the land in ejidos and Indian communes. The reform succeeded
in fragmenting Mexico's agricultural land to a very large extent. Each
ejidatario or comunero was provided approximately 30 hectares to work on.
In order to prevent the re-emergence of large haciendas, the Mexican
Constitution prohibits individuals from owning more than 100 hectares of
irrigated land. Neither ejidos nor the Indian communes allow for full
property rights. Ejidos and Indian communal land cannot be used as
guarantees for credit because banks are not allowed to take them over if
repayments are not made.
of 1995 exacerbated the problem of rural development by severely limiting
the Mexican government's budget available to carry out programs to invest
in rural areas. In addition, according to USDA, other challenges
identified by experts that contribute to the lack of rural development
include: low education level, poor rural infrastructure, environmental
problems related to land use, and low levels of technology.
While U.S. officials note that NAFTA has greatly benefited Mexican
agriculture overall, they express concern about the challenges posed by
lagging rural development to the long-term successful implementation of
the agreement. U.S. officials caution that lagging rural development fuels
the arguments made by opponents of NAFTA that cheap imports from the
United States have depressed Mexican agricultural product prices, hurting
small farmers and deepening rural poverty. In its fiscal year 2005 Unified
Export Strategy for Mexico, USDA acknowledged the need for efforts to
highlight the benefits of NAFTA for Mexico's economy while seeking ways to
help Mexico address its rural development issues.
The implementation of NAFTA became a major political issue as Mexico
prepared to eliminate tariffs and tariff rate quotas in January 2003.
Elimination of these tariffs provided U.S. agricultural exports even
greater access to the Mexican market. In order to respond to intense
criticism by the opponents of NAFTA at that time, USDA officials had to
engage in extensive dialogue with Mexican legislative and executive
officials, and they mounted a public information drive to explain the
benefits of NAFTA for Mexican agriculture. Ultimately Mexico eliminated
the tariffs, but the administration of Mexican President Vicente Fox found
it necessary to negotiate a national agreement on agriculture with various
domestic constituencies. He intended the agreement-referred to as Acuerdo
Nacional para el Campo-to address concerns about perceived negative
effects of trade liberalization on Mexico's rural poor. As part of this
agreement, the Mexican government commissioned several Mexican academic
institutions to study the impacts of NAFTA on Mexican agriculture. This
research generally confirmed that structural problems confronting Mexican
agriculture preceded the implementation of NAFTA. However, certain Mexican
producer groups continue to pressure the government, and a number of
members of Mexico's Congress have strong ties to groups that oppose NAFTA.
U.S. and Mexican government officials and agricultural experts warned that
there may be considerable opposition to the next round of tariff
elimination in 2008. These officials cited the experience in the months
leading up to the latest round of agricultural tariff elimination in 2003.
In addition, they note that corn, one of the three remaining commodities
scheduled to have tariffs lifted in 2008, is a commodity of particular
concern in Mexico. Corn cultivation has ancient roots in Mexican rural
culture; is central to the Mexican diet, accounting for about one-third of
total calories; and remains the principal crop of subsistence farmers. For
these reasons, eliminating tariffs on corn will be a sensitive cultural
issue, as well as a matter of economic concern.
Certain farm groups in Mexico have argued that allowing cheap imports of
U.S. corn will drive the Mexican agriculture into ruin. Mexican
politicians who oppose NAFTA note the continuing economic distress in
rural areas of Mexico and insist on renegotiation of the agricultural
provisions of the agreement to improve the conditions of Mexican farmers.
Although the total elimination of already low Mexican tariffs on corn may
not have much economic significance for U.S. producers, failure to comply
with the final phase of tariff elimination may undercut support for NAFTA
among U.S. producers who were in favor of the agreement with the
expectation that it would lead to genuinely free trade. Additionally, U.S.
trade officials have expressed serious reservations about any attempt to
renegotiate the agricultural provisions of NAFTA, because it could lead to
demands to renegotiate other aspects of the agreement and undermine the
agreement as a model for trade liberalization throughout the Western
Hemisphere.
U.S. Agencies Undertake Collaborative Agricultural Efforts, but Do Not
Focus on Rural Development Challenges to Mexico's Transition to
Liberalized Trade
Over the last 10 years, U.S. agencies, primarily led by USDA, have carried
out numerous activities that benefit both U.S. and Mexican agricultural
interests. However, these activities have not been intended to address the
challenges presented by lagging rural development to Mexico's transition
to liberalized trade under NAFTA. While the United States provides
technical assistance to more recent free trade partners to facilitate
their adjustment to trade liberalization, no such assistance was arranged
for Mexico under NAFTA. Nevertheless, since 2001 the United States has
supported collaborative efforts to promote economic development in the
parts of Mexico where growth has lagged under the Partnership for
Prosperity (P4P) initiative. Officials from both countries are working on
a broader approach to Mexican rural development under the initiative, but
they recognize that much still needs to be done in this area. In an effort
to support rural development through P4P, the United States has provided
some limited technical assistance to the Mexican government's new rural
lending institution. Recognizing the importance of rural development to
the successful implementation of NAFTA, State Department and USDA
strategies for Mexico call for building on collaborative activities under
P4P to pursue the related goals of rural development and trade
liberalization under NAFTA; however, the P4P action plans do not set forth
specific strategies and activities that could be used to achieve these
goals.
United States Pursues Many Collaborative Agricultural Efforts in Mexico
Historically, U.S. agencies have undertaken numerous collaborative
agricultural efforts of mutual interest with their Mexican counterparts;
however, the agencies have not intended those efforts to address the
challenges presented by lagging rural development. USDA, in conjunction
with its Mexican counterparts, has led most of these efforts as part of
its traditional mission of supporting U.S. agricultural production and
exports. With the exception of pest eradication efforts sponsored by the
Animal and Plant Health Inspection Service (APHIS)-approximately $280
million over the past 10 years-all USDA activities have involved modest
funding of less than $8 million combined since NAFTA was implemented.
Some U.S. agencies have been involved in collaborative efforts with Mexico
in pursuit of plant, animal, and human health objectives. USDA's APHIS and
Food Safety and Inspection Service and the Food and Drug Administration
have implemented several programs in Mexico to protect U.S. agriculture
and consumers while also facilitating the export of Mexican agricultural
products. For example, APHIS programs are working with the Mexican
government and growers to eradicate the Mediterranean fruit fly.
Eradicating the fruit fly is of great interest for U.S. fruit farmers.
However, eliminating the fly would also allow Mexican farmers to
eventually export fruit crops from formerly infested areas. Over the past
10 years APHIS has used almost all of its funds in Mexico for
collaborative projects to finance various pest eradication efforts.
USDA's research, data collection, and marketing agencies, such as the
Economic Research Service (ERS), National Agricultural Statistics Service,
and Agricultural Marketing Service, have worked with their Mexican
counterparts to enhance Mexico's capacity to collect, analyze, and
disseminate agricultural information. According to ERS officials, these
efforts have improved and facilitated agricultural trade transactions
through the Emerging Markets Program. Economic Research Service officials
said that while the focus of the Emerging Markets Program is to improve
Mexico's data gathering and reporting systems, USDA has also benefited
from Mexico's improved capabilities because having reliable information
facilitates public and private decision making for both the United States
and Mexico.
The Agriculture Research Service and the International Cooperation and
Development area of USDA's Foreign Agriculture Service have participated
in extensive scientific and academic research to improve Mexico's
agricultural production. According to the Agriculture Research Service,
there are several concerns over agricultural trade, including food safety,
use and consumption of transgenic products,33 and control of plant and
animal pests and diseases. For a list and description of collaborative
activities with Mexico implemented by USDA agencies, see appendix IV.
NAFTA Did Not Provide Technical Assistance to Strengthen Mexico's Trade
Capacity
While the United Sates has provided technical assistance and support to
more recent free trade partners through trade capacity building (TCB), no
such assistance was arranged for Mexico when NAFTA was concluded in 1994.
TCB became an element of U.S. trade policy after it was introduced under
the WTO Doha Development Agenda in 2001.While it was recognized that some
agricultural sectors in Mexico would find it challenging to adjust to free
market conditions when NAFTA was being negotiated, the agreement did not
require that Mexico should receive any assistance to facilitate the
transition of its farmers to a more open market.
One senior Mexican government official noted that in hindsight TCB or some
type of assistance like it would have been beneficial as Mexico entered
into a free trade environment with two very strong economies (the United
States and Canada). However, this official stressed that Mexico has done
very well under NAFTA overall, although small farmers have not typically
benefited from economic opportunities provided by the agreement. Even
though the United States does not have a comprehensive effort to provide
TCB assistance to Mexico, some U.S. agencies have undertaken limited
activities in Mexico, which they have characterized as TCB.
P4P Introduced a Broader Approach to Rural Development
In 2001, U.S. President George W. Bush and Mexican President Vicente Fox
launched the P4P initiative, a new model for bilateral cooperation
involving a public-private approach to collaborative development efforts.
This new initiative is aimed at assisting those economically depressed
regions of Mexico that are the primary sources of migration. These areas
tend to be
33Transgenic products refer to a plant or animal variety that contains
genes from a different species transferred using genetic engineering
techniques.
P4P Expanded Collaborative Activities to New Areas, but Many Rural Regions
of Mexico Remain Untouched
rural regions in Mexico. While P4P seeks to create a new model for
collaborating on economic development in Mexico, officials from both
countries recognize that few activities have been implemented under P4P
that directly affect poor rural areas and that much still needs to be done
in the area of rural development.
P4P seeks to create a public-private alliance and develop a new model for
U.S.-Mexican bilateral collaboration to promote development, particularly
in regions of Mexico where economic growth has lagged and has fueled
migration. No new funds were specifically allocated to P4P by either
government; instead, the U.S. government sought to refocus resources
already devoted to Mexico to create a more efficient collaborative
network. According to State Department and USDA officials, since its
establishment, P4P has become the umbrella for bilateral development
collaboration and providing a broader approach to Mexico's rural
development needs that includes occupational and economic alternatives for
people in the countryside.
While this broader approach to rural development has been embraced by both
the United States and Mexico, few activities have been implemented under
P4P that directly affect poor rural areas. At the most recent P4P
conference in Guadalajara, Mexico, a high-level State Department official
responsible for P4P noted that many rural areas throughout central and
southern Mexico have not yet been touched by P4P. Similarly, Mexican
government officials commented that even though the P4P concept holds much
promise, only a few new activities have been undertaken in rural
development. For example, Mexican government officials told us and U.S.
government documents confirm that approximately $10 million allocated for
USAID rural development activities in Mexico under P4P have not yet been
used to fund any new projects.34
34In recent months USAID has obligated funds for several rural development
activities in Mexico. See appendix V for a description.
Under P4P, the United States Supports Efforts to Facilitate Rural Access
to Credit
Nevertheless, since the initiation of P4P, there have been several
first-time achievements that benefit Mexico's overall economic
development. For example, under an arrangement worked out by the U.S. and
Mexican government in cooperation with private sector financial
institutions, the cost of remittances from the United States to Mexico has
dropped by more than 50 percent over the last 3 years.35 Remittances from
Mexican laborers living in the United States reached a record $16.6
billion in 2004. In addition, in 2003 a bilateral agreement was reached
through P4P to allow the U.S. Overseas Private Investment Corporation
(OPIC) to operate in Mexico for the first time. The agency's mission is to
help U.S. businesses invest overseas to foster economic development in new
and emerging markets. According to OPIC officials, for over 30 years there
had been resistance by the Mexican government to allow the agency to
operate in Mexico because of concerns over sovereignty. Since the
bilateral agreement was signed, the OPIC has provided financing to five
projects in Mexico, including one related to agriculture. For a
description of this and other activities related to rural development by
U.S. agencies under P4P, see appendix V.
One of the few P4P activities to target rural communities is the U.S.
technical assistance provided to the Mexican government's new rural
lending institution, Financiera Rural.36 Financiera Rural supports
agricultural and other economic activities in Mexico's rural sector with
the goal of raising productivity as well as improving the standard of
living of rural populations by facilitating access to credit. Through the
USDA Cochran Fellowship Program, several Financiera Rural officials were
trained in the United States on how to operate a rural credit program.
These officials will serve as trainers for credit managers for Financiera
Rural. In addition, through a USAID fellowship, USDA arranged for a U.S.
expert to assist Financiera Rural in developing a strategic plan. This
strategic plan calls for the development of rural financial lending
intermediaries in Mexico, which will be fostered using a model that
complies with Mexico's legal framework, determined by a study to be
conducted jointly by the Financiera Rural and the Inter-American
Development Bank. The new strategic plan also proposes that Financiera
35Remittances refer to the portion of international migrant workers'
earnings sent back from the country of employment to the country of
origin.
36Mexico established Financiera Rural in 2002, and it is still in a
development stage. It replaced an earlier Mexican government agricultural
lending institution, Banrural, which went bankrupt because of high
operating costs.
Rural fund any productive endeavor in the countryside, not only
agricultural production. Activities could include eco-tourism, rural gas
stations, transportation services, and so on. According to senior
Financiera Rural officials, U.S. technical assistance under P4P has been
instrumental in helping them roll out their rural credit program.
Financiera Rural officials told us that while the assistance they have
received under P4P has had a positive impact, it has been limited. They
said that Financiera Rural faces a great challenge in efforts to address
limited credit availability in the countryside, which, as noted earlier in
this report, is a key factor in Mexico's lagging rural development. In
order to be able to establish an effective rural lending system for small
and medium size farmers in Mexico, these officials explained that they
need to shift from primarily short-term to long-term credit, develop a
network of regional and local intermediary lending institutions, and
provide financing for alternative rural economic activities beyond direct
agricultural production. Mexican and U.S. officials told us that in order
to accomplish these goals Financiera Rural needs to develop expertise in a
number of areas, such as risk assessment, project management, and loan
evaluation. These officials stated that the expertise in the field of
rural credit that exists in the United States would be helpful in ensuring
that Financiera Rural is successful in providing credit to small farmers
and other entrepreneurs in the Mexican countryside.
P4P Does Not Specify Activities to Promote Rural Development in Support of
Mexico's Transition to Liberalized Trade under NAFTA
P4P offers an avenue for the United Sates to provide technical assistance
and support to Mexico similar to what it has provided to more recent free
trade partners through TCB, according to a senior USDA official.
Similarly, Mexican officials said P4P provides the opportunity to make
technical assistance available in areas such as rural development, which
have not yet benefited from NAFTA. Recognizing the importance of rural
development to the full and successful implementation of NAFTA, the State
Department's Mission Performance Plan and USDA's Unified Export Strategy
for Mexico call for building on collaborative activities under the P4P to
pursue rural development and support trade liberalization. However, P4P
documents generally have little to say about furthering Mexico's
successful transition to liberalized agricultural trade under NAFTA, and
P4P action plans do not set forth specific strategies and activities that
could be used to advance rural development in support of free trade.
The lack of specific plans under P4P to pursue rural development in
support of NAFTA is particularly noteworthy because USDA officials
expressed concerns that Mexico's lagging rural development presents a
challenge to the successful transition to liberalized trade under NAFTA,
including the elimination of remaining tariffs in 2008. USDA officials
noted that the underlying factors in Mexico's lagging rural development
are structural and need to be addressed internally by Mexico.
Nevertheless, USDA's Unified Export Strategy for Mexico calls for
coordination with the U.S. Agency for International Development to pursue
a rural development strategy under the rubric of the P4P initiative. This
document also acknowledges the need to continue to underscore the benefits
of free trade for Mexico under NAFTA while seeking ways to help Mexico
address its rural development issues. USDA officials stressed that it is
critical to change the debate from the need for protection from U.S.
imports to promoting rural development in Mexico so that small and medium
farmers can take advantage of the opportunities provided by free trade.
Conclusions As tariffs and tariff-rate quotas have been reduced or
eliminated under the provisions of NAFTA, Mexican authorities have come
under pressure to put in place technical barriers to protect producers
from perceived harm from growing U.S. imports. Moreover, while Mexico has
taken the steps called for under NAFTA to liberalize trade, lagging rural
development fuels opposition to further implementation of the agreement.
Yet the full and successful implementation of NAFTA is an important factor
in assuring market access for United States agricultural exports to
Mexico, and it is critical to broader U.S. trade interests because NAFTA
is a model for trade liberalization in the Western Hemisphere. While the
strategies of U.S. agencies in Mexico see an opportunity to build on the
P4P initiative to pursue the related goals of rural development and trade
liberalization under NAFTA, P4P documents generally have little to say
about NAFTA. More specifically the P4P action plans do not set forth
specific strategies and activities that could be used to advance rural
development in support of free trade. P4P offers an opportunity for the
United States to design a multi-agency comprehensive strategy to address
the challenges presented by lagging rural development to Mexico's
transition to liberalized agricultural trade under NAFTA, rather than
providing assistance through individual measures.
Mexico's experience adjusting to the challenges of trade liberalization,
ranging from difficulties associated with the application of SPS measures,
problems raised by trade data discrepancies with the United States, and
lagging rural development, illustrate the importance of technical
assistance. While Mexico did not seek assistance under NAFTA to adjust to
trade liberalization, the U.S. government has acknowledged the usefulness
of technical assistance in addressing such challenges by providing TCB
assistance in later trade agreements with developing countries. In Mexico,
P4P offers an avenue for the United States to provide such technical
assistance. A key impediment to Mexican rural development is the lack of
credit in the countryside, and the United States with its significant
experience in rural lending has the technical expertise Mexico seeks.
Moreover, most of Mexico's structural impediments must be dealt with
internally, but facilitating rural credit is one area in which the United
States, through P4P, is in a position to collaborate with Mexico.
Improving the rural economy through credit facilitation increases the
opportunities for Mexican importers of U.S. agricultural commodities and
begins to counter negative perceptions of NAFTA's impact.
Recommendation for Executive Action
To aid the full and successful implementation of NAFTA, we recommend that
the Secretary of State, as the head of one of the lead agencies for the
P4P initiative, work with USDA and other relevant agencies to develop an
action plan under P4P laying out specific collaborative efforts on rural
development that would support the successful implementation of NAFTA.
Such a plan could include a comprehensive strategy that outlines specific
activities that are intended to address the challenges presented by
lagging rural development to Mexico's successful transition to liberalized
agricultural trade under NAFTA, and sets time frames and performance
measures for these activities.
To promote rural development in Mexico and enhance Mexican small farmers'
ability to benefit from trade opportunities under NAFTA, which would also
help shape a more positive perception of the agreement, we recommend that
the Secretary of State, as the lead agency for the P4P initiative, work
with USDA and other relevant agencies to expand collaborative efforts with
the Mexican government to facilitate credit availability in the
countryside. This would include providing Mexico with expertise in the
area of rural financing, such as risk assessment, project management, and
loan evaluation.
Agency Comments and Our Response
We provided a draft of this report to the Department of State, USDA, USTR,
USAID, FDA and OPIC for their review. We received formal written comments
from the Department of State and from USDA, which are reprinted in
appendixes VI and VII, respectively, along with our responses to specific
points. In its written comments, the Department of State agreed with the
need to develop a P4P action plan on rural development, and noted that on
February 17, 2005, the U.S. and Mexican governments agreed to create a new
structure under P4P establishing seven permanent working groups, including
one on rural development. Each of these working groups has been asked to
develop an action plan for 2005 activities. The Department of State also
emphasized that the broader goal of P4P is to spur economic growth and
development in parts of Mexico that have benefited less from NAFTA (i.e.,
not limited to rural development) and noted that the P4P initiative must
work within existing resources. The Department of State raised concerns
that the report generally overstates the strength of opposition to NAFTA
in Mexico. However, we do not believe we have overstated the opposition to
NAFTA in Mexico. As noted in the report, U.S. and Mexican officials
expressed concerns about how negative perceptions of NAFTA may impact
successful implementation of the agreement. In addition, the report
recalls the difficulties experienced in Mexico in anticipation of tariffs
elimination under NAFTA in 2003.
In its letter, USDA expressed readiness to work with the Department of
State and with other agencies, under P4P, to develop collaborative efforts
to support Mexican rural development and facilitate the continued and
successful implementation of NAFTA. The Department of State, USDA, USTR,
OPIC, and FDA also suggested clarifications, technical corrections, and
elaboration of certain points which we have incorporated into this report,
as appropriate. USAID comments were incorporated in the formal letter from
the Department of State.
We also obtained comments on key sections of the report from the Mexican
Ministry of the Economy (SE), the Ministry of Agriculture (SAGARPA), and
Mexico's rural lending institution for small and medium farmers
(Financiera Rural). SE and SAGARPA submitted joint comments. While
commending the overall positive portrayal of the U.S.-Mexican agricultural
trade relationship, SE and SAGARPA expressed concern that the report did
not sufficiently underscore the importance of the Mexican market for U.S.
exports under NAFTA. They cited U.S. trade data to illustrate the dramatic
growth in certain U.S. commodity exports to Mexico since NAFTA has been in
effect. They noted that Mexico is the largest foreign market for U.S. beef
and rice and the second largest foreign market for U.S. corn, pork,
poultry, and apples, some of the commodities our report highlights to
illustrate the effects of Mexican trade measures.
Additionally, SE and SAGARPA commented that our report did not provide a
sufficiently detailed objective analysis regarding the nature and validity
of various Mexican trade measures. These agencies expressed concern that
the report unfairly portrays various Mexican trade measures without an
adequate evaluation of the facts behind Mexico's implementation of these
measures, such as the scientific support for certain SPS requirements, and
the legitimate findings of antidumping investigations. SE and SAGARPA also
objected to the report's reliance on the testimony of parties directly
impacted by these measures. Similarly, SE and SAGARPA expressed
disappointment that the report does not examine U.S. trade measures that
impact Mexican agricultural exports to the United States, which parallel
many of the difficulties faced by U.S. agricultural exports to Mexico.
Finally, SE and SAGARPA also stressed that the debate over the impact of
NAFTA on the Mexican rural economy does not have any substantive
implications for the implementation of Mexico's obligations under the
agreement.
GAO fully recognizes, and our report documents, the vital importance of
the Mexican market for U.S. agricultural exports. We note the rapid growth
in the value of U.S. agricultural exports to Mexico, which grew on average
17.4 percent annually and almost doubled from 1993 to 2003. We also point
out that Mexico is the third largest market for U.S. agricultural exports
and that its share of the U.S. agricultural export market has risen from 8
percent in 1993 to about 13 percent in 2003.
Regarding the concerns raised by SE and SAGARPA about the nature of GAO's
analysis, we believe the report presents a balanced and objective
description of key Mexican trade measures that affect U.S. agricultural
exports to Mexico. Consistent with GAO's overarching mission to help
improve the performance and accountability of U.S. government programs and
activities, our report provides recommendations to the Department of State
and USDA to help ensure the successful implementation of NAFTA. Since it
is outside GAO's jurisdiction to audit foreign government programs and
procedures, our treatment of Mexican trade measures is descriptive not
evaluative. We include testimonial, as well as other evidence, in our
report in order to illustrate the positions of various parties. Throughout
the report we have included the views of responsible Mexican officials and
have added clarifications to the report in response to specific comments
made by these Mexican agencies. For example, we added language to the
report to clarify that the existence of a case under dispute settlement
proceedings does not necessarily mean a trade partner's actions violate
the provisions of NAFTA or other trade agreements. Similarly, we
eliminated references to difficulties related to labeling requirements and
import permits, which, as USDA officials have acknowledged, have not been
used frequently by Mexico. Instead we focused only on Mexico's tax on
beverages containing nonsugar sweeteners. In addition, our report covered
a number of areas including collaborative activities of U.S. agencies in
Mexico and concerns about the long-term success of NAFTA, as well as
Mexican trade measures that impact U.S. agricultural exports to Mexico.
While we are aware that Mexican agricultural exports to the United States
also encounter challenges meeting U.S. import requirements, these issues
were outside the scope of this project. We have included language
clarifying the scope of our work in this report.
Regarding the point raised by SE and SAGARPA on Mexico's determination to
proceed with the implementation of NAFTA, our report does not question the
commitment of Mexican authorities to fulfill their obligations under the
agreement. However, both U.S. and Mexican officials have expressed
concerns about how negative perceptions of NAFTA may impact successful
implementation of the agreement. Some of these officials recalled the
difficulties experienced at the time of the 2003 tariff eliminations,
including mass demonstrations against NAFTA, calls for a moratorium on
implementation of the agreement, and pressure to renegotiate the
agricultural provisions of NAFTA. We believe that in accordance with U.S.
government pronouncements regarding the importance of NAFTA for U.S. farm
interests, it is appropriate for U.S. agencies to actively plan to support
the successful implementation of the agreement.
In addition to these broader comments on the report's presentation and
approach, SE and SAGARPA provided technical comments and clarifications on
Mexican agricultural programs, such as clarification on PROCAMPO payments,
and on the crops included under the Direct Payments for Target Income
subprograms. We have made a number of changes in the report to reflect
their comments. Financiera Rural had only one technical comment on our
representation of that agency's strategic plan, which we have incorporated
into our report.
As we agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 30
days from
the date of this letter. We will then send copies of this report to
appropriate
congressional committees and to the U.S. Trade Representative and the
Secretaries of the Departments of Agriculture and State. Copies will be
made available to others upon request. In addition, this report will be
available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions concerning this report, please
contact me at (202) 512-4347 or at [email protected]. Other GAO contacts and
staff acknowledgments are listed in appendix VIII.
Sincerely yours,
Loren Yager
Director International Affairs and Trade
Appendix I
Objective, Scope, and Methodology
To obtain information about the progress made, as well as difficulties
encountered, in gaining market access for U.S. agricultural exports to
Mexico, we reviewed the commitments in the NAFTA, including the tariff
elimination schedules for agricultural products. We reviewed official
documents related to various phases in the implementation of NAFTA and met
with USDA and USTR officials to document progress made on each phase of
tariff elimination. We studied trade flows to track changes in U.S.
agricultural exports to Mexico, both at the aggregate level and at the
product level using USDA's Foreign Agricultural Trade of the United States
database. We discussed the limitations and reliability of the trade data
with USDA officials and determined the trade data reported by USDA are
sufficiently reliable for the purpose of this report. We used various
price indexes to adjust the trade value for inflation to convert trade
values to constant 2003 dollars. We reviewed USDA publications on the
Mexican market for U.S. agricultural products, and we reviewed studies by
U.S. government and academic sources on the impact of NAFTA on U.S.
exports to Mexico. We met with officials from USTR, USDA, and various
producer groups to ascertain the progress and the difficulties in market
access for U.S. agricultural exports to Mexico. We obtained from USTR a
list of trade disputes with Mexico since NAFTA and reviewed WTO and NAFTA
documentation on these agricultural trade dispute settlement cases. While
we describe Mexico's use of trade measures, we did not evaluate the
validity of their application. To illustrate the scope and type of market
access issues faced by U.S. agricultural exports to Mexico, we selected
seven commodities to analyze and present as case studies. Our analysis and
criteria for selecting the commodities is presented in appendix II.
In order to review how Mexico has responded to the challenges and
opportunities presented by free trade in agriculture and explore remaining
challenges to the successful implementation of NAFTA, we reviewed relevant
studies and research prepared by the Mexican Ministry of Agriculture
(Secretaria de Agricultura, Ganaderia, Pesca y Alimentacion- SAGARPA), the
World Bank, the United Nations Food and Agriculture Organization, and
USDA. We conducted an extensive literature search, screening the results
to identify the most appropriate research and studies. We considered
various screening criteria including source, timing, and venue of
publication. We cross checked key conclusions in various studies to assess
their credibility. We reviewed the methodologies described for the studies
we report on to determine their limitations. We also interviewed several
authors of key studies we used in our report to clarify our understanding
of their methodology and their conclusions. Finally, we discussed the
conclusions of these studies with other experts including
Appendix I Objective, Scope, and Methodology
agricultural researchers and U.S. and Mexican government officials with
expertise in the area of Mexican agriculture.
We obtained data from SAGARPA and the Mexican National Institute of
Statistics, Geography, and Information Technology (Instituto Nacional de
Estadisticas, Geografia, e Informatica) on agricultural production. We did
not assess the reliability of the production data; however, the general
trend of production is consistent with what is widely reported in other
studies. We reviewed official Mexican government documents and other
studies, which describe the major agricultural policies in Mexico since
early 1990s. We interviewed current and past SAGARPA officials and the
officials from the Ministry of the Economy (Secretaria de Economia-SE),
who are familiar with current agricultural programs and the evolution of
these programs under NAFTA.
We obtained information from USDA agencies (FAS, APHIS, ERS, NASS, ARS,
FSIS, and AMS) and from FDA on agriculture-related collaborative
activities they have undertaken in Mexico for the 10 years that NAFTA has
been in effect (1994 through 2004). This information included activity
descriptions and funding by agency. To assess the quality and reliability
of the data submitted by each agency, we interviewed the agency officials
responsible for the data and reviewed the data provided. When we noted
discrepancies or gaps in the data, we discussed these with the agency
officials and obtained corrections and/or clarifications. Based on our
work, we determined that the data were sufficiently reliable to portray
overall levels of expenditures and the nature of these activities. For
USDA agencies, we compiled this data in a set of tables presented in
appendix IV. These tables reflect funding for activities implemented by
these agencies from 1994 through 2004; however, some of the agency
activities started before 1994, while others were concluded before 2004.
For FDA we present a summary description of agency activities in the same
appendix.
We met with State Department officials in Washington, D.C., and U.S.
embassy officials in Mexico to discuss U.S. efforts under the Partnership
for Prosperity (P4P). We reviewed documents from the Department of State
on P4P including the 2002 and 2003 P4P reports to Presidents Bush and Fox,
the P4P Action Plan, testimonies by State officials, and press releases on
P4P activities. In order to report on P4P activities related to
agriculture or rural development, we discussed agency plans and ongoing
activities with USDA, U.S. Agency for International Development, and
Overseas Private Investment Corporation officials. We also discussed the
impact of P4P with Mexican government officials from SAGARPA, the
Appendix I Objective, Scope, and Methodology
Mexican Ministry of the Economy (SE), the Mexican Ministry of Foreign
Affairs (Secretaria de Relaciones Exteriores), and Mexico's rural lending
institution for small and medium size farmers (Financiera Rural).
We conducted our review from February 2004 through February 2005 in
accordance with generally accepted government auditing standards.
Appendix II
Case Studies of Selected U.S. Agricultural Exports to Mexico
To illustrate the range of market access barriers faced by certain U.S.
agricultural exports to Mexico, we selected seven products to analyze and
present as case studies: apples, beef, corn, high-fructose corn syrup
(HFCS), pork, poultry, and rice. Each of the case studies includes a brief
background and history of the exported product's experience accessing the
Mexican market, a description of the types of market access barriers each
product faces, and a summary of the current status of market access
issues. We selected commodities as representative of (1) products at
various stages of the tariff elimination schedule; (2) different
agricultural sectors- for example, grains (rice), horticultural products
(apples), and meat (pork); (3) products that face varying types of tariff
and nontariff barriers; (4) the range of mechanisms used in attempting to
settle market access disputes; and (5) varying levels of export volume and
value. Information presented in the case studies is based on our analysis
of trade data, review of U.S., Mexican, WTO, and NAFTA official documents,
and interviews with U.S. and Mexican government officials and various
private sector representatives.
Apples
Background and Trade Data Prior to NAFTA, Mexico restricted access to its
fresh apple market through import licensing requirements and the
application of a 20 percent tariff. In 1991, Mexico eliminated the
licensing requirements. As part of its NAFTA commitments, Mexico
established TRQs on apples, which were to be phased out over a 9-year
period and result in duty-free access for U.S. apple imports by 2003. USDA
reports that U.S. apple exports to Mexico have exceeded these specified
TRQ amounts in each of the years following NAFTA's implementation. The
United States is the world's leading apple producer, and apples comprised
the largest portion of fruit exports to Mexico in 2003. U.S. apple exports
to Mexico accounted for nearly 23 percent of U.S. worldwide apple exports.
Between 1994 and 2003, the total quantity of fresh apple exports to Mexico
increased by an average of 4.7 percent annually, and the value of exports
totaled nearly $71 million in 2003 (see fig. 3).
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
Figure 3: Total Volume of U.S. Fresh Apple Exports to Mexico, 1989-2003
Metric tons in thousands
250
200
150
100
50
0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
2003
Year
Source: GAO, based on USDA Foreign Agricultural Trade of the United States
database.
Key Market Access Issues A key market access issue for U.S. apple
exporters is the way Mexico has sought to exercise oversight for the
application of its phytosanitary requirements. Mexico requires
phytosanitary certificates for U.S. apples due to concerns about apple
maggots in shipments. According the USDA's Economic Research Service, most
countries accept U.S. systems approaches for pest management as adequate
protection against the threat of apple maggot. Mexico, however, requires
that apples undergo a process called "cold treatment" before U.S. apple
shipments can be imported into Mexico. Additionally, Mexico required that
the Mexican government inspect and certify U.S. storage and treatment
facilities. The treatment and inspection process increased U.S. producers'
cost of exporting apples to Mexico. In 1998, Mexico turned over
supervision of the inspection program to USDA. Nevertheless, according to
the U.S. Apple Association, some apple-producing states have been
effectively shut out of the Mexican apple market because of the
prohibitive treatment and certification costs. For example, the
association representative noted that producing states like Pennsylvania,
the fourth largest apple-producing state in the country, cannot recoup the
"hundreds of thousands of dollars" of costs incurred through these
inspections.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
In addition to Mexico's phytosanitary treatment and certification
requirements, Mexico initiated an antidumping investigation against U.S.
apples in 1997 and imposed a preliminary import duty of more than 100
percent on Red and Golden Delicious apples. In 1998, the U.S. apple
industry and the Mexican government signed an agreement suspending this
duty, and the U.S. industry agreed to comply with a minimum-price scheme.1
U.S. apple exports to Mexico declined in 1998 (when the antidumping duty
was in place) but experienced large, successive increases in 1999, 2000,
and 2001 under the price agreement. However, in August 2002, the minimum
price scheme was dropped at the request of Mexican growers, and Mexico
resumed the dumping case and imposed antidumping duties of more than 45
percent on U.S. apples. As a result, U.S. exports decreased in 2002 and
2003. According to the U.S. Apple Association, the timing of the Mexican
imposition of the dumping duty was notable, since NAFTA's tariff rate
quota and duty on apples were to be lifted on January 1, 2003. For this
reason, the association noted that many U.S. apple exporters question the
merits of the dumping allegations and maintain that Mexico is
inappropriately restricting market access in order to protect its domestic
industry.
Current Status and Future U.S. apple industry representatives note that
Mexico's policies restrict U.S.
Challenges producers' access to Mexico's market. The U.S. apple industry
notes that the treatment certification process takes several years and can
be prohibitively costly in U.S. states where there are fewer producers to
share costs. Furthermore, the U.S. apple industry is very fragmented,
which is a significant challenge in dealing with market access problems in
Mexico. For example, even though producers find the certification process
burdensome, the industry does not have a joint strategy on how to address
this problem.
Beef
Background and Trade Data In 1992, 2 years prior to NAFTA's
implementation, Mexico raised tariffs on imported beef from zero to 20
percent. Per NAFTA, Mexico immediately eliminated these tariffs on imports
of most U.S. beef products, and U.S.
1Minimum pricing is also referred to as reference pricing.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
beef exports to Mexico increased.2 The recession that followed the 1994
peso crisis caused U.S. beef exports to Mexico to drop sharply by 1995,
and exports did not recover fully until 1997. U.S. beef exports have grown
steadily since 1995, and USDA notes that this increase is linked partially
to the continuing improvements in the Mexican economy. Between 1994 and
2003, the volume of U.S. beef exports to Mexico increased by an average of
21 percent annually, and beef exports to Mexico accounted for 22.4 percent
of the volume of U.S. beef exports worldwide (see fig. 4). The value of
exports to Mexico in 2003 totaled $604 million.
Figure 4: Total Volume of U.S. Beef Exports to Mexico, 1989-2003
Metric tons in thousands
250
200
150
100
50
0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
2003
Year
Source: GAO, based on USDA Foreign Agricultural Trade of the United States
database.
Key Market Access Issues Although the volume of U.S. exports to Mexico has
been increasing steadily over the past 10 years, market access for U.S.
producers has been affected by antidumping actions and a ban on U.S. beef
following the discovery in the United States of one cow (originally
imported from Canada) with bovine spongiform encephalopathy (BSE) or "mad
cow disease." First, in 1994, the Mexican National Livestock Association
initiated an antidumping
2Under NAFTA, Mexico also agreed to phase out a 20 percent tariff on U.S.
beef offal over a 9-year period that ended on January 1, 2003.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
case against certain types of beef imports by claiming discriminatory
pricing on the part of U.S. exporters. Following industry-to-industry
negotiations, the U.S. National Cattlemen's Beef Association and the
Mexican National Livestock Association signed a memorandum of
understanding that formalized an agreement to (1) share U.S. technologies
with Mexican producers and (2) coordinate both groups' efforts to promote
beef consumption in Mexico. As a result, the Mexican National Livestock
Association dropped the dumping petition.
However, in 1998 charges were made once again that the United States was
dumping beef in Mexico. On August 1, 1999, Mexico announced antidumping
tariffs that varied by company. Individual U.S. beef exporters appealed
these tariffs, and on October 10, 2000, Mexico published a set of revised
antidumping tariffs for certain beef exporters. These duties range from
zero to 80 cents per kilogram, depending on the company and the type of
beef. On June 16, 2003, the United States requested WTO consultations on
Mexico's antidumping measures on rice and beef, as well as certain
provisions of Mexico's Foreign Trade Act and its Federal Code of Civil
Procedure.3 In addition, a NAFTA Chapter 19 panel is expected to rule
shortly on whether these duties were applied in accordance with Mexican
law.
According to the National Cattlemen's Beef Association, the root of the
beef trade dispute in Mexico lies in the lack of differentiation between
the values for various cuts of meat. In Mexico, the different cuts of beef
generally all have the same value, whereas in the United States different
cuts of beef have different values. These different values have led to
antidumping cases against the United States because any commodity that
sells for less than the value of the product in the home country is
considered dumping. According to the National Cattlemen's Beef Association
representative, demand for variety meats (such as tripe and liver) is
significantly higher in Mexico than it is in the United States. Because of
these demand conditions, U.S. exporters can sell variety meats at a lower
price, which leads Mexico's industry to believe the United States is
dumping these products on the Mexican market.
In addition to facing dumping duties, the detection of one case of BSE in
the United States in December 2003 led Mexico to impose a ban on all U.S.
beef products. In March 2004, Mexico was the first country to reopen its
3WTO Case DS/295.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
market to certain types of U.S. beef products (U.S. boxed beef under 30
months of age), expanding the list of allowable beef products in April
2004, and USTR reports that the U.S. government is working to re-open the
remainder of the market as soon as possible.
Current Status and Future According to producer group officials, market
access for U.S. beef exports
Challenges to Mexico has generally been very good, as evidenced by overall
increases in trade. Both U.S. and Mexican industries plan to continue
working together to resolve any potential trade disputes through industry
negotiations. USTR notes that U.S. and Mexican beef and cattle industries
are increasingly integrated, with benefits to producers, processors, and
consumers in both countries.
Corn
Background and Trade Data Corn is an important commodity in Mexico; in
addition to being a dietary staple, white corn is the principal crop for
many Mexican small farmers, and historically corn production is a
fundamental feature of Mexican rural culture. Consequently, NAFTA
negotiations regarding the phase-out of import barriers for corn were
particularly sensitive. Prior to NAFTA, Mexico restricted access to its
corn market through import licensing requirements, and there was no
guaranteed level of access for U.S. imports. During NAFTA negotiations, it
was widely believed in Mexico that immediate increases in imports of U.S.
corn would displace Mexican corn producers. As a result, NAFTA negotiators
agreed to allow Mexico to replace its import licensing requirements with
transitional TRQs that will be phased out over a 14-year period-the
longest transition period set forth in the agreement.
The United States has been one of the major foreign suppliers of yellow
(feed) corn to Mexico, and U.S. exports to Mexico comprised 13 percent of
all U.S. corn exports worldwide in 2003. Between 1994 and 2003, the volume
of U.S. corn exports to Mexico increased by an average of 18.5 percent
annually (see fig. 5). The value of exports to Mexico in 2003 totaled $651
million.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
Figure 5: Total Volume of U.S. Corn Exports to Mexico, 1989-2003
Metric tons in thousands 8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000 0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Source: GAO, based on USDA Foreign Agricultural Trade of the United States
database.
Key Market Access Issues Although Mexico's removal of restrictive import
licensing requirements did away with a significant barrier to U.S. access
to Mexico's corn market, a number of other factors have affected U.S.
exports before and after NAFTA's implementation. For example, in the early
1990's, Mexico lifted a ban on using corn to feed livestock, which
immediately increased demand for imports of yellow corn from the United
States, which had been declining for several years. In 2003, yellow feed
corn exports comprised more than 80 percent of U.S. corn exports to
Mexico. Additionally, in the years following NAFTA, Mexico has usually
allowed higher levels of imports than are required under the NAFTA TRQs in
order to ensure that domestic demand for corn is fully met. Thus, Mexico
has generally applied much lower tariffs on these additional quantities
than those set forth under the agreement.4 These more liberal market
access policies for yellow (feed) corn imports are driven in part by a
need to provide feed for Mexico's expanding livestock industries.
Notwithstanding these policies toward feed corn imports, a USDA analysis
of Mexico's corn market notes that imports
4For example, in 2003, Mexico's applied tariff rate on imports of U.S.
yellow corn that exceeded the NAFTA TRQ levels was less than 2 percent,
while the out-of-quota tariff rate specified under NAFTA was more than 70
percent.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
of white corn (i.e., corn generally used directly for human consumption)
from the United States have declined since 2000, partly because the
Mexican government has provided marketing funds to domestic producers of
white corn. Additionally, USDA reports that in a significant departure
from past practice, Mexico levied the NAFTA-specified above quota tariff
rate of 72.6 percent on white corn in 2004. Mexico's tax on beverages
sweetened with HFCS has also contributed to the decline in U.S. corn
exports to Mexico. The tax has depressed Mexican production of HFCS, which
is made from imported corn.
Current Status and Future U.S. exports of corn to Mexico are expected to
increase significantly as
Challenges Mexico eliminates the transitional TRQs in 2008. However, some
industry groups noted concern about Mexico taking other steps to protect
its sensitive domestic corn market. For example, one U.S. industry
representative noted that it will be important for the U.S. government to
ensure that Mexico does not use SPS requirements as a barrier to U.S.
imports. On the other hand, other observers note that an expanding economy
in Mexico will increase consumer demand for meat and, in turn, continue to
increase demand for U.S. corn imports as feed for Mexican livestock
production.
Additionally, certain farm groups in Mexico have argued that allowing
dutyfree imports of U.S. corn will lead to a total collapse of Mexican
agriculture, and they have vowed to mount an unprecedented campaign to
stop the last round of tariff eliminations. Mexican politicians who oppose
NAFTA note the continuing economic distress in rural areas of Mexico and
insist on renegotiating the agricultural provisions of the agreement to
improve the conditions of Mexican farmers. Although the total elimination
of already low Mexican tariffs on corn may not have much economic
significance for U.S. producers, failure to comply with the final phase of
tariff elimination may undercut support for NAFTA among U.S. producers who
were in favor of the agreement with the expectation that it would lead to
genuinely free trade. Furthermore, U.S. trade officials have expressed
serious reservations about any attempt to renegotiate the agricultural
provisions of NAFTA because it could lead to demands to renegotiate other
aspects of the agreement and undermine the agreement as a model for trade
liberalization throughout the Western Hemisphere.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
High-Fructose Corn Syrup
Background and Trade Data Impediments confronted by U.S. HFCS exports to
Mexico are related to difficulties encountered by Mexican cane sugar
exports to the United States. Trade friction between the United States and
Mexico over HFCS came to a head in 1997, when Mexico initiated an
antidumping investigation of U.S. exports of this product. Based on the
results of this investigation, Mexico imposed antidumping duties beginning
in 1998. This triggered a lengthy WTO dispute settlement proceeding, in
which the United States eventually prevailed in 2001. Thereafter, Mexico
eliminated its antidumping duties but imposed a tax on beverages made with
any sweetener other than cane sugar, including HFCS. The United States has
challenged Mexico's beverage tax in the WTO, and that dispute is still
pending.5 Mexico defends its beverage tax, noting that the United States
has not complied with its market access commitments with respect to
Mexican cane sugar. However, the U.S. government has rejected Mexico's
arguments linking these two issues.
As shown in figure 6, U.S. exports of HFCS began to decline in 1999 after
Mexico imposed the antidumping duties, and dropped to nearly zero after
Mexico imposed the beverage tax in 2002.
5WTO Case DS/308.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
Figure 6: Total Volume of U.S. Fructose Syrup Exports to Mexico, 1989-2003
Metric tons in thousands 250,000
200,000
150,000
100,000
50,000 0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Source: GAO, based on the U.S. International Trade Commission DataWeb.
Note: This graph is for syrup containing more than 50 percent by weight of
fructose (HS 1702600050).
Key Market Access Issues Market access issues began in 1997 when Mexico
imposed preliminary antidumping duties on U.S. exports of HFCS. In 1997,
Mexico's National Chamber of Sugar and Alcohol Industries, the association
of Mexico's sugar producers, filed a petition in which it claimed that
U.S. HFCS was being sold in Mexico at less than fair value and that these
imports constituted a threat of material injury to Mexico's sugar
industry. As a result of these claims, the Mexican Ministry of the Economy
responded by imposing antidumping duties on U.S. HFCS. In 1998, USTR
invoked a WTO dispute proceeding to challenge Mexico's action, and in
2000, a WTO panel ruled that Mexico's imposition of antidumping duties on
U.S. imports of HFCS was inconsistent with the requirements of the WTO
Antidumping Agreement.6 At that time, Mexico agreed to implement the panel
recommendation by September 22, 2000. However, on September 20, 2000,
Mexico issued a new determination and concluded that there was a threat of
material injury to the Mexican sugar industry and that it would maintain
the antidumping duties.
6WTO Cases DS/101 and DS/132.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
The United States maintained that Mexico's new determination did not
conform to the WTO panel's recommendations and challenged this new
determination before a WTO compliance panel. The WTO compliance panel
agreed with the U.S. position. Mexico appealed this ruling. The WTO
Appellate Body agreed with the compliance panel's conclusions and
recommended that Mexico comply with its obligations under the WTO
Antidumping Agreement. While Mexico revoked its antidumping duties on HFCS
in April 2002, in January of that year the Mexican Congress imposed a 20
percent tax on soft drinks and other beverages that use any sweetener
other than cane sugar, which effectively shut out U.S. HFCS from the
Mexican market.
The Fox administration acted to suspend the beverage tax from March 6
through September 2002. Mexico's Supreme Court, however, ruled the
suspension to be unconstitutional and reinstated the tax effective July
16, 2002. The United States argues the HFCS beverage tax is inconsistent
with Mexico's obligations under the WTO, which calls for treating imported
products no less favorably than comparable domestic products. The United
States considers that the beverage tax is inconsistent because it applies
to beverages sweetened with imported HFCS, but not to products sweetened
with Mexican cane sugar. In June 2004, the United States challenged
Mexico's beverage tax in the WTO.
Current Status and Future The dispute over Mexico's beverage tax is
pending before a WTO panel.
Challenges The sugar industry would like to negotiate a resolution to the
sweetener dispute. At this time, private meetings have taken place between
sugar producer groups in the United States and Mexico, and the industries
are working to reach a resolution before 2008.
Pork
Background and Trade Data Prior to 1994, Mexico levied a duty of 20
percent on U.S. pork, but under NAFTA, Mexico agreed to establish TRQs to
be phased out over a 9-year period that ended on January 1, 2003. For
several categories of pork products, U.S. pork exports to Mexico greatly
exceed the quantitative limits of the TRQs, and Mexico generally allowed
the additional product to
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
enter without applying the over-quota tariff. 7 Additionally, NAFTA
permitted Mexico to establish a special agricultural safeguard tariff rate
quota for certain cuts of pork, under which Mexico can apply higher
tariffs if imports of that product exceed specified levels.8 If imports
rise above that level, the duty reverts to the lower of the current Most
Favored Nation or pre-NAFTA levels. The safeguard levels expanded 3
percent each year until the provision expired on January 1, 2003.
U.S. pork exports to Mexico have increased significantly since NAFTA, with
the total volume of U.S. exports rising by an average of 18.5 percent
annually between 1994 and 2003 (see fig. 7). Exports to Mexico accounted
for 22.3 of U.S. pork exports worldwide, and U.S. exports to Mexico
totaled about $217 million in 2003.
Figure 7: Total Volume of U.S. Pork Exports to Mexico, 1989-2003
Metric tons in thousands 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
1999 2000 2001 2002 2003 Year
Source: GAO, based on USDA Foreign Agricultural Trade of the United States
database.
7Under NAFTA, over-quota trade of pork faced a tariff of 10 to 20 percent
in 2002. 8Safeguard was placed on fresh/chilled/frozen pork and hams.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
Key Market Access Issues In November 2002, Mexican producers submitted a
dumping complaint to the Mexican government, alleging that U.S. exporters
were engaging in price discrimination by selling pork to Mexican buyers at
lower prices than they would sell to buyers in other countries. On January
7, 2003, Mexico initiated the antidumping investigation against U.S. pork.
According to U.S. pork producers, the Mexican association that requested
the investigation does not represent the Mexican pork industry, and,
therefore, did not have a legal right to make the request. The producers
of pork in Mexico-the slaughterhouses and the packers-stated that they do
not want the investigation to proceed and asked that it be terminated. On
May 28, 2004, the Mexican government terminated the January 2003
investigation and initiated a more limited antidumping investigation on
hams only.
Even after the antidumping case was filed against U.S. pork, Mexico
continued to be the second major market for U.S. pork exports.
Furthermore, USDA officials stated that any decreases in pork exports due
to the case were more than offset by the increase in demand for pork
following Mexico's ban on U.S. beef products after a case of BSE was
discovered in the United States. In addition, USDA noted that demand for
U.S. pork exports to Mexico correlates closely to income growth in that
country (i.e., the rise of the middle class). Thus, while Mexico's tariff
reductions have been an important contributing factor to the growth of
U.S. pork exports to Mexico, the far more significant drivers of export
growth have been the rapid recovery of the Mexican economy following its
recession in 1995 and continuing income and economic growth since then.
Current Status and Future The U.S. government has questioned the basis of
the May 2004 ham
Challenges antidumping investigation. Furthermore, USTR asserts that the
United States is actively working to prevent potential actions that Mexico
may take on exports of U.S. pork. USTR officials believe that Mexico's
January 2003 initiation of a pork dumping investigation and a May 2004
initiation of a ham dumping investigation may violate WTO rules and
questions the statistics being used by the Mexican government to determine
the level of imports. USTR has engaged the Mexican government to terminate
the hamdumping investigation, to resolve differences on trade statistics,
and to seek alternatives to trade restrictive measures. Despite the
antidumping dispute, Mexico and the United States have pledged to build on
their long history of cooperation regarding swine and pork bilateral trade
on the basis of equal and mutual benefit.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
Poultry
Background and Trade Data Prior to NAFTA, Mexico restricted access to its
poultry market through import licensing requirements and 10 percent
tariffs on imports. As with other products subject to import licensing,
Mexico replaced these barriers with TRQs as part of its NAFTA commitments.
NAFTA called for the TRQs to be phased out over a 9-year period, with
duty-free access for U.S. poultry by 2003. Per NAFTA, the larger portion
of the tariff cuts was to be implemented in the latter half of the
phase-out period-a process referred to as "backloading." Mechanically
deboned meat, which is used by Mexican sausage manufacturers, comprises
the most significant portion of U.S. poultry exports to Mexico. Since
NAFTA, the Mexican government has chosen not to impose the above-quota
tariff on this commodity due to the Mexican sausage industry's high demand
for the product, and, as a result, U.S. exports have routinely exceeded
the TRQ levels set forth in the agreement. Between 1994 and 2003, imports
of U.S. dark meat chicken parts have also generally exceeded the
transitional TRQ levels. The United States is the major foreign poultry
supplier to Mexico's market, and Mexico is typically among the top three
markets worldwide for U.S. poultry exports. From 1994 to 2003, the volume
of U.S. poultry meat exports to Mexico increased by an average of 5.7
percent annually (see fig. 8). U.S. exports to Mexico accounted for 11.4
percent of U.S poultry meat exports worldwide, and the value of U.S.
poultry exports to Mexico totaled about $260 million in 2003.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
Figure 8: Total Volume of U.S. Poultry Meat Exports to Mexico, 1989-2003
Metric tons in thousands
300
250
200
150
100
50
0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
2003
Year
Source: GAO, based on USDA Foreign Agricultural Trade of the United States
database.
Key Market Access Issues Demand for certain U.S. poultry products in
Mexico was driven, in part, by insufficient domestic poultry production in
Mexico. Additionally, because U.S. domestic demand for dark meat is low
relative to Mexico's consumer demand, U.S. producers have been able to
keep dark poultry meat prices relatively low and thus attractive to
Mexican buyers. Over the years since NAFTA's implementation, Mexico's
domestic poultry industry has expanded, and concern about U.S. competition
among Mexican producers has increased commensurately.
As the end of Mexico's transitional TRQ on poultry products drew near in
2002, the Mexican poultry industry petitioned the Mexican government to
apply a safeguard on imports of U.S. chicken leg quarters. The petitioners
argued that the end of the TRQ would result in an import surge from the
United States and injury to Mexico's domestic industry. Article 703 of
NAFTA would have permitted Mexico to impose duties of up to 240 percent on
U.S. poultry imports, if NAFTA's conditions for a safeguard were met.
Rather than face such potentially high tariffs and a disruption to U.S.
exports, U.S. producers, in industry-to-industry negotiations with the
Mexican petitioners, agreed to a more favorable regime.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
In July 2003, Mexico issued a final safeguard determination that imposed a
TRQ which allows the quota to expand each calendar year through 2007, at
which point the duties will be eliminated. The within-quota duty is zero,
and the initial over-quota duty was 98.8 percent, which declines each year
until reaching zero on January 1, 2008. The U.S. and Mexican governments
agreed on a package of compensation measures in response to the safeguard.
In particular, Mexico agreed not to impose any other restrictions on U.S.
poultry products and to eliminate certain SPS restrictions. The U.S.
government also agreed, following consultations with U.S. industry, to
consent to Mexico's application of the safeguard past the expiration of
the transition period.
Some poultry industry representatives noted that settlement of the poultry
safeguard issue brought some initial criticism from other U.S. producer
groups, who maintained that the settlement set a precedent for Mexico to
force renegotiation of its NAFTA commitments. However, USTR officials
stated that the United States will not consider any renegotiation or
rescission of Mexico's NAFTA commitments and views the poultry settlement
as a unique workable solution that forestalled possible significant
disruption to U.S. exports. They doubted a similar outcome could be
achieved in other industries.
Current Status and Future USDA reports that domestic poultry production in
Mexico continues to
Challenges expand. USDA and industry representatives said that the
additional protection for Mexican producers established under the
safeguard settlement will provide Mexican producers additional time to
prepare for free trade. USDA also notes that demand for poultry, combined
with an expanding Mexican economy and a removal of the ban on some U.S.
poultry exports, will continue to increase demand for U.S. poultry
products. Nevertheless, some U.S. industry representatives remain
concerned and noted that once the TRQ expires, Mexican authorities may
employ other measures, such as sanitary restrictions, as a means to
constrain U.S. access to Mexico's market.
Rice
Background and Trade Data The United States is the primary supplier of
rice to Mexico, mostly due to the fact that Mexico has banned or placed
strict phytosanitary standards on
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
imports of rice from Asian countries since the early 1990s.9 The United
States exports both rough (i.e., unprocessed) rice and milled (i.e.,
processed) rice to Mexico, although demand for rough rice is much higher.
As a result of the lack of supply from Asian producers and the high demand
for rough rice, rough rice accounted for about 90 percent of the total
volume of U.S. rice exports to Mexico in 2003. Prior to NAFTA's
implementation, Mexico levied duties of 20 percent on brown and milled
(i.e., processed) rice and 10 percent on rough (unprocessed) rice. Under
NAFTA, Mexico agreed to phase out rice tariffs over a 9-year period, with
all tariffs to be eliminated by 2003. With the phasing out of tariffs on
rice, the volume of U.S. exports has increased by an average of 14.4
percent annually from 1994 to 2003 (see fig. 9). U.S. rice exports to
Mexico accounted for 17.7 percent of U.S. rice exports worldwide, and
exports to Mexico totaled about $140 million in 2003.
Figure 9: Total Volume of U.S. Rice Exports to Mexico, 1989-2003
Metric tons in thousands 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
1999 2000 2001 2002 2003 Year
Source: GAO, based on USDA Foreign Agricultural Trade of the United States
database.
9Due to an infestation believed to have originated from Asian rice
shipments, Mexico banned all rice imports from Asian countries in 1993.
Mexico removed the ban in 1996, but still subjects Asian rice to strict
phytosanitary requirements. Additionally, no major Asian rice producer
allows exports of rough, unmilled rice because rice milling is a
value-added process and source of employment in those countries.
Appendix II
Case Studies of Selected U.S. Agricultural
Exports to Mexico
Key Market Access Issues In December 2000, Mexico initiated an antidumping
investigation on imports of long-grain milled rice from the United States.
Mexican rice millers (who process rice that competes with U.S. milled rice
imports) alleged that U.S. milled rice is being sold in Mexico at a prices
less that its fair market value. The Mexican government subsequently
levied antidumping duties in April 2000 and June 2002 on specific U.S.
rice imports. A U.S. rice industry representative told us that the U.S.
rice industry attempted to resolve the issue through the
industry-to-industry negotiations but that the negotiations were
unsuccessful. Following the industry negotiations, the United States
formally requested WTO consultations with Mexico in June 2003. These
consultations were held from July 31 through August 1, 2003, on the basis
of concerns regarding Mexico's methodology for determining injury to the
domestic market and for calculating dumping margins. WTO consultations
failed to resolve the issue, and in February 2004 a WTO dispute panel was
formed to resolve the case.10 The U.S. rice industry representative said
that several other U.S. commodity groups were supporting this case in the
WTO because the case deals with broad issues related to Mexico's
application of the antidumping law that could affect their exports as
well.
Current Status and Future A ruling on the WTO dispute is expected in April
2005. Notwithstanding the
Challenges outcome of the case, U.S. rice exporters generally benefit from
preferential access under NAFTA and Asian exporters' restricted access to
the Mexican market. USDA reports indicate that U.S. exporters could face
increased competition in the milled rice market in Mexico should Asian
exporters satisfactorily meet Mexico's phytosanitary concerns.
10WTO Case DS/295.
Appendix III
Three Major Mexican Agricultural Programs
Recognizing the challenges and anticipating the opportunities that market
reforms and free trade posed for its farm sector, the Mexican government
has implemented several programs to help its farmers adjust to changing
economic conditions. The three main support programs implemented since the
early 1990s are PROCAMPO, marketing support, and Alianza.
PROCAMPO (Programa de Apoyos Directos al Campo)
o Date initiated: 1994
o Budget: PROCAMPO is the largest agricultural support program,
accounting for 35 percent of Mexico's Agriculture Ministry's (SAGARPA)
budget in 2003, around $1.27 billion.
o Goal: PROCAMPO is a 15-year program that provides transitional income
support to Mexican agriculture as it undergoes structural changes in
response to market conditions and the phasing out of trade barriers under
NAFTA. The political objective is to manage the acceptability of the free
trade agreement among farmers and to prevent extensive levels of poverty
and out-migration.
o How it operates: The program makes payments on a per-hectare basis to
any producer who cultivates a licit crop on eligible land or utilizes that
land for livestock or forestry production or some ecological project.
Eligible land is defined as that which has been cultivated with corn,
sorghum, beans, wheat, barley, cotton, safflower, soybeans, or rice in any
of the three agricultural cycles before August 1993. There are three types
of PROCAMPO payments: preferential, traditional, and capitalized.
Preferential payment is for producers with fewer than 5 hectares in
nonirrigated lands who only produce in the spring-summer cycle. For the
spring-summer 2003 agricultural cycle, the payment levels equaled 1,050
Mexican pesos ($100) per hectare. The traditional payment is for the rest
of the producers. It was 905 pesos ($86) per hectare in 2003. The
capitalized payment is made under certain conditions to producers who
request the sum of their future PROCAMPO payments.
o Beneficiaries: During 2001, 2.7 million producers with a total of 13.4
million hectares received PROCAMPO payments. Around 75 percent of farmers
in the PROCAMPO database have less than 5 hectares of land.
Appendix III Three Major Mexican Agricultural Programs
o Changes in the program: There was a proposal in November 2002, as part
of a broader Mexican government initiative for rural support, to update
the payments according to yields. However, this action was never put into
practice. Another program will be created for producers who are not
currently registered in PROCAMPO, who also may be considered for
assistance to smooth out income fluctuations. Also, the National
Agreement's emergency spending proposal contains 650 million pesos ($62
million) for the inclusion of additional land on the PROCAMPO roster.1
According to Mexican officials, even where there are new producers
enrolling, the total benefiting area has not changed because those new
producers are filling the place left by former producers whose lands are
no longer eligible to receive support.
o Impact: PROCAMPO has become an important source of some rural
households' income, and it may have income multiplier effects when
recipients put the money they receive to work to generate further income.
The Mexican government reported that between 1989 and 2002 incomes from
agricultural businesses have lost importance, while other sources, such as
government support programs, remittances, salaries, and wages, have
increased their share in rural households' income. Scholars have found
payment from PROCAMPO has forestalled the income decline of subsistence
farmers. In addition, scholars found that payment from PROCAMPO generated
an income multiplier effect, which meant that the PROCAMPO payment was
used productively and generated additional income for rural households.
However, scholars believe that the level of payment from PROCAMPO was not
large enough to offset the risks of switching to more profitable crops,
which is part of the goals of the marketing support program (discussed
below).
Marketing Support and Regional Market Development Program (Programa de
Apoyos Directos al Productor por Excedentes de Comercializacion para
Reconversion Productiva, Integracion de Cadenas Agroalimentarias y
Atencion a Factores Criticos, formerly Programa de Apoyos a la
Comercializacion y Desarrollo de Mercados Regionales)
1The Mexican government invited producer groups and other rural
organizations to participate in nearly 4 months of public hearings and
negotiations. The government and many of the participating organizations
signed the National Agreement for the Countryside (Acuerdo Nacional para
el Campo) in 2003. The document includes a plan to reallocate more than
18.8 billion pesos ($1.8 billion) in government funds to a variety of
emergency activities.
Appendix III Three Major Mexican Agricultural Programs
o Date Initiated: 1991
o Budget: The marketing support program is the second largest
agricultural program. Marketing Support and Regional Market Development
Program accounts for about 16 percent of SAGARPA's budget. For 2003, the
budget was around $580 million.
o Goal: The program supports various aspects of agro-marketing and
commerce. The Agricultural Marketing Board (ASERCA) was created to
substitute the traditional direct intervention that the government
formerly made through a parastatal state trading enterprise for sorghum
and wheat.
o How it operates: The program has seven subprograms: (1) direct payment
to producers, (2) price supports, (3) collateral loans, (4) crop
conversion, (5) other types of support, (6) slaughter house certification,
and (7) special support for corn. The major subprogram is the direct
payment to producers. This program provides payments to producers of rice,
corn, wheat, sorghum, barley, canola, copra, peanuts, cotton, and
safflower in certain areas, usually on a per-ton basis.
o Beneficiaries: Beneficiaries of the marketing support program on
average have more land than PROCAMPO payment recipients. According to
Mexican government documents, around 22 percent of the respondents to its
annual survey of the marketing support program have fewer than 5 hectares,
while almost half have more than 15 hectares. In 2004, the program
supported 240,000 producers.
o Changes in the program: In 2003, Mexican farmers asked for support that
would "mirror" what was provided U.S. farmers under the U.S. Farm Bill,
which led the Mexican government to establish "target income" support. The
new program has seven subprograms including direct payments for (1) target
income, (2) slaughtering in certified slaughter houses, (3) accessing
domestic forages, (4) crop conversion, (5) price hedging, (6) pledging,
and (7) other specified activities. Additionally, barley, copra, and
peanuts are no longer on support list. For a period of 5 years, the
government plans to guarantee a target income, expressed per ton, for
producers of certain grains and oilseeds. Nearly 17 billion Mexican pesos
($1.6 billion) have been designated for this program. In determining
whether a producer has reached the target income, the government evaluates
a producer's income from selling on the market, and if the income from
selling on the market falls short of
Appendix III Three Major Mexican Agricultural Programs
the target income, the government will provide additional support to
ensure that farmers' incomes reach the set target. Under the former
program, just a few states were able to request support, while the new
program makes payments to producers with commercial surpluses in all
states.
o Impact: The program has had an impact on crop patterns and migration.
The "target price" program has led to concentration in basic crop
production instead of crop diversification. Mexican officials hope the new
"target income" approach will help farmers to be more responsive to the
market conditions. A Mexican official document points out that the program
is an important factor in mitigating migration from the countryside, but
the document also recognizes that the program did not succeed in
integrating farmers into the marketing chain. Thirty percent of the
respondents to the program annual survey said they would have sought
employment somewhere else if they had not received this assistance. A USDA
study of grain production finds that the marketing supports, along with
the constitutional reforms that allow the rental of ejidal lands, have
facilitated the emergence of large-scale farms of corn and dried beans.
Alianza (Alianza para el Campo)
o Date initiated: 1996
o Budget: Alianza accounts for about 15 percent of SAGARPA's budget,
about $570 million in 2003.
o Goal: The goals of the programs are to boost agricultural productivity
and promote the transition to higher value crops. The objectives include
increasing producer income, improving the balance of trade, achieving an
agricultural production growth rate higher than the population growth
rate, and supporting the overall development of rural communities.
o How it operates: The programs were grouped under four categories:
agriculture, livestock, phytosanitary, and technology transfers.
Activities include better use of water and fertilizer, adoption of
improved seeds, better disease and pest control practices, improved
genetic quality of crops and livestock, improved cattle stocks, better
health and sanitation practices, and pasture development and related
infrastructure development for increased production. These programs are
Appendix III Three Major Mexican Agricultural Programs
decentralized and are financed jointly by federal and state governments
and producers.
o Beneficiaries: The evaluation done by the United Nations Food and
Agriculture Organization (FAO) found that the program serves farmers with
various socio-economic backgrounds, educational levels, ages, farm size,
and income levels. The FAO evaluation also found that medium size
producers have benefited the most from the agriculture program, and 24
percent of small farmers have benefited.
o Changes: In 2002, for the first time, general objectives were
established for all the sub programs. These objectives are to (1) increase
income, (2) diversify employment options, (3) increase investment in rural
development, (4) strengthen producer group organizations, and (5) advance
sanitary standards. To achieve these objectives, strategies were
established to integrate standards, bring together regional producer
groups, and discuss important issues such as land and water use. Also in
2002, there was recognition by the government of a need to transfer
technology and investment to the rural sector.
o Impact: The FAO evaluation pointed out some benefits from Alianza. For
example, technology helped certain areas get access to water. Alianza also
created a forum to consolidate processes of participation and
implementation of different policies for the agricultural sector, allowing
the participation of the state and producers in the conversation. The same
evaluation pointed out that the additional employment generated from the
program was modest.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit Agricultural Trade
(1994-2004)
Animal and Plant Health Inspection Service (APHIS)
While U.S. development assistance to Mexico has been limited, U.S.
agencies have undertaken numerous collaborative efforts that benefit both
U.S. and Mexican agricultural interests. Most of these efforts have been
led by the United States Department of Agriculture (USDA), in conjunction
with its Mexican counterparts, in support of overall agricultural
production and trade objectives. USDA's Foreign Agricultural Service
officials noted that historically USDA has had a very strong collaborative
relationship with Mexico's Ministry of Agriculture. USDA's Animal and
Plant Health Inspection Service (APHIS) has invested more funds in
collaborative efforts with Mexico than of any USDA agency, about $280
million, since NAFTA was implemented. Besides APHIS's collaborative
activities, six other USDA agencies-the Economic Research Service (ERS),
the Agricultural Research Service (ARS), the Foreign Agricultural
Service/International Cooperation and Development (FAS/ICD), the
Agricultural Marketing Service (AMS), the Food Safety and Inspection
Service (FSIS) and the National Agricultural Statistics Service (NASS)-
have participated in agricultural collaborative projects in Mexico.
However, funding for collaborative activities in Mexico from these
agencies has been very modest, about $7.5 million combined over the past
10 years. In addition to collaborative efforts implemented by USDA
agencies, the Food and Drug Administration (FDA) has also had a role in
activities that benefit Mexican agriculture.
In the course of fulfilling its responsibilities of protecting and
promoting U.S. agricultural health, APHIS has collaborated with Mexico for
over 50 years (see table 3). APHIS has also implemented programs that
facilitate agricultural trade from Mexico, such as its preclearance
programs. Furthermore, APHIS has been by far the U.S. agency that has
invested the most money in agricultural collaborative efforts with Mexico,
the bulk of it on its Medfly and Screwworm eradication programs. APHIS
reported spending a total of about $286 million on its plant and animal
health activities in Mexico since the implementation of NAFTA.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
Table 3: Animal and Plant Health Inspection Service (APHIS) Assistance and/or
Collaborative Activities in Mexico, 1994-2004
Activity/Program Budget type Description of activity Time frame 1994-2004
Plant health Medfly: A cooperative program between the USDA and the
governments of Mexico, Guatemala, and Belize on the Medfly (Moscamed in
Spanish) program to eradicate and control the Mediterranean fly, which
would cause $2 billion in losses if established in the United States.
Moscamed's current top priorities are to eradicate the Medfly from
Chiapas, Mexico, and move the barrier south into Guatemala in an effort to
eradicate the Medfly from Central America and establish a sustainable
Medfly barrier at the Darien Gap in Panama, thus providing more secure
prevention against a Medfly infestation of the United States. To achieve
this goal Moscamed is using a two-stage strategy. First, Moscamed sprays
Spinosid, a newly developed organic bait spray. The second phase is the
sterile insect technique in which flies are produced at a facility and
then sterilized. Male flies are then released and compete with wild male
flies. Because the sterilized flies are unable to reproduce, the
population drops dramatically without continuous pesticide use.
Program $113 million
began in (estimate)
Mexico in
1977
Plant health Mexfly: This program maintains Mexican 1969 $8.1 million
fruit fly detection programs in
northern Mexico and Baja California, (estimate)
controls outbreaks along the border in
coordination with Mexico's Plant Health
agency (Sanidad Vegetal) and
provides year-round aerial releases of
sterile flies. A new center is planned to
coordinate sterile fly releases in northern
Tamaulipas along the border U.S.-
Mexican border.
Plant health Pink Bollworm/Boll Weevil: The goal of this 1986 $1.6 million
program is eradication of the boll
weevil and pink boll worm from the (estimate)
northern, cotton-producing areas of Mexico
and maintenance of an effective detection
and control program in the Juarez
Valley, the Ascension area, and Meoqui
Chihuahua.
Plant health Hydrilla: This program works to 1985
progressively eradicate the noxious weed $593,000
Hydrilla from irrigation systems in the (estimate)
Mexicali Valley using mechanical
extraction and sterile triploid grass carp.
Plant health Mexican Mango Preclearance Program: APHIS 1973 Mexican
requires that Mexican
mangoes be treated before entering the producers
United States. APHIS personnel in
Mexico supervise each treatment. pay APHIS
Approximately 38 million boxes of Mexican
mangoes were exported to the United States for these
last season.
services.
Plant health Mexican Avocado Program: APHIS personnel inspect Mexican 1997
avocadoes
before they enter the United States. Last season,
exports totaled
approximately $95 million. A recently approved APHIS
rule (effective January
31, 2005) is expect to increase Mexico's avocado
exports, bringing revenues
up to $300 million.
Plant health Mexican Citrus: APHIS personnel treat Mexican citrus before
entering the 1960s United States. Last season a total of 600,171 boxes
were exported to the United States with a commercial value of $3.9
million.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program Budget type Description of activity Time frame 1994-2004
Animal health Screwworm: The screwworm program is an eradication program
which consists of cooperative programs with Mexico, countries of Central
America, and Panama. The program has eradicated the pest up to the
narrowest point in Panama. The screwworm production facility in
Tuxtla-Gutierrez, Mexico operated in conjunction with the Mexican
government remains the supplier of sterile flies, while APHIS, in
cooperation with the Government of Panama completes construction of a
state-of-the-art sterile fly-rearing facility in Panama, which will
provide flies to maintain the barrier. The Screwworm Eradication Program
uses a highly sophisticated technique to sterilize adult flies. The
program disperses sterile flies where screwworm flies are indigenous. The
sterile males mate with fertile wild females which results in nonviable
egg masses and interrupts the insect's life cycle. Additionally
surveillance and cooperative agreements maintain constant field
surveillance.
Program $157 million
began in (estimate)
Mexico in
1972
Animal health Exotic Animal Disease Commission (EADC): 1947 $5.61 million
This Mexico-U.S.
Commission was organized to eradicate and (estimate)
control foot and mouth disease
(FMD). Freedom from FMD has made it
possible for Mexico to trade cattle,
other ruminants, and their products.
Mexico exports more than one million
head of cattle to the United States
annually. The commission expanded its
operation to other economically important
animal and poultry diseases like
avian influenza, exotic Newcastle
disease, and, more recently, bovine
spongiform encephalopathy (mad cow
disease). Through the EADC, Mexican
farmers have an avenue to trade with the
United States once diseases are
eradicated and prevented from entering
Mexico.
Animal health Tuberculosis and brucellosis: It is a N/A $200,000
requirement that these diseases be
excluded from animals imported by the United
States. Mexican animals often
have these diseases. Through APHIS programs in
cooperation with Mexico's
Ministry of Agriculture, Mexico regionalizes
the diseases in order to be able to
export animals to the United States. APHIS also
conducts training programs
for Mexican veterinarians in the diagnosis and
epidemiology of tuberculosis
and brucellosis.
Animal health Rabies: Mexican farmers lose money in 2004 Spending in
animal deaths and are themselves
also at risk because of this disease. APHIS Mexico
funding supports training at the
U.S. Centers for Disease Control, salaries, $90,000
travel, and office expenses. Since
rabies is not specifically screened by U.S.
import requirements, this program
will decrease risk of rabid bovines being
exported from Mexico to the United
States. Wildlife along the Mexico-U.S.
border is also a known reservoir for this
disease. This situation prevents total
eradication of rabies in the United States.
Total $286,183,000
Source: GAO. based on APHIS data.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
Economic Research Service Since 1996, ERS has spent $2.5 million in
funding to implement the
(ERS) Emerging Markets Program to enhance Mexico's capacity to collect,
analyze, and disseminate agricultural information.1 ERS officials said
that Mexico's enhanced data-gathering and reporting capability also
benefits the USDA because reliable information allows the agency to make
better informed decisions on bilateral agricultural trade. For a full list
and descriptions ERS activities, see table 4.
Table 4: USDA Economic Research Service (ERS), Collaborative Activities
with Mexico, 1994-2004
Activity/Program Budget from type Description of activity Time frame
1994-2004
Mexico's annual agricultural
Emerging Markets outlook forum: USDA assisted in 2001-2004 $2.5 million
the
initiation of Mexico's first
Project outlook forum in 2001. It
organized the first
plenary session, showcasing ERS's
short- and long-term commodity
projections and U.S. farm policy
analysis. It organized similar
sessions for
annual forums in the ensuing 3
years, 2002-2004.
Emerging Markets ERS poultry team works on follow-up analysis: In February
2003, an 2003
Project ERS poultry team visited Monterrey, Guadalajara, and Mexico City
to gather price and other information and interview government and private
sector officials involved at different levels of Mexico's poultry meat
marketing system. The objectives were to analyze the current broiler meat
market conditions/structure in Mexico, including analysis of costs of
production and the shift in demand toward parts versus whole birds; to
develop a flow chart describing chicken meat marketing channels; and to
analyze the future prospects of Mexico's poultry sector, including
production, consumption, and trade.
Emerging Markets Mexico's first regional food outlook forum: In November
2002, ERS 2002-2003
Project analysts participated in Mexico's first regional agricultural
outlook forum in Mazatlan, Sinaloa. The ERS panel covered the long-term
outlook for global food and agricultural markets, provisions of the new
U.S. farm bill and its impact on Mexico, and the expected impacts of the
removal of tariffs on most food and agricultural products in 2003 under
NAFTA.
Emerging Markets Joint pork and poultry analysis: In August 2002, ERS and
the Mexican 2002
Project Ministry of Agriculture (SAGARPA) presented the findings of a
joint ERS- SAGARPA research project about economic challenges facing the
Mexican pork and poultry industries. This briefing was part of a
high-level meeting between Mexican and U.S. delegations headed by Under
Secretaries Mayorga and Penn. The USDA and SAGARPA research teams
submitted individual reports and agreed to an executive summary containing
findings and policy options from the two reports.
1The Emerging Markets Program is an FAS program, but various USDA agencies
implement activities under this program, which are listed in tables
corresponding to the agencies discussed below.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program Budget from type Description of activity Time frame
1994-2004
Emerging Markets Transportation initiative: The project sponsored a
workshop in Laredo, 2001
Project Texas, in January 2001. According to information presented at the
workshop, while incremental measures such as streamlining and automating
customs clearance, expanding border facilities, and improving
infrastructure will continue to reduce the effects of transportation
bottlenecks, two key issues will affect the next generation of growth in
U.S.-Mexican food and agricultural trade: 1) the development of Mexico's
rail system, spurred on by the privatization in the second half of the
1990s and greater integration with the U.S. and Canadian rail systems, and
2) the liberalization of truck access.
Emerging Markets Project
Analysis of NAFTA integration: The project provided major support for the
U.S.-Mexico-Canada conference entitled, "North American Integration and
Its Impact on the Food and Fiber System" held November 2000 in Washington,
D.C. This activity focused on NAFTA impacts on the rural United States,
Mexico, and Canada-including price convergence, food quality standards
harmonization-and measurement and analysis of the ways in which the NAFTA
partners are becoming more integrated. In September 2003, ERS published a
synthesis report that identifies obstacles that continue to constrain
markets in North America from functioning in unison, gauges the progress
in uniting those markets, and identifies challenges and opportunities that
could deepen market integration in North American agriculture. The
Emerging Markets Officefunded workshop and the synthesis report were the
catalysts for the establishment of the tricountry North American Agrifood
Market Integration Consortium and its first forum in May 2004 in Cancun,
Mexico.
2000-2004
Emerging Markets Commodity analysis: To enhance SAGARPA's ability to
produce reports 1997-2004
Project for a wide audience in the United States and Mexico, ERS initiated
and collaborated in updating a report series for 11 commodities (corn,
wheat, sorghum, poultry, dry beans, pork, beef, dairy, eggs, apples, and
honey) starting in 1997. The dissemination of these reports grew to about
800 copies per report, with broader dissemination via the Internet and
through events like the annual Outlook Forum. SAGARPA released updated
reports on corn, sorghum, and horticultural products at the 2004 forum.
Emerging Markets Data sharing: Under the Emerging Markets Project, file
transfer protocol 1997-2004
Project was set up to share information on agricultural production in
Mexico and on U.S. trade. ERS has access to SAGARPA's Agricultural
Information System (SIACON). This system covers production data for
livestock products and crops and farm level prices. The data are available
by state, irrigated and nonirrigated area, and different seasons and
agricultural year from 1980 through 1998. ERS now has access to the Bank
of Mexico's National Economic Structure Information System (SINIEE), with
over 23,000 data series, including producer and consumer prices for many
agricultural and food products.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program Budget from type Description of activity Time frame
1994-2004
Emerging Markets Effects of food quality management systems on U.S.-Mexico
trade: 2002
Project The project evaluated the trade impacts on food sector businesses
in the United States and Mexico of implementing quality management
systems, both mandatory and voluntary. Information was collected via a
survey of the costs and benefits of these quality management systems.
About 300 businesses in the United States were surveyed. The project also
compiled a list of Mexican firms with assistance from the U.S. embassy in
Mexico City.
Emerging Markets Project
Transformation of the Mexican produce distribution system: The Mexican
produce distribution system is in the midst of major structural change.
Small, specialized produce shops or stalls still account for the bulk of
consumer produce purchases, but supermarket chains are rapidly gaining
market share. A similar transformation occurred in U.S. produce markets
from 1946 through 1965. The shift in food demand toward greater diversity
and the upgrading of diets will likely create new opportunities for
exporters in supplying a variety of niche markets and may require dealing
with a different group of importing entities than U.S. exporters have
historically targeted. The AMS report entitled Mexico's Changing Marketing
System for Fresh Produce. Emerging Markets, Practices, Trends, and Issues,
which was published in October 2002, highlights these findings.
2002
Emerging Markets Project
A comparison of food assistance programs in Mexico and the United States:
U.S. food assistance programs tend to be counter-cyclical (as the economy
expands, food assistance expenditures decline and vice versa). Mexican
food assistance programs appear to be neither counter-nor procyclical.
Food assistance programs have less impact on the extent of poverty in
Mexico than in the United States, primarily because the level of benefits
as a percentage of income is much lower in Mexico and because a much
higher percentage of eligible households in the United States receive
benefits from food assistance programs. These findings were published in
the ERS report A Comparison of Food Assistance Programs in Mexico and the
United States, which was published in July 2000.
2000
Emerging Markets Food safety and trade-the impact of the cyclospora
problem in 2000
Project Guatemala on the raspberry Industry in Mexico and the United
States: The project examined the impact of a food safety problem in
Guatemala on the international raspberry market. Mexico, Guatemala, and
Chile are the major raspberry exporters to the United States. Even though
the United States, Mexico, and Chile did not themselves have food safety
problems with raspberries, the cyclospora problem in Guatemala had a
significant and sustained impact on their industries and on trade
patterns. These findings were presented as a case study at the
International Agricultural Trade Research Consortium meetings in Montreal
in June 2000.
Source: GAO, based on ERS data.
Agricultural Research Service In June 1998, ARS and Mexico's Agriculture
Research Institute, Instituto
(ARS) Nacional de Investigaciones Forestales, Agriclas y Pecuarias
(INIFAP), signed a Letter of Intent to promote U.S.-Mexico collaboration
in
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
agricultural research programs. Since then, ARS has spent about $2.3
million on several collaborative projects involving ARS and Mexican
scientists. According to ARS officials, it is important for the United
States that scientists in Mexico have academic backgrounds similar to
their American counterparts' in order to reach common solutions to
problems that impact agriculture in both countries. For a full list and
descriptions ARS activities, see table 5.
Table 5: USDA Agricultural Research Service, Collaborative Activities with
Mexico, 1994-2004
Activity/Program Budget from type Description of activity Time frame
1994-2004
Biotechnology Preserving corn germplasm: The North 2001-2006 $2 million
Central Plant Introduction Station
has a long-standing collaboration with
the International Maize and Wheat
Improvement Center (CIMMYT), based near
Mexico City, to exchange
germplasm genetic resources. There is
mutual regeneration and seed
exchange on a periodic basis. ARS
provides long-term storage and
preservation of germplasm accessions
(ongoing).
Molecular/biotechnology corn research: ARS, Raleigh, North Carolina,
2003-2008
collaborates with the University of Guadalajara on scoring Mexican corn
populations for desirable traits, developing molecular markers and on
teosinte (a close relative of corn) diversity. ARS, Columbia, Missouri,
trained
a CIMMYT scientist on molecular marker techniques and genome database
research. ARS is cosupporting CIMMYT efforts to mirror the U.S. corn
genome database (MaizeDB) and to integrate CIMMYT's available crop and
molecular information. ARS, Ames, Iowa, is collaborating with CIMMYT on
improving corn's nutritional quality. ARS, Tifton, Georgia, is cooperating
with
the University at Irapuato to quantify aflatoxin in feed corn (ongoing).
Management of Bacillus thuringiensis (Bt) Resistance to Bt along the
2001-2006
U.S.-Mexico border is extremely important since both spray applications
and
transgenic crops are in heavy use. ARS, Weslaco, Texas, and Manhattan,
Kansas, are working with the Universidad Autonoma de Nuevo Leon, in
Monterrey, Mexico, to study, at a molecular level, mechanisms of Bt
resistance in Lepidoptera (butterflies and moths) (ongoing).
Wheat and barley disease research: The USA Wheat and Barley Scab 2000-2008
Initiative, managed by ARS, supports collaborative germplasm research with
the CIMMYT Bread Wheat Program. CIMMYT scientists evaluate wheat and
barley lines for natural resistance to scab, providing CIMMYT/Mexican
scientists access to cutting-edge U.S. biotechnology research. ARS,
Aberdeen, Idaho, and ARS, Manhattan, Kansas, support an agreement with
CIMMYT to evaluate Karnal bunt (a fungal disease) resistance in wheat
accessions. ARS and land-grant university wheat researchers visited
CIMMYT and other Mexican research locations in April 2002 to develop
further U.S.-Mexican collaboration on cereal disease research and
extension
(ongoing).
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program Budget from type Description of activity Time frame
1994-2004
Sorghum disease research: ARS, College Station, Texas, has an 2003-2008
agreement with FUMIAF (INIFAP), Mexico, to control sorghum ergot (a
disease that affects cereals) in northern Mexico and the United States.
Research monitors the spread of sorghum ergot and screens sorghum
accessions for ergot resistance at Rio Bravo, Tampico, Celaya, and
Ocotlan,
Mexico. This includes collaboration on assessing sorghum germplasm
diversity using DNA markers with the ARS sorghum germplasm curator in
Mayaguez, Puerto Rico (ongoing).
The winter cotton nursery: In conjunction with maintaining a cotton
2000-2005
germplasm collection of 7,000 cultivated and noncultivated cottons and
closely related species at College Station, Texas, ARS manages a winter
nursery at Tecoman, Colima, Mexico, in cooperation with INIFAP under a
memorandum of understanding. The nursery increases seed availability,
especially from non cultivated plants that flower only in the short days
of
winter, when U.S. weather is too cold for cotton. Mexican scientists also
have
access to the materials for research if the cotton lines are not
restricted by
intellectual property protection (ongoing).
Monarch butterfly: ARS led a consortium of midwestern research 2003-2005
institutions in a coordinated evaluation of the effect of Bt maize on
monarch
butterfly larvae in the field. The studies documented that Bt corn pollen
is
only a very small risk factor to the butterfly in real-world conditions.
This
finding is important to Mexico, the destination for butterfly migration in
winter.
The butterfly is considered a national treasure.
Preventing production of transgenic corn pollen: ARS research has
2002-2006
developed technology to place transgenes very precisely in the genome so
that their expression can be more predictable. In a research program that
is
in its initial phase, this technology will be combined with other ARS
developed innovations to prevent the production of transgenic corn pollen.
If
successful, this research would allow transgenic and indigenous corn to be
grown side by side without any movement of transgenes.
Aquatic weeds: Since 2000, ARS
Water research scientists have collaborated with 2002-2007 Unfunded
Mexican
researchers in an effort to curb
collaboration the spread of water hyacinth cooperation/in-
(Eichhornia
crassipes) in Mexico's dikes,
reservoirs, and canals. kind resources
Cooperators have
introduced weevils and moths as
biological control agents that only
have proven to
be successful in reducing water
hyacinth densities in the United
States.
Assessment tools: ARS scientists at the Grassland Soil and Water Research
Laboratory in Temple, Texas, in cooperation with scientists from Texas
A&M, are working in Mexico to train INIFAP scientists on the use of ARS
water resource and erosion models. The U.S. and Mexico team is currently
using the ARS Soil and Water Assessment Tool (SWAT) to estimate impacts of
different irrigation practices on water supplies affecting the Rio Grande
River.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program Budget from type Description of activity Time frame
1994-2004
Corn residues: Mexican
Conservation scientists are conducting a 2001-2006 Unfunded
study at many locations
scattered about central
tillage cooperative Mexico to determine the cooperation/in-
effect of tillage and
fertility
practices and corn residue
research projects removal on crop yield and kind resources
erosion control. The
study sites included a wide
range of soil and climatic only
conditions in order to
determine soil carbon
sequestration. Results are
preliminary; however, there
appears to be a fairly
strong relationship between
the fraction of residue
removed and increased soil
carbon with no-till farming
methods at mean
annual temperatures below 20
C.
No-till: A study with the INIFAP group at Celaya. Long-term records
indicate that organic carbon in certain soils of the state of Guanajuato,
Mexico, has been reduced by agricultural practices from around 3 percent
to 1.8 percent. A study has been conducted to develop data that supports
the use of no-till farming for wheat-corn cropping systems, evaluate
no-till for wheat and bean cropping systems, and assess the potential for
rebuilding soil organic carbon in these soils.
Natural resources Grazing management: At Tucson, 2001-2005 $25,000
Arizona, the research focus is on
developing planning and evaluation
management methodologies for grazing management
in northern Mexico and the
southwestern United States. In 2003,
ARS hired
two graduate students to prepare data
and adapt a hydrologic simulation
model for application to rangelands in
Mexico.
Rangeland management: At Las Cruces, New Mexico, ARS scientists have
2002-2007
been developing a rangeland monitoring manual in both Spanish and
English. With INIFAP they cohosted workshops on monitoring technologies in
both Mexico and the United States. Research collaborations continue in the
development of indicators for rangeland monitoring that will be
incorporated
into the manual and future workshops to train and inform for ranchers and
land management personnel.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program Budget from type Description of activity Time frame
1994-2004
Animal health Screwworm eradication: In 2000, an ARS 2002-2004 $50,000
scientist was colocated with
APHIS and a large Mexican government staff
at the screwworm rearing
facility in Tuxtla Gutierrez, Mexico, to
provide technical assistance and
research support for eradication program
in Central America. At the request
of the U.S.-Mexico Screwworm Commission,
ARS is assisting Mexican
officials in developing viable options for
alternative use of the sterile
screwworm plant at Tuxtla Gutierrez,
Chiapas. After a new facility is
constructed in Panama, the Chiapas plant
is scheduled to close.
Cattle ticks: Since 2001, Scientists from ARS, Kerrville, Texas, and
INIFAP, 2001-2004
Cuernavaca, Morelos, are studying the southern cattle tick and horn fly to
determine the nature and scope of pyrethroid and organophosphate pesticide
resistance and develop practical guidelines to manage this resistance to
protect livestock. A major goal is determining the mechanisms involved in
resistance and develop an analysis to monitor resistance.
Africanized honeybees: ARS scientists at Weslaco, Texas, are working
2003-2008
closely with their Mexican counterparts to assess the impact of
Africanized
honeybees on the pollination of vegetables and fruits. They will also
investigate the impact on honeybees of hard and soft chemicals used in
crop
pest control.
Vesicular stomatitis virus occurrence in areas of Mexico where it is
2002-2005
endemic: Since 2002, ARS scientists from Laramie, Wyoming, have been
working with their Exotic Animal Disease Commission counterparts to
generate basic epidemiological information about Vesicular stomatitis
virus
(VSV) occurrence in endemic areas in southern Mexico and establish the
necessary conditions for field validation of VSV rapid diagnostic tests in
well
documented infected and noninfected cattle herds.
Plant health Planning meetings: In November 2000, 2000 $185,000
ARS-Southern Plains Area (SPA)
scientists met with INIFAP scientists to
discuss research areas for future
collaboration. There were approximately 40
scientists at the meeting, and
research areas for potential collaboration
included water management, plant
and animal health, range management, and
biotechnology. As a follow-up to
the November meeting, ARS-SPA and INIFAP
entomologists met in January
2002 to discuss potential research
collaboration. There were approximately
20 scientists at the meeting, and potential
collaborative research efforts
included boll weevil, brown citrus aphid, and
fruit flies. In February 2002, ARS
and INIFAP scientists met to discuss the brown
citrus aphid.
Late blight: Breeding for durable resistance to late blight. Late blight
2003-2006
(Phytopthora infestans) is the most important potato disease worldwide,
costing the United States about $200 million annually for control. ARS
scientists are working with Mexican counterparts in the Toluca Valley,
where
late blight originated and all known strains occur, providing heavy
disease
pressure all season every year.
Expanding the pollinator base for Southern California avocados: ARS-
2003-2004
Northern Plains Area scientists were working with a scientist from la
Universidad de las Americas in collecting insects to link pollinators to
pollination success. Pollination efficiency studies were conducted through
the
use of bagged and unbagged flowers.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program Budget from type Description of activity Time frame
1994-2004
Food safety Extend the shelf life of regional cheese: 2002-2004 $15,000
ARS scientists at the Eastern
Regional Research Center, Wyndmoor,
Pennsylvania, in collaboration with
Mexican researchers from CIAD (Centro de
Investigacion en Alimentacion y
Desarrollo), Cuauhtemoc, Chihuahua, Mexico,
have characterized the
chemical, textural, sensory, and
microbiological properties of fresh
Chihuahua cheeses and other cheeses from the
region. The purpose of the
project is to extend the shelf life of
regional cheeses.
Pathogen control in poultry: The development of 2001-2006 Unfunded
nonantibiotic alternatives
for food-borne pathogen control in poultry. ARS cooperation/in-
in Fayetteville, Arkansas, and
the Autonomous University of Mexico started a kind resources
formal cooperation after
September 2001 to evaluate the microflora only
populations in the gastrointestinal
tract of poultry, including the niche
environments of food-borne pathogens.
Planning meeting: On October 1, 2002, INIFAP and 2002 Unfunded
ARS cohosted a
meeting with the main Mexican agricultural cooperation/in-
research and academic
institutions and Consejo Nacional de Ciencia y kind resources
Tecnologia (CONACyT),
Mexico's National Council of Science and only for the
Technology. Representatives
agreed to refocus efforts in agricultural planning
research, education, and exchanges
to address specific agricultural problems of meeting and the
mutual concern through joint
research and cooperation in capacity-building. collaborative
research
Collaborative research workshops: In 2003, five 2003 workshops. In
workshops were
organized by the ARS and its Mexican counterpart, the the case of Bt
National Institute for
Forestry and Agricultural Research (INIFAP). The resistance
scientists who participated
at the workshops developed 106 potential monitoring, the
collaborative research projects of
mutual interest and benefit for both countries. budget
Mexican scientists and their
ARS counterparts then developed 22 research proposals dedicated was
to be presented to
the Mexican National Council for Science and $8,000.
Technology (CONACyT) for
funding at its sectorial fund CONACyT-SAGARPA opening
on September
2003. From these proposals, eight were approved for
funding starting in
2004.
Bt resistance monitoring: ARS and INIFAP sponsored a workshop in April
2004-2005
2004 to adopt common protocols for and to coordinate U.S.-Mexican Bt
resistance monitoring. INIFAP and ARS have been cooperating in resistance
monitoring on a small scale in Mexico. ARS and INIFAP agreed that
enhanced scientific cooperation in this area would be of mutual benefit to
Mexican and U.S. cotton growers and regulatory agencies and arranged a
workshop to start expanding collaborative research in this subject.
Total $2,284,412
Source: GAO, based on ARS data.
Foreign Agricultural Service Over the past 10 years, FAS/ICD has spent a
total of $1.8 million on its (FAS), International Cooperation Scientific
Cooperation Research Program (SCRP) and Cochran Fellowship and Development
Program (CFP). Under SCRP, U.S. and Mexican scientists have conducted
joint research and scientific exchanges for over 20 years to help solve
mutual food, agricultural, and environmental problems. Since NAFTA was
enacted, SCRP has sponsored 32 joint agricultural research projects among
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
U.S. and Mexican universities and other research institutions, of which
about half have been related to trade. In addition, FAS administers CFP,
which provides U.S.-based agricultural training opportunities for senior
and midlevel specialists and administrators from the Mexican public and
private sectors who are concerned with agricultural trade, agribusiness
development, management, policy, and marketing. For a full list and
descriptions of FAS/ICD activities, see table 6.
Table 6: USDA Foreign Agricultural Service, International Cooperation and
Development (ICD), Collaborative Activities with Mexico, 1994-2004
Activity/Program
type Description of activity Time frame Budget
Emerging Markets Mexican congressional delegation on 2001 $463,500
biotechnology: Thirteen members
Program of the Mexican Congress traveled to
Washington, D.C., to obtain information
and make decisions on labeling of
biotechnology foods. Mexico is a $3.1
billion market for U.S. processed foods.
Several of the congressional
members commented to the Agriculture
Attache that what they learned in the
United States on biotechnology from Food
and Drug Administration (FDA)
and the American Medical Association had
convinced them that there was no
need for labeling of biotechnology foods.
Emerging Markets Program
Mexico Food Safety Workshop: The Trade and Investment Program, the USDA
Biotechnology Group, and FAS/Mexico City coordinated a Mexico Food Safety
Workshop, which was held in Mexico City from June 16-18, 2004. The
workshop involved approximately 20 participants from the Mexican
Ministries of Health, Agriculture, Economics, and Education, as well as
the Mexican Center for Research on Food and Development. Seven
participants from FDA, Environmental Protection Agency, and USDA, as well
as two representatives from the Novel Foods Division of Health Canada also
attended. The purpose of the workshop and related meetings was to address
issues related to regulatory requirements and safety assessments related
to biotechnology in North America.
2004
Emerging Markets Agricultural biotechnology workshop for Latin 2004
American farmers: In
Program August 2004, FAS/ICD sponsored a workshop for
farmers and farm leaders
at Zamorano University in Honduras on agricultural
biotechnology. The
workshop provided farmers from 17 Latin American
countries (including
Mexico) with information to increase farmers'
awareness of challenges and
benefits of agricultural biotechnology. The workshop
was organized in
collaboration with Zamorano University, Cornell
University, and REDBIOA, a
network of strategies and policies for assistance to
national biotechnological
research programs in Latin America and the
Caribbean.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program
type Description of activity Time frame Budget
Emerging Markets Program
Mexico agricultural trade missions: Under the U.S.-Mexico Partnership for
Prosperity, FAS/ICD, Mexico's Ministry of Agriculture and the Food
Marketing Institute conducted trade missions to Mexico in March 2003 and
March 2004. The purpose was to identify trade and investment opportunities
between Mexican horticultural producers and U.S. supermarkets. Thirty-one
U.S. representatives from 16 companies established long-term business
contacts and/or initiated produce-sourcing arrangements. Participants
visited 10 farms in Jalisco, Sinaloa, Sonora, and Guanajuato that produce
tomatoes, bell peppers, cucumbers, eggplant, and onions. U.S. companies
that participated in the 2003 mission expected to purchase approximately
$104 million worth of produce from Mexican growers as a result of the
activity.
2003-2004
Emerging Markets Trade show seminars: FAS/ICD/Food Industries 2001-2004
Division/Trade and
Program Investment Program conducted seminars on food
safety, U.S. wines and
cheeses, seafood handling, and produce
marketing, and promoted the Export
Credits Facilities Credit Guarantee program and
Supplier Credit Guarantee
program in tandem with the annual ANTAD (2001),
ABASTUR (2001), and
EXPHOTEL (2000, 2002, 2003, and 2004) trade
shows. These programs
were coordinated with the Agricultural Trade
Office in Mexico City.
Emerging Markets Program/Cochran Fellowship Program Biotechnology short
course: The Trade and Investment Program and the Cochran Fellowship
Program worked in partnership with Michigan State University to design and
implement six short courses on agricultural biotechnology. Twenty-five
participants from 13 countries in Latin America and the Caribbean
(including six participants from Mexico) were selected from local and
national level government bodies, private industry, nongovernmental
organizations, and universities. This course prepared participants to play
an informed, guiding role in the public debate and discussions on
biotechnology in their home countries. Participants engaged in sessions on
the science of biotechnology, but the primary focus of the course was on
biotechnology's relationship to market access and the trade of
agricultural products. The 2-week course covered such topics as research
and development, biotech regulations, international organizations, global
economy, marketing and consumers, food security, and technical assistance.
The course included activities in Washington, D.C., at Michigan State
University, and at Texas A&M University.
2004
Emerging Markets Cold chain field assessment: USDA conducted a cold 2000
chain field
Program assessment of cold-storage facilities in Laredo,
Texas; Mexican trucking
companies and supermarkets; and central markets in
Monterrey and Mexico
City. Over 100 perishable food producers, importers,
distributors, and
transportation and refrigeration providers attended
a seminar on "Maintaining
the Cold-Chain from Port to Consumer."
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program
type Description of activity Time frame Budget
Emerging Markets Program
Cold chain technical assistance: USDA provided two weeks of technical
assistance on produce marketing, cold storage logistics, and the Hazard
Analysis and Critical Control Point to Mexican companies, including a
wholesaler from Mexico City's Central Market, a fruit
grower/importer/distributor, a meat importer/processor, and a
refrigeration company. In September 2003 those companies were visited
again to monitor the success of earlier assistance and to give additional
advice. One Mexican company and a major U.S. cold-storage company were
constructing a new meat processing and distribution facility. Another
company was able to double and triple fresh fruit imports from Washington
state and northern California, respectively, by air conditioning an
adjacent storage space. It also reduced shrinkage through better
temperature monitoring and improved trucking services.
2002
Emerging Markets Cold chain: In the fall of 2004 two participants 2004
attended a program providing
Program understanding of proper management of refrigerated
and frozen foods. The
program began with training covering topics such as:
an overview of the
entire cold-chain process, from producer to
consumer; quality maintenance
from producer to wholesaler to retailer;
characteristics of cold-storage rooms;
transportation and distribution systems for
refrigerated and perishable
products; receiving and managing perishable products
at the port and in the
store; packaging and merchandising perishable
products; waste
management; and methods for extending shelf life.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program
type Description of activity Time frame Budget
Cochran Fellowship Five-a-Day promotion program: The 2003 $183,225
training provided officials from the
Program newly formed "Fundacion Campo y Salud"
with important information
regarding Five-a-Day program development,
establishment, and operation.
The training took place in Washington,
D.C., and Wilmington, Delaware, and
included meetings with officials from
USDA, the National Cancer Institute,
and the Produce for Better Health
Foundation. In April and May 2003, four
participants attended training.
Cochran Fellowship Meat and poultry inspection: FSIS conducted 1999-2004
seminars from 1999-2004
Program providing in-depth knowledge regarding U.S.
inspection procedures and
regulations used to ensure that meat,
poultry, and egg products are safe,
wholesome, and properly labeled. Emphasis was
placed on Hazard Analysis
and Critical Control Point and pathogen
reduction initiatives. A few seminars
were given in Spanish, and in some
participants took field trips during the
training to farms, slaughterhouses,
processors, and port facilities. A total of
29 people participated from 1999 to 2004.
Cochran Fellowship Veterinary epidemiology: In 2001, a participant 2001
attended a seminar
Program focusing on training veterinary epidemiologists
regarding U.S. standards and
techniques to identify, control, and eradicate
animal diseases such as foot
and mouth, screwworm, swine fever, etc. The
purpose of the training was to
provide other governments pursuing these diseases
a means by which to be
proactive in excluding diseases from the United
States.
Cochran Fellowship Veterinary biologics: In 2003, one participant attended
a seminar providing 2003
Program the participants with in-depth training regarding the scientific
principle of vaccines and vaccination and of the USDA regulatory process
for assuring the purity, safety, potency, and efficacy of veterinary
biologics. Topics included Immunology and Principles of Vaccination,
Procedures for Ensuring Vaccine Safety and Efficacy, Potency and Safety
Testing, and Diagnostic Test Kit Evaluation.
Cochran Fellowship Veterinary medicine: A total of eight participants 2001
from Mexico attended the
Program Southwestern Veterinary Symposium, which included
presentations on food
animal disease diagnosis and treatment, public
health, and epidemiology and
addressed U.S. import requirements, identification
and quarantine of
diseased livestock, and disease control and
eradication issues in Mexico.
Cochran Fellowship Foreign animal disease: In 2002, one participant from
Mexico attended a 2002
Program course providing an overview of Foreign Animal Diseases, including
epidemiological animal surveillance, diagnosis of foreign animal diseases,
and controlling methods.
Cochran Fellowship Risk management: In 2001, one participant from 2001
Mexico attended a seminar
Program to increasing knowledge of risk management in
terms of agricultural
insurance for crops, livestock and farms,
machinery, and farm buildings.
Topics included banks and financial markets;
assessing risk; determining
premiums; new technology to evaluate risk, inspect
damage, and adjust loss;
sources of financial data; index-based insurance;
catastrophic bonds; needs
of agribusinesses; and new tendencies in risk
management theories.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program
type Description of activity Time frame Budget
Cochran Fellowship Animal health policy: In 2000, one participant from
Mexico attended training 2000
Program providing in-depth understanding of how animal health policy
evolves and is implemented at state, national, and international levels.
Topics included animal health policy evaluation, leadership methods, food
safety, how to influence policy makers, strategic planning, inter
governmental relations and regionalization, the role of special interest
groups and the media, and legislative perspectives.
Cochran Fellowship Grain handling: In 2000, one participant from Mexico
attended training 2000
Program providing in-depth knowledge regarding US grain quality and
handling procedures. Topics included grain storage procedures, drying and
handling equipment, grain grading and inspection procedures,
handling/loading for transportation, land vs. ocean transportation,
preservatives and their applications, factors affecting grain quality in
handling, and export programs.
Cochran Fellowship Program
Food safety/hazard analysis and critical control point (HACCP): In 1999,
nine participants from Mexico attended a course designed to prepare
officials to review a plant's HACCP plan, determine if the plan was
properly implemented and maintained, and react to minor or major
discrepancies in an appropriate and effective manner. Topics included an
overview of FSIS food safety goals and strategies, HACCP overview and
principles, steps in the development of the HACCP system and relationship
of Hazard Analysis and Critical Control Point/Good Manufacturing
Practices/Sanitation Standard Operating Procedures, microbiological
testing, E. coli and salmonella, the revised Performance-Based Inspection
System, basic compliance/noncompliance of plans, and consumer protection.
1999
Cochran Fellowship Rural finance: In 2004, six participants from Mexico
attended a program that 2004
Program trained them in the areas of credit administration, credit
compliance, risk management, and greenhouse project assessment.
Research project: The University
Scientific of Florida in collaboration with 1991-1994 $1.2 million
Alimentos
Del Fuerte, Los Mochis, Sinaloa,
Cooperation worked on a project titled
"Characterization
of strains of Xanthomonas
Research Program campestris pv. Vesicatoria in
Mexico and the
impact of resistant genotypes and
bactericides."
Scientific Research project: USDA/Forest Service worked in 1992-1995
cooperation with Centro
Cooperation de Genetica Forestal, A.C. on a project titled
"Cooperative program for the
Research Program conservation of biodiversity."
Scientific Research project: The University of Idaho 1993-1995
collaborated with Centro
Cooperation Internacional de Mejoramiento de Maiz y Trigo
(CIMMYT) on a project titled
Research Program "Identification of novel or under utilized
sources of nuclear and cytoplasmic
germplasm in wheat."
Scientific Research project: USDA/ARS, Gainesville, 1993-1996
Florida, worked with Instituto de
Cooperation Ecologia, Xalapa, Veracruz on a project titled
"Host-finding by parasitoids of
Research Program species of anastrepha and the importation of
Caribbean fruit fly natural
enemies."
Scientific Research project: USDA/ARS, Tucson, Arizona, 1993-1996
worked with Instituto
Cooperation Nacional de Investigaciones Forestales,
Agricolas y Pecuarias (INIFAP) on a
Research Program project titled "Comparative research on
integrated watershed management at
Walnut Gulch, Arizona and Rio Matape, Sonora,
Mexico."
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program
type Description of activity Time frame Budget
Research project: Colorado State
Scientific University collaborated with the 1993-1996
University
Cooperation of Baja California School of Veterinary
Medicine on a project titled "Bovine
tuberculosis in Baja California,
Research Program Mexico: A prototype program for
surveillance
and control."
Scientific Research project: USDA/ARS, Maryland, 1995-1998
collaborated with Centro
Cooperation Internacional de Mejoramiento de Maiz y
Trigo (CIMMYT) on a project titled
Research Program "Correlation between PCR-based seed
assay and development of Karnal
bunt in the field."
Scientific Research project: The University of 1995-1998
Missouri collaborated with Instituto
Cooperation Nacional de Investigaciones Forestales,
Agricolas y Pecuarias (INIFAP) on a
Research Program project titled "Epidemiology of bovine
hemoparasitic diseases in selected
areas of Central America and Mexico."
Scientific Research project: The University of 1995-1998
Wisconsin collaborated with
Guadalajara University on a project
Cooperation titled "Pulp and paper from
agricultural
Research Program materials via environmentally benign
processes."
Scientific Research project: The University of 1996-1999
California collaborated with the
University of Baja California on a
Cooperation project titled "Brucellosis in goats in
the
Research Program Mexicali Valley: Risk factors for herd
infection and health risks of REV-1
vaccination."
Scientific Research project: The University of 1997-2000
Arizona collaborated with Universidad
de Sonora on a project titled
Cooperation "Categorization of isolates of the root
rot fungus,
phymatotrichum and its fungal
Research Program antagonists for the development of
biological
control strategies in the U.S."
Scientific Research project: The University of 1997-2000
Massachusetts collaborated with the
Cooperation University of Nuevo Leon on a project
titled "Presence and enterotoxigenicity
Research Program of Clostridium perfringens in U.S. and
Mexican foods."
Scientific Research project: USDA/ARS, Texas, 1998-2001
collaborated with the Center for
Cooperation Genetics and Advanced Studies on a
project titled "Improvement of fruit
Research Program storage-life and quality in muskmelon
by genetic transformation."
Scientific Research project: USDA/ARS, Arizona, 1998-2001
cooperated with the Instituto
Cooperation Nacional de Investigaciones Forestales,
Agricolas y Pecuarias (INIFAP) on a
Research Program project titled "Extension of the
rangeland health concept and associated
classification schemes into Mexico."
Research project: The University of
Scientific Missouri collaborated with the 1998-2001
Instituto
Cooperation Nacional de Investigaciones Forestales,
Agricolas y Pecuarias (INIFAP) on a
project titled "Vaccine control of
Research Program bovine babesioisis/prevention in U.S.
and
Mexico."
Scientific Research project: USDA/ARS, Hawaii, and 1998-2001
the USDA/APHIS collaborated
Cooperation with the Colegio de la Frontera Sur on
a project titled "Strain development
and field evaluation of biosteres
Research Program arisanus for control of fruit flies in
Hawaii,
Mexico, and Guatemala."
Scientific Research project: New Mexico State University 1999-2002
collaborated with the
Cooperation Universidad Autonoma de Chiapas on a project
titled "The density and
Research Program diversity of parasitic hymenoptera as
bio-indicators of habitat disturbance in a
cotton producing region of tropical Mexico."
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program
type Description of activity Time frame Budget
Scientific Research project: North Dakota State University 1999-2001
collaborated with the
Cooperation Institucion de Ensenanza e Investigacion En
Ciencias Agricolas on a project
Research Program titled "Comparison of the calcium, iron, zinc,
and magnesium, contents of
bean seed of Mexican and American origin."
Scientific Research project: Northern Arizona University 1999-2002
collaborated with Instituto
Cooperation Nacional de Investigaciones Forestales,
Agricolas y Pecuarias (INIFAP) on a
Research Program project titled "Managing fragmented Douglas-fir
ecosystems in Southwestern
North America for long term sustainability."
Scientific Research project: The University of California 1999-2002
collaborated with the
Cooperation Universidad Autonoma del Estado de Mexico on a
project titled "Population
Research Program genetic characterization of naturally sympatric
and allopatric populations of
teosinite with maize in Mexico: Implications."
Scientific Research project: The University of Florida 2001-2004
functionally collaborated with
Cooperation Monterrey Institute of Technology on a project
titled "Properties of improved
Research Program natural pigments (antimicrobial compounds)."
Scientific Research project: USDA/ARS, Pennsylvania, 2001-2004
collaborated with Centro de
Cooperation Investigacion en Alimentaction y Dessarollo,
Chihuahua, on a project titled
Research Program "Modification of cheese-making parameters to
extend the shelf-life of
Hispanic-style fresh cheeses."
Scientific Research project: Yale School of 2001-2004
Forestry/Environmental Sciences
Cooperation collaborated with Centro de Investigaciones
Avanzados Unidad Merida on a
Research Program project titled "Implications for agrarian
change and the status of crop genetic
resources in Yucatan, Mexico."
Scientific Research project: USDA/APHIS, Hawaii, 2001-2004
collaborated with ECOSUR (a
Cooperation research institute devoted to ecological
studies in southern Mexico) on a
Research Program project titled "Controlling the Mediterranean
fruit fly: Improving the sterile
insect technique via nutritional and olfactory
manipulation."
Scientific Research project: The University of Arkansas 2002-2005
"Solutions to food safety and
Cooperation security problems for Mexico and the United
States (U.S.): Development of
Research Program non-antibiotic and alternative controls."
Scientific Research project: The University of California 2002-2005
Riverside collaborated with la
Cooperation Universidad Autonoma Chapingo on a project
titled "Conservation and
Research Program restoration of wild avocado (Persea spp.) in
Mexico."
Scientific Research project: The USDA/ARS, Maryland, 2003-2006
cooperated with the
Cooperation International Cooperative Potato Late Blight
Program on a project titled
Research Program "Cooperative testing of late blight
resistance."
Scientific Research project: USDA/ARS, Washington, 2003-2006
collaborated with Instituto
Cooperation Nacional de Investigaciones Forestales,
Agricolas y Pecuarias (INIFAP) on a
Research Program project titled "Enhancing resistance in Mexican
pinto bean cultivars to
common bacterial blight."
Scientific Research project: The University of Wisconsin 2004-2007
initiated a project with
Cooperation Instituto Tecnologico de Veracruz titled
"Identifying potential cancer
Research Program chemopreventive agents in maize."
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program
type Description of activity Time frame Budget
Scientific Research project: Cornell University, 2004-2007
in collaboration with the Monterrey
Institute of Technology (ITESM),
Cooperation initiated a project titled "Effects of
tortilla
processing on the fate and
Research Program bioavailability of phytochemicals in
high
carotenoid and pigmented corns."
Scientific Research project: The University of New Mexico, 2004-2007
in collaboration with El
Cooperation Centro de Desarrollo Humano hacia la Comunidad,
Cuernavaca, Morelos
Research Program initiated a project titled "Nutritional &
medicinal agricultural product sharing
between underserved communities in Mexico and
the United States."
Scientific Research project: The Southwestern 2004-2007
Indian Polytechnic Institute, in
collaboration with the State
Cooperation Government of Chihuahua, initiated a
project
Research Program titled "Application of hydroponic
forage production in arid lands."
Total $1,836,855
Source: GAO, based on FAS/ICD data.
Agricultural Marketing Service AMS
AMS has spent about $548,200 since 1994 in collaborative activities with
Mexico. Most of AMS activities consist of providing training to Mexican
fresh fruit and vegetable inspectors to help them meet U.S. inspection
standards. For a full list and descriptions of AMS agricultural
collaborative activities, see table 7.
Table 7: USDA Agricultural Marketing Service (AMS), Collaborative
Activities with Mexico, 1994-2004
Activity/Program
type Description of activity Time frame Budget
Inspection training/ destination
Emerging Markets market inspection: With support 1999 and 2002 $491,200
from
the Emerging Market Program, AMS
Program is providing training in the
United
States to Mexican fresh fruit and
vegetable inspectors. Objectives
of this
project include helping SAGARPA
develop a professional inspection
service and establish a codified
fruit and vegetable grading and
standards
system, bringing Mexico's
marketing system for fruits and
vegetables closer
to that of the United States and
Canada.
Dispute resolution corporation:
Emerging Markets The objective is to efficiently 2004
resolve
disputes between exporters and
Program importers, assisting Mexico's
agricultural
commodity markets to operate
similar to those in Canada and
the United
States and increase U.S. exports
to Mexico.
Market information organization
Fruit and of the Americas: The objective
vegetable was to 1999 (ongoing) $27,000
enhance the dissemination of
standards market information in domestic to
producers,
importers, and shippers.
Research and promotion: The
Fruit and objective was to facilitate 2002 and 2004
vegetable Mexico
standards understudying of AMS research and
promotion activities.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
(Continued From Previous Page)
Activity/Program
Type Description of activity Time frame Budget
Research publications Research projects: The objective was to provide
information to U.S. exporters on the transportation and logistical
infrastructure, facilities, and services used to support U.S. exports to
Mexico. Publications include (1) Mexico's Agricultural Trade
Infrastructure for Apples and Pears, by Juan Batista and John W. Hagen,
Center for Agricultural Business, California State University, Fresno,
1994, CATI Publication #940201; (2) "Logistics and Perishables Trade
Between the United States and Mexico," Richard Beilock, Roger Clemens,
James Dunn, and Barry Prentice, University of Florida, Gainesville, May
1995, Economics Report ER 95-1; 12-25-A-3381; and (3) "Shipping U.S. Grain
to Mexico," by Keith A. Klindworth and Arne J. Martinsen, Marketing and
Transportation Analysis, Transportation and Marketing, September 1995,
USDA AMS Marketing Research Report Number 630.
1994-1995 $30,000
Total $548,200
National Agricultural Statistics Service (NASS)
Source: GAO, based on AMS data.
NASS has been involved in a few collaborative activities in Mexico since
1997. Using the Emerging Markets Program, NASS has spent $361,000 to help
improve the agricultural statistics system and methodology in Mexico. As
part of this assistance, NASS provided training to analysts from Mexico's
agricultural statistics service, Servicio de Informacion y Estadistica
Agroalimentaria y Pesquera (SIAP). This training focused on methodology
for preparing official agricultural statistics. For a full list and
descriptions of NASS activities, see table 8.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
Table 8: USDA National Agricultural Statistics Service (NASS),
Collaborative Activities with Mexico, 1994-2004
Activity/Program
type Description of activity Time frame Budget
Emerging Markets Training for SIAP (Mexico's 1997-2002 $67,000
Agricultural Statistics Service): NASS
Project conducted training and implementation
of objective yield measurement
surveys for crops important to
U.S.-Mexico trade (corn, soybeans,
sorghum,
and avocados). These surveys provide an
accurate indication of the yield and
available production of these crops.
Emerging Markets Training for SIAP: Mexican analysts 2003-2004 $294,000
from SIAP attended seminars and
Project training on the methodology used in
NASS to prepare official agricultural
statistics and the responsibilities
shared between the federal-and
state-level
organizations. These activities have
included both visits from NASS
personnel
to Mexico and Mexican analysts' visits
to NASS headquarters and field office
locations.
Emerging Markets Training for SIAP: Mexican analysts from SIAP attended
seminars and
Project training on the use of NASS's area frame, multiple frame, and
remote sensing techniques in the preparation of agricultural statistics.
These seminars have included training in sophisticated sampling techniques
to improve the efficiency of the agricultural surveys conducted. SIAP
analysts are currently producing their first general-purpose area frame
for use in several statistical surveys.
Total $361,000
Source: GAO, based on NASS data.
Food Safety and Inspection Since 2001, FSIS has implemented a small number
of activities valued at
Service (FSIS) $298,412 under the Emerging Markets Program in Mexico. Most
of these activities consist of providing training and technical assistance
to Mexican meat and poultry exporters to help them meet U.S. import
regulations. For a full list and descriptions of FSIS activities, see
table 9.
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
Table 9: USDA Food Safety and Inspection Service (FSIS), Collaborative
Activities with Mexico, 1994-2004
Activity/Program
type Description of activity Time frame Budget
Emerging Markets Pathogen reduction: Using Emerging Markets 2001 $98,458
Program funding, FSIS has
Program provided pathogen reduction training to
Mexican meat and poultry inspection
officials in order to assist SAGARPA in
implementing the standards necessary
for Mexican plants to export meat and
poultry products to the United States.
This consisted of activities for improving
knowledge of HACCP principles and
for improving knowledge of FSIS microbiology
testing methods.
Emerging Markets Technical assistance activity: This activity 2003 $73,434
consisted of providing technical
Program assistance to assure the continuation of
safe and wholesome meat and
poultry exports from Mexico to the United
States. Mexican government
officials (from headquarters to inspection
officials located at exporting
Mexican establishments) obtained technical
assistance on meeting equivalent
requirements of the U.S. meat and processed
poultry inspection system.
Emerging Markets Technical assistance activity: Mexican 2004 $15,000
officials obtained inspection
Program requirements training and technical
assistance for fresh-slaughtered poultry
and egg products to help the officials meet
equivalent requirements of the
U.S. slaughter poultry and egg products
inspection system.
Emerging Markets Program-U.S. Codex Office Support for Western Hemisphere
countries' WTO participation: Working with the Inter-American Institute
for Cooperation on Agriculture (IICA), FAS supports attendance at WTO/SPS
committee meetings by select representatives of trade and regulatory
agencies of the 34 IICA member countries (including Mexico). FAS's
Emerging Markets Program funded this project, which helps countries in the
hemisphere implement international trade agreements. All 34 IICA member
countries sent representatives to WTO/SPS meetings held in Geneva in
November 2002; FAS also supported their participation in WTO meetings in
April and June 2003. For 2004, Mexico has become a member of the Steering
Committee for this program and, therefore, no longer receives funding to
attend the meetings.
2002 $10,000
Emerging Markets Regional Codex Workshop: FAS/ICD, in 2004 $101,520
cooperation with the U.S. Codex
Program-U.S. Codex Office, organized a technical workshop in
Mexico City, Mexico, in May 2004
for 31 Codex contact points and
Office policymakers from 22 Latin American and
the
Caribbean nations, including Mexico. The
workshop addressed food safety
guidelines and avoidance of potential
barriers to sanitary-phytosanitary
protocols. Presenters from USDA/FSIS,
USDA/FAS, FDA, and the countries'
Codex offices addressed topics that
included the following: key issues of the
Codex Alimentarius Commission, Codex
National Committees; CCLAC
Strategic Plan; SPS, TBT and TRIPS
agreements, equivalence and Codex
guidelines; product trace back; risk
analyses; and biotechnology labeling.
Total $298,412
Source: GAO, based on FSIS data.
Other U.S. Agencies In its efforts to protect U.S. consumers, FDA has also
undertaken activities that benefit Mexican agricultural producers. FDA's
approach has been to work with Mexican government agencies to help them
establish effective food safety regulatory, inspection, and enforcement
infrastructure,
Appendix IV
U.S.-Mexico Collaborative Activities Benefit
Agricultural Trade (1994-2004)
focusing particularly on microbiological hazards. For example, if a
foodborne disease outbreak resulting from a Mexican import occurs, FDA
determines the cause and works with the Mexican government to try and
resolve the problem and develop a system to prevent future outbreaks. FDA
officials explained that in 1997 their agency launched its Food Safety
Initiative (FSI) to improve the safety of the U.S. food supply, which
includes imported foods. Because Mexico exports around $3 billion in
fruits and vegetables to the United States each year, an important FSI
component has been to help Mexican commodity exporters become more
familiar with FDA regulatory requirements and to improve their ability to
comply with U.S. food safety regulations. FDA activities under FSI have
basically involved a series of training programs since 2002 for Mexican
fruit and vegetable exporters, academics, and government officials. In
addition to activities under FSI, FDA established the Southwest Import
District Office in 1999 to enhance food inspection activities along the
Mexican border. The Southwest Import District inspects imported goods
entering the United States through the Mexican Border from Brownsville,
Texas, to San Diego, California. During the last 4 years, FDA's Center for
Veterinary Medicine has also participated in training and assisted in the
establishment of a program in four agricultural states of Mexico to
monitor pathogens that are transmitted via contaminated food. FDA reported
it has spent about $1.8 million for its activities related to agricultural
production in Mexico since NAFTA went into effect.
Appendix V
Recent U.S.-Mexico Collaborative Agricultural Activities under Partnership
for Prosperity
The Partnership for Prosperity (P4P) initiative has a few collaborative
programs that are oriented towards agriculture. On the U.S. side, USDA's
FAS, OPIC, and USAID have played key roles in implementing the programs.1
Overall, P4P seeks to create a public-private alliance and develop a new
model for U.S.-Mexican bilateral collaboration to promote development,
particularly in regions of Mexico where economic growth has lagged and is
fueling migration. No new funds were specifically allocated to P4P by
either government since the program's inception; instead, the U.S.
government has sought to refocus resources already devoted to Mexico to
create a more efficient collaborative network. According to State
Department and USDA officials, since its establishment, P4P has become the
"umbrella" under which development collaboration between the United States
and Mexico takes place.
USDA's FAS has worked closely with several Mexican government agencies,
including Mexico's new rural lending institution, Financiera Rural, to
incorporate P4P's broader approach to rural development and assistance to
small farmers. For example, FAS arranged for USAID to use its U.S.
fellowship program to place one of its participants at Financiera Rural.
Through this fellowship, Financiera Rural hosted a professor from the
University of Minnesota who assisted the agency in developing a strategic
plan to incorporate the new paradigm for rural development proposed in the
P4P conferences, acknowledging that Financiera Rural is better suited to
operate as a second-tier lender. This strategic plan calls for the
development of rural financial lending intermediaries in Mexico, which
will be fostered using a model that complies with Mexico's legal
framework, determined by a study to be conducted jointly by the Financiera
Rural and the International Development Bank. The new strategic plan also
calls for the agency to fund any productive endeavor in the countryside,
not only agricultural production. Activities could include such things as
eco-tourism, rural gas stations, and transportation services. According to
Financiera Rural officials, the guidance provided by the USAID fellow has
positively contributed to Financiera Rural operations because funding and
access to these types of resources and knowledge are not otherwise
available in Mexico. Furthermore, the fellowship has provided support in
trying to resolve the issue of limited credit availability-one of Mexico's
most significant structural problems.
1On the U.S. side, P4P is co-led by the Departments of State, Commerce,
and Treasury. On the Mexican side, P4P is co-led on the Mexican side by
the Office of the President and the Ministries of Economy, Foreign
Relations, and Finance.
Appendix V Recent U.S.-Mexico Collaborative Agricultural Activities under
Partnership for Prosperity
According to U.S. Embassy officials in Mexico, one of the most significant
accomplishments under P4P has been the bilateral agreement to allow the
Overseas Private Investment Corporation (OPIC) to operate and provide
financing in Mexico. OPIC's mission is to help U.S. businesses invest
overseas, to foster economic development in new and emerging markets, and
to complement the private sector in managing the risks associated with
foreign direct investment. According to OPIC officials, for over 30 years
there had been resistance by the Mexican government to allow the agency to
operate in Mexico because of concerns over sovereignty. Mexico did not
want a U.S. government agency to provide loans in Mexico because that
would mean that the agency could ask for collateral and possibly own
Mexican property in the case of default on a loan. However, in 2003, an
agreement was reached through P4P to allow OPIC to operate in Mexico.
Since the bilateral agreement was signed, OPIC has begun to provide
financing for five projects in Mexico, including one related to
agriculture. For the agriculture-related project, OPIC approved a $3.3
million loan to Southern Valley Fruit and Vegetable, Inc., of Georgia to
develop a new farming project in Mexico that will serve as a winter
division of the company that will grow, package, and ship cucumbers,
squash, eggplant, and zucchini. The project will employ approximately 300
laborers and professionals in an area of high unemployment. Southern
Valley has committed over $2.2 million in equity to the project. OPIC
officials indicated that they expect their lending portfolio to grow in
Mexico.
USAID plans to expand its activities in Mexico to support rural
development. USAID officials explained that, overall, USAID has not had a
large presence in Mexico, and historically funding for activities in
Mexico has been limited. Furthermore, USAID activities in Mexico have
typically been in the areas of population, democracy, governance, health,
and microfinancing, instead of agriculture. However, in 2004 USAID
received an added $10.2 million specifically for rural development in
Mexico, which brought its budget to $32 million. USAID is now working with
other U.S. and Mexican agencies to develop projects to assist rural areas
of Mexico. In recent months USAID has initiated several activities
targeting rural development including:
o Small Farmer Support/Rural Business Development: Through this activity,
USAID award h is providing targeted business development and marketing
services to agricultural producer organizations and cooperatives in the
southern rural states of Oaxaca and Chiapas.
Appendix V Recent U.S.-Mexico Collaborative Agricultural Activities under
Partnership for Prosperity
o Connecting Small Producers with Market Opportunities: In partnership
with Michigan State University and USDA, USAID launched this activity in
late 2004 designed to allow small and medium producers to better compete
for opportunities in the mushrooming domestic market for food and produce.
o Rural Finance: In late 2004, USAID expanded what had been an
urbanfocused micro-enterprise finance program to include rural finance as
a priority activity.
o University Partnerships: In 2004, USAID focused the ongoing Training,
Internships, Exchanges, and Scholarships annual partnership competition on
proposals that would spur agribusiness and other issues tied to rural
economic growth. In August 2004, USAID awarded five new partnerships
directly related to rural development.
Appendix VI
Comments from the U.S. Department of State
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
Appendix VI
Comments from the U.S. Department of State
See comment 1.
See comment 2.
Appendix VI
Comments from the U.S. Department of State
See comment 3.
See comment 4. See comment 5.
See comment 6. See comment 7.
Appendix VI
Comments from the U.S. Department of State
Appendix VI
Comments from the U.S. Department of State
Appendix VI
Comments from the U.S. Department of State
The following are GAO's comments on the State Department's letter dated
March 16, 2005.
GAO Comments 1.
2.
3.
4.
5.
6.
7.
We revised title to make clear that we are not suggesting that Mexico has
failed to implement its obligations under NAFTA's agricultural provisions.
We do not believe that we overstate the opposition to NAFTA in Mexico. As
noted in the report, U.S. and Mexican officials have expressed concerns
about how negative perceptions of NAFTA may impact successful
implementation of the agreement. In addition, the report recalls the
difficulties experienced in Mexico at the time of tariffs elimination
under NAFTA in 2003.
We changed language in the two locations of the report cited by the State
Department to clarify that as a matter of course the United States has not
committed to providing technical assistance to its post-NAFTA free trade
partners. The report now states simply that the United States has recently
provided such assistance.
The points about the P4P Initiative noted by the State Department are also
mentioned in our report. We did not consider it necessary to make
revisions to address these points.
In our recommendations we identify the Secretary of State as the head of
one of the agencies taking the lead on P4P activities. We have added a
footnote in appendix V on P4P activities to clarify the roles of the
Departments of Commerce and Treasury. While these departments also have a
leading role in P4P activities, they are not directly involved in
activities related to rural development or the agricultural sector, and
therefore our recommendation is not addressed to these agencies.
Our review was concluded by the time the Partnership for Prosperity
working groups cited by the State Department had taken place. These
developments may represent the first steps in addressing our
recommendation.
We revised appendix V of the report to include key elements of the
information provided on recent USAID activities.
Appendix VII
Comments from the U.S. Department of Agriculture
Appendix VII
Comments from the U.S. Department of
Agriculture
Appendix VIII
GAO Contacts and Staff Acknowledgments
GAO Contacts Christine Broderick, (415) 904-2240 Juan Gobel, (213)
8301-031
Acknowledgments In addition to those listed above, Ming Chen, Francisco
Enriquez, Matthew Helm, Sona Kalapura, Jamie McDonald, Marisela Perez, and
Jonathan Rose made key contributions to this report.
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