1. Confidential and Proprietary/For internal use Food & Agribusiness Research I North American Trade Disputes: A Mexican Perspective

2. Confidential and Proprietary/For internal use Food & Agribusiness Research I North American Trade Disputes: A Mexican Perspective Sources of trade irritants Underlying cause of trade disputes What’s wrong with a little dispute Conclusions

3. Confidential and Proprietary/For internal use Food & Agribusiness Research I Sources of Trade Disputes Trans-border power Political sensitivity –growing democracy Differential policy mechanisms Relative price differentials Rapid structural change -- technology innovation Foreign investment -- lack thereof

4. Confidential and Proprietary/For internal use Food & Agribusiness Research I Trans border power ratio Size of market Concentration ratio Import market share Size of market e * Concentration ratio e Size of market i * Concentration ratio i * import share = TBPR * imports / domestic production

5. Confidential and Proprietary/For internal use Food & Agribusiness Research I Trans border power ratio and trade conflicts Trans border power ratio Probability of trade disputes Beef Poultry

6. Confidential and Proprietary/For internal use Food & Agribusiness Research I Trans border power ratio and political sensibility: Probability of disputes as trade grows High Low Trans border power ratio Political sensibility High Medium probability Trade disputes Nobody cares High probability Low HFC S Avocado s Hogs Trucking

7. Confidential and Proprietary/For internal use Food & Agribusiness Research I Differential policy mechanisms Policy vision Support mechanisms Subsidies

8. Confidential and Proprietary/For internal use Food & Agribusiness Research I USDA organizational chart: Areas where the then SAGAR was not involved or not overly active

9. Confidential and Proprietary/For internal use Food & Agribusiness Research I 11 USDA Comparative budgetary expenditures Source: Consjeo Nacional Agropecuario

10. Confidential and Proprietary/For internal use Food & Agribusiness Research I Apoyos en otros países USDA Other Gov. agencies US$ 36 100 million (not operated by SAGAR) US$ 5 503.2 th 1).- Social and food programs, including nutrition Anti proverty program Capital Hum.:$ 2 695.1 mil (Progresa) Opciones Ingr:$ 906.3 mil (Pet,Fonaes) Capital físico:$ 1 901.8 mil (State local gov) US$ 4 700 million US$ 82.4 th 3).-Natural resources Water commission: $ 82.4 mil US$ 2 100 million US$ 205.4 th 5).- Education and research including economic research Inifap: $ 67.3 mil UACh: $ 69.8 mil UAAANarro$ 32.0 mil Col.Postgr: $ 30.0 mil CEASAGAR:$ 6.3 mil TOTAL US: $ 62 200 million TOTAL MÉXICO: $ 8 509.6 million 12 Comparative budgetary expenditures Source: Consjeo Nacional Agropecuario

11. Confidential and Proprietary/For internal use Food & Agribusiness Research I Agricultural development budget (Billion of 1994 pesos) Source: Various presidential informes; Banco de Mexico. !980 - 1994 refers to rural development

12. Confidential and Proprietary/For internal use Food & Agribusiness Research I Agricultural development budget as a percentage of the total programmed budget Source: Various presidential informes; Banco de Mexico. !980 - 1994 refers to rural development

13. Confidential and Proprietary/For internal use Food & Agribusiness Research I Subsidy Levels in NAFTA Countries U.S. Dollars per hectare U.S. Dollars per full-time farmer Source: Consjeo Nacional Agropecuario

14. Confidential and Proprietary/For internal use Food & Agribusiness Research I Government export support

15. Confidential and Proprietary/For internal use Food & Agribusiness Research I You talk the talk, but you don’t walk the walk The Mexican view on their NAFTA partners agricultural policies

16. Confidential and Proprietary/For internal use Food & Agribusiness Research I Comparative subsidy levels among NAFTA partners (PSE’s) Apoyos en otros países 15 Mexico Canada United States

17. Confidential and Proprietary/For internal use Food & Agribusiness Research I Relative price differentials Undermines local markets Opportunities for dumping Strengthens exporter balance sheet

18. Confidential and Proprietary/For internal use Food & Agribusiness Research I Mexican Beef Market Imports Wholesale price us$ / Lb 1.20 1.60 1.00 1.50 4.00 Mex USA Domestic 3.00 30%83% 70% Popular Cuts Mid-range Cuts High end cuts Source: AMEG

19. Confidential and Proprietary/For internal use Food & Agribusiness Research I Source: Enrique Dominguez, WSJ, ASERCA, CMP elaboration Price structure: Hogs and Pork in the U.S. and Mexico

20. Confidential and Proprietary/For internal use Food & Agribusiness Research I Tomatoes - extended shelf life U.S. beef market Change in Mexican trade profile Structural and technological change

21. Confidential and Proprietary/For internal use Food & Agribusiness Research I U.S. beef market Fuente: NCBA

22. Confidential and Proprietary/For internal use Food & Agribusiness Research I U.S. Beef Trade Balance (million dollars) * Beef and variety meats Fuente: NCBA *

23. Confidential and Proprietary/For internal use Food & Agribusiness Research I Food and agriculture imports (Million dollars)

24. Confidential and Proprietary/For internal use Food & Agribusiness Research I Food and agriculture imports

25. Confidential and Proprietary/For internal use Food & Agribusiness Research I Food and agriculture exports (Million dollars)

26. Confidential and Proprietary/For internal use Food & Agribusiness Research I Food and agriculture exports

27. Confidential and Proprietary/For internal use Food & Agribusiness Research I Stimulates trade Creates interdependency But can create competitive pressure Foreign Investment

28. Confidential and Proprietary/For internal use Food & Agribusiness Research I Foreign Investment in Mexican food and agriculture (number of firms) Source: Secretaría de Economía Food Manufacturing

29. Confidential and Proprietary/For internal use Food & Agribusiness Research I Foreign Investment in Mexican Food and Agriculture by Country of Origin Agriculture Food

30. Confidential and Proprietary/For internal use Food & Agribusiness Research I So what’s wrong with trade disputes? When there is no trade there are no disputes Keeps lawyers and economists busy Absence of disputes could indicate collusion –Are consumers better off? –Are farmers better off? Tomato case –U.S. and Mexican growers agreed to essentially a price floor in 1996, ending a trade dispute

31. Confidential and Proprietary/For internal use Food & Agribusiness Research I U.S. imports of Mexican tomatoes (‘000 tons) Source: Bancomext, based on U.S. Department of Commerce data

32. Confidential and Proprietary/For internal use Food & Agribusiness Research I Prices per kilo of imported tomatoes in the U.S. market Source: Bancomext, based on U.S. Department of Commerce data

33. Confidential and Proprietary/For internal use Food & Agribusiness Research I Mexico’s share of the U.S. winter tomato market (% volume) Source: Bancomext, based on U.S. Department of Commerce data

34. Confidential and Proprietary/For internal use Food & Agribusiness Research I Conclusions An ad hoc-type dispute resolution mechanism is needed

35. Confidential and Proprietary/For internal use Food & Agribusiness Research I Legal time frame for an trade case Live hogs Source: USDA, Enrique Dominguez INVESTIGATION REQUEST Jun 98 PROVISIONAL RESOLUTION Feb 99 DEFINITIVE RESOLUTION Oct 99 INVESTIGATION Oct’97-Mar’98 Heads 480 DAYS

36. Confidential and Proprietary/For internal use Food & Agribusiness Research I Conclusions An ad hoc-type dispute resolution mechanism is needed Need to incorporate more Mexican academics Need to bring together private sector actors Nevertheless Probability for more trade conflicts in the near future

37. Confidential and Proprietary/For internal use Food & Agribusiness Research I Mexico’s aggressive trade stance 1994 NAFTA 1992 Chile 1995 Bolivia, Costa Rica, Colombia y Venezuela 1998 Nicaragua 2000 EUFTA

38. Confidential and Proprietary/For internal use Food & Agribusiness Research I Conclusions An ad hoc-type dispute resolution mechanism is needed Need to incorporate more Mexican academics Need to bring together private sector actors Nevertheless Probability for more trade conflicts in the near future –Mexico’s aggressive trade stance –Adjustment of domestic agricultural policy