A quiet shot across the unbuilt wall was fired Monday from Mexico City when Senator Armando Rios Piter said he would introduce a bill that would end the purchase of corn from the US. This is in response to some of the suggestions from the current administration to stop the trade imbalance between the two countries.
NAFTA is a dirty word among many folks, especially labor. However, Iowa’s corn farmers saw a huge boon when NAFTA went into effect. NAFTA opened up a huge market for their corn in Mexico. What most people forget or maybe never knew was that when NAFTA ended the barriers to exporting corn to Mexico, Mexican farmers were greatly affected. Few farmers could compete with the cheap and hybridized corn from the US. Having lost their means of income in their home country, for many of them the only answer was to go to the US to look for work.
So while NAFTA was a boon for Iowa farmers, opening markets that were hard to get into before, it was a disaster for Mexican farmers. Here is a snippet of a story from a couple of years ago that illustrates the plight of the Mexican farm community:
When the North American Free Trade Agreement went into effect in 1994, it removed nearly all corporate trade barriers between the United States and Mexico. Among the industries affected was agriculture, forcing small Mexican farmers into direct competition with big American agribusiness. Cheap American corn — heavily subsidized, mechanized, and oh, yes, genetically modified — soon flooded the Mexican market, undercutting local farmers’ prices.
In the last eighteen years, the share of American corn in Mexico has jumped at least 500 percent. And just as millions of industrial workers in the United States lost their jobs in the free-trade outsourcing bonanza, rural Mexicans suffered a parallel fate. Even by cautious estimates, NAFTA is directly responsible for the loss of two million farm jobs in Mexico.
One of those farmers was Luis Moreno, Carla’s brother.
“How could he compete with something like Cargill?” Carla asked, speaking the name of the U.S. agricultural giant like it was a mythical dragon.
“He couldn’t, but he still had a wife and three kids,” Carla continued. “So Luis left to find work. First to Mexico City. Then to Kansas City. He’s been there for nine years now, cleaning office buildings. His kids only know him on the phone.”
It is also easy to see that the displaced Mexican farmer was integral to the wave of persons immigrating to the US illegally. When farmers could no longer make a living in their own country they had to do something. That something was to go to where to where the money was.
Immigration was an unplanned for side effect of NAFTA. Iowa farmers had a major new market for their corn.
Agriculture.com sums up the effects of the potential boycott of American corn by Mexico:
To date, Mexico is the No. 1 buyer of U.S. corn. For the marketing year September 1 through February 13, 2017, Mexico has bought 25% of the total U.S. corn sales. The next biggest buyer is Japan at 16% of the total.
Jason Ward, director of grains and energy for Northstar Commodity Investment Co., says the trade spat could impact both future and past sales.
“If all future sales get shut off to Mexico, it would be a significant negative to the marketplace for corn, and would easily overflow into other commodities, including pork and dairy,” Ward says.
To this point, in bushels, Mexico has bought 411.4 million bushels of corn from the U.S. this marketing year. Of that total, 197.6 million bushels have been shipped, “so we are talking about future sales and potentially unshipped sales that we have on the books, but haven’t arrived in Mexico yet,” Ward says.
However they do note that since commodities like corn are traded world wide, if Mexico shifts to new suppliers, then other current customers of the suppliers that would now service Mexico suppliers may need to find other suppliers. That is the US may pick some business from those customers.
What the current administration has done with its fist shaking and tough talk with our neighbor to the south is to start some cracks in a wall of trade that may well be the start of the destruction. So far all that has happened is to have an initial shot fired by the US and a return of fire from Mexico. That may be the end of it. Or these may be the first shots in what will become an all out trade war.
With an administration that has little experience in international relations and little skill in negations outside of making demands I fear Iowa farmers may see this little skirmish blow up with those farmers as one of the major victims.