NAFTA Will Benefit US Agriculture in the Long Run
`FREE trade is going to set us back a little bit," says Jerry Walzel. "But it will be positive in the long run."
As vice president of government affairs for the Texas Citrus and Vegetable Association (TCVA), Mr. Walzel speaks for a group of farmers presumed to be vulnerable to competition from Mexico under a North America Free Trade Agreement (NAFTA).
Currently, Mexico takes 6 percent of US farm exports, worth $2.5 billion. That places it among the top 10 US farm export markets.
The United States, in turn, is the export market for Mexico's farmers. The $2.6 billion worth of agriculture products they send to the US is 96 percent of Mexico's farm exports.
The 35 different farm products - from cantaloupes to citrus fruits to cucumbers - grown by the 400 members of the TCVA are the sort that Mexico already ships to the US. Mexico's exports of such products to the US were $1.5 billion in 1990.
In some instances, though, that produce comes from operations owned by Texas growers, who have had a foothold in Mexico since the 1950s, Walzel explains. And those operations were located in areas with a different growing season than their Texas farms. So instead of competing with themselves they created a larger marketing window.
"There's virtually no difference" between the cost of an onion grown in Texas and one grown in Mexico and shipped to Texas; thus the longer marketing window is the only reason for operating in Mexico, Walzel says.
The tariffs that NAFTA would eliminate have protected Texas growers from some same-season competition in Mexico, Walzel admits. But he says the phase-out period will be adequate for his members to adjust.
Walzel also says that within five years Mexico will have the same sort of environmental requirements as are in place on US agriculture. And he says that the notion of cheap labor in Mexico is a myth. Workers there may earn one-fourth as much as their US counterparts, but they also are one-fourth as productive because of differences in education and training.
At the National Farmers Union, which represents the operators of 2 million family farms, spokesman Clay Pederson worries that Mexico will try to become a conduit to the US for sugar exports from third countries. Mexico is a net sugar importer, yet "it is going through the paperwork to be an exporter," he says. "That bothers us."
Sugar production is heavily subsidized by most producing nations. The US is a net importer, maintaining tariffs to defend prices for the domestic sweetener industry. If sugar imports are allowed to rise under NAFTA, Mr. Pederson predicts, sugar prices will plunge. As an example, he cites milk. It dropped 33 percent in price last year in reaction to a domestic production increase of 1 percent.
On the export side, Mexico buys $2.5 billion worth of grain from the US. NAFTA "is going to be very positive for us," says Kent Van Amburg, director of trade relations at the US Feed Grains Council.
Mexico is already the third-largest foreign market for grains such as sorghum, corn, and barley, buying some 10 percent of US feed grain exports. Mr. Van Amburg says that President Carlos Salinas de Gortari's economic reforms are expanding Mexico's middle class. Experience in other countries has shown that as incomes rise, consumers buy more meat.
But Mexico lacks the resources to grow more feed grain for an expanding beef and poultry industry, which will enhance exports of feed grains from the US, he concludes.