A Coherent Agriculture Trade Policy for Mexico

Ralf Peters and David Vanzetti ()

No 332229, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: Mexico’s agricultural trade reform coincides with increasing imports, decreasing employment in agriculture and high poverty rates in rural areas. Imports have increased from all major trading partners and particularly from NAFTA members who supply more than 80 per cent of Mexico’s agricultural imports. NAFTA has been accused of damaging farmers in Mexico and jeopardizing Mexico’s food self-sufficiency. Although tariffs have been gradually reduced, many Mexican producers have expressed concern about the removal of tariff protection. In addition, although NAFTA specified the removal of bilateral tariffs on both sides of the border, there are no limitations in the agreement concerning the use of domestic support. The purpose of this study is to assess alternative policy options. A global general equilibrium model, GTAP, is used to analyze the production, trade and welfare effect of such policy changes. The results show that policies that increase distortions may strengthen the agricultural sector in terms of higher output, exports and employment but are likely to have adverse effects on the remaining economy. Removing payroll taxes and policies that increase agricultural productivity instead have positive effects for both the agricultural sector and the economy as a whole.

Keywords: International Relations/Trade; Labor and Human Capital (search for similar items in EconPapers)
Pages: 40
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332229

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