Transition Problems in Economic Reform: Agriculture in the Mexico-US Free Trade Agreement

Santiago Levy and Sweder van Wijnbergen

No 624, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: At what speed should Mexican agriculture be incorporated into the North American Free Trade Agreement (FTA)? What policies should characterize the transition? We use Mexican agriculture as a case study to analyse the transition problems that arise in most major economic reforms. In particular, European Community (EC) farmers can expect similar problems if the Common Agricultural Policy (CAP) is dismantled and/or Eastern Europe gains unrestricted access to the EC's farm product markets. We focus on the implications for policy design of the absence of efficient capital markets, on the welfare costs of reforming only gradually, on incentive problems created by trade adjustment policies and on the redistributive aspects of policy reform in the presence of realistic limits on available intervention instruments. Our key point is that adjustment should focus on increasing the value of the assets owned by the groups affected, and not on direct income transfers or programmes targeting output or other characteristics controlled by the beneficiaries. We target adjustment on what people have, as opposed to what people do.

Keywords: Economic Reform; Mexico-US FTA; Transition Problems (search for similar items in EconPapers)
JEL-codes: F13 F15 Q17 (search for similar items in EconPapers)
Date: 1992-02
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Citations: View citations in EconPapers (17)

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