Washington is threatening to expand its sanctions regime to Mexico, its second largest trade partner, for wanting to protect its own native crop diversity as well as its citizens’ rapidly worsening health.
Almost three decades after NAFTA was signed, Mexico has overtaken the United States as the world leader in childhood obesity. As diets rich in native corn and other traditional foods have been supplanted by ultra-processed foods and beverages, most of them coming from the US, Mexico is now in the grip of an alarming health crisis. This issue was already discussed in a VOXEU study cross-posted here in 2018, the findings of which indicated that “across Mexican states, a one standard deviation increase in the unhealthy share of food imports from the US increases the likelihood of individuals being obese by about 5 percentage points.”
According to that article adult obesity rates more than tripled in Mexico between 1980 and 2012, from 10% to 35%. Today, the rate is 37% today, the fifth highest in the world. Over 12% of the adult population has diabetes and a further 22% prediabetes. Almost half (47%) of adults have hypertension — the exact same proportion as the US.
Unless current trends are reversed, close to half (43%) of all children between the ages of 5 and 19 could be obese by 2030, according to forecasts by the Food Health Alliance. Mexico’s AMLO government is determined to step up to the plate (apologies) but it faces a wall of resistance from its biggest trading partner, the US, which provides 80% of Mexico’s food imports.
Mexico already enacted one of the strictest food labelling laws on the planet in 2020, much to the horror of global food and beverages companies. To them Mexico is a vital market, consuming more processed food than any other country in Latin America. The US, EU, Canada and Switzerland, home to some of the world’s biggest food companies, tried to derail the new legislation. But to no avail. The arrival of Covid-19, which is particularly lethal to people with three comorbidities — obesity, diabetes, and hypertension — strengthened the government’s case and resolve.
The AMLO government has also passed new legislation to ban trans fats from all processed foods, which will take effect in September. And it is trying to ban the consumption of GMO crops, albeit poquito a poquito. On December 31, 2020 Mexico’s President Andrés Manuel López Obrador (aka AMLO) issued a decree calling for all imports of GMO crops, including corn, as well as the “probably” carcinogenic weedkiller glyphosate to be phased out by the end of January 2024. Crucially, the decree enjoyed the support of Mexico’s Supreme Court.
But the decree terrified US farmers, particularly in the corn belt, Big Ag companies and global biotech behemoths, for good reason: More than 92% of the corn grown in the States is GMO, and Mexico, where corn was first domesticated around 9,000 years ago, is currently the biggest export market for US corn, all thanks to NAFTA. Its second biggest market, China, has been gradually reducing its corn imports from the US due to a combination of weak domestic demand, cheaper supplies from Brazil and the spectre of escalating tit-for-tat trade war with the US. Between them China and Mexico accounted for over half of all overseas purchases of US corn last year.
Faced with the threat of retaliatory measures from the US, AMLO’s government issued a new presidential decree earlier this year. It includes exemptions for feed corn, which counts for the lion’s share of U.S. exports. In its new decree the ban only applies to GM corn used in tortillas and corn-dough, which is supplied almost exclusively by Mexican producers of white and native corn varieties. The government reserved the right to substitute GM corn for animal feed some time in the future.
Only four percent of US corn exports are white corn, and most of that does not go into tortillas. In other words, the new decree will have minimal impact on US growers, at least for some years to come. Yet even that did not placate the US government.
At the beginning of this month, Washington convened a trade dispute panel, arguing that the new decree still violates the U.S.-Mexico Canada free trade agreement and is based on bad science. A week letter, the Canadian government joined the scrum arguing that Mexico could extend its GM ban to other crops. The panel of handsomely paid experts will now spend around half a year studying the complaint before releasing its findings, which could lead to the imposition of trade sanctions on Mexico if the country is deemed to have violated the USMCA trade agreement.
But if the US and Canada’s escalation of their trade dispute with Mexico was meant to snap the Mexican government’s resolve, it appears to have had the opposite effect. Instead of bowing to the threats of trade sanctions, Mexico’s government has upped the ante. On Saturday, it imposed a 50% tariff on white corn imports with the aim of boosting national production and preventing the entry of GM corn.
“It may be that they take us to a panel, but this is a matter of public health,” AMLO said in his daily morning conference, adding that Washington has refused to jointly carry out an investigation with Mexican scientists to study the harm caused by the consumption of GM corn. “There are many interests involved,” he concluded.
At stake is $42.3 billion of revenues over the next decade, according to the National Association of Corn Growers in the US — $30.5 billion for US businesses, $11.7 billion for Mexican ones and $96 million for those in Canada.
AMLO’s decision to impose a tariff on imports of white corn comes after corn growers in the state of Sinaloa shut down the local airport in Culiacán for two days to protest against low international corn prices. The hope is that this will help reduce the downward price pressures for local growers. Mexico’s President has also said he will sign a decree banning all tortilla shops from buying GM corn:
“I am about to sign this week (an agreement) so that only white and non-transgenic corn is used in tortilla shops. This will be accompanied by the establishment of tariffs so that [GM corn] is not imported and purchased from Mexican producers ”
AMLO’s latest actions will no doubt elicit more threats from Washington and Ottawa. But it seems that the stakes are too high for Mexico’s government to back down at this point. At stake is the (already compromised) health of the country’s people as well as the diversity of its native maize varieties and ecosystems, which are invaluable not just for Mexico but for the world at large. As Timothy A Wise, a senior adviser at the Institute for Agriculture and Trade Policy, notes in a piece for Consortium News, the escalating food fight between the US, Canada and Mexico “may well test the extent to which a major exporter can use a trade agreement to force a sovereign nation to abandon measures it deems necessary to protect public health and the environment”:
As Mexico’s Economy Ministry noted in its short response [to the US governments’ convocation of a trade dispute panel), Mexico will show that its current measures have little impact on U.S. exporters, because Mexico is self-sufficient in white and native corn.
Any future substitution of non-GM corn will not involve trade restrictions but will come from Mexico’s investments in reducing import dependence by promoting increased domestic production of corn and other key staples.
The statement also noted that the U.S.-Mexico-Canada Agreement’s environment chapter obligates countries to protect biodiversity, and for Mexico, where corn was first domesticated and the diet and culture are so defined by it, corn biodiversity is a top priority.
As for the assertion that Mexico’s concerns about GM corn and glyphosate are not based on science, the U.S. Trade Representative Office’s action came on the heels of an unprecedented five weeks of public forums convened by Mexico’s national science agencies to assess the risks and dangers.
More than 50 Mexican and international experts presented evidence that justifies the precautionary measures taken by the government. (I summarized some of the evidence in an earlier article.)
But even if Mexico wins the dispute, the AMLO government will still have its work cut out. While a decline in white corn imports in 2022 suggests a certain amount of progress in reducing import-dependence, national-level data show few signs of a meaningful increase in corn production. As Wise notes, “with corn and wheat prices falling around 20% percent in recent weeks, the government is buying up around 40% of the harvest from small and medium-scale farmers at higher prices with the goal of giving larger producers the bargaining power to then demand higher prices from the large grain-buyers that dominate the tortilla industry.
AMLO also appears to be setting his sights on the oversized market power of Mexico’s food monopolies. In a speech last week he said:
There are still many monopolies. For example, the corn monopoly. Two companies control 90% of the corn industry. Ninety percent! Imagine that, in a country where corn is the basic food staple. Meat: three big [companies]. Fish: around five. Eggs: around 10. So we need to find a way to democratise all productive activity.
But the main problem right now is with yellow corn, which Mexico is hugely dependent upon for animal feed. And for the moment almost all of it comes from the US, in GM form. In fact, Mexico’s corn imports are forecast to climb to 18 million tonnes in the next marketing year, up 5% from the previous year, due to increased demand from the starch and animal feed sectors. That’s according to a Global Agricultural Service of the US Department of Agriculture.
To try to reverse this trend, Mexico’s government is studying the possibility of reaching agreements with farmers in Argentina and Brazil to procure imports of non-GM yellow corn while also trying to ramp up domestic production. To that end, scientists at the National Autonomous University of Mexico (UNAM) have developed three varieties of yellow corn — Kuautli Puma, Mistli Puma and Coztli Puma — as an option for growers in rain-fed or irrigation peak areas. Also, as previously reported here, some US farmers are also getting behind Mexico’s proposed GM ban.
But the outcome of this trade dispute will ultimately be decided by the supposedly independent judges on the dispute panel. And that outcome could have global repercussions. If the panel sides with the plaintiffs, as tends to happen in most of these cases, Mexico could face significant retaliatory sanctions should its government decide to proceed with its ban on GM corn for human consumption. The message will be clear to governments worldwide: think twice before adopting measures to protect public health and the environment, if those measures threaten in any way the economic interests of a major exporter with whom you have signed a free trade agreement.