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

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  • Levy, Santiago
  • van Wijnbergen, Sweder

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.

Suggested Citation

  • Levy, Santiago & van Wijnbergen, Sweder, 1992. "Transition Problems in Economic Reform: Agriculture in the Mexico-US Free Trade Agreement," CEPR Discussion Papers 624, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:624
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    References listed on IDEAS

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    1. Feenstra, R.C. & Rose, A.K., 1992. "Trade with Mexico and Water Use in California Agriculture," Papers 399, California Davis - Institute of Governmental Affairs.
    2. Aaron Tornell, 1991. "Time Inconsistency of Protectionist Programs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 963-974.
    3. Peter A. Diamond, 1982. "Protection, Trade Adjustment Assistance, and Income Distribution," NBER Chapters, in: Import Competition and Response, pages 123-150, National Bureau of Economic Research, Inc.
    4. Paul Krugman, 1982. "Trade in Differentiated Products and the Political Economy of Trade Liberalization," NBER Chapters, in: Import Competition and Response, pages 197-222, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Steven J. Matusz & David G. Tarr, 2017. "Adjusting To Trade Policy Reform," World Scientific Book Chapters, in: Trade Policies for Development and Transition, chapter 4, pages 77-114, World Scientific Publishing Co. Pte. Ltd..
    2. Hinojosa-Ojeda, Raul & Robinson, Sherman, 1992. "Labor Issues in a North American Free Trade Area," CUDARE Working Papers 198601, University of California, Berkeley, Department of Agricultural and Resource Economics.
    3. Van Wijnbergen, S. & Venables, Tony, 1993. "Location choice," LSE Research Online Documents on Economics 2099, London School of Economics and Political Science, LSE Library.
    4. Rossana Patrón, 1999. "The imperfect mobility of labour: Going from theory to ‘virtual’ reality. Simulations with simple trade models," Documentos de Trabajo (working papers) 2299, Department of Economics - dECON.
    5. J. C. Burgess, 1998. "Economic analysis of deforestation in Mexico," Chapters, in: The Economics of Environment and Development, chapter 10, pages 183-222, Edward Elgar Publishing.
    6. Susan M. Richter & J. Edward Taylor & Antonio Yúnez-Naude, 2007. "Impacts of Policy Reforms on Labor Migration from Rural Mexico to the United States," NBER Chapters, in: Mexican Immigration to the United States, pages 269-288, National Bureau of Economic Research, Inc.
    7. Rossana Patrón, 2000. "Effects from trade with heterogeneous workers and minimum wages: numerical exercises," Documentos de Trabajo (working papers) 1700, Department of Economics - dECON.
    8. Harris, Rebecca Lee, 2001. "A computable general equilibrium analysis of Mexico's agricultural policy reforms," TMD discussion papers 65, International Food Policy Research Institute (IFPRI).
    9. K. Doroodian & Roy Boyd, 1999. "The impact of removing corn subsidies in mexico: A general equilibrium assessment," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 27(2), pages 150-169, June.
    10. Richter, Susan M. & Taylor, J. Edward & Yunez-Naude, Antonio, 2005. "Gender Impacts of U.S. Immigration Policies," 2005 Annual meeting, July 24-27, Providence, RI 19403, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Bryant, Elizabeth & Yumkella, Kandeh K., 1993. "Mexican Agricultural Policies and NAFTA: Implications for U.S. - Mexican Bean Trade," Staff Paper Series 201175, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    12. Dani Rodrik, 1993. "Trade and Industrial Policy Reform in Developing Countries: A Review of Recent Theory and Evidence," NBER Working Papers 4417, National Bureau of Economic Research, Inc.
    13. Fisher, Anthony & Fullerton, David & Hatch, Nile & Reinelt, Peter, 1994. "Alternatives for Managing Drought: A Comparative Cost Analysis," CUDARE Working Papers 198616, University of California, Berkeley, Department of Agricultural and Resource Economics.
    14. Barbier, Edward B., 2004. "Agricultural Expansion, Resource Booms and Growth in Latin America: Implications for Long-run Economic Development," World Development, Elsevier, vol. 32(1), pages 137-157, January.
    15. Yunez-Naude, Antonio, 2002. "Mexico'S Basic-Crops Subsector: Structure And Competition Under Free Trade," Proceedings of the 7th Agricultural and Food Policy Systems Information Workshop, 2001: Structural Change as a Source of Trade Disputes Under NAFTA 16860, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.

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    More about this item

    Keywords

    Economic Reform; Mexico-US FTA; Transition Problems;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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