structural change as a source of trade disputes under nafta
DESCRIPTION
STRUCTURAL CHANGE AS A SOURCE OF TRADE DISPUTES UNDER NAFTA. ANDRES ROSENZWEIG PICHARDO GENERAL DIRECTOR OF AGRICULTURAL STUDIES MINISTRY OF AGRICULTURE, LIVESTOCK, RURAL DEVELOPMENT, FISHERIES AND AGRI-FOOD Tucson, Arizona February, 2001. IMP ORTS/PRODUCTION RATIO. Imports/Production. - PowerPoint PPT PresentationTRANSCRIPT
STRUCTURAL
CHANGE AS A
SOURCE OF TRADE
DISPUTES UNDER
NAFTAANDRES ROSENZWEIG PICHARDO
GENERAL DIRECTOR OF AGRICULTURAL STUDIES
MINISTRY OF AGRICULTURE, LIVESTOCK, RURAL DEVELOPMENT,
FISHERIES AND AGRI-FOOD
Tucson, Arizona
February, 2001
SECTOR WITH SUBSTANTIALLY GREATER EXPOSURE TO THE INTERNATIONAL MARKET DUE TRADE LIBERALIZATION
IMPORTS/PRODUCTION RATIO
1/. Million dollars.
Source: CEA and SAGARPA with Secretary of Economics data.
IMPORTS 1994 IMPORTS 1999Imports/Production
1994 (%)Imports/Production
1999 (%)PRODUCT
Value 1/ Value 1/ Value 1/ Value 1/
Maize 369.5 600.2 10.4 21.7
Wheat 189.3 336.8 25.2 77.7
Sorghum 394.8 426.9 88.5 69.7
Barley 6.7 39 10.9 54.6
Rice 104.1 122.3 136.7 168.4
Bovine meat 337.0 595.2 10.2 19.4
Swine meat 107.2 131.8 6.2 7.3
Poultry meat 89.4 82.6 4.5 3.8
Import penetration has increased in all these products, with the exception of surghum and poultry, due to:
Higher growth of human consumption than production.
Higher demand of processing industries.
MEXICAN AGRICULTURAL EXPORTS FIGURES
AGRIFOOD EXPORTS/TOTAL EXPORTS RATIO, MEXICO – WORLDMillion dollars
Concept 1994 1995 1996 1997 1998 1999ARG
99/94
Total exports of Mexico 60,817.2 79,540.6 96,003.7 110,236.8 117,459.6 136,391.1 17.53
Agri – food exports Mexico - World 4,031.7 5,786.2 5,724.7 6,337.5 6,746.0 6,985.9 11.62
Agri – food exports / Total Exports of Mexico (%)
6.6 7.3 6.0 5.7 5.7 5.1 (5.03)
The share of agri-food exports to total exports has been diminishing, even though agri-food exports have increased at an ARG of 11.6 per cent.
Data shows no trade diversion on the side of exports due to NAFTA. Trade remains concentrated with NAFTA Partners.
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
(Million
dollars
)
1994 1995 1996 1997 1998 1999 (Years)
PERFORMANCE OF MEXICAN AGRIFOOD EXPORTS WITH NAFTA AND REST OF THE WORLD
Rest of the World Mexico - NAFTA
ARG10.9%
ARG15.8%
Source: SAGARPA and Secretary of Economics.
MEXICAN AGRICULTURAL IMPORTS FIGURES
Food imports vs total exports measures vulnerability according to FAO. This index is decreasing for Mexico, due to the performance of the economy as a whole.
Data shows trade diversion on the import side due to the NAFTA.
AGRIFOOD IMPORTS/TOTAL EXPORTS RATIO, MEXICO – WORLDMillion dollars
Concept 1994 1995 1996 1997 1998 1999ARG
99/94
Total exports of Mexico 60,817.2 79,540.6 96,003.7 110,236.8 117,459.6 136,391.1 17.53
Agri – food imports Mexico - World 7,343.2 5,252.9 7,678.3 8,610.1 8,546.7 6,985.9 11.62
Agri - food imports / Total Exports of Mexico (%) 12.1 6.6 8.0 6.9 7.3 6.3 (12.2)
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
(Million
dollars
)
1994 1995 1996 1997 1998 1999 (Years)
PERFORMANCE OF MEXICAN AGRIFOOD IMPORTS WITH NAFTA AND REST OF THE WORLD
Rest of the World Mexico-NAFTA
ARG4.4%
ARG(2.2%)
Source: SAGARPA and Secretary of Economics.
MEXICAN AGRICULTURAL AND AGRI-FOOD TRADE BALANCES
AGRICULTURAL TRADE BALANCE / AGRICULTURAL GDP RATIOMillion dollars
Concept 1994 1995 1996 1997 1998 1999
Agricultural Trade Balance Mexico - World
(1,332.3) 1,176.6 (1,433.0) (730.7) (1,134.4) (977.6)
Agricultural GDP 22,216.4 14,348.3 18,393.4 20,109.5 20,080.2 20,488.5
Agricultural Balance / Agricultural GDP (%)
(6.0) 8.2 (7.8) (3.6) (5.6) (4.8)
Source: SAGARPA with Secretary of Economics data.
AGRICULTURAL TRADE BALANCE / AGRI-FOOD GDP RATIOMillion dollars
Concept 1994 1995 1996 1997 1998 1999
Agri-food Trade Balance Mexico - World
(3,311.5) 533.3 (1,953.6) (1,311.6) (1,864.0) (1,560.9)
Agri-food GDP 41,968.1 28,546.4 35,023.5 39,168.4 39,785.8 43,845.6
Agri-food Balance / Agri-food GDP (%)
(7.9) 1.9 (5.6) (3.3) (4.7) (3.6)
Source: SAGARPA with Secretary of Economics data.
The deficit in agri – food productos is equal to 3.6 per cent of agri – food GDP.
Agricultural exports have gained importance in agricultural GDP:
21.1 per cent of agricultural GDP is generated by exports.
15.9 per cent of agri – food GDP is generated by exports.
AGRICULTURAL EXPORTS / AGRICULTURAL GDP RATIO
AGRICULTURAL EXPORTS/AGRICULTURAL GDP RATIO
21.1%21.1%20.6%20.6%20.4%20.4%
29.4%29.4%
13.0%13.0%
20.3%20.3%
0
5,000
10,000
15,000
20,000
25,000
1994 1995 1996 1997 1998 1999
Mil
lion
doll
ars
0
5
10
15
20
25
30
35
(%)
Agricultural Exports México-World
Agricultural GDP Agricultural Exports / Agricultural GDP (%)
Country or Region
Population (millions)
PIB per cápita(dollars)
North America CanadaUnited StatesMexico
Central America GuatemalaHondurasEl SalvadorCosta RicaNicaragua
South AmericaColombiaVenezuelaChileBolivia
European Union
Israel
3027097
116645
4123158
368
6
19,35430,4834,099
1,722895
1,9782,620
401
2,5104,1315,2491,073
22,191
16,754
TOTAL 902
EFTA 12 32,921
POTENTIAL MARKET FOR MEXICAN AGRICULTURAL AND AGRIFOOD SECTOR, 1998
A potential market of 902 million of consumers is open or will be for Mexican products. NAFTA and the European Union remain the major market for increasing agricultural and agri – food exports.
POTENTIAL MARKET FOR MEXICAN AGRICULTURAL AND AGRIFOOD SECTOR, 1998
Agricultural Policies for the period 2001 – 2006 will be established in the next “Agricultural and Rural Development Plan”. Elaboration is under process. Some general highlights are:
Greater emphasis in rural development policies (health care, education, living conditions in the country side, among others).
Strong commitment to alleviate rural poverty.
Greater role of state governments in public expenditure decisions. Enhancement of the federalization process.
Further liberalization of agricultural markets. Redefinition of the “agricultural marketing support program”.
More emphasis in better marketing practices vis a vis raising the level of production.
Strong commitment with free trade.
Strengthening of rural financial markets. Adjustment and changes in those institutions that provide financing to the countryside. Redefinition of the role of the government in both credit and risk management programs.
Adjustments to main existing Programas “PROCAMPO an the Alianza para el Campo”, in order to improve equity and efficiency.
MACROECONOMIC SCENARIO 2000-2001
2000 e/
7.1
5,496.811.0
8.9
9.5
15.2
6.8
18,958.5
3.3
0.93
2001
4.5
6,133.16.8
6.5
10.1
12.4
6.2
22,848.0
3.8
0.5
Gross Domestic Product
Real Growth %
Nominal (thousand million pesos)GDP deflactor
Inflation rate
Dic. / Dic.
Nominal exchange rate 1/
Average
Interest rates (Cetes 28 days)
Nominal Average %
Real %
Current Account
Million dollars
% of GDP
Public Balance
% of GDP
Support Variables:
e/ Estimated data.
1/ Because the exchange rate regime is of free float ng, this numbers are neither goals nor predictions of the exchange rate; this data was used as reference for budget purposes.
SOURCE: General Criteria of Economic Policy for 2001, SHCP.
Mexico’s and the U.S. economies will slow down in year 2001. Differentials in inflation and interest rates have been diminishing but remain relatively high.
-9.0
-6.0
-3.0
0.0
3.0
6.0
9.0
1994 1995 1996 1997 1998 1999
Real A
nn
ual %
Ch
an
ge
National GDP Agricultural GDP
NATIONAL AND AGRICULTURAL GDP
Agricultural GDP shows a more stable pattern than national GDP.
Average rate of growth of agricultural GDP during the period 1990 – 1998 was 1.7 percent, 1.3 percentage points lower than national GDP.
GDP for the food and beverages industry grew at an average rate of 3.4 percent over the period 1990 – 1998.
STRENGTH OF REST OF THE ECONOMY
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 p/
MAIN AGRICULTURAL PRODUCTION BY GROUP OF PRODUCTS1990-1999
(Thousand Tons.)
Grains and oilseeds Fruits Vegetables
Grain & Oilseeds ARG 0.8%
Fruits ARG 2.6%
Vegetables ARG 4.7%
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 p/
MAIN LIVESTOCK PRODUCTION BY GROUP OF PRODUCTS(Thousand Tons.)
Beef Pork meat
Beef ARG 2.6%
Pork Meat ARG 3.0%
Poultry Meat ARG 9.5%
Poultry meat
THE ROLE OF GOVERNMENT
SUPPORT PRODUCER EQUIVALENT(percent)
CROP
Maize Wheat Rice
Other grains
1997
30 15 3 21
Mexico
1998
31 30 6 23
1999p/
3936 20 32
1997
1425 10 23
USA
1998
27 39 15 40
1999p/
30 46 26 40
Source: Agricultural Policies in OECD Countries. Monitoring and Evaluation. 2000 p/ preliminary
PSE´s figures of OECD for maize are higher in Mexico than in the US. Nevertheless, in 1998 total transfers as a percentage of agricultural GDP were on average 55.6 percent in OECD countries and 25.8 percent in Mexico.
To some extent, Mexico has gradually phased out tariffs and phased in direct payments. As the phase out of tariffs in the context of NAFTA keeps on track, one might anticipate further pressures on the budget to compensate producers.
THE CURRENT POLICY MIX
Distribution of Fiscal Transfers to the Agricultural Sector
Production
enhancement
42.8
Direct income
support
37.1%
Others
6.7% Infrastructure
13.5%
Source: Public Account 1990-1997; for 1998, SHCP estimated data.
On average for the 1997-98 period, support oriented to foster production was 42.8 per cent, direct income support 37.1 per cent, and development of
infrastructure 13.5 per cent.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Real M
illion
s p
esos 1
994
Dic. 1995 Dic. 1996 Dic. 1997 Dic. 1998 Dic. 1999 Sep. 2000
TOTAL CREDITS BY COMMERCIAL AND DEVELOPMENTS BANKS TO THE AGRICULTURAL SECTOR
December 1995 - September 2000
Source: Economic Indicators, Banxico.
ARGDec 1995-1999
(14.4%)
The credit to agriculture has decreased steadily.
RURAL POPULATION STRUCTURE BY REGION
7.4 %7.4 %
12.3 % 12.3 %
2.8 %2.8 %
17.0 %17.0 %
21.5 %21.5 %21.3 %21.3 %
15.1 %15.1 %
2.6 %2.6 %
43.9 percent of rural population lives in communities of less than 500 inhabitants, and 68.6% in communities of less than 1,000
inhabitants.
AGRICULTURAL LABOR FORCE
AGRICULTURAL LABOR FORCE(number of persons)
AGRICULTURAL LABOR FORCE
PRODUCERS
WORKERS
1991
9,845,020
4,318,053
5,526,967
1993
10,469,013
4,750,568
5,718,445
1995
9,717,247
4,074,350
5,642,897
1996
9,160,828
3,734,966
5,425,862
1997
10,427,954
4,002,194
6,425,760
1998
9,838,318
3,879,013
5,959,305
Source: National Emplo yment Survey, Ministry of Employment and Social Security (STPS).
The agricultural labor force amounts to 9.8 millions, of which 3.8 millions are producers and 5.9 millions are workers. 60 percent of all workers do not receive payments (mostly family work).
INCOME SOURCES OF THE RURAL SECTOR
The greater the farm size, the farm income is greater.
In farms smaller than 5 hectares, farm income accounts for 34.8 – 50 percent of total.
Almost 70 percent of all farms have less than five hectares.
MAIN INCOME SOURCES FOR RURAL COMMUNITIES WITH LESS THAN 2,500 INHABITANTS, 1999
Other incomes19%
Self-consumption5%
Payments in kind2%
Business income24%
Work remunerations36%
Transfers12%
Other current income
1% Property income
1%
Monetary Income
Non Monetary IncomeSource: INEGI.
22.222.2
57.857.8
20.020.0
34.734.7
49.649.6
15.715.7
47.347.3
35.835.8
16.916.9
55.355.3
28.528.5
16.216.2
72.372.3
24.324.3
0%10%20%
30%40%
50%60%
70%80%90%
100%
Incom
e S
ou
rces
0-2 2-5 5-10 10-18 >18
Land size (ha)
3.43.4
Farm income Non farm income Mexico - US migration
INCOME SOURCES OF RURAL FAMILIES BY LAND SIZE (%)
The greater the farm size, the farm income is greater.
In farms smaller than 5 hectares, farm income accounts for 34.8 – 50 percent of total.
Almost 70 percent of all farms have less than five hectares.
INCOME SOURCES OF THE RURAL SECTOR
WORKING AGRICULTURAL POPULATION BY INCOME LEVEL , 1998
41.7%
29.2%
17.8%
4.0%2.6%
1.0% 0.4%3.3%
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Without income< 1 MW 1 - 2MW 2 - 3MW 3 - 5MW 5 - 10MW > 10 MWNot specified0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Source: National Employment Survey, 1998, STPS.
NW= Minimum Wage.
Nu
mb
er
of
pers
on
s
Of total working agricultural population, 41% gets no income, and 88 percent gets two minimum wages or less. A minimum wage
amounts around 3 USD per day.