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Chantal Line Carpentier, Ph.D
Head,
Environment, Economy and
Trade
NAFTA CEC Efforts to
Examine the Mexican
Experience
Commission for
Environmental Cooperation
• Canada, Mexico, United States
created CEC to better protect
our shared environment
• NAAEC – parallel agreement
to NAFTA
CEC Structure
Council
JPAC
Secretariat
9 years
experience
in Ex post
assessment
…going into
Ex ante
• CEC Framework, 1999
• Council Public call for
Papers
• First Symposium, World
Bank, 2000
• Second Symposium
2003, with UNEP
–Mexico City March 25-28
–Focus on Agriculture and
Energy
CEC Efforts: > 30 Papers Commissioned
• 23 include Mexico
–13 compared to 2 other countries
• Fisheries,industrial pollution, transboundary
hazardous waste, electricity, RPS, environmental
laws (2), transport corridors, cement, wheat, cattle,
and livestock.
–5 compared to Canada or US
• Stonewashing, wastewater treatment, industrial, hog,
maize, tomatoes
–5 specific to Mexico
• Grains, Sonora agriculture and aquifers,
manufacturing, forestry, maize.
Lessons from
North America
and Mexico
Are they
transferable?
In joining NAFTA, Mexico joined:
• Two developed economies, and though
Mexico is a developing country and a new
OECD member, it addresses many similar
challenges facing other developing countries;
• A superpower and middle power country,
Mexico being a G77 country, the region
mirrors the geopolitical range of countries;
• Countries with large intra-regional trade – now
1/3 of NA Trade is among NAFTA partners
General Lessons
• Pollution havens are not widespread;
• Some border communities have suffered more air pollution due to
increased road freight transport to move an increasing amount of
goods across the two borders;
• Scale effects are leading to marginal increases in pollution and CO2
especially from petroleum, base metals, and transportation
equipment sectors;
• No evidence of race to the bottom.
Policy Lessons
• Trade liberalization on the environment depends on
mitigating policies in place
– especially during the economic adjustment period following
trade liberalization;
• These policies can be informed by ex ante analysis that are
themselves informed by ex post analysis of previous
agreements;
• To offset the increasing scale effects on the
environment,and competitive pressures to reduce needed
investment in infrastructure and enforcement of
environmental laws.
• Best achieved in an open, transparent, and inclusive
manner.
Lessons from
North America
in
Agriculture?
Trade and
Environment in NA
GATT
MX CUSTA NAFTA
GATT/
UR starts joins CA+US CA+US+MX WTO
in effect in effect
in effect
1986
1987 1988
1994
1995
MX joins OECD
WTO
New Round
starts
2001
NAFTA- Environmental side agreement
Secretariat in Montreal created (CEC)
Mexican Δ Planted Area and Prices
GATT 89-93 Area
Price
Maize Total 21%
9%
Irrigated 40%
Beans Total
41%
24%
Irrigated
Sorghum, wheat, soybean,rice
-25-67%
Import of sorghum up
3.3X and soybean 1.2 X
NAFTA Area Price
-1%
-44%
-40%
-3%
-26%
-34%
-35-67%
Trade Theory 101 – Assumes Perfect
Competition and No Externalities
Competitive environment?
•
9 multinational represent 46% of maize import from the US to Mexico
•
11 agrochemical companies represent 78% of the Mexican market
•
4 firms control 81% of US and Canadian Cattle and Beef market
•
3 firms control 80% of US and Canadian Corn market
•
•
Trends in concentration of production on few large farms and regions,
•
Favored by farm support programs
•
While Mexico has mainly smaller holders and,
US farmers support averages US$21,000/year compared to US$700 for Mexican
farmers
No externalities?
•
Environmental, associated with intensive livestock operations
•
Maize is the most pesticide intensive among major U.S. crops
•
Tomato production use more water in the US than any other crop
•
Mexico is a center of origin for maize agrobiodiversity
•
Given exceptions, special rules, and protection of sensitive sector -- the effect of
liberalization is unknown.
Specific – Maize
Economic
Environment
• 100% Increase of US Maize
exports
Mexico
• 25% NAFTA related
• Segmented market:
capitalized and irrigated
changed; smaller farmers
cannot adapt
• 40% decrease in irrigated
area, still maize is 50%
seeded area –total area
constant at 8.7 M ha
• Production increase
– TRQ not applied
– US$1 B loans for peso crisis
including purchase of corn
– External factors important,
since NAFTA not significant
difference in import increase.
• No maize genetic erosion
• 18% increase rainfed area –
expansion into marginalized
areas
• Decreased production in
agrochemical intensive area
US: 1% of production exported
to Mexico relocated to higher
agrochemical use area
Origin and Objectives
of maize report
•
•
•
Petition by communities, NGOs including
Greenpeace
Secretariat will receive advice from Advisory
Group on objectives and scope of the report
…will analyze the likely effects of
current and future uses of transgenic
maize as compared to nontransgenic maize production upon:
a) the genetic diversity of land races
and wild relatives, b) agricultural and
natural biodiversity, c) human and
animal health, d) social values and
cultural identity, and e) economic
impact.
Specific – Tomatoes
Economic
• 83% Increase in Mexican
Tomatoes export to US
• 8-15% NAFTA related
• Irrigated, agrochemical
intensive of Sinaloa and BC
but area decreased 15%,
yield increase of 50%
• 20% tomato production
reduction in FL, 22% FL area
reduction due to relocation
to Mexico
Environment
Positive
• Technological innovation
(started prior to NAFTA)
offset increase production
impact
• In the US, 2-3% reduction in
agrochemical use is believed
to be associated with NAFTA
• No pollution haven in Mexico
Specific – Beef and Cattle
Economic
• 245% increase in beef
export to Mexico
• 10-15% NAFTA related
• Production and export
increased in 3 countries
– Price inelasticity of beefcattle
Environment
• According to Porter, little since
production does not respond to
price
• However larger production in US
and Canada, in large concentrated
animal feeding operations may
lead to more environmental
problems.
• There is an uneven regulation of
these operations throughout NA
but no evidence of pollution haven
Agricultural Preliminary
Conclusions
• No agricultural pollution haven in Mexico (nor in cement)
• BUT the 3 million farmers employed in basic crop production are losing,
except for large capitalized farmers that can adapt.
• Government support and prices have dropped, alternative are limited,
smaller farmers not able to adapt to these rapid and sweeping changes
• Market failure such as these should be addressed before further trade
liberalization, in addition to competition and externality failures
• Programs needed to help farmers during transition to market economy
• Policies to protect the environment, in developing countries? Even in US
modeling capability is limited for ex ante assessment.
• Developing country policies’ ability to keep up with changes (e.g. pesticide
containers in Sonora)
– Monitoring program needed for environmental, social, and economic
concentration impacts