Fearing a Bitter Harvest : Free Trade Pact Would Jolt Lives of Many Farmers

Shoppers in Mexico’s best supermarkets quickly snap up shiny red and green Washington apples, passing over a nearby bin of the lackluster little yellow fruit grown in the mountains just south of the U.S. border.

Meanwhile, frozen broccoli and cauliflower prices in the United States have remained steady the past four years--the benefit, for U.S. shoppers, of a 60% increase in imports from Mexico.

Even now, with trade in fruits and vegetables across the U.S.-Mexico border carrying duties as high as 37%, customers in the two countries are eating richly of each others’ bounty.

And should a North American Free Trade Agreement remove such duties and other barriers to trade, the changes in supermarkets and fields across the continent would be striking.

Agricultural trade among the three North American countries is already significant. Canada and Mexico are the first- and second-largest providers of U.S. agricultural imports. Mexico is the third-largest customer for U.S. agricultural products.

About 40% of the farm goods the United States imports from Mexico enter duty free now, but the rest are subject to import duties that average 7%. Mexico’s top duty is 20%; the average imposed on U.S. agricultural products is 11%. The free trade agreement signed three years ago by the United States and Canada provides for gradual tariff reductions along that border.

For all three countries negotiating the continental free trade pact, farmers are an important part of the national mythology. And in all three nations, their symbolic value has distorted economic policy, resulting in a complex web of subsidies that makes opening borders to agricultural products difficult.

Further complicating the talks are ecological considerations and concerns about the effect on farm workers throughout the continent. Already, multinational vegetable packers are moving to Mexico, closing plants in California’s Central Valley. In the future, abrupt changes in agricultural trade could disrupt the Mexican countryside, increasing migration to the United States.

As a result, sources close to the three-way talks are predicting that any agreement on farm products will include long transition periods, with gradual reductions in trade barriers. That would allow farmers in all three countries to switch to crops in which they are competitive and permit displaced workers to find other jobs.

However, a transition period may not be slow enough to satisfy some farmers--among them California avocado growers, who have vowed to fight for continuing a quarantine on Mexican avocados.

Those objections must be balanced against the lower prices that consumers in all three countries could expect to enjoy under free trade. Also to be weighed are pressures from U.S. and Canadian grain and dairy farmers plus multinational vegetable growers, who expect to increase sales or reduce costs dramatically once trade barriers are removed.

But before those benefits can be realized, negotiators must untangle the knotty question of farm subsidies.

The United States pays farmers the difference between a target price and the market price for their crops. Through another program, in effect, it provides export subsidies. Quality standards and tariffs, in the meantime, control import competition.

For its part, Mexico protects agriculture with subsidies, tariffs and import quotas.

As a consequence, Mexican corn prices are double international levels--providing a subsidy to the roughly 2.3 million small farmers who scrape out a living growing the country’s most important crop. Dropping the subsidy would force 850,000 of them off the farm and into the cities--or across the border, predicted a report by UC Berkeley researchers.

“The rapid introduction of free trade in agriculture and the elimination of agriculture support programs may not be desirable for either country when the social and economic costs associated with increased migration are weighed against the benefits of increased trade growth,” the report concluded.

By contrast, a slow transition during a time of economic growth and investment in the Mexican countryside will provide an opportunity for farm workers to move into other crops or jobs, said Raul Hinojosa Ojeda of UCLA, who worked on the Berkeley report.

Those factors also could increase the market in Mexico for nuts, wine, peaches, pears and apples, helping California farmers adjust to increased competition in citrus fruits and vegetables.

“California’s horticulture sector will be more affected by (a free trade pact) than other sectors,” said Hinojosa Ojeda.

Fruit and vegetable growers would face competition from Mexico both at home and in Canada, a $628-million market for California crops.

In addition, some growers argue that no adjustment period can overcome their biggest worry: a flood of imports of fruit infested with insects and diseases that can be fought effectively only with pesticides illegal in the United States.

The California Avocado Commission is pressing for a continued quarantine on Mexican avocados. Growers said a pest called the seed weevil infests Mexican avocados--and imports could lead to the pest plaguing the California crop.

Other growers, backed by ecologists, have called for joint, three-nation standards on pesticide use.

“Pesticides are one of the few environmental issues that will be included” in the trade agreement, said a senior Mexican official.

In any case, quarantines and similar measures will provide protection only for growers who market fresh fruit and vegetables. Increasingly, Mexican agribusiness is setting its sights on the export of processed foods.

Mexican tomato paste exports to the United States have doubled since 1986, despite a 13.6% import duty. Removing the duty would allow Mexico to increase market share, predicted Kirby S. Moulton, a UC Berkeley economist who has studied the industry.

Similarly, avocado growers are partially circumventing the U.S. quarantine by processing their crop and exporting guacamole.

U.S.--Mexico Agricultural Trade

In millions of dollars

Figures are for fiscal years ending Sept. 20. 1987:

Mexican Exports to the United States: 1,905 U.S. Exports to Mexico: 1,215 1988:

Mexican Exports to the United States: 1,903 U.S. Exports to Mexico: 1,726 1989: Mexican Exports to the United States: 2,093 U.S. Exports to Mexico: 2,763 1990:

Mexican Exports to the United States: 2,600 U.S. Exports to Mexico: 2,700 1991: Mexican Exports to the United States: 2,500 U.S. Exports to Mexico: 2,900 Source: U.S. Department of Agriculture, Economic Research Center