Farmers in Mexico Fear End of Tariffs

Times Staff Writer

The last time Mexican farmers got irate about President Vicente Fox's perceived failure to protect them from foreign competition, they stormed through the ornate wooden doors of Congress here on horseback in a raucous protest that would have made revolutionary hero Pancho Villa proud.

Though still fuming over agricultural trade inequities that led to that Dec. 10 confrontation, growers have promised to rein in their emotions today as tariffs are lifted on key American imports of wheat, rice, pork and poultry, which could severely damage domestic production.

But with the dawn of the new year shedding harsh light on the average Mexican peasant's inability to compete with more heavily subsidized U.S. agribusiness, the stage is set this year for conflict between the two countries as they try to balance the benefits and burdens of the North American Free Trade Agreement.

Fox's government averted a threatened border confrontation today by promising to negotiate within 20 days more relief for farmers who will be hit hard by the expiration of tariffs. Economy Secretary Luis Ernesto Derbez even hinted that the government might consider renegotiating provisions of NAFTA -- a departure from Fox's vow to live up to the letter of the 9-year-old treaty that links the U.S., Mexico and Canada.

An 11th-hour deal Monday between farm groups and the government elicited pledges from growers not to seize customs checkpoints at the U.S.-Mexican border, as some farm lobbyists had threatened. But with nearly a quarter of this nation's work force based in the countryside and the government unable to match Washington's $19 billion in annual farm subsidies, tensions are expected to rise with the flood of U.S. food into Mexico, which already suffers a $2-billion agricultural trade deficit with its northern neighbor.

According to Mexico's National Agricultural Council, farmers in this country receive, on average, about $700 a year in state support, compared with more than $20,000 per U.S. farmer. Agrarian groups want bigger subsidies to cover their losses, but analysts warn that Mexico, which earns only about 6% of its gross domestic product from farm output, can ill afford to engage the United States in a spending contest.

What Mexican farmers need is a thorough restructuring to consolidate small producers into bigger enterprises capable of investing in the technology required to compete, said Gustavo Vega Canovas, a political scientist and trade expert at the Colegio de Mexico here.

"These problems didn't start with NAFTA," he said. In Mexico, farms average just over 5 acres, compared with 250 acres per U.S. grower.

Hog farming in Mexico is so antiquated that it could be driven into extinction within 10 months of the expected flood of cheap U.S. bacon, sausage and other culinary staples, warned Enrique Dominguez Lucero, director of the Confederation of Mexican Pork Producers.

Fox's government has been assuring farmers that a "Countryside Accord" is in the offing that will provide $120 million to compensate those hurt by NAFTA, which dictated the tariff cuts.

During the talks Monday, officials promised more state investment to close the technology gap. They also vowed to initiate "safeguard" trade barriers allowed under World Trade Organization rules, separate from NAFTA, to prevent the U.S. poultry growers from threatening Mexico's industry with extinction.

Imports of U.S. poultry already amount to $115 million a year -- up almost 40% over the past decade, even with tariffs of 98% in place until 2001, and 49% last year. However, the U.S. industry is seeking to extend the protections for Mexican producers for another five years, both to shield its own investments here and to ward off fresh barriers to sales in Mexico, now the No. 3 market for American producers.

This year's changes are expected to undercut 3 million Mexican producers of poultry, pork, veal, sorghum, wheat, rice, apples, potatoes and a dozen other farm sectors. They also could have an adverse effect on the electoral fortunes of Fox's ruling National Action Party. Congressional elections are set for July, and the farm lobby has long been a power base of the opposition parties.

The consequences for U.S.-Mexican relations were clear during November's annual session here of the U.S.-Mexico Binational Commission. Fox warned Secretary of State Colin L. Powell that U.S. failure to address the influence of heavy farm subsidies could send thousands more desperate Mexicans to seek illegal entry into the United States in search of work.

Fox has deflected farmers' demands for a renegotiation of NAFTA, and Derbez's comments after this week's heated talks were probably aimed at preventing a holiday confrontation rather than signaling an intention to rewrite the treaty.

In an interview this week with the Reforma newspaper, Agriculture Secretary Javier Usabiaga warned farmers they cannot pick and choose which aspects of NAFTA to honor. Renegotiating part of the treaty would throw other provisions into question, including those that benefit producers in Mexico, he said.

"The same arguments could be made by beer producers in the United States. They could say: 'Listen, Mexico, you've taken 18% of our market. Let's renegotiate the beer sector while we're at it,' " the agriculture minister warned, noting that overall farm exports to the U.S. have doubled under the treaty.

Usabiaga added that, thanks to NAFTA, the auto industry in Mexico has added 3 million jobs from U.S. car makers and that those jobs could be vulnerable to any attempt to reopen the treaty.

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