The cataclysmic economic disruptions predicted by WPI rest on false and self-serving assumptions. As IATP has argued, most economic costs can be easily avoided if Mexico’s sovereign rights to determine its own standards for public health and the environment are respected and markets get the clear signals they need to adjust to the new demand for non-GM corn.
Agribusiness spokespeople and farm organizations have have whipped up a frenzy of alarm about Mexico’s proposed ban on imports of genetically modified (GM) corn, with U.S. officials threatening Mexico with trade actions under the new NAFTA , with its Agricultural Biotechnology provisions. A high-level Mexican delegation was in town last week, and negotiations on the issue will continue in early January. Much of the alarm comes from an industry-sponsored study that predicts catastrophic economic harm from the ban. As I explain in a new IATP policy brief, the study is deeply flawed, designed to produce unrealistically high damage estimates. See IATP’s summary of the study below. And also note IATP’s clear analysis showing that the new NAFTA does not prohibit Mexico from restricting GM corn imports. In fact, it states:
“This Section does not require a Party to mandate an authorization for a product of agricultural biotechnology to be on the market.”
Distorting Markets in the Name of Free Trade
Industry-sponsored study overestimates the costs of Mexico’s proposed phaseout of GM corn imports
For the last three months, business pages and farm media in the United States have been sounding the alarms about the Mexican government’s announced phaseout of imports of genetically modified (GM) corn. Mexican President Andrés Manuel López Obrador first reported the move in a December 2020 presidential decree, which immediately banned the cultivation of GM corn in Mexico and mandated the phaseout of GM corn imports and the importation and use of the herbicide glyphosate by January 31, 2024. The decree cites concerns about public health and the environment.
Mainstream U.S. farm organizations reacted immediately, calling on U.S. government officials to invoke the new biotechnology provisions in the newly revised U.S.-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement in July 2020. But the recent alarm bells were prompted by an economic modeling study from consulting firm World Perspectives, Inc. (WPI) that claims to show catastrophic impacts of Mexico’s looming GM corn ban on U.S. and Canadian farmers and on Mexico’s own food security. The media dutifully reported the story, with alarmist headlines and dire warnings to U.S. officials to stop Mexico from enacting the ban.
The Mexican and U.S. governments continue to negotiate the scope and timeline of Mexico’s restrictions on GM corn, with further meetings planned for the January 9-10 presidential summit in Mexico. According to a new analysis by economic researcher Timothy A. Wise, negotiators should discount the WPI findings, which inject an unrealistic set of assumptions apparently designed to generate large estimates of economic damage and rising hunger in Mexico.
Wise, who has followed the controversies over GM corn since he covered it for his 2019 book, Eating Tomorrow, points out that most reports on the WPI study failed to disclose that the original modeling was commissioned by CropLife International, the agrochemical industry trade association. That March 2022 study was updated in September to reflect market turbulence caused by the Russia-Ukraine war. While press accounts dutifully ascribed the new study to a “coalition of leading food and agriculture industry stakeholders in both Mexico and the United States,” in fact those “stakeholders” include CropLife and other agribusiness interests in the U.S. and Mexico. All have a strong economic interest in opposing Mexico’s proposed restrictions on GM corn.
In his analysis for the Institute for Agriculture and Trade Policy (IATP), where he serves as a senior advisor, Wise examines the methodology and assumptions in the industry-sponsored modeling to determine whether researchers have inflated the estimates of the negative impacts of the proposed GM corn ban. Indeed, he finds that the researchers overestimate the costs of the ban in both the U.S. and Mexico by:
treating the January 2024 GM corn ban as sudden, even though it had been announced three years earlier;
treating the ban’s deadline and scope as inflexible, even though the Mexican government has announced it will not ban feed corn imports, which represent the vast majority of U.S. exports, in January 2024 but will phase in any restrictions;
underestimating U.S. producers’ ability and willingness to respond to increasing demand for non-GM corn; many have expressed an interest in producing more non-GM corn;
ignoring the Mexican government’s funded effort to decrease import dependence by increasing its own corn production; those efforts are well underway and beginning to bear fruit;
overestimating the yield advantages of GM over non-GM corn; seed industry sources confirm that yields are comparable;
imputing high costs associated with segregating non-GM from GM corn in international supply chains; WPI offers no basis for such exorbitant estimates.
“Taken together,” Wise concludes, “these flawed assumptions in WPI’s industry-sponsored assessment of Mexico’s GM corn restrictions act as growth hormones injected into a complex economic model to generate inflated estimates of high costs and lost output in the U.S. and severe food insecurity in Mexico.”
He notes that WPI’s huge up-front costs in the first years following the ban would be dramatically lower if markets are permitted to adjust to rising demand for non-GM corn from Mexico. With the Mexican government extending the deadline until 2025 or later for feed corn, there is little reason to believe that the long-term costs, after markets have adjusted, would be at all significant, a finding confirmed in a little-reported alternative scenario modeled by WPI.
“With the WPI study,” Wise says, “CropLife and its agribusiness allies in the U.S. and Mexico seek to introduce uncertainty into North American corn markets, clearly hoping to disrupt what could easily be the relatively smooth and inexpensive emergence of a thriving non-GM corn sector in this country, a development that would please many U.S. consumers.”
The U.S. government only adds to the market uncertainty with its threats to sue Mexico under the USMCA trade agreement. They do not have a case, according to a detailed analysis of the Agricultural Biotechnology section of the agreement by Sharon Treat, a respected attorney formerly with the Institute for Agriculture and Trade Policy. “The final text of the agreement does not restrict domestic policy choices in the manner agribusiness and its allies might wish,” she concludes.
In fact, the text of the Agricultural Biotechnology section is explicit: “This Section does not require a Party to mandate an authorization for a product of agricultural biotechnology to be on the market.” [Art. 3.14.2]
The cataclysmic economic disruptions predicted by WPI rest on false and self-serving assumptions. As IATP has argued, most economic costs can be easily avoided if Mexico’s sovereign rights to determine its own standards for public health and the environment are respected and markets get the clear signals they need to adjust to the new demand for non-GM corn.