US Economic Protectionism and Mexican Corruption: a Recipe for Disaster
by Abdul Khan
With the prices of even the most basic goods like eggs hitting record high prices in recent weeks, one can begin to wonder how exactly this could have been prevented. As American poultry farmers combat a recent wave of avian flu, some consumers found a somewhat “eggceptional” source for their demand: Mexico. However, this was entirely illegal as Mexican eggs are banned by the USDA because of, ironically, a 2012 avian flu outbreak within the country. Nevertheless, this recent outbreak demonstrates the interconnectedness of the US and Mexican economies, however, their relationship does not always manifest in such poetic ways. As is the case in the avocado industry, US-Mexican trade has been a rather “guac-ward” affair. To satisfy the US demand for products like avocados as well as ensure the safety of American citizens, the government must consider decreasing subsidies for American farmers.
The export of avocados from Mexico to the United States is an incredibly large industry; Mexican farmers provided almost $3 billion dollars worth of avocados to the US market in 2021. However, this “green gold” has caught the attention of drug cartels in the country, particularly in the state of Michoacan (which provides 80% of the avocados consumed in the US), where avocado farmers have been threatened and had their relatives kidnapped or killed. The surge of violence eventually caused the US government to temporarily ban Mexican imports of the superfood last year. However, to no one’s surprise, this proved ineffective in curtailing violence and may have even exacerbated the situation. This is because organized criminal activity in Mexico extends beyond the avocado industry. Avocado cartels are just another way in which ordinary Mexicans are caught between a guac and a hard place. This need not be the case, however, as the US holds the keys to Mexican prosperity, all there is to do is twist them into place.
As of 2021, Mexico is one of the largest trading partners of the United States, providing the second-largest amount of imported goods to the US. Of these goods imported from Mexico, approximately $40 billion consisted of agricultural products. The United States-Mexico-Canada Agreement essentially eliminates trade barriers between the United States and Mexico in most industries – including agriculture – barring some regulatory restrictions. While this may on the surface mean that trade is relatively free between the two economies, one must consider the interventions both undertake to empower their domestic industries. For example, the United States exports approximately $5 billion in corn to Mexico. However, the US also spends billions subsidizing domestic producers of corn and other agricultural products to keep its competitive edge in the international market. And while this strategy may certainly help reduce trade deficits in goods like corn or avocados, it falls apart upon the actual consequences of a trade deficit. Trade deficits occur when a country purchases more goods from abroad than it sells. While an extreme deficit could lead to large-term consequences for the potential growth of the economy, a limited deficit for an economy as large as the United States is inconsequential, and in some cases, may even be advisable. This is because said foreign goods would be purchased with US dollars, which have a tendency of finding their way home. Additionally, because of the relatively low-income tax in rural states and the competitive salary of farming, the economic cushion provided to US farmers is vast enough that a limited reduction in subsidies would be negligible in the long run. In fact, by artificially making American goods more competitive, the US forces out other foreign producers who can create goods at higher quality and lower prices than domestic producers. Ultimately, there is no advantage in spending several billion dollars subsidizing domestic producers, as it only leaves American consumers with inferior alternatives.
This restructuring of the American agricultural sector would not only benefit the nation economically but would ensure greater security between the US and Mexican border as well. This is because an increase in Mexican cartel activity – in this case, within the avocado industry – would likely increase the number of drugs and violence that spills into the US across the border, an already large affliction for Americans. Additionally, the prevalence of cartel activity in Michoacan has largely been a result of poverty driving ordinary citizens into desperation. Organized violence has been amplified by the corruption of the Mexican government, whose greed and fear of the cartel make it unable to provide adequate security for its citizens. This forces Mexican farmers to resort to defending themselves or bribing the cartels directly, limiting their capacity to produce. Thus, the Mexican government must make a more deliberate effort to limit the grasp of the cartel. If any attempt at encouraging Mexican agriculture is to prosper, it must be backed by the full support of the government.
The geopolitical lens perspective is no refuge for the protection of domestic agriculture either. By limiting the competitiveness of Mexican agriculture, the US imposes an artificial barrier to the growth of the Latin American country in the long run. It’s possible that Mexican producers may outpace their American counterparts in the agricultural sector, but one must again ask themself if that would be all that bad. The US economy continues to be one of the largest and most developed in the world, but its agricultural sector is largely bloated with subsidies and government assistance programs. Mexico’s growth in the agricultural sector and its corresponding increase in trade with the US would strengthen the relationship between the two states. If supported with robust government policy by both nations, this growth would also loosen the grip of organized crime and corruption over the state, ultimately leading to greater regional stability and economic prosperity. If the United States intends to ease the woes of its southern neighbor, it must abide by the do’s and “avocadon’ts” of cooperative and economically sound trade policy.