Negotiations between the United States and Mexican governments continue over Mexico’s planned phaseout of imports of genetically modified corn, first announced in a presidential decree two years ago. A high-level Mexican delegation visited Washington December 16, offering to delay the January 2024 deadline to 2025, and maybe beyond, for feed corn. Feed corn represents most U.S. exports. Negotiations are set to resume when President Biden visits Mexico for a January 9-10 presidential summit that will also include Canada’s Justin Trudeau.
The looming trade conflict was given new urgency by a September economic modeling study from consulting firm World Perspectives, Inc. (WPI), which claimed to show catastrophic impacts on U.S. and Canadian farmers and on Mexico’s own food security. It projected massive price spikes, market chaos, and billions of dollars of lost output for U.S. corn farmers. Mexico would see its economic output fall by US$19.39 billion, with an annual loss of 56,958 jobs, reducing labor income by US$2.99 billion.
Don’t believe a word of it. The study, attributed to a “coalition of leading food and agriculture industry stakeholders in both Mexico and the United States,” was actually commissioned by CropLife, the biotech trade association and greatly overstates the impacts of the ban.
Still, it gained wide coverage and prompted a flurry of calls on the U.S. government to stop Mexico by invoking the Agricultural Biotechnology section of the U.S.-Mexico-Canada trade agreement (USMCA). National Corn Growers Association President Tom Haag cited the WPI study in his October opinion article for The Hill, warning that a ban on GM corn imports would “lead to increased food insecurity in Mexico.” Indeed, the study forecast a spike in corn and tortilla prices, a huge drop in poultry production and consumption, and widespread food insecurity in Mexico.
I examined WPI’s economic modeling and can assure Mr. Haag that no such outcomes are at all likely. The study starts from a set of unrealistic assumptions designed to produce inflated estimates of harm to U.S. farmers and Mexican consumers. Those assumptions now seem even less reasonable with Mexico showing flexibility in the scope and timing of its restrictions on GM corn.
WPI modelers assumed that the 2024 GM corn ban, announced two years ago, will be an unannounced shock to corn markets. Even with three years’ notice, markets will not have time to grow more non-GM corn seed and begin to produce more non-GM corn. No surprise, then, that their model shows massive price spikes and economic chaos in the first three years following the ban. In fact, nearly all of the lost output in the model occurs in those early years.
Why is this absurd? Because U.S. farmers already grow non-GM corn. In fact, in 2020 they planted an estimated 7.5 million acres of non-GM corn. According to reports, many would be happy to produce non-GM corn for Mexico and can do so if given time to prepare. They are being given that time.
WPI’s modelers add to the economic chaos by treating the ban’s deadline and scope as inflexible, as if our southern border would be closed without warning on January 31, 2024 to all U.S. GM corn. Even when they did their modeling, the Mexican government was giving mixed signals on how it would treat feed corn. Now, the deadline on that key issue is postponed to 2025 or later. WPI’s unrealistic assumption blows up the damage estimates in those first few years.
In fact, WPI includes in the back of its study a more realistic scenario in which feed corn is not included in the ban. Under such conditions, “the market adjusts relatively quickly and the large shifts in farm trends and the grain handling industry are not predicted.”
One additional growth hormone injected into WPI’s post-ban estimates is its assumption of exorbitant costs – US$0.29-cents per bushel – for creating the infrastructure to segregate non-GM from GM corn in North American supply chains. There will certainly be up-front costs, but some non-GM corn supply chains already exist. WPI offers no basis for such inflated estimates, which in their model account for a remarkable one-third of some US$35 billion in direct U.S. economic losses due to the ban.
In addition, WPI predicts long-term costs even as markets adjust. For example, researchers assume GM corn has a 7-10 percent a yield advantage over GM corn, even though field trials have shown comparable yields.
They also ignore Mexico’s well-funded government effort to increase domestic corn production to reduce import-dependence. WPI assumes no increase in corn production and no decrease in Mexico’s need for U.S. imports, even though the government has ambitious goals to increase production of both white and yellow corn by millions of tons. In fact, they assert that Mexico’s promotion of agroecological practices will reduce corn yields by 31 percent.
Taken together, these flawed assumptions in WPI’s assessment of Mexico’s GM corn restrictions generate inflated estimates of high costs and lost output in the U.S. and severe food insecurity in Mexico. Nearly all of the projected damage evaporates when exposed to the open air of economic and political reality. Depending on the final scope and timing of Mexico’s restrictions, expect only small adjustment costs that disappear over time.
Why would a respected consulting firm produce such a flawed analysis? Probably because that “coalition of leading food and agriculture industry stakeholders” that commissioned the study includes CropLife, the biotechnology industry trade association, and other agribusiness interests in the U.S. and Mexico. All have strong economic interests in opposing Mexico’s GM corn restrictions.
The U.S. and Mexican governments are now engaged in reasonable negotiations over the scope and timeline for the GM-corn restrictions. Hopefully, U.S. officials will resist demands to sue Mexico under the USMCA. As a close textual analysis of the agreement shows, Mexico retains the right to take what it deems to be appropriate precautionary measures to protect public health and the environment, the stated reasons for the ban. In fact, Article 3.14.2 of the Agricultural Biotechnology section reads:
“This Section does not require a Party to mandate an authorization for a product of agricultural biotechnology to be on the market.”
As a recent letter from FarmAction to U.S. government officials made clear, alarmist reports and trade threats only prevent markets from adjusting to rising demand from Mexico for non-GM corn. Most economic costs can be easily avoided if markets get the clear signals they need to adjust. That would also give U.S. consumers something polls say they have wanted for years: a wider selection of non-GM foods.
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Photo courtesy of Pablo Garcia, Unsplash
