Agrifood industry: the new focus of Mexican trade

In 2017, Mexico was deemed the 12th largest food producer worldwide, leading power in the trade of avocado, strawberry, lemon, beer, and tequila.
Agrifood industry: the new focus of Mexican trade
Avocado production - Photo: EL UNIVERSAL
15/05/2018
14:35
Newsroom
Mexico City
Mauricio Millán C.
-A +A

The United States Congress has set the date of 17 May as the deadline for a consensus in the renegotiation of the North American Free Trade Agreement (NAFTA); if the deadline is not met, the Congress’ approval will not take place until 2019.

One of the most decisive subjects in the modernization of NAFTA is the agrifood sector and the imposition of seasonal windows that might limit highly competitive Mexican exports to the United States.

The agrifood sector in Mexico is at a high point in its export dynamics, which is why upholding productivity and favorable trade conditions in this strategic sector is fundamental.

As for the domestic market, the agrifood sector (which includes agro-industrial production and agricultural activities) stands out in Mexico’s economy as an important job-generator and a strong contributor to economic growth. According to data gathered by the National Occupation and Employment Survey (ENOE), in 2017, the sector employed 8.8 million people. During the same year, the agrifood sector accounted for 7.51% of Mexico’s GDP.

From an international standpoint, the agri-food sector’s dynamism and its links to other commercial partners are crucial for the diversification of the domestic food supply, as well as for the increase in profit from foreign trade, harnessing the country’s comparative strengths.

In 2017, Mexico was deemed the 12th largest food producer worldwide, and leading power in the trade of avocado, strawberry, lemon, beer, and tequila.

Additionally, the agrifood export value was of 32,582 million dollars, thus becoming the country’s third source of foreign currency.

The seasonal windows clause, encouraged by the United States at the renegotiation of NAFTA, proposes to design a structure of tariffs and quotas between the three North-American countries to stop the free trade of agrifoods during the seasons in which domestic production is at a high point.

In so doing, Mexican exporters of high-consumption products in the United States, such as avocado, or berries, will have tonnage restrictions and imposed tariffs at times when domestic production in the United States is peaking. The Mexican government’s position in the renegotiation is against the US’ request for seasonal clauses.

Simultaneously, the agrifood sector in Mexico has explored different markets in order to diversify their exports. The country’s recent renegotiation of the Free Trade Agreement with the European Union (TLCUEM) allows for 86% of Mexican agrifood products to have free access to the European market.

On the other hand, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) presents a unique opportunity for the access of agrifood products to the Asian market, mainly to Japan, whose demand of Mexican products showed an increase of 12.7% between 2012 and 2017.

In spite of these recent accomplishments, it is necessary to outline a long-term agenda which guarantees the creation of an infrastructure that transcends the Mexican presidential election and strengthens the producers’ capacity with the development of competitive varieties, as in the production of cheese or milk. Some of these products have been threatened by the recent renegotiation of the FTA with the European Union.

Additionally, it is necessary to spread the benefits of these commercial adjustments among the country’s small-scale producers while working for the preservation of the environment. The legislation must strive for the generation of subsidy and protection schemes for producers in order to increase their productivity and resilience in the face of adverse production conditions.

With the implementation of these subsidy schemes through the cooperation of public and private investment, the agrifood sector should grow in production and competitiveness in light of some of the market’s new challenges, such as the use of clean technologies, the conservation and use of water in the production process, and insurance schemes for cases of natural disaster.

With this public-private strategy, the infrastructure for the agrifood sector will enable it to grow and become stronger, in order to assess risks and seize opportunities in the wake of new sales prospects for Mexico.
 

Vicepresident of International Consultants S.C.

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