FREE TRADE VS. PROTECTIONISM IN MEXICAN AGRICULTURE: THE CASE OF SUGAR AND HIGH-FRUCTOSE CORN SYRUP

Abstract

The commercial relationship of sugar and high-fructose corn syrup between Mexico and the United States has been characterized by constant commercial controversies since the signing of the North American Free Trade Agreement (NAFTA). The recent bilateral conflict on sugar trade between the US and Mexico, in which the first country threatened to impose harsh tariffs on sugar imports, and the second one to ban imports of corn syrup, justifies the evaluation of free trade and protectionism scenarios in the sweetener market in Mexico. In order to determine the effects that the corn syrup import ban by Mexico would have on the welfare of society, the solution of a spatial and inter-temporal equilibrium model of the sugar and corn syrup markets was obtained in the 2014/2015 sugar season. Results indicate that in the analyzed period, sugar exports and corn syrup imports were 1582 and 979 thousand tons, respectively, and the welfare of society, measured thorough net social payoff was 352,375 million Mexican pesos (MXN). The ban of corn syrup imports by Mexico would increase sugar consumption by decreasing exports and would generate a welfare of 350,767 million MXN, barely 0.5 % lower in relation to the base level where there is nowadays. The small difference in the welfare of society as a result of protectionist policy indicates that the benefits of free trade are not as high as its advocates point out.