The cold, hard reality of President Donald Trump's intent to force Mexico to pay for a border wall project may soon set in if Mexican trade officials carry through with a plan to boycott U.S. corn this year.
Reports from news sources in Mexico City indicate Mexican officials are wasting no time in responding to bi-nation issues with the Trump administration in direct response to what they call “White House rhetoric” about how Mexico will be forced to pay for the wall's construction and over escalating immigration issues being raised by the Trump administration.
The issue has become a hot topic among Mexican newspapers and broadcasters in recent weeks after government officials there announced they are prepared to take counter measures to offset President Trump's plans to renegotiate the North American Free Trade Agreement (NAFTA) and his aggressive approach to immigration issues, including talk at the White House of how the U.S. could leverage Mexico into paying for immigration enforcement efforts.
"If they place on us a tax on Mexican exports," Foreign Minister Luis Videgaray told the Chamber of Deputies last month according to La Jornada (newspaper), "we are going to put one on them, but better, because we are going to choose [which exports] hurt them the most."
NOT JUST POSTURING?
The statement, at face value, may seem little more than defensive posturing by a Mexican government that, in many ways, has built up dependence on trade with the United States since NAFTA was signed in the mid 1990s. But political analysts are beginning to realize that what has been termed as anti-Mexican sentiment within the new U.S. political machine may serve as a calling to Mexican nationalists who have been warning for years that such dependence on doing business with the U.S. is counter-productive to Mexico's independence and financial wellbeing.
They point to agriculture as an example of how NAFTA has hurt Mexico. Prior to that international agreement, Mexico produced a fair share of the corn they used. Corn has long been a primary food staple in Mexico, and in pre-NAFTA days corn was one of the primary crops produced by Mexican farmers. Following the NAFTA agreement, however, corn production in Mexico plummeted, causing many Mexican producers to lose their farms.
In modern times Mexico depends almost entirely on corn imports, mostly from the United States. But thanks to escalating trade issues with the U.S. in recent months, that dependence may soon be changing.
Daniel Rodriguez, founder of the group No Maiz Gringo (roughly translated to mean “no more U.S. corn”), says research indicates the best way to counter pro-Trump, anti-Mexican sentiment is to adopt measures that target his supporters. Since the majority of U.S. corn that is exported to Mexico each year is grown in the U.S. Midwest, specifically Nebraska, Indiana and Iowa, a ban on U.S. corn imports would send a clear message to U.S. farmers who tend to support his presidency.
CORN STATES WILL BE HARD HIT
"Nebraska, Indiana, and, of course, Iowa — states who voted heavily in favor of President Trump - are major U.S. corn-producing states and also represent an area that supported Donald Trump's bid for the White House," Rodriguez said. "For that reason, we think a boycott against American corn would be the most politically and economically effective campaign that we could launch in response to Trump's attacks [on Mexico]."
And it's not just a grass roots effort to strike back at Trump policies. Mexican Sen. Armando Rios Piter, a member of the left-wing PRD representing the state of Guerrero and who leads a congressional committee on foreign relations, rallied behind the idea of striking back at Trump supporters. In February he introduced a measure to "eliminate the dependence on corn imports from the United States" in the Mexican legislature.
LOOKING FOR OTHER TRADE PARTNERS
Since then, a trade envoy to both Brazil and Argentina has been launched with hopes of developing a corn deal with those nations, which, he says, seem eager to replace U.S. corn exports to Mexico.
"This is a good way to tell them (the United States) that this hostile relationship has consequences, in hopes that it changes," Rios told fellow legislators.
Earlier last month, Economy Minister Ildefonso Guajardo said Mexico needed to prepare to immediately "take a fiscal action that clearly neutralizes" a potential U.S. border tax.
Rios, meeting with the Mexico City-based Association of Fundraising Professionals (AFP), told the group that "U.S. corn producers may have been fooled by Donald Trump when he said that Mexico was the only one benefiting from NAFTA." He said when they realize what is at stake, "they may well change their minds."
The issue hasn't set well with many Midwest farm groups or Nebraska Governor Pete Ricketts.
"This has the potential to be devastating to agriculture, U.S. agriculture and Nebraska agriculture. And also certainly would not be good for the entire economy of the state of Nebraska," said Steve Nelson, president of the Nebraska Farm Bureau Federation, the state’s largest group representing farmers.
Gov. Ricketts echoed that warning recently when voicing concern over damage to agriculture trade issues with Mexico.
"I urge the Trump Administration to look for ways to grow trade opportunities for Nebraska’s ag producers and manufacturers," Ricketts said last month.
OTHER TRADE TARGETS
Roberto Simon, lead political analyst for Latin America at FTI Consulting, told the Business Insider last month that the idea could help Mexico to mobilize a coalition of U.S. corn producers to lobby the Trump administration and Congress in support of NAFTA. To do so could be the solution needed to prevent Mexico from taking serious aim at not only corn imports, but also other commodities and products that could escalate trade tensions between the two neighboring countries.
He warned that the alternative could be that Mexico will proceed with plans to establish new trade relations with South American countries that appear anxious to fill the trade shoes of U.S. producers. The idea to expand trade with countries like Brazil and Argentina has long been touted by many Mexican officials as a way to gain more independence from "yoke of U.S. support." Such a move, he said, could have major ramifications for U.S. companies, and especially U.S. agricultural producers, most notably in the areas of grain, dairy, and livestock production.
For U.S. corn producers alone, an impact on corn exports to Mexico would be staggering. Over the last two decades, corn purchases from U.S. producers have risen dramatically, from $391 million in 1995 to $2.5 billion in 2015.
With low commodity prices and an agricultural economy that is proving to be stubborn and sluggish, the negative impact on U.S. producers would be troubling.