Insight Focus
- Mexico’s President ban on GM corn to be contested internationally.
- This could halt USD 3b in trade, primarily American corn arrivals.
- Mexican sugar flows to the U.S. could also be halted.
In December 2020, Mexico’s president Andres Manuel Lopez Obrador announced a ban on Genetically Modified (GM) corn and Glyphosate (a pesticide) starting in 2024. This ban worried many American corn farmers since Mexico is their second largest export destination. The ban proposes to stop the flows of American GM yellow (for animal feed) and white (for human consumption) corn to Mexico.
Then in October 2021, the Mexican Minister of Agriculture guaranteed American farmers that this policy would only affect U.S. white corn meant for human consumption. However, in December 2022, the President stated that Mexico would halt the imports of both yellow and white GM corn. Now, Mexico has announced it will enforce a ban on GM white corn for human consumption and most likely a gradual ban for yellow corn as well.
Mexico’s ban on GM corn has led the United States to file an official trade dispute under the United States-Mexico-Canada (USMCA) free trade agreement. The United States claims that Mexico’s actions violate the USMCA agreement. Experts from Canada, Mexico, and the US will investigate all parties’ complaints and then release their findings in six months. The US could potentially enforce sanctions if the panel decides that Mexico violated the USMCA agreement.
Economic Consequences
Mexico is a significant importer of American corn, taking 18m tonnes in 2022.
Studies show that 90% of U.S. corn is grown from GM seeds. Much of the corn that the U.S. usually exports to Mexico will have to find a new home. According to the Mexico Institute of Research, this legislation could halt 3b USD in trade and raise the cost of corn in Mexico by 19%.
If Mexico were to enact this ban, it would have to find a new trade partner or produce more corn. It’s not self-sufficient. Mexico produced around 28 m tonnes of corn, while its population consumed 44 m tonnes of corn in 2022.
Why is Mexico banning GM Corn?
Mexico is banning GM corn for two main reasons to promote self-sufficiency and over health concerns.
Currently, Mexico is self-sufficient in white corn. Even though Mexico can produce enough white corn to satisfy its domestic demand, it still imports around 800k tonnes from the United States. Approximately 90% of this white corn imported from the United States was genetically modified.
If Mexico bans the importation of yellow GM corn from the United States, replacing those 17m tonnes will be challenging since Mexico is not self-sufficient in yellow corn.
The second reason Mexico is banning GM corn’s importation is health. The President has stated, “When deciding between health or trade, we opt for health.” Mexico claims that GM corn can cause damage to health. Officials in Mexico also claim that GM seeds are a danger to wildlife. They claim that these seeds can harm ecosystems through cross-pollination.
Potential Disruption in the US-Mexican Sugar Trade
If the USMCA considers the Mexican ban on American GM corn a violation of the USMCA agreement, sanctions and other trade war tactics could emerge. 750k tonnes of American high-fructose corn will not be allowed to enter Mexico. This could lead to severe repercussions. The U.S. could potentially ban the 1.35m tonnes of imported Mexican sugar (70% raw vs. 30% white).
A ban by the U.S. on Mexican sugar could lead to complications. The U.S. could give more TRQ allocations to Brazil, Dominican Republic, or Central American countries. But the TRQ only accounts for raw sugar. The U.S. still needs to take in consideration around 405k tonnes of white sugar. The U.S. would need to figure out a new quota system to replace the banned Mexican sugar.
