Trade dispute arising over Mexico’s plan to block imports of genetically modified corn

The USTR is the only United States organization that can request a USMCA dispute settlement consultation against Mexico or Canada.

Under the USMCA, the parties have 75 days from the filing of the complaints to settle the dispute. If Mexico and the U.S. can’t come to a resolution, then a formal arbitration panel would be established to decide on the complaint.

According to the Iowa senators, any interruption to corn exports could severely affect U.S. farmers in corn-producing states, including Iowa, Nebraska, Illinois, Minnesota and Indiana.

“[Mexico’s] proposed ban would effectively phase out the import of 90% of U.S. corn by January 2024,” the senators wrote. 

In recent weeks, Mexican President Andres Manuel Lopez Obrador has remained steadfast in his promises to ban GM corn imports. Lopez Obrador has reiterated that he wants Mexico to achieve food sovereignty without the use of herbicides in its agricultural supply chain.

“There is now an alleged threat …. from a [U.S.] Republican senator who suggested that, if we did not buy yellow corn, that Mexico would be denounced or that the law on transgenics would be revised,” Lopez Obrador said during a news conference on Nov. 9. “With all due respect, they cannot do that because we are a free, sovereign country.”

Origins of Mexico’s GM corn ban go back to when Lopez Obrador took office in 2018. He signed a decree to phase out imported crops — especially yellow corn — that use fertilizers containing glyphosate, an herbicide that kills weeds. There has been a growing movement across Mexico over the last decade against the widespread use of pesticides and import of genetically modified crops.

Mexican supporters of the ban also contend that seeds from genetically modified corn could contaminate the country’s age-old native varieties of white corn, which many consider a part of its history and heritage.

Genetically modified organisms were introduced in U.S. crops in the 1990s to resist insect pests, tolerate herbicides and grow using less water. More than 90% of corn harvested in the U.S. is genetically modified, according to the U.S. Department of Agriculture.

Tai recently virtually met with Mexico Secretary of Economy Raquel Buenrostro to discuss several trade issues between the two countries, including “the importance of avoiding a disruption in U.S. corn exports,” according to a news release. 

However, Tai has not yet announced any formal decision on whether to file a USMCA complaint over Mexico’s ban on GM corn.

Mexican ban on GM corn could cause severe harm to U.S., Mexican economies

Mexico is one of the world’s largest importers of corn, the majority of which comes from the United States. In 2021, Mexico imported $4.7 billion worth, behind only China ($5.06 billion).

Grassley and Ernst said if Mexico goes forward with the ban, it could create an economic crisis in the U.S. They cited a recently released report from World Perspectives Inc. titled “Consumer Price Impacts of Mexican Restrictions on GM Corn: An Economic Analysis.” 

World Perspectives is a Washington-based agricultural market analysis and consulting firm founded in 1980. The report, commissioned by a coalition of food and agriculture industry stakeholders in both Mexico and the United States, details the implications of the GM corn ban for both countries.

“The announced policy would exacerbate current food insecurity [in Mexico] by drastically raising prices for corn, basic foods and other critical products derived from corn in the Mexican economy,” according to the study. “The average cost of corn would increase 19% … in the first year of the ban, non-GM corn prices would rise 48% to $8.14 [per] bushel, and Mexico would pay an additional $571 million for imported corn. Tortilla prices would rise 16% on average.”

Mexico’s gross domestic product could fall by $11.72 billion over 10 years during the corn ban, and economic output would be reduced by $19.39 billion, according to the study.

“There would be an annual loss of 56,958 jobs, which would reduce labor income by $2.99 billion,” the World Perspective report said.

In the United States, the GM corn ban could also be harmful to the U.S. economy and corn producers. In the first year of the Mexican ban, U.S. corn producers and industry partners would suffer losses of $3.56 billion, followed by a loss of $5.56 billion in the second year.

The ban could create an economic downturn in the U.S. that could eventually lead to the loss of 32,000 jobs, the report said.

The majority of U.S. corn is produced in states such as Iowa, Nebraska and Illinois, and shipped by rail, truck and barge, according to the USDA. The bulk of U.S. corn exports to Mexico are shipped either from the Port of New Orleans via container ship or by truck from the port of entry in Laredo, Texas.

According to Angus Kelly, director of public policy, trade and biotechnology at the National Corn Growers Association (NCGA), genetically modified crops are often misunderstood.

Founded in 1957, Missouri-based NCGA represents about 40,000 corn growers and the interests of more than 300,000 farmers.

“You can save water. You use fewer insecticides. You can spray an environmentally benign herbicide, so that you don’t have to plow and you don’t have soil erosion — all those kinds of environmental and economic benefits come from genetically modified crops,” Kelly told FreightWaves.

Experts disagree whether Mexico is breaking USMCA deal with corn ban

The NCGA supports Ernst and Grassley’s call to open a USMCA dispute settlement consultation against Mexico. Kelly said the USTR should be doing everything they can to resolve this issue now, before the Jan. 31, 2024, deadline draws closer.

“We just need some clarity because the stakes are too high,” Kelly said. “Mexico is too important a trading partner to hope for the best. I would also argue that there is already material harm to the U.S. because the research and development companies can’t commercialize their new technology that my farmers want for corn rootworm or for drought tolerance or whatever the varieties may be. So that’s that loss of opportunity, loss of productivity, by not being able to plant the better germplasm out in the field.”

The majority of the yellow GM corn Mexico imports from the U.S. each year is used for livestock and industrial purposes. Most of the white corn grown domestically in Mexico is earmarked for human consumption.

Kelly also said it’s unclear if Mexico will even be able to import enough non-GMO yellow corn by 2024 to provide feed for its livestock industries.

“The Mexican government recently asserted they could contract with growers in the U.S., Brazil and Argentina [to buy] non genetically modified corn,” Kelly said. “Would U.S. growers abandon market efficiencies and ecological benefits to plant millions of metric tons of non-GM yellow or white corn, while setting up a whole infrastructure in parallel with GM corn? Let’s assume you could do all that, this approach still stretches the imagination.”

Not everyone in the agricultural policy community feels the U.S. should challenge Mexico’s decree to block imports of GM yellow corn.

Karen Hansen-Kuhn, program director at the nonprofit Institute for Agriculture and Trade Policy (IATP), said Mexico, as a sovereign nation, has every right to determine the rules governing its food system.

IATP, founded in 1986 and based in Minneapolis, is a research and advocacy organization promoting sustainable food, farm and trade systems.

“We have trade agreements, so that there are rules for the interactions among our countries,” Hansen-Kuhn told FreightWaves. “But if you look even at what Mexico has agreed to legally with the USMCA, there are still protections that countries have. We have to have a say in our food systems and, given all the disruptions recently and the changes that could be coming with climate change, there’s a lot of discussions around the world about growing things differently, strengthening local production.”

Hansen-Kuhn also said there is nothing in the USMCA deal that explicitly requires Mexico to accept imports produced using agricultural biotechnology such as genetic modification.

“The USMCA does add in some new language about imports of agricultural biotechnology, but there’s a very clear section about how countries determine if they want to approve those technologies, which would include GMOs,” she said. “They have to have a process to receive petitions. They have to assess them. They have to use science in making those determinations but then, at the end, it says very clearly that nothing in the agreement determines what those outcomes will be. The USMCA is very specific that this doesn’t require a particular outcome.”

Kelly agrees that sovereign nations have a right to govern their own food supply chains but reminded that Mexico committed itself to certain trade agreements when it signed the USMCA.

“There’s a narrative that the U.S. is forcing its products to go into Mexico against the will of the Mexican administration,” Kelly said. “But if Mexico wants to be part of a rules-based trading system and live up to its end of the agreement with the U.S. and Canada, then that’s the whole point of forming a dispute panel to take and discuss their arguments on cultural exceptions to sanitary and phytosanitary issues. And they could better understand that we’re trying to maintain this market access to avoid retaliation on either side.”

Watch: US officials want the Mexican government to lift its ban on imports of genetically modified corn.

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