LABOR-MARKETS, MIGRATION AND WELFARE - AGRICULTURE IN THE FREE-TRADE AGREEMENT BETWEEN MEXICO AND THE UNITED-STATES

Mexico, like many other countries, provides its agricultural sector with substancial protection from international competition. Income distributional considerations and concerns about transitional problems once liberalization starts explain much of the persistence of such policies. This paper argues four points: (i) substancial efficiency gains can be expected from liberalization; (ii) the income distributional effects of protection are in fact regressive; (iii) well targeted adjustment programs that help rather than delay adjustment can be designed once a careful analysis of the precise distributional impact has been made; and (iv) a comprehensive, two-sided liberalization by Mexico and its main export market, the US, would significantly reduce any adjustment problems. The latter point is made in the context of an assessment of the potential impact of the Free Trade Agreement (FTA) on agriculture.