Much Ado About Nothing

The trivial trade impacts of Mexico’s GM corn restrictions compared to Trump’s threatened 25% tariffs on all Mexican goods

The three-member tribunal empaneled to rule whether Mexico’s restrictions on genetically modified corn in tortillas violate the U.S.-Mexico-Canada trade agreement (USMCA) have delayed without explanation the publication of their verdict. I would like to believe that they just now realized that Mexico’s restrictions barely affect U.S. corn exports and that the entire year-long process amounts to much ado about nothing.

If the USMCA tribunal rules against Mexico, as expected, and mandates a damage assessment based on the losses caused by Mexico’s policies for U.S. corn producers, how significant would that punishment be? Generally, complaining countries are authorized to impose retaliatory trade measures such as tariffs in amounts that compensate for the estimated damages.

By any sensible measure, those damages would be trivial, or even non-existent, particularly compared to the 25% across-the-board tariffs president-elect Trump is threatening. The tiny trade impacts of Mexico’s GM corn policies should have led the USMCA to reject the U.S. complaint from the outset. Now, they may make a U.S. “victory” in the trade dispute economically meaningless. Few U.S. corn exporters were affected. And they all had the option to keep their Mexican markets by switching to non-GM corn, which could have earned them a 20% price premium. Consider the supposed damages:

Total U.S. corn exports to Mexico have increased, not decreased, since the February 2023 decree, so if that is the metric the damages are zero. The U.S. charged that what it called the “substitution instruction” to gradually replace GM with non-GM corn in animal feed was a trade restriction. It isn’t, and soaring yellow-corn exports from the U.S. to Mexico make that clear.

If the damages are based on lost exports in the small white corn export market, those losses are commensurately small. Only 2–3% of U.S. corn exports to Mexico are of white corn. Only an estimated 50% of that is GM corn. And only about half of white corn exports are destined for the tortilla supply chain. As I explained in an earlier article, well under 1% of total U.S. corn exports may have been affected by Mexico’s restrictions.

It if came to estimating damages, how small would the penalty be? U.S. white corn exports to Mexico in 2022, the year before the decree, were 455,000 metric tonnes. U.S. white corn exports in 2023 fell to 104,000 mt, but as the Mexican government pointed out in its rebuttal filing in the trade dispute, that decline was not because of the decree but because Mexico suspended tariffs on white corn imports from all exporters to combat inflation. South African corn, freed of tariffs, outcompeted U.S. corn on price. Total Mexican white corn imports in 2023 were 363,000 mt of which 259,000 mt were from South Africa.

Those tariffs were restored again in 2024 and, as Mexico explained, U.S. white corn exports recovered. As of September, year-to-date they were at 182,000 mt, which annualizes to a total of 273,000 mt. Using the annualized estimate for 2024 U.S. white corn exports as a more useful comparison than 2023, the decline from 2022 is 159,000 mt.

That decline cannot be attributed entirely to the GM corn decree. Many other factors are at play:

· Other exporters may have captured market share.

· Mexico’s government programs to encourage greater self-sufficiency also may have reduced demand.

· Mexico’s tortilla companies no doubt reduced their demand for GM corn and have vowed to keep GM corn out of its tortillas.

· Why? because Mexican consumers are loud and clear in saying they don’t want GM corn in their tortillas. That is the market speaking. In June, the coalition Sin Maiz No Hay Pais (Without Corn There Is No Country) sent more than 100,000 letters to the trade tribunal urging them to respect Mexico’s right to determine for itself how to feed its residents.

But even if we attribute the entire 159,000 decline to Mexico’s decree, the economic damages are very small:

• 159,000 mt @$250/mt (based on 2024 prices) = $39.75 million/year in losses. (Compare that small number to the more than $5 billion in total U.S. corn exports to Mexico.)
• If the tribunal authorized the U.S. to apply such a penalty as a tariff on tequila:
• Mexico exports $6.5b/year, 321m liters, each liter costing an average of $20
• a $39.75m/year penalty, as a tariff on tequila, would be $0.12/liter, or 0.6%
• By contrast, a 25% Trump tariff on tequila would cost $5/liter, more than 800 times the punitive tariff for GM corn. And that’s just on tequila; Trump’s tariffs are on all goods, making them literally thousands of times more trade-distorting than Mexico’s GM corn restrictions.

The U.S. government and the USMCA secretariat have made much ado about nothing. All to put a sovereign government in its place for daring to question the safety of biotech firms’ products. The USMCA itself would be the loser with such a verdict, showing itself to be a tool of U.S. and corporate power in disciplining Mexico’s precautionary measures that barely affect trade while it stands impotent in the face of president-elect Trump’s threatened violations of a trade agreement that he himself negotiated.

Trade rules? Not for the powerful. Hypocrisy rules.