88 



We are also concerned that NAFTA may jeopardize our ability to continue use of 

 the Dairy Export Incentive Program (DEEP) on sales of milk to Mexico. 



III. LOSS OF ABILITY TO ADDRESS TRADE INEQUITIES 



The U.S. eliminates restrictions on access to its market immediately, as well as 

 removes the only tool of recourse if trade abuse occurs, in giving up Section 22 in 

 our agreement with Mexico. Section 22 of the Agriculture Adjustment Act of 1933 

 allows the Secretary of Agriculture and the President to take immediate action if 

 they believe a condition exists requiring emergency treatment. 



In analyzing what has taken place with certain commodities under the Canadian/ 

 U.S. Free Trade Agreement, the Clinton administration has now seen the need to 

 take and consider Section 22 action. The accompanying chart A-3 reports the in- 

 crease in peanut butter and peanut paste at 567 percent from 1989 to 1992 and an 

 increase of 3021 percent in sugar products from 1989 to 1992. 



Chart A-2, referred to previously, clearly shows the import surge of Durum, bar- 

 ley, and all wheat that has occurred from Canada since the implementation of the 

 Canadian Free Trade Agreement. The only tool available to the administration to 

 respond to the detrimental trade action is Section 22. 



The only other option for producers of a particular commodity is to file a com- 

 plaint through a binational panel, at a cost per case of several hundred thousand 

 dollars. 



Within the Mexico/U.S. agreement, there is no enforceable way for the U.S. Gov- 

 ernment to intercede on behalf of producers if flagrant transshipment of commod- 

 ities occur, nor to intercede if import surges occur. 



IV. LOSS OF FARM INCOME 



Some may characterize NAFTA as a method of redistributing the wealth. We be- 

 lieve farmers in both the United States and Mexico will be the donors. 



Free trade proponents like to cite a recent study claiming that corn prices may 

 increase by 5.06 per bushel under NAFTA. It is worth noting that this study does 

 not make any claims of gains for any other U.S. agriculture commodities. We also 

 point out that the 5.06 for our farmers comes at the expense of an estimated 3 mil- 

 lion Mexican corn farmers who will lose their farms, jobs, and homes when their 

 prices are cut by one half. 



One of the biggest threats to U.S. farm income under the NAFTA is the loss of 

 Section 22, which allows us the ability to stabilize our domestic food supply. Cur- 

 rently used for dairy, sugar, peanuts, and cotton, Section 22 is available and has 

 been used for many other commodities, including wheat, barley, rye, oats, and oth- 

 ers. NAFTA eliminates our import controls in favor of tariffs, which are then phased 

 out, over periods of 5, 10, and 15 years. 



The loss of import controls, coupled with the problems caused by inadequate rules 

 of origin and transshipment, combine to produce a serious threat to producer income 

 and will also negatively impact U.S. taxpayers. 



The problem becomes even worse when one considers that NAFTA provides an in- 

 centive for farms to be moved south of the border, due to cheaper labor and land, 

 and lack of enforcement regarding environmental restrictions. Family farmers do 

 not have the incentive to move. However, agribusiness does. 



A Texas dairy farmer compared his costs of production to those of a Mexican coun- 

 terpart. The Texan paid his workers $40 a day, along with social security and work- 

 men's compensation. His land costs were higher, his fuel costs were higher, and his 

 environmental restrictions more severe. His Mexican friend paid his workers $3.00 

 a day, with no benefits, and paid less for the chemicals and pesticides he used on 

 his farm. The result was no surprise. The Mexican farmer had a much higher profit 

 margin. 



The projected loss of jobs is often cited by labor unions. This loss is also serious 

 for farm families, since off-farm income is often the source of cash flow that provides 

 day to day living expenses for our members. When off-farm income is separated out 

 from farm income, USDA figures reveal that the average annual farm net income 

 is less than $4,000 per year! 



CONCLUSION 



Some tell us that the decline of the American farm family is inevitable. If the 

 United States continues to accept agreements such as the NAFTA, we will seal this 

 fate. 



