International Trade Lessons for the New York Times

04/03/2017 12:00am

The New York Times told readers that Mexico is preparing to “play the corn card” in its negotiations with Donald Trump. The piece warns:

“Now corn has taken on a new role — as a powerful lever for Mexican officials in the run-up to talks over Nafta, the North American Free Trade Agreement.

“The reason: Much of the corn that Mexico consumes comes from the United States, making it America’s top agricultural export to its southern neighbor. And even though President Trump appears to be pulling back from his vows to completely overhaul Nafta, Mexico has taken his threats to heart and has begun flexing its own muscle.

“The Mexican government is exploring buying its corn elsewhere — including Argentina or Brazil — as well as increasing domestic production. In a fit of political pique, a Mexican senator even submitted a bill to eliminate corn purchases from the United States within three years.”

It then warns of the potential devastation from this threat:

“The prospect that the United States could lose its largest foreign market for corn and other key products has shaken farming communities throughout the American Midwest, where corn production is a vital part of the economy. The threat is particularly unsettling for many residents of the Corn Belt because much of the region voted overwhelmingly for Mr. Trump in the presidential election.

“‘If we lose Mexico as a customer, it will be absolutely devastating to the ag economy,’ said Philip Gordon, 68, who grows corn, soybeans and wheat on a farm in Saline, Mich., that has been in his family for 140 years.”

Okay, I hate to spoil a good scare story with a dose of reality, but let’s think this one through for a moment. According to the piece, instead of buying corn from the United States, Mexico might buy it from Argentina or Brazil. So, we’ll lose our Mexican market to these two countries.

But who is buying corn from Argentina and Brazil now? If this corn had previously been going to other countries, then presumably these other countries will be looking to buy corn from someone else, like perhaps U.S. farmers?

It is of course possible that Argentina and Brazil will switch production away from other crops to corn to meet Mexico’s demand, but that would likely leave openings in these other crops for U.S. farmers. The transition to new markets for corn crops or a switch from corn to the crops vacated by Brazil and Argentina would not be costless, but it also may not imply the sort of devastation promised by the New York Times.

See, market economies are flexible. This is something that economists know, as should reporters who write on economic issues. This may undermine scare stories that are being told to push an agenda, but life is tough.

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