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Transition Problems in Economic Reform: Agriculture in the Mexico-US Free Trade Agreement


  • Levy, Santiago
  • van Wijnbergen, Sweder


At what speed should Mexican agriculture be incorporated into the North American Free Trade Agreement (FTA)? What policies should characterize the transition? We use Mexican agriculture as a case study to analyse the transition problems that arise in most major economic reforms. In particular, European Community (EC) farmers can expect similar problems if the Common Agricultural Policy (CAP) is dismantled and/or Eastern Europe gains unrestricted access to the EC's farm product markets. We focus on the implications for policy design of the absence of efficient capital markets, on the welfare costs of reforming only gradually, on incentive problems created by trade adjustment policies and on the redistributive aspects of policy reform in the presence of realistic limits on available intervention instruments. Our key point is that adjustment should focus on increasing the value of the assets owned by the groups affected, and not on direct income transfers or programmes targeting output or other characteristics controlled by the beneficiaries. We target adjustment on what people have, as opposed to what people do.

Suggested Citation

  • Levy, Santiago & van Wijnbergen, Sweder, 1992. "Transition Problems in Economic Reform: Agriculture in the Mexico-US Free Trade Agreement," CEPR Discussion Papers 624, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:624

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    References listed on IDEAS

    1. Feenstra, R.C. & Rose, A.K., 1992. "Trade with Mexico and Water Use in California Agriculture," Papers 399, California Davis - Institute of Governmental Affairs.
    2. Paul Krugman, 1982. "Trade in Differentiated Products and the Political Economy of Trade Liberalization," NBER Chapters,in: Import Competition and Response, pages 197-222 National Bureau of Economic Research, Inc.
    3. Aaron Tornell, 1991. "Time Inconsistency of Protectionist Programs," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 963-974.
    4. Peter A. Diamond, 1982. "Protection, Trade Adjustment Assistance, and Income Distribution," NBER Chapters,in: Import Competition and Response, pages 123-150 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Van Wijnbergen, S. & Venables, Tony, 1993. "Location choice," LSE Research Online Documents on Economics 2099, London School of Economics and Political Science, LSE Library.
    2. Rossana Patrón, 1999. "The imperfect mobility of labour: Going from theory to ‘virtual’ reality. Simulations with simple trade models," Documentos de Trabajo (working papers) 2299, Department of Economics - dECON.
    3. Rossana Patrón, 2000. "Effects from trade with heterogeneous workers and minimum wages: numerical exercises," Documentos de Trabajo (working papers) 1700, Department of Economics - dECON.
    4. Barbier, Edward B., 2004. "Agricultural Expansion, Resource Booms and Growth in Latin America: Implications for Long-run Economic Development," World Development, Elsevier, vol. 32(1), pages 137-157, January.
    5. Barbier, Edward B. & Burgess, J.C., 1996. "Economic analysis of deforestation in Mexico," MPRA Paper 12089, University Library of Munich, Germany.
    6. Yunez-Naude, Antonio, 2002. "Mexico'S Basic-Crops Subsector: Structure And Competition Under Free Trade," Structural Change as a Source of Trade Disputes Under NAFTA; Proceedings of the 7th Agricultural and Food Policy Systems Information Workshop - 2001 16860, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.

    More about this item


    Economic Reform; Mexico-US FTA; Transition Problems;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade


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