LABOR-MARKETS, MIGRATION AND WELFARE - AGRICULTURE IN THE NORTH-AMERICAN FREE-TRADE AGREEMENT

Mexico, like many other countries, provides its agricultural sector wi th substantial protection from international competition. Income distr ibutional considerations and concerns about transitional problems once liberalization starts explain much of the persistence of such policie s. This paper argues four points: (i) substantial efficiency gains can be expected from liberalization; (ii) the income distributional effec ts of protection are in fact regressive; (iii) well targeted adjustmen t 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 U.S., would significantly reduce any adjustme nt problems. The latter point is made in the context of an assessment of the potential impact of the Free Trade Agreement (FTA) on agricultu re.