Corn Prices Revisited
After the protests in December and January against the rising tortilla prices spiked by the US demand for ethanol, Mexico has finally done something to stop the rising prices and angry consumers. Although Mexico does produce alot of corn, it still imports much of it from the US. As the US ethanol producers’ demand for corn increases, so do the market prices of corn and thus the prices of tortillas in Mexico. This is a prime example of globalization. The free market system and the trade agreement between the United States, Mexico, and Canada (NAFTA) means that a change in the price of a market good in one country immediately effects the other countries as well especailly if that good is in demand. This could be considered a negative aspect of globalization and trade. Corn prices in the United States can rise due to increased demand, but this has a devestating effect on Mexico who depends on US grown corn. There is little they can do about it though because of their reliance on US corn. Although the Mexico government has put a cap on tortilla prices to ease the tensions of the people and keep inflation down, there is little they can do to stop the global market from determining the price of corn. Mexico hopes to increase its yeild of corn, but in the mean time, they still must import it from the United States. Although multilateral trade agreements are generally considered beneficial for all countries involved, here is an example of the negative effects of trade which of course fall upon the poorer country. The trade agreement (NAFTA) between the United States, Mexico, and Canada is an example of commercial liberalism because the countries are cooperating to increase prosperity. Known as laissaez-faire economics, the market determines the prices of goods without any government intereference. But although the theory says that everyone will gain, it does not say that everyone will gain equally. Commercial liberalism is concerned with absolute gains, not relative gains, and therefore some may gain more than others. In this case, the United States may gain from higher corn prices because the producers are making more money, but Mexico losses because it relies on US corn and thus tortilla prices rise.
