Brazil and the United States may have settled, for now, their long-running WTO dispute over U.S. cotton subsidies, but the issues it raised remain. After all, Brazilian producers were not the only ones hurt by U.S. dumping of its highly subsidized cotton on world markets, which not only took market share from competing producers, it depressed the international price for all producers.

How much does agricultural dumping cost farmers in developing countries? I recently completed a study for a Woodrow Wilson Center project that highlights just how high the cost of dumping can be. I benefited from the somewhat controlled experiment represented by U.S.-Mexico agricultural trade under the North American Free Trade Agreement (NAFTA). I call it a controlled experiment because NAFTA liberalized agricultural trade dramatically over a short period of time, Mexico imports most basic grains and meats almost exclusively from the United States, and Mexican farmers grow many of the crops that compete with the imports. In such a case, one can easily see the increase in U.S. exports, the drop in Mexican producer prices, and it is reasonable to assume that the U.S. export price is the reference price for these products in Mexico.

Using one of the definitions of dumping listed by the WTO (GATT Article VI Sec. 2.2), we estimated the extent to which U.S. export prices to Mexico were below U.S. farmer costs of production (plus transportation and handling). We looked at the nine-year period 1997-2005. We began in 1997 because NAFTA’s agricultural provisions were mostly implemented and the 1996 U.S. Farm Bill, which had a price-depressing effect on most major crops, had taken effect. We ended the period in 2005 to avoid the confounding effects of the speculative commodity price boom, which began in late 2006. We simply calculated the extent to which Mexican producer prices were lowered by U.S. dumping, and then estimated how much more Mexican producers would have earned if they had received non-dumping prices – at least high enough to cover U.S. costs of production.