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Hogging the gains from trade in Mexico

Photo: US Government Accountability Office / Wikipedia / CC BY-SA 3.0

Medium | 9 August 2022

Hogging the gains from trade in Mexico

by Timothy A. Wise

Author of Eating Tomorrow: Agribusiness, Family Farmers, & the Battle for the Future of Food. Advisor with Institute for Agriculture and Trade Policy.

In this excerpt from Chapter 8 of my book, Eating Tomorrow (The New Press, 2019), I recount one of the most compelling stories I came across in researching the book. It captures how the multinational pork giant Smithfield, now owned by a Chinese firm, took advantage of trade, investment, labor, environmental, and immigration policies, after the North American Free Trade Agreement (NAFTA), to expand its low-wage factory farming model on both sides of the U.S.-Mexico border. It is published with permission from The New Press and with thanks to photojournalist David Bacon, who covered the issue so well for The Nation. (Links to sources are in footnotes.)

Just up the Veracruz coast, farmers have lived their own NAFTA nightmare, and not just on the Mexican side of the border. The Perote Valley is now home to some of Mexico’s largest hog slaughterhouses, which expanded with all the perks that came with the trade agreement. U.S.-based Smithfield Foods, then the largest pork producer in the world, took control in 1999 of Granjas Carroll, a large industrial hog operation that had expanded operations in the valley in 1993. Between them, they turned the local economy into a living laboratory for all that is wrong with NAFTA, and with the agriculture, labor, immigration, and environmental policies that benefit agribusiness on both sides of the border.

The first blow to the local economy came with new industrial-scale hog operations. Local farmer David Ceja grew up on a farm with pigs, chickens, and cows, which were the family’s savings banks when it needed cash. “Sometimes the price of a pig was enough to buy what we needed,” he told Nation reporter David Bacon, “but then it wasn’t. Farm prices were always going down.”[i] They couldn’t get a decent price for their pigs, as Granjas Carroll undersold local producers. Part of that came from local production and part came from imports, which multinationals like Smithfield now exported to Mexico tariff-free.

Pork exports grew a destabilizing 700 percent after NAFTA, and hog producer prices in Mexico fell by more than half.[ii] “We lost 4,000 pig farms,” Alejandro Ramírez of the Mexican Confederation of Pork Producers told The Nation. He estimated that Mexico lost 20,000 direct jobs in the industry and as many as 120,000 when you count indirect jobs lost in related industries.[iii]

Wouldn’t those new industrial hog operations increase the local demand for maize and soybeans, the two main ingredients in feed mixtures? Not under NAFTA. The Perote Valley sits just over the mountains from Veracruz, one of Mexico’s most important Gulf ports. Container ships laden with U.S. maize and soybeans, now tariff-free under NAFTA, provided the new factory farms with all the feed they needed, and at a discount thanks to U.S. dumping. Smithfield was dumping pork on Mexico thanks to below-cost feed at hog operations like its giant Tar Heel plant in North Carolina. Smithfield was getting a 26 percent discount on feed, its most important operating cost, saving the company nearly $284 million a year.[iv] So Ceja’s family couldn’t get a decent price for its pigs, and it couldn’t sell its maize at a profit either despite the rise in local demand.

But things got still worse in the Perote Valley for farm families. NAFTA didn’t liberalize only goods trade but also investment, and Smithfield came into Mexico hard through its joint venture with Granjas Carroll. The company expanded its hog farms to become Mexico’s biggest supplier, with at least 25 percent of the domestic market. From the Perote Valley alone they were raising nearly one million pigs a year in some 80 complexes scattered around the area.[v] With the economic devastation of NAFTA, the area was desperate for employment, but these were highly automated operations, so the job-creation was limited. The new factory farms created an estimated 1,200 jobs; NAFTA had probably displaced far more than that.

But weren’t they good jobs? NAFTA proponents had promised that foreign investment would at least bring better jobs, a so-called “harmonization upward” toward U.S. wage and labor standards rather than a “race to the bottom,” as critics warned. The critics were right. David Torres worked for eight years in one of the Perote plants, and he told The Nation that the pay was low for 50–60-hour workweeks. Worse still, he was employed as a contractor, not an employee hired directly by Granjas Carroll or Smithfield. “Since we work for a contractor, we’re not entitled to profit-sharing or company benefits,” said Torres.

Smithfield’s foreign investments made particular sense because back home state governments were finally cracking down on the environmental damage caused by factory farms. A Virginia judge had fined Smithfield $12.6 million in 1997 for dumping hog manure into a tributary to the Chesapeake Bay. The same year, North Carolina, long the regulation-free home for industrial animal facilities, enacted a moratorium on new open-air manure lagoons and placed limits on further expansion at the Tar Heel plant, the largest hog processing facility in the world. Mexico had no such enforceable limits, and neither did Veracruz. As the hog farms expanded, so did the complaints about water pollution and air quality. NAFTA’s environmental side agreement was no match for Smithfield. Despite regulations calling on the companies to cover their manure lagoons and seal them to prevent leaks, there was little enforcement. Wells were reported contaminated, and the stench of manure made communities nearly unlivable. “The company can do here what it can’t do at home,” said Carolina Ramírez of the Veracruz Human Rights Commission.

By 2005, the community had had enough. After petitioning the government to stop licensing new hog operations, they took matters into their own hands: 1,000 residents confronted a construction crew preparing to install another hog shed and manure pond. The uproar would eventually force the company to suspend temporarily the construction of new hog operations in the Perote Valley. But the gods were by no means done with Perote: it was time for a plague. In 2009, a five-year-old boy in nearby La Gloria was diagnosed with the first case of swine flu, the beginning of the AH1N1 virus outbreak that would kill 45 people in Mexico. Everyone agreed the virus came from pigs and most agreed that it had probably spread to humans when a plant worker had inadvertently brought it home on his shoes or clothing. But Smithfield and Granjas Carroll quickly denied it came from their plants, and no clear link was proven. According to one local, “no one believed it.”[vi]

So the communities were becoming dangerous and unlivable, the jobs certainly weren’t good ones, and making a living from farming had grown more difficult with NAFTA’s dumped imports. What was a young worker to do? Smithfield had an answer for that too. The company’s Tar Heel plant in North Carolina, beset by unionization efforts by its largely African-American work force, started hiring workers from Veracruz. That’s where David Ceja ended up, paying $1,200 to a coyote to smuggle him across the border. When he got to Smithfield’s plant he said he was surprised to see many of the kids he’d played with at home. “I’d see many of them working in the plant.”[vii]

“The company thought the undocumented would work cheap, work hard, and they wouldn’t complain,” said Keith Ludlum, a white worker at the plant, which employed 5,000. And their fear could be exploited to undermine unionization efforts by the United Food and Commercial Workers (UFCW), which had come close to winning union votes in Tar Heel in 1994 and 1997. They hadn’t because U.S. labor law was (and still is) so toothless that the company could engage in what the National Labor Relations Board would call “egregious and pervasive unfair labor practices,” including the firing and intimidation of pro-union workers, yet still keep out the union. With its growing Mexican work force, which it knew was undocumented, Smithfield could pit the U.S.-born workers against the immigrants, making the cynical claim that the immigrants were taking Americans’ jobs.

That’s where U.S. immigration policy comes in. Smithfield had little trouble getting undocumented workers from Veracruz to North Carolina. It was even easier to get them out. All it took was an anonymous call to Immigration and Customs Enforcement (ICE). The company made sure that periodic raids reminded Mexican workers how vulnerable they were if they caused any trouble.

Remarkably, they did anyway. With the plant’s work force a majority Latino, the union sent in a new set of organizers who could work with the immigrants, teach them English, and remind them of their rights in the workplace. Short wildcat stoppages started taking place in 2003. As on any fast-moving assembly line, any small group of workers could shut down the whole line. David Ceja was part of a stoppage in 2004. The immigrant workers were gaining confidence and the union was gaining strength. The Tar Heel plant practically shut down on May 1, 2006 when workers joined the nationwide immigrant rights protests, leaving work to march in nearby Wilmington, North Carolina.

Later that year, the company announced it would fire undocumented workers for using false Social Security numbers, claiming it was just obeying U.S. immigration laws. A work stoppage slowed the company action, and even inspired African-American workers to demand a paid holiday for Martin Luther King Day. When the company refused, they too shut down the line. Eventually, though, ICE came through the plant and the communities, arresting or driving away some 1,500 immigrant workers.[viii]

In December 2008, on the heels of Barack Obama’s historic victory in the U.S. presidential election, the remaining Latino, African-American, and white workers at the Tar Heel plant finally forced and won a union vote, ending one of the longest organizing campaigns in U.S. labor history.[ix] That remarkable victory came in spite of, not because of, U.S. agriculture, trade, immigration, and labor policies since NAFTA, which had pushed cheap commodities south and driven people north. On both sides of the U.S.-Mexican border, transnational livestock firms like Smithfield had taken advantage of such policies. They had gotten cheap feed for their animals, a favorable investment climate in Mexico, tariff-free exports to Mexico of finished products and tariff-free imports of feed for operations there. And they had benefited from a growing supply of low-wage labor on both sides of the border.

In migration policy, people speak of “push factors” that compel people to migrate, and “pull factors” that attract migrants. Under NAFTA, Smithfield provided both, pushing people out of the Perote Valley and pulling them to the United States as undocumented low-wage workers. As UCLA professor Gaspar Rivera-Salgado, who founded and led a bi-national organization of indigenous people from Mexico’s Oaxaca state, some living in Mexico and some in the United States, told The Nation, “We need development that makes migration a choice rather than a necessity — the right to not migrate.”[x]

[i] Much of the local detail in this section comes from David Bacon, “How US Policies Fueled Mexico’s Great Migration,” The Nation, January 4, 2012.

[ii] Wise, “Agricultural Dumping Under NAFTA,” 25.

[iii] Bacon, “How US Policies Fueled Mexico’s Great Migration.”

[iv] Timothy A. Wise and Betsy Rakocy, “Hogging the Gains from Trade: The Real Winners from U.S. Trade and Agricultural Policies,” Policy Brief (Global Development and Environment Institute, January 2010), 2.

[v] Bacon, “How US Policies Fueled Mexico’s Great Migration.”

[vi] Ibid.

[vii] Ibid.

[viii] Bacon, “How US Policies Fueled Mexico’s Great Migration”; Those raids were captured on video by union organizers powerless to stop the actions, the footage featured in the popular documentary “Food Inc.”

[ix] Steven Greenhouse, “After 15 Years, North Carolina Plant Unionizes,” The New York Times, December 12, 2008, sec. U.S.

[x] Bacon, “How US Policies Fueled Mexico’s Great Migration”; Rufino Domínguez, “Cultural Roots as a Source of Strength: Educating and Organizing a Fragmented Immigrant Community” (Oaxacan Indigenous Binational Front, September 2003); David Bacon, The Right to Stay Home: How US Policy Drives Mexican Migration (Boston, MA: Beacon, 2014).

 source: Medium