Question

Some Mexican corn farmers in economically depressed areas are able to use their land to grow marijuana and poppy plants (used to produce opium). Use demand and supply analysis to illustrate the market for illegal crops before and after NAFTA. Explain why developments in the corn market may or may not affect the production of crops used to produce drugs. (For this task, assume that the likelihood of being caught/penalized does not change with the introduction of NAFTA.)

Answer 1

Ans) NAFTA ( North American Free Trade Agreement) is a pact signed between US, Canada and Mexico creating a trilateral trade bloc. It aimed at increasing cross border trade and for that it removed tariffs and reduced some non tariff barriers mainly on agriculture , textile and automobile.

NAFTA apart from benefitting other sectors , particularly contributed in growth of one sector and that is illicit drug trade.

Before NAFTA illegal trade of these drugs was comparatively easy to keep under check as flow of goods and people was limited and hence keeping check was easy.

But after NAFTA, people and goods started entering in these countries exponentially and to keep a proper check became difficult , although sufficient number of trucks and other containers were checked.

This gave drug traders a golden opportunity to increase their trade. Market for drugs is worth multi billion dollar, so to meet the rising demands these traders convinced farmers specially who were in distress to grow more of marijuana and poppy which will yield them high returns. Seeing a good opportunity in this to overcome the crisis, farmers started growing marijuana and poppy more than corn whose return is not that high.

Even if more developments would have been made in corn market then also farmers would have chosen marijuana and poppy over corn . Because the return for these plants is much higher than return from corn, also market for corn may go up and down but the market for these drugs is always high. Also , Drug Trading Organisations (DTO) pay good amount to these farmers to ensure constant supply of these plants to meet rising demands.

DTO also use profits from these illegal sale to provide public goods like employment, education, medical care etc which government fail to provide and maintain trust of these underprivileged farmers.