Mexican agricultural trade under the GATT

Expected effects from partially lifting tariff barriers on the Mexican agricultural sector are investigated using a restricted profit function (RPF) approach. Short-run and intermediate-run effects of the implementation of GATT minimum tariff provisions on Mexican agricultural trade are examined. Specification tests reveal the appropriateness of the RPF approach, that exports should not be aggregated with non-traded production into a single output, and that the farm sector behaves as an ‘almost’ price-taking, profit-maximizing firm. Policy simulations suggest important short-run changes in agricultural trade and chemical use and intermediate-run changes in agricultural trade, labour wage, chemical use, capital investments, and net farm income.