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Taking advantage of people's need

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Mexico is putting price controls on tortillas [2] to protect the poor from increases in tortilla prices caused by rising prices of corn. The AP reports (HT: Noah Yetter):

President Felipe Calderon signed an accord with businesses on
Thursday to curb soaring tortilla prices and protect Mexico’s poor from
speculative sellers and a surge in the cost of corn driven by the U.S.
ethanol industry. The corn tortilla is the basic staple of the Mexican
diet and is especially crucial for the poor. The accord limits tortilla
prices to 8.50 pesos ($0.78) per kilogram and threatens to use existing
laws to achieve prison sentences of up to 10 years for company
officials found hoarding corn. Some stores have been selling tortillas
for as much as 10 pesos ($0.91) per kilogram.

It also raises quotas for duty-free corn imports to 750,000 metric tons
(826,733 U.S. tons), most of which will come from the United States.

The measure is to be reviewed for possible modifications on April 30.

"The unjustifiable price rise of this product threatens the economy
of millions of families," Calderon said. "We won’t tolerate speculators
or monopolists. We will apply the law with firmness and punish those
who take advantage of people’s need.

Why is corn getting more expensive?

The rise is partly due to U.S. ethanol plants gobbling corn supplies
and pushing prices as high as $3.40 a bushel, the highest in more than
a decade.

So because of a bad law in the United States (the requirement to put ethanol in gasoline), the Mexicans have decided to pass a bad law that can only lead to a tortilla shortage.

But wait. There’s another source of high corn prices in Mexico. Re-read that earlier line:

It
also raises quotas for duty-free corn imports to 750,000 metric tons
(826,733 U.S. tons), most of which will come from the United States.

Quotas? Mexico keeps out American corn? Wait a minute. Didn’t the United States sign a free trade agreement with Mexico, the North America Free Trade Agreement? I guess there was a exception for corn. Or a very slow phase-in. Maybe we should call it NAMTA—the North America Managed Trade Agreement. Or maybe NAFTA stands for the North American Fair Trade Agreement because it protects Mexican corn farmers from  unfair competition by American corn farmers.

Getting rid of corn quotas would be a lot better way to help the poor than imposing price controls on tortillas. Maybe President Calderon should spend more time listening to Mike Munger [3]

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