How corporate America exports disease to the rest of the world
Exporting Obesity and Diabetes: NAFTA and the Health of Mexico
Constructing an alternative to hyperconsumption and its disease burden will require an understanding of the strategies that multinational corporations use to distribute their unhealthy products around the world. To begin this task, let us examine the impact of the North American Free Trade Agreement (NAFTA) on the health of the people of Mexico, a story that illustrates how free trade can harm health. The United States, Mexico, and Canada signed NAFTA in 1994 to create the world’s largest trading bloc.
In the late 1980s, these three nations began to negotiate a new treaty designed to eliminate barriers to trade and investment. The political battle to pass NAFTA pitted industries in these countries that were big enough to prosper from expanded markets—tobacco, processed food, and automobiles—against smaller ones that preferred the continued protections that tariffs and subsidies offered. NAFTA opponents included industries like textiles, apparel, rubber, and plastics, as well as labor unions and environmental groups, who feared that the agreement would hurt their interests. The industries that had saturated the domestic U.S. market with unhealthy products and were now attracting greater regulatory scrutiny favored NAFTA and its successor treaties as a way to reach new customers in markets with less stringent public health and environmental standards. In testimony at a Senate hearing on the Central America–Dominican Republic Free Trade Agreement, a NAFTA spinoff treaty approved in 2005, Kraft’s executive vice-president for global corporate affairs, Mark Berlind, explained:
The 50 U.S. states are currently Kraft’s largest market. Given U.S. demographic realities, however, future growth for Kraft—as well as for the entire U.S. food and agriculture complex—is inextricably tied to our ability to access export markets. Mr. Chairman, as you and most other farm state Members know, 95 percent of the world’s consumers live outside the U.S. That is where future growth will take place.
For the U.S. food and agricultural sectors, the quest for new international markets was the consequence of the subsidy, trade, and land policies that Secretary of Agriculture and former Ralston Purina director Earl Butz had implemented during the Nixon Administration, as described in Chapter 3. These policies, approved at the behest of the agribusiness interests Butz represented, had led to overproduction of cheap, processed food and the need for new customers to sustain profits.
President Bill Clinton, who became a champion of NAFTA when he took office in 1993, responded to critics by saying that he supported the treaty because it would create jobs in the United States:
NAFTA will generate these jobs by fostering an export boom to Mexico; by tearing down tariff walls….Already Mexican consumers buy more per capita from the United States than other consumers in other nations. . . . The average Mexican citizen . . . is now spending $450 per year per person to buy American goods. That is more than the average Japanese, the average German, or the average Canadian buys. . . . So when people say that this trade agreement is just about how to move jobs to Mexico so nobody can make a living, how do they explain the fact that Mexicans keep buying more products made in America every year? Go out and tell the American people that….And there will be more if they have more money to spend. That is what expanding trade is all about.
Although the United States had long had trade agreements with other countries, NAFTA was the first proposed agreement among countries of such unequal size and levels of development in which governments chose to ignore these differences. It was also the largest trade agreement to be negotiated since the emergence of the Washington Consensus, the U.S.-driven push to elevate free trade, deregulation, and privatization to paramount political and economic priorities. For these reasons, NAFTA was important both in its own right and for setting precedents that guided the creation of the World Trade Organization (WTO) in 1995 and subsequent bilateral and multilateral trade agreements.
The NAFTA treaty called for a variety of changes, some to be implemented immediately, and others to be phased in over fifteen years. These included reductions in tariffs between the three countries, increased protection for corporate intellectual property rights, and the relaxation of restrictions on for- eign direct investment. On the whole, it opened wide the doors that enabled U.S.-based corporations to export many products, including those that harmed health.
In the years after NAFTA, the pattern of food exchanges between Mexico and the United States changed significantly, as did the diet of Mexicans. American exports of sugar, high-fructose corn syrup, snack food, dairy products, and breakfast cereals to Mexico increased dramatically. In 1994, the United States exported about 50,000 metric tons of sugar and other sweeteners to Mexico; by 2007, this had climbed to almost 950,000 metric tons, a nineteen-fold increase. U.S. exports of corn and soybeans, the foundation of industrial processed food for both American and Mexican producers, also increased significantly. In this same period, exports of livestock and other meat products more than tripled. In the decade after NAFTA passed, sales of processed food in Mexico increased by 5 to 10 percent annually.
U.S. foreign direct investment in Mexico also spiked after NAFTA. In just five years, from 1994 to 1998, U.S. direct investment in the Mexican food and beverage industries almost quadrupled, from $2.3 billion to $8.8 billion. Between 2002 and 2007, U.S. foreign direct investment in Mexican beverage companies increased by 35 percent to almost $6 billion. In 2012, grains, oils, and meat— products associated with obesity, diabetes, and other diet-related diseases— accounted for 75 percent of the U.S. agricultural exports to Mexico.
NAFTA also changed food retailing in Mexico. With tariff barriers lowered, large multinational supermarket chains began to move into Mexico and rapidly came to dominate the market. Between 1997 and 2006, market share of the five largest retail chains doubled from 24 percent to 48 percent. Walmart was a leading player: between 1993 and 2001, the number of its stores grew from 114 to 561, and by 2005, Walmart controlled about 20 percent of the Mexican food retail market.
In 2012, an investigation by the New York Times revealed that Walmart facilitated this expansion by bribing local and national officials to overlook a variety of rules, and that an internal inquiry into the matter had been suppressed at corporate headquarters in Arkansas. Challenging Walmart’s defense that it was the victim of a corrupt culture, the Times investigation concluded:
Walmart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance—public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals.
The Times reported that deciding how to manage the bribery charges provoked “a prolonged struggle at the highest levels of Walmart, a struggle that pitted the company’s much publicized commitment to the highest moral and ethical standards against its relentless pursuit of growth.” The Mexican government and the United States Department of Justice and the Securities and Exchange Commission began investigating the bribery and cover-up. In a regulatory filing shortly after the story broke, Walmart warned investors that its reputation could be affected by the bribery scandal, with inquiries from the media and law enforcement authorities adversely affecting the “perception among certain audiences of its role as a corporate citizen.” In 2012, Walmart spent $157 million on its probe of alleged bribery allegations in Mexico, Brazil, China and India, and on improvements to its compliance programs. Walmart also boosted the pay of its CEO Mike Duke by 14 percent to $20.7 million for the year.
In the short run, Walmart’s business model makes cheap food more available, but in the longer run it puts pressure on local growers to lower their prices, often to the point of driving them out of business. Walmart can always find other suppliers in another part of the world, but for Mexico, such practices diminish the supply of locally grown food and increase unemployment among small farmers and local store owners. The bribery also contributed to weakening the rule of law in Mexico, further diminishing its government’s capacity to protect its citizens rather than special interests.
U.S.-based multinational fast food outlets also grew in the post-NAFTA era. The first McDonald’s restaurant opened in Mexico City in 1985; by 2012, there were more than 500 McDonald’s outlets in eighty-three cities in thirty-one states in Mexico. Yum! Brands, the owner of Kentucky Fried Chicken (KFC), Pizza Hut, Taco Bell, and Long John Silver’s, and other U.S.-based fast food corporations, also expanded their presence in Mexico.
By the time NAFTA was fully implemented, the Mexican diet had been transformed. Between 1992 and 2000, for example, calories from carbonated soft drinks increased by almost 40 percent, from 44 to 61 calories per capita per day. By 2002, the average Mexican was drinking 487 servings of Coca-Cola per year, more than the 436 8-ounce servings U.S. residents downed annually. Between 1992 and 2000, in part as a result of economic changes precipitated by NAFTA, the cost in pesos per calorie of food tripled, making the low-cost, low-nutrient foods that NAFTA brought in more attractive, especially to families with low incomes.
Aggressive marketing of soft drinks and other high-calorie, low-nutrient snack foods by global and national beverage makers further encouraged consumption. Companies like Coke, Pepsi, McDonald’s, and Kraft hired global advertising companies to use their U.S.-tested skills in winning over young customers by targeting advertising to urban children and young adults. These were the fastest growing segment of the Mexican population and the multinational companies’ best hope for long-term increased market share. One study of a large sample of Mexican children aged five to eleven found that, between 1999 and 2006, the number of calories consumed annually from sugary beverages more than doubled. The growing exports of snack foods from the United States to Mexico increased competition between local and U.S. manufacturers. This in turn led to more aggressive advertising and price competition, further increasing consumption of these high fat, salt, and sugar products.
Not surprisingly, the changes in food consumption, availability, and prices that NAFTA had triggered led to changes in the health of Mexican eaters. Between 1988 and 1999, the national prevalence of overweight and obesity almost doubled, rising from 33 percent to a shocking 59 percent. Among some groups, the rise was even more striking. Among female adolescents in Mexico, obesity and overweight more than tripled between 1988 and 2006. By 2006, 26.3 percent of Mexican children aged two to eighteen were overweight or obese. In the 1990s, the overall prevalence of diabetes in Mexico increased by 30 percent. Another study found significant increases in deaths due to diabetes, hypertension, and acute myocardial infarctions in Mexico in this period, which the authors attributed to increases in the prevalence of obesity.
So Bill Clinton was right to predict an export boom to Mexico as a result of NAFTA. Unfortunately, some of the boom was the result of products that significantly worsened Mexico’s health profile and raised its health care costs. Did NAFTA cause Mexico’s obesity and diabetes epidemics? Of course not. Obesity is too complex a problem to have a single cause, and weight and body mass have been expanding around the world, not just in Mexico. Nevertheless, the evidence is clear that NAFTA, a trade agreement shaped by multinational food, agriculture, and other industries to increase their profits, transformed Mexico’s food environment and diet. These NAFTA-induced changes increased the availability, promotion, and consumption of the processed foods, sugar-sweetened beverages, and fast food most associated with obesity, diabetes, and other diet-related chronic diseases. In Mexico, NAFTA provided the platform from which multinational food companies could launch their program of hyperconsumption.
And Mexico is not the only country to suffer the consequences. China, India, South Africa, and Indonesia, among others, are witnessing similar transformations of their diet and health. Moreover, the food industry is not the only sector to use trade agreements and foreign investments to pursue profits at the expense of health. Tobacco, automobile, firearms, and other global industries have also used trade agreements to increase exports of their side products of premature death and preventable illnesses and injuries.
Excerpted from “Lethal But Legal” by Nicholas Freudenberg. Copyright © 2014 by Nicholas Freudenberg. Reprinted by arrangement with Oxford University Press, a division of Oxford University. All rights reserved.