3.6 After Mexico signed the North American Free Trade Agreement (NAFTA) in 1994, corn imports from the United States doubled within a year, and today U.S.

imports make up nearly one-third of the corn consumed in Mexico. According to the charity Oxfam in 2003, the price of Mexican corn fell more than 70% after NAFTA took effect. Part of the reason for this flow south of the border was that the U.S.

government subsidizes corn production to the tune of $10 billion a year. According to Oxfam, the 2002 U.S. cost of production was $3.08 per bushel, but the export price was $2.69 per bushel, with the difference reflecting an export subsidy of 39¢ per bushel.

The U.S. exported 5.3 metric tons. Use graphs to show the effect of such a subsidy on the welfare of various groups and on government expenditures in the United States and Mexico.