The producer welfare effects of trade liberalization when goods are perishable and habit‐forming: the case of asparagus

Abstract

Asparagus is a perishable, highly seasonal crop. We find that out-of-season imports of asparagus caused habit formation that increased demand in the U.S. growing seasons. We find that habit effects offset about 64% of the welfare losses to U.S. asparagus producers from increased Mexican imports under NAFTA and all of the U.S. producer welfare losses from increased Peruvian imports under the Andean Trade Preference Act. We estimate that the U.S. producer welfare losses from NAFTA are less than the annualized value of market loss assistance provided them in the 2008 Farm Bill.JEL classifications: D12, F130, Q17, Q18

Food safety, reputation, and regulation

“…As discussed by Ferrier et al (2022), large growers may particularly benefit from additional regulations governing safety, like FSMA. Produce Marketing Association (PMA), a major U.S.‐based fruit and vegetable trade association, repeatedly submitted comments and testimony supporting increased regulation of the industry under FSMA and increased funding support for FDA's food safety budget (Produce Marketing Association, 2015, 2021).…”

“…In Bovay et al (2018), we develop new estimates of the cost of compliance with the Produce Safety Rule for 18 fruit and 20 vegetable commodities. In Ferrier et al (2022), we estimate own‐ and cross‐price elasticities of consumer demand for each of the 38 commodities. We then use these cost and demand parameters as inputs in an EDM to simulate producer and consumer welfare effects of the rule.…”

“…The comprehensive adoption of food-safety practices under FSMA therefore protects the reputations of all growers, and especially protects the growers that had previously adopted GAPs or similar standards from spillover effects. 24 Bovay and Sumner (2018) and Ferrier et al (2022) explore the effects of various producer groups facing differential costs under FSMA on market prices and producer and consumer surplus using equilibrium displacement models (EDMs). 25 In Bovay and Sumner (2018), we focus on the North American fresh-tomato industry as a useful case study to demonstrate distributional impacts of FSMA on various groups of producers differentiated by (a) size, (b) location (United States or foreign), and (c) GAPs adoption prior to the actual implementation of FSMA.…”