US–Mexico fresh vegetable trade: the effects of trade liberalization and economic growth

Abstract

Studies of US-Mexico vegetable trade have generally emphasized the importance of US tariffs in determining the competitive advantage of US producers. Even so, research has identified at least four factors related primarily to the different levels of economic development in the US and Mexico that also have important effects on US-Mexico agricultural trade in general and fresh vegetable trade in particular. These include the differential growth rates of US and Mexican real wages, production technology (yields), and per capita income as well as cyclical movements in the real Mexican Peso/US Dollar exchange rate. This study examines the relative contribution of NAFTA and the development-related factors to likely future changes in US fresh vegetable imports from Mexico. The analysis employs an econometric simulation model of US and Mexican markets for five fresh vegetables (tomatoes, cucumbers, squash, bell peppers, and onions) accounting for 80% of US fresh vegetable imports. The results suggest that the 1994-1995 Peso devaluation rather than NAFTA was primarily responsible for the sharp increase in US imports of Mexican vegetables observed in the first years following the implementation of NAFTA. Over time, however, the results suggest that differences in the growth rates of US and Mexican production yields and, to a lesser extent, of US and Mexican real incomes and/or real wage rates could plausibly contribute more to the future growth of US tomato, squash, and onion imports from Mexico than the trade liberalizing effects of NAFTA.

Simple-but-sound methods for estimating the value of changes in biodiversity for biological pest control in agriculture

“…Thus, we ran the analysis for several different assumptions regarding the price elasticity of supply to explore the sensitivity of results to that parameter (see Table 4). Malaga et al (2001) estimated supply and demand elasticities for squash and cucumbers in the U.S. as a whole, but supply elasticity for this small regional subset of the full market may be either higher or lower than the Malaga et al (2001) estimate. Ornelas and Shumway (1993) estimated supply elasticities for Texas production of vegetable crops ranging from .003 for potatoes to .597 for watermelon; we used different values of the supply elasticity parameter within that range.…”

“…By using this method, we are implicitly assuming that the agricultural products are homogeneous, their markets are competitive, and the cost changes for which we have data are applicable across the whole region of production for the market. The crops in our case study have been modeled as homogeneous competitive commodities before (Malaga et al, 2001), and we limit our study to a small geographic area (Georgia and North Carolina), so these assumptions may not be too problematic.…”

Trade diversion from tomato suspension agreements

“…How important are these effects on U.S. fresh tomato prices? Given an estimated demand elasticity of −0.55 (Malaga, Williams, and Fuller 2001) and noting that U.S. consumption is slightly over 2 million tonnes of fresh tomatoes (USDA‐ERS 2007), the direct reduction in Mexican imports would cause the price of fresh tomatoes to increase by 4.1%. However, because diversions offset over half of the direct reduction in Mexican exports of fresh tomatoes to the United States, the price increase is only 2.5% 15 .…”

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

“…To generate our welfare estimates, we supplement the demand elasticities from our Monte Carlo simulations with simulated supply elasticities. The available literature suggests that the own‐price supply for asparagus is approximately 0.4 (Málaga et al., ; Onyango and Bhuyan, ; Ornelas and Shumway, ; Torok and Huffman, ). Therefore, in our 5000 Monte Carlo simulations, we assume this elasticity is drawn from a normal distribution with mean 0.4 and standard deviation of 0.1 and is constant across all suppliers in all months.…”