Offsetting Price Impacts from Imports with Generic Advertising and Promotion Programs: The Hass Avocado Promotion and Research Order

California avocado producers, concerned about sharp increases in imports from Chile and Mexico, secured passage of national legislation to include financial participation by imports in U.S. generic promotion programs. Estimated demand parameters for avocados indicate that new advertising and promotion funded by the 2.5 cents per pound assessment on all Hass avocados sold in the U.S. can offset a portion of the price impact of increased imports. Producers of other specialty crops may want to investigate the feasibility of using national promotion and research orders to expand demand when faced with increased production or imports.     

U.S. Agricultural Trade with Mexico

Abstract

This study examined the effects of exchange rates, economic growth, trade liberalization, and export assistance programs on U.S. agricultural exports to Mexico. The Commodity Credit Corporation's GSM-102 Export Credit Guarantee Program reduces the risk associated with export financing and payment. The impact of the export credit guarantee program on U.S. agricultural exports to Mexico was estimated in an import demand model using quarterly data from 1980 to 1996. The results indicate that for every $1 of export credit guarantees, Mexican imports of U.S. farm products increased $0.30. Real income growth in Mexico, however, was the most important factor in the expansion of U.S. exports. Trade liberalization under NAFTA also increased U.S. exports to Mexico.     

Impact of the 2014 Suspension Agreement on sugar between the United States and Mexico

In December 2014, the U.S. and Mexico agreed to a suspension agreement that set a $22.25/cwt import price floor on U.S. sugar imports from Mexico. A partial equilibrium trade model was developed to estimate the economic impact the agreement would have had if it had been in effect from 2008 to 2014. In years when the price floor would have been binding, on average, U.S. producers would have gained $138 million and Mexican producers would have lost $218 million. However, total Mexican welfare would have actually increased by $11.5 million. Furthermore, the average price floor that would have maximized total Mexican welfare over that period is $22.76/cwt. Also, under certain supply and demand elasticity conditions, the average price floor that would have maximized joint U.S. and Mexican producer welfare over that period is $21.91/cwt. The latter two estimates are both close to the actual price floor agreed to in the 2014 Suspension Agreement.     

Imports versus Domestic Production: A Demand System Analysis of the U.S. Red Wine Market

The U.S. wine market experienced rapid growth in all facets—production, consumption, exports, and imports—over the past decade. Red wine imports more than tripled while consumption of domestically produced red wines doubled. This research estimates demand elasticities of U.S. red wine imports from five countries accounting for over 90% of imports—Italy, France, Spain, Australia, and Chile—using the first-difference version of the almost ideal demand system (AIDS). These elasticities are compared with those for domestically produced red wine. Results for conditional expenditure elasticities indicate that the U.S. red wine industry gains over imports when U.S. consumers' total expenditures on red wine increase. However, comparing own- and cross-price elasticities reveals an increase in the price of U.S. red wine results in a decline in quantity demanded six times greater than for French and Italian red wines and over 20 times greater than other import countries, thus harming the U.S. red wine industry. Empirical results suggest that U.S. red-wine producers could increase their total revenue by decreasing prices, while Italian and French producers can increase total revenues by increasing them.     

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

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.     

Forecasting Japan's Frozen Potato Imports

THe U.S. potato industry is the main supplier of frozen potatoes to a rapidly growing Japanese food service market. A two-stage budgeting procedure was employed to estimate total Japanese imports of frozen potatoes and imports by country of origin. Japanese demand for frozen potatoes was found to be own-price inelastic and income elastic. The complementary relationship between hamburger and frozen potatoes suggests that replacement of tariffs for beef import quotas will impact the Japanese potato market. Imports from the United States are expected to increase substantially and remain in constant proportion to total imports.     

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

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.     

Effect of Sugar Price Policy on U.S. Imports of Processed Sugar-containing Foods

The relationship between U.S. and world sugar prices, and U.S. import demand for four categories of sugar-containing products is examined. Results from econometric estimation indicate that U.S. intervention in the sugar market has helped to increase U.S. imports of some sugar-containing products, but that increased disposable income has played a more important role. Although some developing countries have benefitted from U.S. sugar policy by increasing their exports of sugar-containing products to the United States, U.S. sugar policy has helped imports from developed countries proportionately more than those from developing countries as a whole.     

Productivity Growth and Environmental Regulation in Mexican and U.S. Food Manufacturing

Many argued during the NAFTA debate that trade liberalization would favor Mexican over U.S. food processors, especially because of lax environmental laws south of the border. We find through an examination of profit functions that productivity growth in Mexico has outstripped that in the United States, suggesting free trade indeed will benefit Mexican suppliers. U.S. pollution regulations have had no impact on the profitability or productivity of U.S. food manufacturing. In contrast, Mexico's swiftly rising environmental standards have enhanced food processors' productivity growth, corroborating the Porter hypothesis. Pollution law, therefore, has favored Mexican over U.S. food processing, but for reasons few had anticipated.     

Big Data and Dietary Trend: The Case of Avocado Imports in China

ABSTRACT

The advancement of data science and technology presents a unique opportunity to understand rapidly evolving dietary trend around the world. In this case study, we show that the Baidu index, a measurement of the intensity of user searches for specific words, helps explain and forecast the growth of avocado imports in China. Specifically, we find that China’s avocado imports rise by 8% in response to a 10% increase in the Baidu index. Furthermore, the inclusion of the Baidu index in a standard demand model reduces the prediction error by 2.7%.     

A NOTE ON BIAS IN THE ESTIMATED EFFECTS OF BEEF IMPORTS ON U.S. MEAT PRICES

The impact of beef imports on United States meat prices is a highly emotional and controversial issue. Congressmen representing urban districts, and to a lesser extent the Administration, look towards beef imports as a way of containing rapid increases in meat prices. Congressmen and Senators from beef-producing States regard beef imports as a direct attack on the U.S. beef-producing industry. These differing views are being reconciled through Congress considering amendments to the Meat Import Law (Public Law 88-482). The impacts and the amendments are of vital interest to Australia because about 25 per cent of Australia's beef production is sold on the lucrative U.S. market. In this note it is argued that, in general, the reported impacts on U.S. meat prices are overestimates because the analysts misspecify the structure of the U.S. beef industry.     

The Effects of NAFTA on Trade and Welfare in the U.S. Fresh Tomato Industry

Abstract

The purpose of this study was to measure NAFTA's impact to date and quantify how the producers and consumers of fresh tomatoes in the United States, Canada and Mexico have benefited or lost. Changes in consumer and producer surpluses were calculated in 2001 US dollars based on simulations of two scenarios. The analysis found that U.S. consumers captured $12.1 billion more surplus than they would have captured had NAFTA not been enacted. Mexican fresh tomato producers gained an additional $2.08 billion in surplus due to NAFTA. In contrast to Mexican growers, U.S. and Canadian producers appear not to have benefited economically from NAFTA. Findings suggest that U.S. producers would have earned $3.29 billion more if NAFTA had not gone into effect. Canadian producer surplus with NAFTA was estimated to be approximately $20 million less with NAFTA, and the total net benefit from NAFTA was found to be a positive $10.87 billion.     

Agricultural Trade among NAFTA Countries: A Case Study of U.S. Meat Exports

The U.S. NAFTA partners are important markets for U.S. meat exports. A source-differentiated almost ideal demand system is used in this study to estimate meat demand in Canada and Mexico. Empirical results suggest that while a U.S. price increase in the Canadian market is expected to increase U.S. sales revenues; it would decrease sales revenues in the Mexican market. Furthermore, an increase in meat expenditures in Canada and Mexico is expected to increase the demand for U.S. meats, while the bovine spongiform encephalopathy outbreaks have had a negative effect on U.S. and Canadian beef market shares. Finally, a decomposition of the causes of changes in demand for U.S. meats over time is performed.     

Revisiting U.S. country of origin labeling trade damage estimates how does an equilibrium displacement model perform under different scenarios

Mexico and Canada successfully challenged the U.S. mandatory country of origin labeling (COOL) requirements for beef and pork as inconsistent with World Trade Organization (WTO) rules, which ultimately led to arbitration over the level of trade lost due to the COOL measure. During this phase of the dispute, Mexico, Canada, and the United States provided the Arbitration Panel with estimates of the trade losses caused by COOL that were produced using different quantitative methods. The U.S. estimates were based on an equilibrium displacement model (EDM). This article presents a version of the EDM used by the U.S. Government to calculate trade losses due to COOL. The Panel developed its own analysis combining econometric analysis and an EDM that used only supply-side information to calculate changes in Canadian and Mexican livestock trade. The U.S. EDM includes both the supply and demand sides of the market. We use the U.S. EDM and the Panel's assumptions to re-estimate the value of lost trade due to COOL. The inclusion of demand-side effects and domestic COOL costs produces lower estimated trade damages than those produced using the Panel's analysis, validating the EDM as a useful quantitative tool for this type of trade policy analysis.     

Avocado Pests and Avocado Trade

This article evaluates the effects of a November 2004 phytosanitary rule that removed seasonal and geographic restrictions on the importation of fresh Hass avocados from approved orchards in Mexico to the United States. With the remaining systems approach compliance measures in place, pest risks do not substantially increase and U.S. net welfare rises by $77 million. Removal of remaining compliance measures may lead to lower net welfare gains depending on which measures are eliminated and the estimated probabilities of pest infestations.     

China and Taiwan access to the World Trade Organization: implications for U.S. agriculture and trade

This paper investigates the impact of China's and Taiwan's accession to the World Trade Organization (WTO) on U.S. and world agricultural trade by means of a 12-region, 14-sector Computable General Equilibrium model for world trade and production. The simulation results show that integrating China and Taiwan into the global trading system could induce more competition on labor-intensive Products and reduce their prices. It could drive up the demand for capital and skill-intensive manufactured goods, thus further improving industrial countries' terms of trade. The expansion of labor-intensive sectors in China could also induce contraction in agricultural exports from China and increase its net agricultural imports by as much as US$9 billion annually, causing food and agricultural exports from other regions to increase. Total U.S. food and agricultural exports could increase by about US$2.4 billion annually, with the non-grain crop sectors gaining the most. The biggest winner from China's WTO accession is China itself. WTO membership could bring a net welfare gain of about US$30 billion a year for China, a substantial benefit compared with the gains for the USA (US$8.5 billion).     

The Wheat War of 1994

Following the signing of the 1989 Canada–United States Free Trade Agreement, sales of Canadian wheat to the United States grew rapidly. This resulted in a series of trade disputes, culminating in an investigation by the U.S. International Trade Commission (USITC) into the impacts of U.S. imports of Canadian wheat on the U.S. wheat farm program. A USITC finding of "material interference" would have led to a recommendation to implement tariffs or quantitative restrictions against Canadian wheat under Section 22 of the U.S. farm program legislation. The U.S. Department of Agriculture (USDA) claimed such material interference, but the U.S. flour millers, pasta makers and grain handlers, along with Canadian grain industry interests, testified that the true effects of imports are in the order of one–tenth of the effects claimed by the USDA. USITC staff analysis led to intermediate estimates of effects. This study explores the impacts of Canada–U.S. wheat trade on U.S. wheat prices and program costs, explains some of the differences in measured effects, and reports the outcome of the dispute.     

Evaluating the uncertainty in estimates of the economic impacts of Bovine-Leukosis virus in U.S. dairy cows

An examination of the economic impacts of Bovine‐Leukosis virus indicated that reduced milk production, attributed to the presence of Bovine‐Leukosis virus in dairy cows, reduced consumer surplus by 2.7 ± 2.3 billion US$ (bUS$), and resulted in a total partial equilibrium loss of 720 ± 560 million US$ (mUS$) to the U.S. economy in 1996. Most of the economic surplus lost by consumers was transferred to producers, whose economic surplus increased by 2.0 ± 1.8 bUS$ as a result of reduced milk production attributed to the presence of Bovine‐Leukosis virus in dairy cattle. Uncertainty analysis showed that an estimate of the milk‐production decline per percent increase in the prevalence of Bovine‐Leukosis virus in dairy cows accounted for most of the uncertainty in the economic‐impact estimates. If Bovine‐Leukosis virus had not been present in U.S. dairy cows, then milk production would have increased by 2.0 billion ± 1.5 billion kg, the price would have fallen by 3.8 ± 3.2 cents/kg, and the value of the milk produced would have decreased by 2.1 ± 1.9 bUS$. Guidelines delineated by the International Organization for Standardization, for evaluating and expressing uncertainty in measurement, are discussed and proposed for use in the context of broad national estimates, for which the economic impacts of Bovine‐Leukosis virus serve as an example. The principal advantages of the methodology are the clarity and transparency of results, and the ability clearly to identify major uncertainty contributors.     

Price Discrimination and Pricing to Market Behavior of Canadian Canola Exporters

The role of exchange rate fluctuation on the pricing behavior of Canadian canola exporters to Japan, Mexico, and the U.S. is examined using a model identifying noncompetitive and exchange rate related pricing behavior. Price discrimination was identified for Canadian canola exports to the three destinations over the period of 1993–99. Results also suggest that Pricing to Market strategies were employed for Japanese imports. Canadian canola exporters used local currency price stabilization to dampen the effects of relative price changes in the Japanese currency, perhaps linked to the large size of Japanese imports relative to Mexico and the U.S.     

Tariff equivalents of nontariff measures: the case of European horticultural and fish imports from African countries

In the context of the Partnership Agreements between the European Union (EU) and the African, Caribbean, and Pacific countries, this study estimates ad valorem tariff equivalents of European food safety standards on imports of key horticultural and fish products from Kenya, Tanzania, Uganda, and Zambia. The study uses an extension of the price‐wedge method to account for imperfect substitution and factor endowment in monopolistic competition. The estimated tariff equivalents are 55% and 98% for imports of fresh peas from Zambia to the Netherlands and the U.K., respectively. They range from 39% to 64% for imports of green beans and avocados from Kenya and from 63% to 270% for imports of frozen fish fillets in EU countries from the East African Community. We also observe large variations in tariff equivalents for the horticultural and fish products over time and EU importing countries.