Was the establishment of a minimum floor price for tomatoes consistent with the free trade principles enshrined in the NAFTA agreement?

Why, despite the establishment of a minimum floor price, have imports from Mexico grown over the years?

Who benefits from the importation of tomatoes grown in Mexico? Who suffers?

Do you think that Mexican producers were dumping tomatoes in the United States?

Was the Commerce Department right to establish a new minimum floor price rather than scrap the agreement and file an antidumping suit? Who would have benefited from an antidumping suit against Mexican tomato producers? Who would have suffered?

What do you think will be the impact of the new higher floor price? Who benefits from the higher floor price? Who suffers?

What do you think is the optimal government policy response here? Explain your answer.

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When the North American Free Trade Agreement (NAFTA) went into effect in December 1992 and tariffs on imported tomatoes were dropped U.S. tomato producers in Florida feared that they would lose business to lower-cost producers in Mexico. So they lobbied the government to set a minimum floor price for tomatoes imported from Mexico. The idea was to stop Mexican producers from cutting prices below the floor to gain share in the U.S. market. In 1996 the United States and Mexico agreed on a basic floor price of 21.69 cents a pound. At the time, both sides declared themselves to be happy with the deal. As it turns out, the deal didn't offer much protection for U.S. tomato growers. In 1992, the year before NAFTA was passed, Mexican producers exported 800 million pounds of tomatoes to the United States. By 2011 they were exporting 2.8 billion pounds of tomatoes, an increase of 3.5-fold. The value of Mexican tomato exports almost tripled over the same period to $2 billion. In contrast, tomato production in Florida has fallen by 41 percent since NAFTA went into effect. Florida growers complained that they could not compete against low wages and lax environmental oversight in Mexico. They also alleged that Mexican growers were dumping tomatoes in the U.S. market at below the cost of production, with the goal of driving U.S. producers out of business. In 2012, Florida growers petitioned the U.S. Department of Commerce to scrap the 1996 minimum price agreement, which would then free them up to file an antidumping case against Mexican producers. In September 2012 the Commerce Department announced a preliminary decision to scrap the agreement. At first glance, it looked as if the Florida growers were going to get their way. It soon became apparent, however, that the situation was more complex than appeared at first glance. More than 370 business and trade groups in the United States- from small family-run importers to meat and vegetable producers and Wal-Mart Stores-wrote or signed letters to the Commerce Department in favor of continuing the 1996 agreement. When the North American Free Trade Agreement (NAFTA) went into effect in December 1992 and tariffs on imported tomatoes were dropped U.S. tomato producers in Florida feared that they would lose business to lower-cost producers in Mexico. So they lobbied the government to set a minimum floor price for tomatoes imported from Mexico. The idea was to stop Mexican producers from cutting prices below the floor to gain share in the U.S. market. In 1996 the United States and Mexico agreed on a basic floor price of 21.69 cents a pound. At the time, both sides declared themselves to be happy with the deal. As it turns out, the deal didn't offer much protection for U.S. tomato growers. In 1992, the year before NAFTA was passed, Mexican producers exported 800 million pounds of tomatoes to the United States. By 2011 they were exporting 2.8 billion pounds of tomatoes, an increase of 3.5-fold. The value of Mexican tomato exports almost tripled over the same period to $2 billion. In contrast, tomato production in Florida has fallen by 41 percent since NAFTA went into effect. Florida growers complained that they could not compete against low wages and lax environmental oversight in Mexico. They also alleged that Mexican growers were dumping tomatoes in the U.S. market at below the cost of production, with the goal of driving U.S. producers out of business. In 2012, Florida growers petitioned the U.S. Department of Commerce to scrap the 1996 minimum price agreement, which would then free them up to file an antidumping case against Mexican producers. In September 2012 the Commerce Department announced a preliminary decision to scrap the agreement. At first glance, it looked as if the Florida growers were going to get their way. It soon became apparent, however, that the situation was more complex than appeared at first glance. More than 370 business and trade groups in the United States- from small family-run importers to meat and vegetable producers and Wal-Mart Stores-wrote or signed letters to the Commerce Department in favor of continuing the 1996 agreement.

Answer rating: 100% (QA)

1 NAFTAs streamlined commerce standards look to empower deregulation between Canada the United States and Mexico to further develop seriousness and advantage makers and customers The standards of dere... View the full answer