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 Impact of tariff reductions
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Group Title: Policy Brief Series - International Agricultural Trade and Policy Center. University of Florida ; no. 02-2
Title: Probable economic effects of the reduction or elimination of U.S. tariffs on selected U.S. fresh vegetables
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Permanent Link: http://ufdc.ufl.edu/UF00089752/00001
 Material Information
Title: Probable economic effects of the reduction or elimination of U.S. tariffs on selected U.S. fresh vegetables
Series Title: Policy Brief Series - International Agricultural Trade and Policy Center. University of Florida ; no. 02-2
Physical Description: Book
Language: English
Creator: VanSickle, John J.
Publisher: International Agricultural Trade and Policy Center, Institute of Food and Agricultural Sciences, University of Florida
Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: 2002
 Record Information
Bibliographic ID: UF00089752
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.

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Table of Contents
    Front Cover
        Front Cover
    Center information
        Page 1
    Introduction
        Page 2
    Impact of tariff reductions
        Page 3
        Page 4
        Page 5
    Tables
        Page 6
        Page 7
        Page 8
        Page 9
Full Text

PBTC 02-2


POLICY BRIEF SERIES


UNIVERSITY OF
FLORIDA


Institute of Food and Agricultural Sciences


PROBABLE ECONOMIC EFFECTS OF THE REDUCTION OR
ELIMINATION OF U.S. TARIFFS ON SELECTED U.S. FRESH
VEGETABLES

By
John J. VanSickle
PBTC 02-2 May 2002


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INTERNATIONAL AGRICULTURAL TRADE
AND POLICY CENTER


MISSION AND SCOPE: The International Agricultural Trade and Policy Center
(IATPC) was established in 1990 in the Food and Resource Economics Department
(FRED) of the Institute of Food and Agricultural Sciences (IFAS) at the University of
Florida. Its mission is to provide information, education, and research directed to
immediate and long-term enhancement and sustainability of international trade and
natural resource use. Its scope includes not only trade and related policy issues, but also
agricultural, rural, resource, environmental, food, state, national and international
policies, regulations, and issues that influence trade and development.

OBJECTIVES:

The Center's objectives are to:

Serve as a university-wide focal point and resource base for research on
international agricultural trade and trade policy issues
Facilitate dissemination of agricultural trade related research results and
publications
Encourage interaction between researchers, business and industry groups,
state and federal agencies, and policymakers in the examination and
discussion of agricultural trade policy questions
Provide support to initiatives that enable a better understanding of trade and
policy issues that impact the competitiveness of Florida and southeastern
agriculture specialty crops and livestock in the U.S. and international markets










PROBABLE ECONOMIC EFFECTS OF THE REDUCTION OR ELIMINATION
OF U.S. TARIFFS ON SELECTED U.S. FRESH VEGETABLES

John J. VanSickle

The U.S. vegetable industry is one of the largest global suppliers of fresh

vegetables in the world. U.S. producers grew more than 21.5 million metric tons of fresh

produce in 2001. The high value nature of fresh vegetables makes these crops attractive

to both domestic and foreign producers.

Consumption of fresh vegetables has increased significantly over the last decade

as consumers have become more health conscious and as more variety and higher quality

produce has become available. U.S. per capital consumption of fresh vegetables increased

from 142.4 pounds per person in 1990 to 176.1 pounds per person in 2000. Most of the

major vegetables followed this trend with fresh tomatoes increasing from 15.5 to 17.8

pounds per person over this period, bell peppers increasing from 4.5 to 8.1 pounds per

person and cucumbers increasing from 4.7 to 6.7 pounds per person.1

Consumption of fresh tomatoes in the U.S. was valued at $1.638 billion in 2000

with imports accounting for 39% of this value. U.S. growers produced 1,676.6 MMT and

exported 186,052 metric tons (78% to Canada, 13.6% to Mexico), while imports totaled

730,063 metric tons (80% from Mexico, 13.9% from Canada). Imports accounted for

33% of the U.S. consumption quantity of fresh tomatoes.

Consumption of bell peppers in the U.S. was valued at $703 million in 2000. U.S.

production totaled 885,648 metric tons and exports totaled 71,486 metric tons, while




1 Economic Research Service/USDA. "Vegetables and Specialties Situation and Outlook Yearbook." VGS-
284. July 2001: 12-13.









imports totaled 198,176 metric tons. Imports accounted for 19% of the U.S. consumption

quantity of fresh bell peppers.

Consumption of fresh cucumbers in the U.S. totaled almost $379 million in 2000.

U.S. production totaled 522,543 metric tons and exports totaled 25,900 metric tons, while

imports totaled 346,049 metric tons. Imports accounted for 41% of the U.S. consumption

quantity of fresh cucumbers.

Impacts of Tariff Reductions

Tables 1 through 3 show the tariff structures and import values for fresh tomatoes,

bell peppers and cucumbers. Negotiations of trade agreements within the World Trade

Organization (WTO) or as part of the Free Trade Area of the Americas (FTAA) could

significantly lower these tariffs.

The U.S. International Trade Commission uses the COMPAS model, a

computable general equilibrium model, to estimate the potential impacts of tariffs

imposed on imports. The COMPAS model was used in this analysis to estimate the

potential impact of tariff reductions on tomatoes, bell peppers and cucumbers. The

COMPAS model requires certain inputs in order to estimate the impacts of tariff

reduction. The key data required include the ad valorem equivalent tariff collected on

imports, the elasticity of substitution between the domestic product and imports, the

domestic demand elasticity, the supply elasticity for domestic product and the import

supply elasticity. The model also requires values for domestic production (quantity and

value) and imports (quantity and value). Production and value for domestic production of

these crops were collected from USDA sources. The quantity and value data for imported

values of these crops (tomatoes, bell peppers and squash) were collected from U.S.









Department of Commerce. The imported values used in this analysis are those for

countries enjoying no special preference. As such, that would exclude Canada and

Mexico since they are part of the North American Free Trade Agreement that will

eventually lead to elimination of tariffs on these commodities. It would also eliminate the

Caribbean Basin Initiative (CBI) who already enjoy duty free entry. It also excludes

Israel and Jordan. The supply and demand elasticities were derived from previously

published works.

The results of those evaluations are detailed in tables 4 through 6. The results

indicate that elimination of tariffs on these commodities will have a small impact because

the larger countries exporting to the U.S. already enjoy zero tariffs or are on a schedule to

eliminate tariffs through existing trade agreements.

Current Production Levels

Tables 7 through 9 show production of all tomatoes (fresh and processed),

peppers and cucumbers in 2001 for countries by region in the western hemisphere

(Caribbean, Central America and South America). Table 10 shows the regional

production of these vegetables with Mexico, Canada and the U.S. included. The results

demonstrate that the U.S. is by far the largest producer of tomatoes and cucumbers in the

western hemisphere with 11.27 MMT of tomatoes and 1.078 MMT of fresh cucumbers.

Mexico is the second largest producer of cucumbers and peppers, but South America is

the second largest producing area for fresh tomatoes, producing 5.7 MMT of fresh

tomatoes. Brazil alone produces 2.99 MMT of tomatoes making it the second largest

tomato producing country in the western hemisphere, followed by Mexico (2.18 MMT),

Chile (1.15 MMT), Argentina (0.7 MMT) and Canada (0.67 MMT). From a productivity









point of view, clearly Brazil is the largest threat to become a regional supplier of fresh

tomatoes even thought they do not currently export tomatoes in significant volumes to the

U.S. As technologies improve and producers in these countries adopt longer shelf life

production and shipping practices, the threat exists that they could become significant

competitors in a regional market. The industry should monitor this situation and be aware

that the threat of increased competition does exist in a regional trading zone such as a

FTAA.

The largest threat to U.S. producers from current countries that export to the U.S.

are Mexico and Canada, but those countries are already on schedule to eliminate tariffs

through NAFTA. Changes in production technologies and or marketing practices could

bring other countries into the global market. It would appear that countries like Brazil

pose potential threats given the large productive capability they possess.









Table 1. U.S. tariff structure and import value for fresh tomatoes.


Ad Valorem
Equivalent


2001 Import
Value


(cents/kg) (--%--) ($million)
11/15 2/end 2.8 3.1 253.8

3/1 7/14
9/1-11/14 3.9 4.6 395.6

7/15 8/31 2.8 3.0 72.1
Source: U.S. International Trade Commission. 2002 Tariff Database.
http://dataweb.usitc.gov


Table 2. U.S. tariff structure and import value for fresh bell peppers (excluding chili
type).
Ad Valorem 2001 Import
Period Tariff Equivalent Value
(cents/kg) (--%--) ($million)
Year 4.7 3.0 328.5
Source: U.S. International Trade Commission. 2002 Tariff Database.
http://dataweb.usitc.gov


Table 3. U.S. tariff structure and import value for fresh cucumbers.

Ad Valorem 2001 Import
Period Tariff Equivalent Value
(cents/kg) (--%--) ($million)
12/1 2/end 4.2 10.6 64.8

3/1 4/30 5.6 8.7 51.0

5/1 6/30
9/1-11/30 5.6 8.4 63.2

7/1 8/31 1.5 2.1 21.5
Source: U.S. International Trade Commission. 2002 Tariff Database.
http://dataweb.usitc.gov


Period


Tariff









Table 4. Expected Impact of tariff reduction on the U.S. tomato industry, by season.
Ad Valorem Price
Season Tariff Impact Production Impact Revenue Impact
(-----------------) (1,000 cwt) (%) ($1,000) (%)

11/15 2/end 3.1 (0.6) (33) (0.4) (609.6) (1.0)

3/1 7/14
9/1-11/14 4.6 (0.5) (69) (0.3) (1,520.1) (0.8)

7/15-8/31 3.0 (0.2) (7) (0.2) (242.0) (0.4)


Table 5. Expected Impact of tariff reduction on the U.S. bell peppers industry, by season.
Ad Valorem Price
Season Tariff Impact Production Impact Revenue Impact
(--- %------------) (1,000 cwt) (%) ($1,000) (%)

All Year 3.0 (0.5) (53) (0.4) (1,444.7) (0.9)


Table 6. Expected Impact of tariff reduction on the U.S. cucumbers industry, by season.
Ad Valorem Price
Season Tariff Impact Production Impact Revenue Impact
(--- %------------) (1,000 cwt) (%) ($1,000) (%)

12/1 2/end 10.6 (2.0) (9) (1.5) (159.4) (3.6)

3/1 -4/30 8.7 (0.2) (2) (0.1) (42.8) (0.3)

5/1 6/30
9/1-11/30 8.4 (0.2) (5) (0.1) (88.8) (0.3)

7/1 8/31 2.1 0.0 0 0 (5.3) 0












Figure 7. Caribbean Production of Tomatoes, Peppers and Cucumbers in Year 2001
Chillies &
Tomato Peppers, Cucumbers and
Production Green Production Gherkins
Country per (MT) per (MT) Production per (MT)
Antigua and Barbuda 170 60 200
Bahamas 3,419 0 0
Barbados 650 900 1,300
Dominica 200 0 1,650
Dominican Republic 285,546 14,557 2,500
Grenada 60 0 100
Haiti 2,300 0 0
Jamaica 21,500 4,500 13,500
Saint Kitts and Nevis 80 60 80
Saint Lucia 0 0 0
Saint Vincent and Grenadines 0 380 0
Trinidad and Tobago 2,728 400 2,572
Total 316,653 20,857 21,902



Figure 8. Central American Production of Tomatoes, Peppers and Cucumbers in Year 2001
Chillies &
Tomato Peppers, Cucumbers and
Production Green Production Gherkins
Country per (MT) per (MT) Production per (MT)
Belize 0 0 0
Costa Rica 30,000 1,063 0
El Salvador 21,065 3,676 8,000
Guatemala 149,000 1,800 0
Honduras 31,000 1,050 24,000
Nicaragua 6,234 0 0
Panama 17,049 2,100 1,400
Total 254,348 9,689 33,400













Figure 9. South American Production of Tomatoes, Peppers and Cucumbers in Year 2001
Tomato Chillies & Peppers, Cucumbers and
Production Green Production Gherkins
Country per (MT) per (MT) Production per (MT)
Argentina 700,000 121,000 C
Bolivia 137,816 5,800 3,800
Brazil 2,993,651 0 C
Chile 1,157,000 60,000 22,000
Colombia 145,000 10,500 5,100
Ecuador 70,431 13,836 428
Guyana 1,250 0 C
Paraguay 60,000 9,500 C
Peru 197,300 12,000 18,068
Suriname 960 0 1,500
Uruguay 36,000 7,200 C
Venezuela, Boliv Rep of 215,000 80,000 18,500
Total 5,714,408 319,836 69,396



Figure 10. Western Hemisphere Production of Tomatoes, Peppers and Cucumbers in Year 2001
Tomato Chillies & Peppers, Cucumbers and
Production Green Production Gherkins
Country per (MT) per (MT) Production per (MT)
Canada 670,000 30,872 110,000
United States 11,270,000 885,630 1,078,800
Mexico 2,180,000 1,800,000 400,000
Caribbean 316,653 20,857 21,902
Central America 254,348 9,689 33,400
South America 5,714,408 319,836 69,396

Total 20,405,540 3,066,884 1,713,498




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