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 Title Page
 Abstract
 Introduction
 U.S., European Union and Japanese...
 Swiss 25 formula
 Empirical analysis of price impacts...
 Concluding comments
 Reference






Title: Impacts of reducing orange-juice tariffs in major world markets on U.S. prices
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Table of Contents
    Title Page
        Title Page
    Abstract
        Abstract
    Introduction
        Page 1
    U.S., European Union and Japanese OJ tariffs
        Page 2
    Swiss 25 formula
        Page 3
    Empirical analysis of price impacts of U.S., European Union and Japanese OJ tariffs
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
    Concluding comments
        Page 14
        Page 15
    Reference
        Page 16
        Page 17
Full Text











Impacts of Reducing Orange-Juice Tariffs


in Major World Markets on U.S. Prices
















Mark G. Brown,

Thomas H. Spreen

Jonq-Ying Lee*








* Mark G. Brown and Jonq-Ying Lee are research economists with the Economic and Market
Research Department, Florida Department of Citrus, University of Florida, 2129 McCarty Hall,
P.O. Box 110249, Gainesville, Florida 32611-0249, Telephone: (352) 392-1874, extension 501,
Fax (352) 392-8634, E-Mail: MGBrown@mail.ifas.ufl.edu. Thomas H. Spreen is Professor and
Chair, Food and Resource Economics Department, University of Florida, Gainesville, FL.


Florida Agricultural Experiment Station Journal Series No. R-10078.
















Impacts of Reducing Orange-Juice Tariffs


in Major World Markets on U.S. Prices





Abstract



A demand model is developed to examine the impacts on orange-juice prices resulting from

elimination or reduction of the tariffs on orange juice imposed by the United States, European Union

and Japan. An empirical analysis suggests that elimination of the U.S. tariff by itself would decrease

the U.S. orange-juice price by about $.22 per gallon, while simultaneous elimination of the U.S.,

European and Japanese tariffs would decrease the U.S. price by about $.13 per gallon. Alternatively,

reducing these tariffs according to the Swiss 25 formula would decrease the U.S. price by an

estimated $.09 per gallon. The U.S. produces about 1.4 billion gallons and each penny reduction in

the price impact increases the U.S. orange-juice FOB revenue by $14 million.


Key word: orange juice, tariffs, demand, prices, Swiss 25 tariff formula.









Impacts of Reducing Orange-Juice Tariffs
in Major World Markets on U.S. Prices


Tariffs on orange juice (OJ) have been critical for the U.S. orange juice industry. In a recent

study of the impact of the proposed Free Trade Area of the Americas (FTAA) on world OJ markets,

Spreen, Brewster and Brown estimated that unilateral elimination of the U.S. tariff on OJ imports

from Brazil, the world's largest OJ producer, would result in decreases in U.S. OJ prices for frozen

concentrated orange juice (FCOJ) and not-from-concentrate orange juice (NFC) of $.22 per single

strength equivalent (SSE) gallon and $.21 per SSE gallon, respectively. Elimination of the U.S. OJ

tariffs would make the U.S. market relatively more profitable to foreign exporters, increasing U.S.

imports of foreign product and driving down U.S. OJ prices. In some ways, however, this is a worst

case scenario, because, through World Trade Organization (WTO) negotiations, other major

importing countries may end up sacrificing their OJ tariffs in order to obtain trade concessions from

the United States. World markets where OJ tariffs are eliminated or reduced would also become

more attractive to exporters. Marginal profits would increase in these markets and the flow of

imports into the United States would be expected to be moderated compared to the case where only

the United States eliminated its tariffs.

The purpose of this paper is to examine how OJ prices may be impacted if tariffs are

eliminated or reduced across the three major markets in the world-the United States, European

Union and Japan.1 The United States and Europe are the largest OJ markets in the world, accounting

for over 40% and 35% of world consumption, respectively (Spreen et al.; USDA). The Japanese


1 Canada is also a significant market for OJ with consumption levels as high or higher than in Japan
(Statistics Canada). Canada does not, however, impose a tariff on OJ imports, nor do they produce OJ, and was
included in the rest-of-world market group in subsequent analysis.









2

market is much smaller but still significant, accounting for about 4% of world consumption.

Production of OJ is dominated by Brazil and the United States. In 2001-02, Brazil and the United

States accounted for 51.6% and 39.6%, respectively, of the OJ produced in the major producing

countries in the world (USDA, 2003a). The focus of this study is on the tariff impacts on U.S. and

Brazil prices.

Two tariff reduction scenarios are examined. First, total elimination of U.S., European Union

and Japanese OJ tariffs is considered. Then, a partial tariff reduction scenario based on the Swiss

25 formula proposed by the United States in WTO negotiations is discussed. The Swiss formula

harmonizes tariffs by lowering all tariffs across all countries to similar levels.



U.S., European Union and Japanese OJ Tariffs

Much of the orange juice (OJ) imported into the United States is subject to a tariff. For 2003,

the most-favored-nation (MFN) tariff rates for FCOJ and NFC are $.297 and $.170 per SSE gallon,

respectively. These tariff rates declined by 15% from 1994 to 2000 according to the General

Agreement on Trade and Tariffs (GATT). The MFN tariffs apply to Brazil which is the largest

producer of OJ in the world and is the dominant supplier of imported OJ to the U.S. market. U.S.

OJ imports from Caribbean countries (CBERA), Andean Trade Preference Act countries (ATPA),

Israel, African Growth and Opportunity Act countries (AGOA) including South Africa, and Canada

are duty free. OJ imports from Mexico receive preferential treatment as established by the North

American Free Trade Agreement (NAFTA)--- the first 40 million SSE gallons of FCOJ and all NFC

from Mexico are subject to reduced tariff rates; presently imports of FCOJ above the 40-million-









3

gallon level are subj ect to a tariff rate that is the same as the MFN tariff; the NAFTA tariffs on FCOJ

and NFC are scheduled to decline to zero by 2008 (Spreen and Mondragon).

OJ tariffs in the European Union and Japan are applied on an ad valorem basis. The

European tariff is 15.2% while the Japanese tariff is 25.5%. These rates apply to the cost-insurance-

freight (CIF) value of the import. Similar to the U.S. tariff, the Japanese tariff decreased by 15%

since 1994 according to the GATT agreement, while the European tariff declined by 20%. Europe

also offers some trade preferences to select countries in Africa, the Caribbean and the Pacific (Spreen

et al.). The main beneficiaries of these trade preferences are Belize and Costa Rica.



Swiss 25 Formula

The WTO has considered various approaches to determine tariffs across countries including

the use of specific formulas. During the Kennedy Round (1963-67) negotiations, a simple formula

of cutting tariffs by 50% was used, although some products were exempted and negotiated smaller

tariff reductions based on their economic sensitivity. In the Tokyo Round (1974-79) negotiations,

a formula known as the Swiss formula, which reduces higher tariff rates by larger amounts in both

absolute and relative terms, was used. The next round of negotiations, the Uruguay Round (1986-

94), was based on a less specific approach-broad tariff reduction goals across product sectors

leaving the distribution of cuts by product up to negotiations between trading partners. More

recently, however, the United States has proposed using the Swiss formula again. This formula can

be formally written as

(1) T, = aT/(T + a),









4

where Ti is the new tariff and To is the current tariff rate. The parameter a is a ceiling tariff rate, the

highest possible new rate. The U.S. proposal is known as the Swiss 25 as the ceiling rate a is set at

25% in the formula.


Empirical Analysis of Price Impacts
of U.S., European Union and Japanese OJ Tariffs


Model

In our empirical analysis, the world is divided into four markets-the United States,

European Union, Japan and the rest of the world (RW). Following Brown, Lee and Spreen, the case

where the United States, Europe and Japan absorb all OJ produced domestically plus part of the

production in the RW is considered. Imports in the analysis are assumed to be net (import-

exports)-some exports/re-exports from maj or importing countries, even those in Europe that do not

produce OJ from round oranges, to niche markets across the world will occur.

Formally, let total supplies of OJ from the United States, European Union, Japan and the RW

be denoted by q1, q2, q3, and q4, respectively.2 Japanese OJ production is insignificant at less than

.2% of its domestic consumption (USDA, 2003a). Supplies across the world are assumed to be fixed

and the short-run adjustment process of allocating them across markets is considered.

The demand for OJ in each market is specified as a function of the price of OJ and cost

margins including the tariff in that market. The quantity demanded in the United States is specified

as f,(p + c, + t1) where p is the price in the RW measured by the Brazilian FOB price, c, is the




2 Duty-free OJ imports from nearby CBERA countries, as well as from Mexico in the future when the
NAFTA tariff rates go to zero, can be treated as part of U.S. domestic production and included in q,.









5

transportation cost from the RW to the United States and t, is the U.S. tariff. The FOB price in the

United States is p + c, + t1. As most U.S. imports are FCOJ, only the FCOJ tariff is

considered-NFC import levels are minor because the transportation cost of importing NFC is much

greater than for FCOJ. The United States is assumed to have excess demand; that is, f,(p + c1 + t1)

> q.

The quantities of OJ demanded in the European Union and Japan are specified as f2 ((p +

C2)(1+ t2)) and f3 ((p + C3)(+ t3)), respectively, where p is again the FOB price in the RW; c2 and c3

are transportation costs from the RW to the European Union and Japan, respectively; and t2 and t3

are the European Union and Japanese ad valorem tariff rates, respectively. The (after-tariff) FOB

prices in Europe and Japan are (p + c2)(+ t2) and (p + c3)(l+ t3), respectively. Similar to the United

States, Europe and Japan are assumed to have excess demand; that is, f2((p + c2)(1+ t)) > q2 and f3

((p + c3)(1+ t)) > q3.

The quantity demanded for OJ in the RW is specified as f4 (p). The RW is assumed to have

excess supply; that is, f4 (p) < q4.

These excess supply and demand assumptions are descriptive of the world OJ situation over

the last decade and are assumed to hold with or without the U. S., European and Japanese tariffs. In

the future, however, excess supply and demand conditions may change across markets.

The quantities of OJ produced in the United States, European Union and Japan are assumed

to be consumed in each market, respectively. On the other hand, the RW is assumed to export OJ

to each of these markets, as well as supply the RW, receiving the same net price p in each market.

Prices are determined by equating excess supply and demand. U.S., European and Japanese excess









6

demands vary inversely with p, while the quantity of excess supply in the RW varies directly with

p, given negatively sloped demands (af/ap < 0 i = 1, ..., 4).

Setting RW excess supply equal to aggregate U.S., European Union and Japanese excess

demand results in a world supply-demand equilibrium equation

(2) [q4- f4 (p)] = [fl(p + cl + t)-qj] + [f2 ((p + c2)(1+ t2))-q2] + [f3 (( + 3)(1+ t3))-q3].

Collecting supply and demand terms separately, equation (1) can be alternatively written as total

world supply equals total world demand. Assuming an interior solution, the impact of the U.S.,

European Union and Japanese tariffs on price can be determined straightforwardly from this

equation; changes in the tariffs result in a change in the equilibrium price level p that equates excess

supply and demand.

Unilateral elimination or reduction of the U.S. tariff makes it more profitable for the RW to

reallocate its OJ from the RW, Europe and Japan to the United States. As OJ is taken out of these

world markets for reallocation to the United States, p increases until a new equilibrium is reached.

Similarly, elimination or reduction of the European and Japanese tariffs reallocates RW OJ from RW

markets without tariff changes and the United States for export to Europe and Japan. To determine

the impacts of these tariff changes on prices, totally differentiate the equilibrium equation (2) with

respect to prices and tariffs, holding supply constant, and find

(3) 0 = af/ap(dp+dtl) + f2 /ap (dp) + f2 /ap (((p+c2)/( + t))dt2) + af3 /p (dp) + af3 /ap

(((p+c3)/( +t3))dt3)+ af4/ap (dp).

Solving the above result for dp,

(4) dp = -wl(dtl) w2 (((p + c2)/(1+ t2))dt2) w3 (((p + 3)/(1+ t3))dt3)),

where w, = (af,/p)/(af/p), w2 = ( af2//(fp)/(f/p), and w3 = (af3/ap)/(af/ap), with af/ap = af,/p +












af2/ap + af3/ap + af4/ap. The derivative af/ap is the world price slope and the term wi is the ith

market's contribution or share of the world price slope.

Hence, the change in the U.S. price is

(5) dp + dt, = (1-w,) dt, w2 ((p + c2)/(1+ t2))dt2- w3 ((p + c3)/(+ t3))dt3.

Based on results (4) and (5), if all demand slopes (afj/ap, i = 1, ..., 4) are changed

proportionally, say doubled, each market's share of the world price slope (wi) is unchanged, and the

impacts of the U.S., European and Japanese tariffs on prices are also unchanged. That is, the

relative, not absolute, magnitudes of the market demand slopes are the determining factors.

When estimates of the market price slopes are unavailable, a simple approach to determine

the market shares of the world price slope is to assume the price elasticities across markets are all

the same in which case the wi's become the volume shares.3

Based on result (5), as the U.S. share of the world price slope (w,) declines, the impact of the

U.S. tariff on the U.S. price increases. For the extreme case where the U.S. share approaches zero

(the United States becomes a price taker), the impact on price is the full amount of the U.S. tariff,

with the European Union and Japanese tariffs unchanged (dti = 0; i = 2, 3).

Demand Estimates

Estimates of the price slopes by market are required to apply equations (4) and (5). In this

study, the U.S. price slope is based on an estimate of the U.S. price elasticity of demand for OJ

reported by Brown, Lee and Spreen. The price slopes for the other markets are based on price

elasticity estimates obtained by applying the seemingly unrelated regression (SUR) method to Brazil



3 The market price slope share is w, = (. 1'. pi ij af/ap) = [i. 1,, p 11 p fI, if, I/(j1 (. 1, p p f, 1, 1 /1 = f,/jfj when
the price elasticity (. 1f,. I 1 I is equal across j.









8

export data. In this analysis, the natural logarithm of Brazil's FCOJ exports by destination was

regressed on the natural logarithm of Brazil's CIF price,4 and time. Data from 1990-91 through

2000-01 reported by ABECitrus, an association of Brazilian processors, were used. The Japanese

price elasticity was based on exports to Asia as Japanese exports were not reported separately. In

the equations for the European Union and Japan, the Brazil price, expressed in dollars, was

transformed to Francs5 and Yen, respectively, based on the exchange rates for these two currencies.

The general demand specification in the set of SUR equations can be written as

(6) log (Q) = Pjo + Pj3 log(Pj* rj) + Pj2 t, j=2, 3, 4,

where Qj is the quantity of Brazilian exports to market j; j=2,3 and 4 for the European Union, Asia

and the RW (excluding NAFTA countries), respectively; p. is the Brazil CIF price; r is the exchange

rate (Francs for Europe, Yen for Asia, unity for the RW), t is time; and the Pio's, Pjl's and Pj2's are

intercepts, price elasticities, and growth rate coefficients, respectively. Time was excluded from the

Japanese equation as it was not significantly different than zero at any reasonable level of

significance. The estimates are shown in Table 1. All coefficient estimates were significant at the

a = 5% level of significance, except the estimate of the price elasticity for the RW-OJ exports to

the RW were subject to a strong trend, and in comparison, price appears to be a relatively minor

factor.





4 The CIF price was measured by the Rotterdam FCOJ price for exports to Europe and the RW, and the
Rotterdam price plus an additional $.08 per SSE gallon transportation cost for exports to Japan. Transportation costs
from the RW (Brazil) to the United States and Europe are about the same, estimated at $. 10 per SSE gallon; while
the cost from the RW to Japan is estimated at about $.18 per SSE gallon.

5 Although arbitrary, use of the Franc exchange rate in the regression analysis is representative of exchange
rate movements in Europe to the extent that the Franc-dollar exchange rate and other European exchange rates were
highly collinear.
















Table 1. Seemingly Unrelated Regression Estimates of Export Demand for FCOJ in the
European Union, Asia and the RW (Excluding the U.S. and other NAFTA countries).a

Approximate
Region Parameter Estimate standard error

European Union p20 16.737 1.417

P21 -0.410 0.158

P22 0.053 0.008

Asia P30 17.204 2.525

P31 -0.471 0.210


RW P40 10.677 2.787

P41 -0.109 0.379

P42 0.061 0.021
a R-square values for European, Asia and the RW were.84, .33 and .56, respectively.


Total Elimination of OJ Tariffs

Based on the elasticity estimates and on data from the USDA and the Florida Department of

Citrus (FDOC) (2003), equation (5) was used to estimate the impacts of the U.S., European Union

and Japanese tariffs on the U.S. price of OJ as shown in Table 2. The last two columns of this table

show the estimated impacts of the tariffs on prices; the first six columns of the table show underlying

market parameters. For each market, the price slope was estimated as that market's price elasticity

estimate times the market quantity divided by the market price (columns one through four of Table

2); price slopes are assumed to be the same at different levels of the marketing chain; e.g., FOB,

import, retail. Column five of Table 2 shows each market's estimated share of the world price slope









10

based on the previous column estimates. Column six shows each market's tariff-change term in

equations (4) and (5)-dt, for the United States; ((p + c2)/(1+ t2))dt2 for Europe; and ((p + 3)/(l+

t3))dt3 for Japan. Column seven shows the estimated market-specific components for equation (4),

the impacts of the tariffs on world price p; while, column eight shows the estimated market-specific

components for equation (5), the impact of the tariffs on the U.S. price. The totals of these last two

columns show the price impacts when all tariffs are eliminated.

If only the U.S. tariff were eliminated, the RW price is estimated to increase by $.079 per

SSE gallon, while the U.S. price is estimated to decrease by $.218 per SSE gallon. These estimates

are similar to those found by Spreen et al. Additionally, elimination of the European Union tariff

results in an estimated increase in the RW price of $.071 per SSE gallon, while elimination of the

Japanese tariff results in an estimated increase in the RW price of $.015 per SSE gallon, which in

turn, would increase the U.S. price by the same amounts. Hence, elimination of the U.S., European

and Japanese tariffs would decrease the U. S. FOB price for OJ by an estimated $.132 per SSE gallon

or $.086 per SSE gallon less than the impact of the losing the U.S. tariff only.6 This reduction in the

negative impact of losing only the U.S. tariff is an estimate of the gain that might be obtained

through negotiations that eliminate OJ tariffs across countries.












6 The simple approach to calculating the world price slope shares provides a somewhat similar
result-measuring the w,'s in equation (5) by the volume shares, the U.S. OJ price decreases by $.11 per SSE
gallons.












Table 2. Estimates of Quantity-Price OJ Demand Slopes in U.S., European Union,
Japanese and RW Markets, and Tariff Impacts on Prices.

Price Impact on Impact on
Quantity Priceb elasticityb -- -Price slope" - - Tariff1 world price U.S. price

Mil. SSE $/SSE (aq/ap) aq/ap: Mil. Share of
Market gallons gallon (p/q) SSE gal./$ world ------- $/SSE gallon-------

U.S. 1,515 4.25 -.70 -250 26.6% 0.297 0.079 -0.218

Europe 1,230 .90 -.41 -561 59.8% 0.119 0.071 0.071

Japan 145 .98 -.47 -70 7.4% 0.199 0.015 0.015

RW 483 .90 -.11 -58 6.2%

TOTAL 3,373 .90 -.25 -938 100.0% 0.165 -0.132

a Market consumption based on data reported by the FDOC (2003), and by the USDA ,FAS (2002).

b Retail price for United States, based on ACNielsen data; Rotterdam Bulk FCOJ price for Europe and RW (tariff not paid),
based on data reported by Foodnews; Rotterdam price plus a transportation differential for Japan.

cEstimated as price elasticity times market gallons divided by market price; price slopes are assumed to be the same at different
levels of the marketing chain; e.g., FOB, import, retail.
d For United States, absolute tariff; for Europe and Japan, ad-valorem tariff term in equation (5): ((Brazil CIF price for bulk
FCOJ)/(l+ad valorem rate))(ad valorem rate).


Swiss 25 TariffReductions

Alternatively, OJ price impacts resulting from partial tariff reductions according to the Swiss

25 formula are shown in Table 3. These results are based on a U. S. CIF import price for bulk FCOJ

of $.90 per SSE gallon. In this case, the ad-valorem equivalent of the U.S. tariff is 33% (FCOJ tariff

of $.297 per SSE gallons divided by $.90 per SSE gallon). Application of the Swiss 25 formula

reduces the U.S., European Union and Japanese OJ tariffs by 18.8%, 5.7%, and 12.9%, respectively

(columns one through three of Table 3). Column five shows each market's estimated tariff-change

term for equations (4) and (5); while column six shows again each market's estimated share of the

world price slope used in these equations. Column seven shows the estimated impacts on the world










12

price based on equation (4), while column eight shows the estimated impacts on the U. S. price. The

estimates in the last column show that the Swiss 25 tariff changes would lead to an estimated

reduction in the U.S. price of $.09 per SSE gallon. Hence, these results suggest that use of the Swiss

25 formula would cut the negative impact on the U.S. price by more than half compared to the

scenario where only the United States eliminated its tariffs on OJ.


Table 3. Tariff Impacts on Prices, Based on Swiss 25 Formula.

FCOJ Tariff Share of Change in Impact on
------ Ad valorem tariff ------ price" changed world world price U.S. price
price
Market Current" Newb Change - $/SSE gallon - slope --- $/SSE gallon - -

U.S. 33.0% 14.2% -18.8% 0.90 -0.169 26.6% 0.045 -0.124

Europe 15.2% 9.5% -5.7% 0.90 -0.045 59.8% 0.027 0.027

Japan 25.5% 12.6% -12.9% 0.98 -0.101 7.4% 0.007 0.007

TOTAL 0.079 -0.090

a U.S. ad valorem rate was estimated as the U.S. FCOJ tariff of $.297 per SSE gallon divided by an assumed tariff-not-paid
FCOJ import price of $.90 per SSE gallon.

b Based on Swiss 25 formula: .25* current tariff/(.25+current tariff).

cTariff-not-paid CIF price for bulk FCOJ..

d For United States, the ad valorem tariff change times the tariff-not-paid import price of $.90 per SSE gallon; for Europe and
Japan, the ad-valorem tariff term in equation (5): ((Brazil CIF price for bulk FCOJ)/(l+ad valorem rate))(ad valorem rate
change).

e See Table 2 for calculations.











Qualifications /Extensions

The results shown in Tables 2 and 3 are based on the assumption that the United States,

European Union and Japan have excess demand for OJ with or without tariffs. For Europe and

especially Japan, extending this assumption into the future seems reasonable with their production

levels being relatively small compared to their consumption levels. U.S. OJ production, however,

is relatively large, and various corner solutions are possible (Takayama and Judge). In some world

supply-demand situations, U.S. imports, other than for blending, may be zero with or without the U. S.

tariff, in which case, the U.S. OJ price might be determined by U.S. production only; or, for some

large U.S. production levels, the United States may become a net exporter with the U.S. price

becoming the world price. Another possibility is that imports are zero with the tariff but some

positive amount without the tariff.

The analysis of this study has also examined the impact of tariffs under the short-run

assumption that supply is not a function of price. Orange tree populations across producing countries

along with weather largely determine OJ production in the current year independent of prices. OJ

prices are assumed to be high enough for growers to maintain groves and tree yields, as has generally

been the case historically. Production for the next several years also tends to be independent of

prices. Trees under three years old generally do not produce a significant amount of fruit to be

commercially harvested, and production for the next several years is largely dependent on maturation

of the current tree populations (yield per tree tends to increase with age) and tree losses. In upcoming

years, higher than average tree losses are expected as a result of diseases in Brazil and the United

States. Trees are being lost to the citrus tristeza virus (CTV) and canker in Florida and citrus

chlorosis variegated (CVC) and "sudden death of citrus" in Brazil. Tree losses to diseases combined









14

with maturing tree populations may even keep orange production relatively flat or possibly result in

production declines in upcoming years (FDOC, 2001).

In the long run, prices may have a notable impact on production through planting rates, and

following Spreen et al., extension of our model to the long run is straightforward. The latter study

found a strong, positive relationship between tree planting levels in Florida and previous season

grower prices. A similar relationship was found for Brazil. Hence, following their approach, price

levels determined in the short run along with past prices might be used to determine planting levels,

which, in turn, might be used to determine future production in a forward recursive manner.




Concluding Comments

This study examined how the U.S. OJ price might change if tariffs in the United States,

European Union and Japan were eliminated or reduced according to the Swiss 25 formula. Spreen

et al. found in an earlier study that elimination of the U.S. tariff by itself would reduce the price of

OJ by $.21 per SSE gallon to $.22 per SSE gallon, depending on product form. The present study

confirms this result and further finds that simultaneous elimination of the U.S., European and

Japanese tariffs would decrease the U.S. OJ price by an estimated $.13 per SSE gallon or about $.09

per SSE gallon less than if only the U.S. tariff were eliminated. Alternatively, if OJ tariffs are

reduced according to the Swiss 25 formula, the U.S. price is estimated to decline by $.09 per SSE

gallon or $.13 per SSE gallon less than if only the U.S. tariff were lost.

These results provide an indication of the value that may be obtained through multilateral

trade negotiation. If the United States finds that it may lose its OJ tariffs, a secondary strategy should

include seeking OJ tariff reductions in other world market. Given that the United States typically









15

produces 1.4 billion SSE gallons per year, each penny reduction in the adverse price impact of losing

the U.S. tariff is worth $14 million to U.S. OJ industry. Thus, the roughly $.09 per SSE gallon

savings obtained by eliminating the European and Japanese tariffs translates into a $126 million gain

to the U.S. OJ industry. Similarly, the $.13 per SSE gallon difference in the price reductions for

eliminating only the U.S. tariff versus reducing tariffs in these major markets based on the Swiss 25

formula is worth $182 million.













References



ABECitrus, Brazilian Association of Citrus Exporters. Export data on web site at:

(http://www.abecitrus.com.br/expyus.html#expfcoj 1). Sao Paulo, Brazil.

ACNielsen. Various orange-juice and grapefruit-juice retail sales data provided to the Florida

Department of Citrus, Lakeland Florida. Atlanta, Georgia.

Brown, M.G., J.Y. Lee, and T.H. Spreen. 1996. "The Impact of Generic Advertising and the Free

Rider Problem: A Look at the U.S. Orange Juice Market and Imports." Agribusiness

12(4):309-316.

Florida Department of Citrus, Economic and Market Research. 2003. Citrus Reference Book.

Lakeland, Florida.

Florida Department of Citrus, Economic and Market Research. 2001. Florida Citrus Production

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