The effects of tomato suspension agreements on market price dynamics and farm revenue

Feng Wu, Zhengfei Guan, Dong Hee Suh

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)

Abstract

Since 1996 there have been several suspension agreements between the United States and Mexico that set reference prices for imported Mexican tomatoes. The 2013 suspension agreement raised the reference prices of Mexican tomatoes by 43%. This study conducts an econometric analysis to examine the effects of reference prices on the dynamics of tomato price and farm revenue. Findings indicate that the suspension agreements have resulted in significant adjustments in the U.S. and Mexican tomato prices, and that the two prices are now more interdependent under the 2013 agreement. Although the 2013 suspension agreement has boosted the prices of U.S. tomatoes, simulation analysis shows that the Mexican industry reaps most of the benefits from increased prices under the 2013 suspension agreement. The findings in this study could inform future trade negotiations.

Original languageEnglish
Pages (from-to)316-332
Number of pages17
JournalApplied Economic Perspectives and Policy
Volume40
Issue number2
DOIs
Publication statusPublished - 2018 Jun

Keywords

  • Granger-Causality
  • Price dynamics
  • Reference price
  • Simulation
  • Tobit model
  • Tomato suspension agreement

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics

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