According to the latest news, the tomato growers in Florida have pressed the Obama government since at the beginning of June to end a 16-year-old tomato trade agreement with Mexico, which is a $3.5 billion business for both countries. On last Thursday, Obama government had made a preliminary decision to terminate the agreement. It is said that this movement is motivated by the presidential politics. However, the U.S. Commerce Department has said it would make a final decision whether to terminate the agreement in no longer than 270 days.
In my opinion, I don’t think this agreement
will be terminated totally. However, U.S will take some measure to protect the U.S
tomato growers, like make traffics on tomatoes importing from Mexico. And
anti-dumping policy will not be good for both countries.
Obviously, America tomato supply rely on
importing tomatoes form Mexico, which account for almost 90% of the total
imports of tomatoes in the U.S. Mexico
has comparative advantage in producing tomatoes and exporting tomatoes because
of its lower opportunity cost. Also because the tomatoes in Mexico is a
labor-intensive agriculture industry, the lower wage allow they hire more labor
to produce more tomatoes. In another way, even U.S., a capital-intensive
agriculture industry, has high technology in agriculture, they don’t have
comparative advantage because its higher wage. With importing tomatoes from Mexico, American can consume more out
of PPF without producing by themselves.
It is not impossible to get rid of Mexico
tomatoes now. Consumers in the U.S. don’t want to consume tomatoes at a higher
price. The food industries that need tomatoes don’t want to pay a higher cost
to produce their products. It also will result in the high price and less
demand on the products. Additionally, if they take the anti-dumping policy, not
only tomato industry will be hurt.
Even though some Americans benefited from
the importing tomatoes from Mexico, this agreement do harm the U.S. tomato
growers’ profit. When the supply of tomato goes up in U.S. because of imports
from Mexico, the price of tomato in the U.S. go down. That’s not good for
making profits from it.
However, Why tomato growers in U.S don’t produce
more tomatoes with their high technology and a large amount of land resource to
let drag their price of tomatoes down and have higher competition. Someone said
if U.S. produces more tomatoes, the supply will exceed the demand, the price and profit
will go down.
I’m also curious about why Mexico has lower
wage, is there any factors that result in its comparative advantage except the
lower cost of labor. And it surprise me
that Mexico tomato growers said that the technology of produce tomatoes in
Mexico is more advanced than U.S. That’s why theirs taste better and import
more.
This was very interesting to read about. I think the agreement should stay intact between Mexico and the US. Mexico is a labor abundant country and therefore should produce the labor intensive tomato. The US should stick to producing and exporting finished goods that are capital intensive. I don’t think the US should start producing our own tomatoes without importing any from Mexico because when compared with Mexico we do not have the comparative advantage in tomatoes. Also, because of our higher wages, the production of tomatoes only in the US would raise the prices of tomatoes and the total demand for tomatoes would decrease.
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