Price Analysis of Mexican Tomato Imports: Are AntidumpingDuties Warranted?ByGlenn C.W. AmesJeffrey H. DorfmanandElisa SoaresAbstract:The U.S. fresh winter tomato market was analyzed using a six-equation econometric model.The estimated welfare impacts of a 50% increase in the tariff rate on Mexican tomato importsindicated that 67% of the loss in consumer welfare is transferred from domestic consumers todomestic producers as a gain in producers surplus. The import price falls but the volume ofimports declines only about 1%. Tomato importers pay about $3.6 million in additional tariffrevenue.Paper presented at the Tri-National Research Symposium, NAFTA and Agriculture: Is theExperiment Working? San Antonio, Texas, November 1-2, 1996.Price Analysis of Mexican Tomato Imports: Are AntidumpingDuties Warranted?Tomato imports have been the center of many legal and political conflicts in internationaltrade since the first case was decided by the U.S. Supreme Court in 1893 (Bredahl et al., 1987,p. 5). Competing for the U.S. market are Florida producers and the Mexican growers, situatedin the State of Sinaloa and Baja California. In calendar year 1995, U.S. tomato imports fromMexico rose to a record 1.31 billion pounds valued at $404 million, a 58% increase in volumeand a 29% increase in value over 1994. Since the peso devaluation of December 1994, importsfrom Mexico have captured significant additional market share, 10.2% in quantity and 8.5% invalue (Table 1). In 1995-96, Florida growers blamed the reduction in trade barriers due to NAFTA for therecent surge in Mexican tomato imports which have allegedly depressed domestic prices, profitsand resulted in the loss of market share for Florida producers. In the winter market, Florida’smarket share fell from 59% in 1990/91 to 37% in 1995 (The Wall Street Journal, April 3, 1996,p. 1). During the 1995-96 early winter season, tomato imports from Mexico jumped 24% involume but only 2% in value compared to 1994-95. By February 12, 1996, the winter tariff-ratequota (177,459 metric tons) was filled but over quota imports were 60% higher than 1995 duringthe balance of the month (Love and Plunkett 1996, p. 19). Alarmed by the surge of imports andgeneral market conditions, Florida producers filed two separate petitions in March and April foreconomic relief, the first under Section 202(a) of the Trade Act of 1974 and the second underSection 733(a) of the Tariff Act of 1930. The petitioners allege that “domestic growers have been devastated by import surges fromMexico which have depressed market prices” (Petition March 29, 1996, p. 2). The depressed2tomato prices are alleged to cause all of the other industry problems such as declining profits,employment and investments in the industry. Changes in U.S. consumption and market sharesbetween 1991-1995 are given in Table 1. The objectives of this study are: to analyze the impactof Mexican tomato imports on U.S. fresh tomato prices, and to determine the welfare impacts ofpotential antidumping duties on domestic producers, consumers, taxpayers, and importers. U.S. Trade Laws and Vegetable ImportsU.S. trade law allows domestic vegetable producers to seek protection from imports whichallegedly injure specific firms or industries. Sections 201-3 of the Trade Act of 1974 protectdomestic industry against imports judged to be a “substantial cause of injury” to U.S. producers."Evidence of substantial injury is provided by significant declines in sales, production, profits,wages, or employment" (Salvatore 1993, p. 313). The loss of market share as acceptableevidence was added in 1988 (Salvatore 1993, p. 313). If the International Trade Commissionvotes in the affirmative, the President is authorized to impose duties, quotas or other orderlymarketing arrangements to protect domestic industry unduly hurt by imported products. On March 11, 1996, the Florida Fruit and Vegetable Association, the Florida Bell PepperGrowers Exchange, the Florida Department of Agriculture and Consumer Services and the AdHoc Group of Florida Tomato Growers and Packers, filed a petition requesting global safeguardrelief against increased imports of fresh tomatoes and bell peppers pursuant to Section 202(a) ofthe Trade Act of 1974. The domestic industry requested relief for a four-year period using botha volume quota and increased duties based on the value of the imported product (p. 50). TheU.S. International Trade Commission (ITC) instituted Investigation No. TA-201-66 of freshtomatoes and bell peppers on March 11, 1996. Subsequently, the petitioners also filed an3antidumping petition requesting relief under the antidumping statute and temporary emergencytariffs. On March 29, 1996, the Florida Commissioner of Agriculture, the Florida Tomato GrowersExchange, the Florida Tomato Exchange, the Florida Fruit and Vegetable Association (and itsTomato Committee), the Florida Farm Bureau Association, the Gadsden County Tomato GrowersAssociation, the South Carolina Tomato Association, the Accomack County Farm Bureau (VA),and the Ad Hoc Group of Florida, California, Georgia, Pennsylvania, South Carolina, Tennesseeand Virginia Tomato Growers, also filled a petition “to request initiation of an antidumping dutyinvestigation of fresh tomatoes imported from Mexico which are being, or are likely to be, soldin the United States at less than fair value” (Petition March 29, 1996, p. 2). The petition allegedthat increased imports, cited in the Section 202 petition, are directly attributable “to dumping byMexican growers and their importers” leading to U.S. market prices below salvage value forFlorida producers. Florida growers filed a very similar Section 202 petition in 1995 which wasdenied. Thus, the petitioners requested two sets of remedies, one under Section 202(a) and anotherunder Section 733 (a) of the Tariff Act of 1930, alleging that the “surge” or increased volume ofimported products are due in part to imports sold at less than fair value (LTFV). The International Trade Administration (ITA) of the Department of Commerce determineswhether dumping has occurred and then the ITC determines if the domestic industry has beenharmed by the dumping (Moore 1992). If both the ITA and ITC rule affirmatively at the finalstage, then duties equal to the dumping margin are placed on the LTFV imports. While the analytical approach in antidumping cases and Section 201 are similar, affirmativedecisions in