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Q1. was the establishment of a minimum floor price for tomatoes consistent with the free trade principles enshrined in NAFTA?

A1. The free trade principles of NAFTA wanted to encourage free trade among Canada, the United States, and Mexico to increase competitiveness and benefit manufacturers and consumers. The free trade principles aim to eliminate tariff and non-tariff barriers to free trade. Now, the establishment of minimum floor price was clearly against the free trade principles enshrined in NAFTA. This was because the minimum floor price acted as a non-tariff barrier aimed at limiting the competitive advantage of Mexico to protect the interests of producers of tomato in Florida.

Q2. why despite the establishment of a minimum floor price have imports from Mexico grown over the years?

A2. Despite the establishment of a minimum floor price tomato imports from Mexico have grown mainly due to a combination of several reasons. Firstly, Mexican producers can supply tomatoes at the established floor price as their cost of production is low, thanks to the low wages in Mexico. Secondly, the quality of tomatoes grown in Mexico is superior compared to Florida tomatoes. Mexico has a weather which is conducive for growing tomatoes. In Florida, tomatoes are treated with gas to change the color as they are plucked green.

Q3. who benefits from the importation of tomatoes grown in Mexico? Who suffers?

A3. US based business and trade groups who are involved in the production of tomatoes in Mexico stand to gain as they can import cheap tomatoes from Mexico and sell them at a higher price in USA. Suppliers of materials to the tomato growing industry (like the suppliers of seeds or farming equipment) also gain.

In terms of the sufferers, the producers of tomatoes in USA, mainly in the Florida region are at the losing end. This is because their output is less competitive compared to Mexico’s output both in terms of quality as well as price. The import of tomatoes from Mexico reduces the demand for tomatoes grown in Florida, causing the business of Florida growers to suffer.

Q4. Do you think that Mexican producers were dump-ing tomatoes in the United State?

A4. No, I don’t think that Mexican producers were dumping tomatoes in the United States. They were merely using their competitive advantage in this area, thanks to low wages, conducive weather and lax environmental regulations in Mexico. Dumping will happen when growers in Mexico are said to be practicing predatory pricing by selling tomatoes in USA at a price lower than in Mexico.

Q5. was the Commerce Department right to establish a new minimum floor price, rather than scrap the agreement and file an antidumping suit? Who would have benefited from an antidumping suit against Mexican tomato producers? who would have suffered?

A5. Yes, the Commerce Department was right. The facts and evidence of the case clearly points out that Mexico was not dumping tomatoes in the United States. Hence, the Commerce Department could not have filed an antidumping suit.

If an antidumping suit were filed, the Florida growers would have benefited. In terms of sufferers, Mexican growers, US based business and trade groups who are involved in the production of tomatoes in Mexico and suppliers of materials to the tomato growing industry (like the suppliers of seeds or farming equipment) stand to lose.

Q6. What do you think will be the impact of the new higher floor price? who benefits from the higher floor price? who suffers?

A6. The higher floor price of 31 cents a pound will be beneficial for Florida growers as it will increase the price competitiveness in the market. They will have that extra cushion that has been provided by the increase in the floor price.

The higher floor price will, to some extent, reduce exports from Mexico. Mexican exporters will now not be able to sell below 31 cents a pound and thus they will lose some of their competitive advantage.

Q7. What do you think is the optimal government policy response here? Explain your answer.

A7. The optimal government policy response should be to remove all forms of barriers. Currently it has imposed non-tariff barriers in the form of floor price. Even this should be eliminated to allow free trade in the true sense. When this is allowed, Florida growers will be forced to increase their competitiveness in the market. At present, they are reluctant to do so due to the limited protection in terms of floor price.

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