The extent to which NAFTA impacted the tomato industry of United States is still fiercely argued. Almost all vegetables bought in America are either domestically grown or from Canada or Mexico. They saw that imported tomatoes own a price elasticity of 0.5317, as compared to 0.4505 for locally grown tomatoes, and determined that local and imported tomatoes are interchangeable.
They suggested for tomato imports to be stopped using tariffs and price incentives. The devaluation of the peso happened around the signing of NAFTA, causing a lot Floridian growers to turn on NAFTA for the import surge. But, an estimated eighty-seven percent increase in tomato imports from 1996 was due to the 1994-1995 devaluation of the peso, with only six percent coming from the reducing of tariffs.
The fixing of a minimum tomato floor price works with free trade principles in the NAFTA agreement as it does not harm free trade between America and Mexico. This was done to secure the NAFTA agreement which is often subject to disagreements between American and Mexican tomato growers.
Enhanced imports have been credited to the devaluation of the peso, the Mexican recession, bad weather in Florida, great weather in Mexico and the Mexican technological enhancement. The devaluation in1994 caused Mexican tomatoes to be vastly cheaper, over seventy percent, in fact, and the Mexican economic crisis probably enhanced excess supply.
There are various reasons for Mexican imports increasing over time. Mexico enjoys a competitive advantage over various American tomato growers, which might not appear just to the American tomato grower but they have to take that as it is since not all companies can have the number one product in their line of work. Some reasons for the increased imports from Mexico are great weather, lesser costs of labor, and years of greenhouse technology study and development. This war is a trade war as well as a political one.
Both Republicans and Democrats hope to use this situation. The American Department of Commerce can protect the best interests of its people. Scraping can cause thousands of job losses on both sides, as well as difficulties for American growers due to the horrible weather they face. Anti-dumping suits would help only the American growers, with the consumer losing most of all.