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The New Tomato Suspension Agreement: What Are the Implications for Trade Flows?
Author(s) -
Ghazalian Pascal L.
Publication year - 2015
Publication title -
canadian journal of agricultural economics/revue canadienne d'agroeconomie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 37
eISSN - 1744-7976
pISSN - 0008-3976
DOI - 10.1111/cjag.12054
Subject(s) - suspension (topology) , free trade agreement , gravity model of trade , international economics , economics , horticulture , agricultural economics , international trade , environmental science , free trade , biology , mathematics , homotopy , pure mathematics
This paper examines the implications of the new tomato suspension agreement (signed on March 4, 2013, by the U.S. government and Mexican tomato producers) for trade in fresh tomatoes and processed tomato products. The empirical analysis is performed through a gravity model that accounts for vertical linkages between primary and processed goods. The estimated gravity parameters are used to implement suspension agreement scenarios. The results show that the new suspension agreement leads to considerable decreases in Mexico's exports of fresh tomatoes to the United States. These decreases are accompanied with various trade diversion and deflection effects. There are increases in Mexico's exports of processed tomato products to the United States and other countries, and in Mexico's exports of fresh tomatoes to non‐U.S. destinations. These increases do not amount, however, to considerable compensations of the decreases in Mexico's fresh tomato exports to the United States. The results also suggest that the initial 1996‐based suspension agreement has significantly smaller impacts on trade flows over the period that preceded the implementation of the new suspension agreement.