Do you think that Mexican producers were dumping tomatoes in the United States? Discuss.

Learning Outcomes: •
Discuss the reasons for and methods of governments’ intervention in trade (Lo 1.2) • Identify and evaluate the significant trade agreements affecting global commerce (Lo 1.1) • Carry out effective self evaluation through discussing economic systems in the international business context (Lo. 3.1) Critical
Thinking Read the Management Focus on, “NAFTA’s Tomato Wars,” available in your e-book (page no.
620), and answer the following questions:

Assignment Question(s):
1. Do you think that Mexican producers were dumping tomatoes in the United States? Discuss.
2. 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? (marks:3) 3. What do you think is the optimal government policy response here? Explain your answer. (mark:1) Answer: 1. 2. 3. &&&& The NAFTA
Tomato Wars When the North America Free Trade Agreement (NAFTA) went into effect in December 1992 and tar- iffs on imported tomatoes were dropped, U.S. tomato producers in Florida feared that they would lose busi- ness to lower-cost producers in Mexico. So they lobbied the government to set a minimum floor price for toma- toes imported from Mexico. The idea was to stop Mexican producers from cutting prices below the floor to gain share in the U.S. market. In 1996, the United States and Mexico agreed on a basic floor price of 21.69 cents a pound. At the time, both sides declared themselves to be happy with the deal. As it turns out, the deal didn’t offer much protection for U.S. tomato growers. In 1992, the year before NAFTA was passed, Mexican producers ex- ported 800 million pounds of tomatoes to the United States. By 2011, they were exporting 2.8 billion pounds of tomatoes, an increase of 3.5-fold. The value of Mexican tomato exports almost tripled over the same
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period, to $2 billion. In contrast, tomato production in Florida has fallen by 41 percent since NAFTA went into effect. Flor- ida growers complained that they could not compete against low wages and lax environmental oversight in Mexico. They also alleged that Mexican growers were dumping tomatoes in
the U.S. market at below the cost of production, with the goal of driving U.S. producers out of business.