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Abstract
Studies of US-Mexico vegetable trade have generally emphasized the importance of US tariffs in determining the competitive
advantage of US producers. Even so, research has identified at least four factors related primarily to the different levels of
economic development in the US and Mexico that also have important effects on US-Mexico agricultural trade in general and
fresh vegetable trade in particular. These include the differential growth rates of US and Mexican real wages, production technology
(yields), and per capita income as well as cyclical movements in the real Mexican Peso/US Dollar exchange rate. This
study examines the relative contribution of NAFTA and the development-related factors to likely future changes in US fresh
vegetable imports from Mexico. The analysis employs an econometric simulation model of US and Mexican markets for five
fresh vegetables (tomatoes, cucumbers, squash, bell peppers, and onions) accounting for 80% of US fresh vegetable imports.
The results suggest that the 1994-1995 Peso devaluation rather than NAFTA was primarily responsible for the sharp increase
in US imports of Mexican vegetables observed in the first years following the implementation of NAFTA. Over time, however,
the results suggest that differences in the growth rates of US and Mexican production yields and, to a lesser extent, of US and
Mexican real incomes and/or real wage rates could plausibly contribute more to the future growth of US tomato, squash, and
onion imports from Mexico than the trade liberalizing effects of NAFTA. © 2001 Elsevier Science B.V. All rights reserved.