Effect of Trade Barriers on U.S. Apple Exports on Washington Apple Exports
Principal Investigator Dr. Stephen Devadoss and Prasanna SreedharanStart
Date July 1, 2003
Completion DateDecenber 31, 2006
Mission Building a world apple trade model to increase policy maker’s understanding of tariff implications.
Problem Addressed
The price received by apple growers in the U.S has been decreasing as a result of stagnant domestic consumption. One way to resolve the price slump is to export apples abroad. However, many countries have high tariffs for apples entering their countries which make U.S. apples less competitive than domestic apples in those regions. The problem addressed in this study is to quantify the impacts of these trade barriers to determine the economic value of removing these tariffs.
Goal
To build a world apple trade model by including the major importing and exporting regions and to quantify the effects of removing existing tariffs.
Implications
U.S. apple exports were about $392 million in 2001. Apple exports have been very crucial to the U.S. apple industry in general and the Washington apple industry in particular. Washington grows more than half of all U.S. apples and exports about 30 percent of its crop. So Washington apple growers stand to gain from both an increase of exports and from an increase in domestic price.
Procedures
Research implemented a spatial equilibrium model, which has been in use for a long time, and has been put to much use recently as it is a standard tool to evaluate agricultural trade policies. Researchers estimated the regional demand and supply relations for apples in each region and used these estimates to formulate an objective function, which was used to determine the optimal production, consumption, price, and trade flows under the tariff regime. They then simulated two scenarios. The first was the case where there is no region with a tariff of greater than 25 percent (this is the U.S negotiating position) and the other was a free trade scenario. The comparison of results in the baseline model and simulated model allows for the quantification of the impacts of the trade barriers.
Results show that U.S. apple exports increase upon tariff removal. U.S. exports increase by 24 percent in the scenario of reduced tariffs and almost double in the free trade scenario. In the scenario of reduced tariff, the U.S. increases exports to Mexico, Southeast Asia, India, Turkey, and the Middle East. In the free trade scenario, the U.S. exports more to Turkey, the Middle East and Mexico. It also replaces some imports to Germany and countries in Europe. However, U.S. apple exports to Southeast Asia and India are replaced by China. U.S domestic price increases in both scenarios.
Techniques and Technologies Developed
Most spatial equilibrium models rely heavily on already existing elasticity databases. In our study we use elasticity values obtained by econometric estimation. So our model uses more information from the actual observed data. In addition we have incorporated ad valorem tariffs as against specific tariffs.
Publications/Journal Articles From Project
Publications in refereed journal articles, as well as paper presentations at professional meetings of economists will be pursued.