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Location Of Vertically Linked Industries Under Free Trade: Case Studies Of Orange Juice And Tomato Paste In The Western Hemisphere

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  • Hartman, Darcy A.
  • Sheldon, Ian M.
  • Tweeten, Luther G.
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    Abstract

    The objective of this study was to determine the economic impact on the United States of removing tariff barriers on imports of concentrated orange juice and tomato paste from South America. The study highlighted an agglomeration model of industry location recognizing imperfect competition and increasing returns. The results were contrasted with those from a competitive model with conventional estimates of supply and demand elasticities. Because the assumptions of the models differed, the results also differed. The agglomeration model indicated that the United States would gain market share of production and processing with the removal of tariffs. In contrast, the competitive model indicated that the United States would lose market share in production and processing. According to the competitive model, US consumers would gain, producers would lose, and the government would lose from less tariff revenue, but the gains to consumers would offset losses elsewhere so that national income would rise. In South America, consumers would lose, producers would gain, and national incomes would rise. In the long run, countries would individually and collectively gain from freer trade in fruits and vegetables. Both models indicated that American production and processing of oranges and tomatoes would not be displaced by removing barriers to international trade.

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    Bibliographic Info

    Paper provided by International Agricultural Trade Research Consortium in its series Working Papers with number 14580.

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    Date of creation: 1999
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    Handle: RePEc:ags:iatrwp:14580

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    Related research

    Keywords: oranges; tomatoes; juice; paste; model; agglomeration; competitive; comparative advantage.; Industrial Organization; International Relations/Trade;

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    1. Krugman, Paul & Venables, Anthony J., 1996. "Integration, specialization, and adjustment," European Economic Review, Elsevier, vol. 40(3-5), pages 959-967, April.
    2. Selting, Anne C. & Allanach, Christopher & Loveridge, Scott, 1994. "The Role Of Agglomeration Economies In Firm Location: A Review Of The Literature," Staff Papers 13321, University of Minnesota, Department of Applied Economics.
    3. Venables, Anthony J., 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
    4. Paul Krugman & Anthony Venables, 1993. "Integration, Specialization, and the Adjustment," NBER Working Papers 4559, National Bureau of Economic Research, Inc.
    5. Drabenstott, Mark, 1994. "Industrialization: Steady Current or Tidal Wave?," Choices, Agricultural and Applied Economics Association, vol. 9(4).
    6. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
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