U.S. produce industry has 'benefited substantially' from globalization, says expert
The produce industry is becoming rapidly globalized, and an expert from Cornell University says the U.S. has 'benefited substantially' from increased levels of trade.
During one of the inaugural sessions at the New York Produce Show and Conference being held in the Big Apple this week, associate professor from the Dyson School of Applied Economics and Management, Miguel Gomez, aimed to convince the audience that "more trade is better for everybody".
"We know that trade happens because of certain factors that have to do with supply, demand and institutions - things like policy and trade agreements," he said during the talk entitled 'The Global Produce Industry - Implications for the United States'.
Gomez explained that improvements in many aspects relating to these three factors had improved over recent years.
For instance, he said technological developments had boosted supply, while rising incomes, urbanization, a growing desire for produce to be available year-round and increasing health concerns had influenced positively on demand.
As for the institutions, the implementation of numerous trade agreements over recent years has been an instrumental factor in the evolution of the global produce industry, Gomez said.
He explained how the formation of economic trading blocs in the early 1990s - including MERCOSUR in South America, the ASEAN Free Trade Area (AFTA) in Southeast Asia, the Central European Free Trade Agreement (CEFTA) and the North American Free Trade Agreement (NAFTA) - had all been strong drivers in produce trade.
Following these trading blocs came an 'era of proliferating free trade agreements', usually of a bilateral nature. Gomez noted that the U.S. had generally 'lagged behind' in this area, which he believed was not in its own interest.
"This is because the U.S. has one of the lowest levels of tariffs when it comes to imports of fruit and vegetables. With other countries the level of tariffs is much higher," he said.
"So in general if the U.S. engages in preferential trade agreements with other countries to lower tariffs, the U.S. is already pretty low but the other country will have to lower too, so that makes good sense for the U.S."
Since the North American country has entered into free trade agreements with other countries, exports have skyrocketed.
The signing of such agreements with Colombia, Panama and South Korea in 2012 resulted in fresh and processed fruit exports to these countries increasing from less than US$370 million in 2011 to more than US$600 million in 2015. Vegetable exports also shot up from US$135 million to around US$200 million over the same period.
The U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) saw U.S. fruit exports to the region almost triple over a decade from US$50 in 2005, while vegetable exports nearly quadrupled from US$30 million. NAFTA has also helped drive fruit exports to Mexico and Canada from US$2.4 billion in 2007 to nearly US$3 billion last year.
A graph presented by Gomez also demonstrated how China's accession to the World Trade Organization (WTO) in 2001 led to U.S. exports rising much faster than they had done in the past.
Across the whole fresh fruit category, total U.S. fruit and vegetable imports rose by 9.1% from 1990 to 2015, and over the same period produce imports grew 12.4%.
Gomez emphasized that the increased imports had also been positive for the industry, since a significant proportion of the imports happen at the auspices of U.S. companies.
"Having more imports is indirectly very positive for the country for two reasons. One is because American companies are promoting this investment, and another is because the farm value of the produce is just 20%, but 80% happens along the supply chain. Most of these value-added activities are happening in the place that is importing this food - in this case the U.S - so it is good for the economy, " he said.
"It’s important to recognize that trade is not a zero-sum game. It’s not that someone is going to win and somebody is going to lose. As a society we are all better off because more trade generates more value.
"It has been proven that protectionism reduces economic growth. Tariffs are just taxes that are paid by the consumers, and it has been demonstrated that reducing tariffs stimulates economic growth."
The associate professor also commented that the produce industry was becoming increasingly globalized due to the various assets owned in foreign countries, and the 'very tight coordination' that now exists between growers, packers, exporters and retailers to ensure a year-round supply.
The bottom line, according to Gomez, is that "through economic specialization and efficiency gains, trade liberalization has increased global economic growth, improved standards of living, strengthened commercial ties, fostered mutual interests and contributed to more diverse diets."