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Article
Trade Diversion from Tomato Suspension Agreement
Canadian Journal of Economics (2010)
  • Kathy Baylis, University of Illinois at Urbana-Champaign
  • Jeffrey M. Perloff, University of California, Berkeley
Abstract

: Trade barriers can cause output to be diverted to other countries and into other products. We study the effect of a voluntary price restraint (VPR) on Mexican tomatoes entering the United States. The diversion caused by the VPR is statistically and economically significant – representing over four-fifths of the direct effects of the trade barrier. When the VPR was binding, Mexico exported more tomatoes to Canada, the United States cut back on exports while Canada increased their exports to the United States. The VPR also diverted fresh tomatoes in Mexico into paste production, which was then exported to the United States.

Keywords
  • Trade diversion,
  • Voluntary Price Restraint,
  • Suspension Agreement,
  • Tomatoes,
  • NAFTA
Publication Date
2010
Citation Information
Kathy Baylis and Jeffrey M. Perloff. "Trade Diversion from Tomato Suspension Agreement" Canadian Journal of Economics (2010)
Available at: http://works.bepress.com/kathy_baylis/22/