U.S. consumers enjoy a wide variety of fresh fruits and vegetables year-round. This is facilitated by the United States importing produce from countries that can grow crops during times of the year when production is not possible in the United States. Even though it is grown and harvested elsewhere, produce grown abroad supports economic activity, jobs, and income in the United States. U.S. businesses and workers are engaged in different parts of international agribusiness supply chains. First, there are activities that deliver fresh produce to end users, referred to as forward linkages in the supply chain. Second, foreign producers may purchase agricultural inputs from U.S. suppliers. These are known as backward linkages. Both forward and backward linkages support additional economic activity for U.S. businesses. Such is the case for imported fresh tomatoes from Mexico.
Tomato production and trade in North America rely on international agribusiness supply chains that take advantage of growing conditions, industrial specializations, and comparative advantages across countries. The benefits of trade for a net-importer of fresh tomatoes such as the United States are not limited to the increased availability of tomatoes for consumers. Benefits include economic activity taking place within the transportation, warehousing, wholesale, retail, and foodservice industries to deliver tomatoes to end buyers in the United States and Canada, as well as economic activity supported by demand for goods and services from tomato producers in Mexico, such as agricultural inputs to production. This study provides an estimate of the economic contribution of the forward supply chain link- ages to the U.S. economy supported by imports of Mexican fresh tomatoes, both those tomatoes destined for consumption in the United States, as well as those shipped by truck across the country to Canada. Using these estimates of the direct effect of forward supply chain linkages on the economy, the study also estimates the indirect effects and induced effects of this economic activity to the U.S. economy, generally referred to as multiplier effects. These effects are measured in terms of economic output (sales), value added (gross domestic product), employee compensation and business owner income (labor income), and full- and part-time jobs. Finally, the study explores the economic benefits to U.S. consumers, known as consumer surplus, from Mexican tomatoes by simulating the effects of a reduction in the volume of imports.
Findings
U.S. and Canadian imports of fresh tomatoes from Mexico contributed an estimated $4.8 billion in total economic activity to the U.S. economy in 2016 including direct, indirect, and induced multiplier effects. That activity supported nearly 33,000 full- and part-time jobs earning $1.4 billion in employee compensation, $353 million in business owner income, and $801 million in cor- porate profits and other returns. In total, $2.9 bil- lion in GDP was directly and indirectly supported by the value chain delivering imported fresh tomatoes from Mexico to Canada and to U.S. consumers through grocery retail and foodservice industries. Over $400 million in federal tax reve- nue was generated through direct and multiplier effects and nearly $350 million was generated in state and local tax revenues in 2016.
Tomatoes imported from Mexico comprise an important share of U.S. fresh tomato supply.
- The United States imported approximately $1.9 billion worth of fresh tomatoes from Mexico in 2016. In terms of weight, imports of fresh tomatoes from Mexico totaled 3.4 billion pounds in 2016.
- As of 2015 (most recent data available) total U.S. fresh tomato supply, including domestic production and imports net of exports, was 6.6 billion pounds. In recent years, imports of fresh tomatoes from Mexico have repre- sented between 40% and 50% of the U.S. fresh tomato supply.
- By weight, 1.7 billion pounds of imports from Mexico were round tomatoes, 1.5 billion pounds were plum (Roma) tomatoes, and the remainder of imports (228 million pounds combined) were cherry and grape tomatoes.
- By weight, most tomatoes imported from Mexico (2.4 billion pounds) were produced using protected agriculture techniques for cultivation, with 1 billion pounds of imports produced in the open field.
- While the United States. is a net importer of fresh tomatoes from Mexico, it is a net exporter of processed tomato products to Mexico. Exports of processed tomato prod- ucts totaled $96 million in 2016, with nearly 247 million pounds of prepared or processed tomatoes, tomato juices, and tomato sauces and catsup exported to Mexico.
Accounting for indirect and induced multiplier effects, the total sales contribution of imported Mexican tomatoes to the U.S. economy was an estimated $4.8 billion in 2016.
- Forward-linked wholesale, retail, and food- service activities required to deliver imported Mexican tomatoes to U.S. consumers directly contributed an estimated $2.0 billion in sales to the U.S. economy in 2016; $991 million in sales occurred through wholesale, $816 million was in retail, and $145 million was in foodservices.
- In-bond shipment of Mexican tomatoes to Canada directly supported nearly $30 million in economic activity within the U.S. transportation and logistics sector.
- Combined, direct forward supply chain link- ages of roughly $2 billion (including shipments to Canada) support an additional $2.8 billion in economic output through multiplier effects. Of those sales, approximately $1 billion were through indirect effects, and $1.8 billion were through induced effects.
U.S. and Canadian imports of fresh tomatoes from Mexico supported $2.9 billion in U.S. GDP (value added).
- Value added is the measure that best reflects the value of production of goods and services within an economy. Analogous to GDP, value added measures the value of a good or service above and beyond the cost of intermediate inputs used for its production and includes employee compensation, business owner income, profits, and taxes.
- The total value added (GDP) contribution to the U.S. economy in 2016 was an estimated $2.9 billion.
U.S. and Canadian imports of fresh tomatoes from Mexico supported nearly 33,000 jobs and $1.8 billion in labor income in the U.S. economy.
- An estimated 33,000 full- and part-time jobs are supported in the U.S. economy by U.S. and Canadian import of Mexican tomatoes.
- A total of $1.8 billion in labor income was supported ($1.4 billion in employee compensation and $353 million in business owner (proprietor) income.
U.S. consumer welfare analysis.
- A 5% decrease in the supply of fresh tomatoes at retail in the United States, assuming all decreases occur in standard round tomatoes and plum tomatoes, would correspond to decreases in U.S. consumer surplus of $528 million (ranging from $396 million to $792 million).
Methods
This study was conducted using a variety of meth- ods and data sources. Forward supply chain link- ages (for wholesale and retail activities) were estimated using a price margin approach applied to shipping point, terminal market, and retail price data for tomatoes in the United States National input-output accounts were used to estimate the value of foodservice tomatoes using gross operating surplus as a share of total costs. The IMPLAN 3.1 national input-output model was used to estimate the multiplier effects of this supply chain activity to the U.S. economy. The consumer welfare analysis section uses import data, price data, and estimated demand elasticities from recent studies on tomato demand in the United States to estimate changes in consumer surplus that would result from a hypothetical decrease in the volume of Mexican tomatoes imported by the United States.