Effect of Liberalized U.S.-Mexico Dry Onion Trade: A Spatial and Intertemporal Equilibrium Analysis

Abstract

AbstractA spatial, intertemporal equilibrium model of the North American dry onion economy is constructed to analyze the impact of liberalized U.S.-Mexico trade. In a free-trade environment, exports of Mexican onions to the U.S. are projected to increase about 50%, while Mexico's share of the U.S. market increases from 8.7 to 12.8%. Farm-level prices in the U.S. are projected to decline 8.9%, while production declines 2.4%. The effect of free trade on U.S. producers is disproportional across regions. Northwest storage onion producers experience the greatest decline in production; however, analysis suggests that improved storage methods may offset a portion of the unfavorable impacts of liberalized trade on these producers. In spite of the unfavorable impact of free trade on U.S. dry onion producers, the industry would not be economically devastated.