AN ECONOMIC ASSESSMENT OF REMOVING THE PARTIAL U.S. IMPORT BAN ON FRESH MEXICAN HASS AVOCADOS

The importation of fresh Hass avocados from Mexico into the United States has been restricted, totally or partially, since 1914 on grounds of the potential risk of pest infestation. This quarantine has been a cause of dispute between the Mexican and U.S. governments. In 1997, Hass avocados from approved orchards in the State of Michoacán, Mexico, were permitted to be imported during the months of November through February into 19 northeastern states plus the District of Columbia. In 2001, the import period was extended to October 15 through April 15, and access was granted to 12 additional states. Currently there is a proposal to remove all seasonal and geographic restrictions on the importation of fresh Hass avocados from Mexico. The purpose of this research is to assess the potential economic impacts of removing the partial import ban. A static, partial equilibrium model is constructed to analyze impacts of removing the partial import ban on Mexican avocados. Two scenarios are considered: one with population and real per-capita income held constant (short run) and one that allows growth in population and real per-capita income over five years (long run). When population and real income are held constant, removal of the partial import ban leads to an increase in avocado imports from Mexico of 102.72 million pounds (267% increase). The increased competition from Mexican avocados results in welfare losses for both Californian and Chilean avocado producers of $84.5 million and $8.5 million respectively. Conversely, consumers in the United States gain from greater availability of avocados and lower prices. The gain in equivalent variation for US consumers is $115.3 million resulting in a net welfare gain of $30.8 million for the US. For the long-run scenario, population and real per-capita income are allowed to grow at their recent historical annual averages for five years. A five-year period is chosen to match the biological lag between planting and fruit bearing for avocados and is assumed to be the time period required for avocado producers to fully adjust to any price changes. The resulting increase in the aggregate demand for avocados significantly reduces the impact on Californian and Chilean producers of removing the partial import ban on Mexican avocados. While imports from Mexico increase by 161.4 million pounds, Californian avocado production decreases by only 14.4 million pounds and exports from Chile increase by 2.5 million pounds. The loss in producer surplus for Californian producers is $9.4 million, while the net US welfare gain is $33.2 million.While it appears likely that the removal of the partial import ban on Mexican avocados will hurt Californian producers, growth in demand for avocados will mitigate a great deal of the potential losses. Regardless of the magnitude of the growth in demand, consumers in the United States will benefit from a greater availability of avocados at lower prices. The gain in consumer welfare more than offsets the loss in producer welfare.