California Agriculture

Many countries apply import barriers for processing tomatoes, but the European Union is the main producer that uses export and production subsidies. We modeled and measured the potential impacts on global markets and the California industry that would result from reductions in trade barriers (such as import tariffs) and subsidies for the European Union’s processing tomato industry. A multi-equation simulation model showed that reducing trade barriers in Europe and elsewhere (including the United States) by 50% would raise the market price for California tomatoes by about 6%, improve net returns to California processing tomato producers by $34 million per year, and improve net returns to California tomato processors by $19 million per year. We also found that a 50% reduction in EU domestic support would improve the net returns of California producers and processors by about $8.5 million per year. Based on these results, we believe that negotiating reductions in subsidies, and especially in global trade barriers, would make economic sense for the California processing tomato industry.