A Profile of Foreign Direct Investment by the U.s. Fruit and Vegetable Industry

The analysis revealed incentives for foreign direct investment (FDI) for the U.S. fruit and vegetable industry. A relationship was found between U.S. tariffs on fruits and vegetables and FDI by U.S. produce firms in Latin America. Other factors affecting FDI were also investigated. The analysis revealed that a majority of the commodities produced as a result of FDI by U.S. fruit and vegetable firms were exported to the United States. Significant implications for the U.S. market in light of trade agreements such as NAFTA are presented. These implications include the likelihood of increased FDI and a more internationally oriented marketplace for the U.S. fruit and vegetable industry. INTRODUCTION The United States is a major producer of fruits and vegetables, valued at over $20.3 billion in 1995 (U.S. Department of Agriculture, April and November 1995). The U.S. fruit and vegetable industry has been largely seasonal in nature with respect to production. In the past, U.S. imports of fruits and vegetables have been mainly supplemental. That is, in general, foreign produced fruits and vegetables have entered the United States when production in the United States has not been in season or when prices have been sufficiently high to attract additional supplies from foreign sources. Imports of fruits and vegetables in dollar value have risen steadily over the past ten years from nearly $1.8 billion in 1986 to almost $2.7 billion in 1995 dollars (U.S. Department of Agriculture, September/October 1986 and 1995). With the passage of time rapid advances in technology have occurred. Advances in information and communication systems, distribution systems, and large-scale production systems have changed markets dramatically, becoming more global and less regional in scope. Moreover, artificial trade barriers between countries are falling. Important examples of such action are the General Agreement on Tariffs and Trade (GATT), the Caribbean Basin Initiative (CBI), and the North American Free Trade Agreement (NAFTA). Although much progress has been made under GATT, negotiations have been far more sweeping under NAFTA in the reduction of trade barriers. NAFTA, which is an agreement among Canada, Mexico, and the United States, was implemented on January 1, 1994. Under NAFTA all non-tariff barriers are to be converted to tariffs and all tariffs are to be reduced to zero within fifteen years, depending on the sensitivity of the product (American Farm Bureau, 1995). NAFTA also provides for the free movement of capital without restrictions on its ownership and control among the participating countries.