Sunshine Farms: Withering Since NAFTA
Question 1: Is NAFTA unfair to American farmers? Explain.
NAFTA has been unfair to some segments of the American farming industry as seen by the number of farms in Florida that have been closed since the passage of NAFTA.
The case study indicates that due to the reduction & removal of tariffs, it is difficult for American farmers that specialize in the same products as Mexico to be competitive. This is primarily due to lower administrative costs and the lack of regulations surrounding the development of comparative Mexican produce.
Given the current economic climate, it is evident that most consumers will shop on price first then branding is secondary. As such, the country that is able to operate their industry at the lowest cost will control the market share of the farming industry.
However, while the NAFTA has negatively impacted famers such as Sunshine Farms, it is conceivable that other segments of the US agriculture market could be seeing advances in areas where Mexico is not a dominant factor in the industry. For example, the meat, rice, corn and bean industries may be experiencing an increase in profits due to the tariff reductions resulting in increased exports to Mexico & Canada.
Therefore, while the study addresses highlights the negative impacts on some segments of the farming industry, there are other areas that could be benefitting from the passage of the NAFTA.
Question 2: Could Sunshine Farms differentiate its products by placing a “Grown in the USA” label on them in order to charge a premium price?
Sunshine Farms should make an attempt to brand its products to see if that will increase their sales, given that their products are made in the USA. However, the increased cost of branding the products should be taken into consideration to determine if the increase in sales offsets the increase in administrative costs.
Given that it is already difficult to compete in the market in...