Cost of Imported vs. Homegrown Goods

By: Bents Dulcio

Homegrown produce should cost less than fruit from Mexico or Chile, shouldn’t it? The reality is more complicated than “proximity to consumer”. In truth, many imports cost less than domestically grown equivalents.

A number of factors go into the price of produce, which include:

·         Tariffs

·         Cost of production, packing, and processing

·         Government subsidies

·         Counter-seasonal demand

 

Tariffs

A tariff is a tax on imports and exports. Lower than average import tariffs in the U.S allow foreign companies to flood the market with fruits and vegetables from around the world. This may sound like a bad thing, but competition from imports keeps domestic prices low, which is a plus for consumers. The reason foreign companies can offer cheaper goods varies by country or region.

 

Cost of Production, Packing, and Processing

Developing countries can sell their produce for less because of lower prices associated with the production, packing, and processing of fruits and vegetables. Particularly, lower cost of labor over-seas compared to rising cost in the U.S for energy, transportation, and labor allow developing nations to sell their products for less, even after the cost of international shipping. Average per unit production cost in China for citrus are one-tenth those in the U.S.

Government Programs and Subsidies

In the EU, farm costs are similar to those in the U.S. However, most European governments offer subsidies (grants) or programs to keep farmers competitive in world markets. U.S producers are not afforded similar programs, which means the entire cost of production falls on the producer.

 

Counter-Seasonal Demand

Years ago, Americans could not enjoy melons in the winter, or blackberries come fall. Thanks to innovations in transportation and refrigeration, American consumers have access to these fruits year around. The demand for counter-seasonal produce is high. Technical innovations in farming have allowed some domestic producers to grow produce in areas where they couldn’t in the past. However, the cost is often more (for consumers and on the environment), than purchasing overseas, where the product can flourish in its natural environment.

 

Fruit for Thought

American consumers will buy cheap goods, even if they are produced in countries that exploit workers. U.S Government regulations that protect workers by providing a minimum wage, access to health care, and workers compensation are all good things. But, many developing nations do not adhere to similar standards. American consumers would be (rightfully) outraged to hear of the exploitation of workers in the U.S, however we continue to purchase goods produced overseas through “slave” labor. Do we, as a nation, condone these practices, so long as they happen away from home? Why do we support (however indirectly) with our dollar, practices we disagree with?

By introducing a variety of goods into the market, international trade can be a very good thing for consumers, but with great variety comes great responsibility. It is our job to do the research on the companies: to know where our goods are coming from and at what cost.