Case 4.2.

Mexican Tomatoes
In 1969, the US Department Of Agriculture put a set of minimum
size restrictions on all tomatoes sold in the US market. The
regulations provided that mature green tomatoes (those that
ripen after they are picked) could not be sold unless they
measured more than 2-9/32" in diameter. Vine ripened tomatoes
were required to measure at least 2-17/32" in diameter. Mexican
tomato farmers were outraged because the regulations barred
almost 50 percent of their crop from the US market. Florida
growers contended that the regulations were not discriminatory
because they applied to both the Mexican and the US crops. But
the Mexicans pointed out that the regulations were more lenient
on green than ripened tomatoes. Green tomatoes accounted for
approximately 85 percent of the Florida tomato crop and only 10
percent of the Mexican crop. While US consumers saw prices rise
as much as 30 percent, Mexican tomato framers were enraged
while they watched tons of their tomatoes being fed to cattle or
simply rotting in heaps along the highway. Rod Batiz, president of
the 20 thousand member Confederation of Agriculture
Association, was quoted in the "Wall Street Journal" as saying,
"The whole of Mexico feels stabbed in the back".
The example illustrates how difficult it is to deal with non-tariff
barriers to trade. The Mexicans could protest the decisions of the
US Department of Agriculture, but the Florida growers who were
competing with the Mexican growers, in effect, wrote their own
regulations. They maintained that the regulations worked for the
benefit of everyone: growers on both sides of the border and the
consumer. A strong case could be made for the harm done by
these regulations to Mexican growers and US consumers, but the
mechanism for hearing this case did not really exist. The Mexican
growers could influence this decision by pressuring the US
government through diplomatic channels, or try to appeal directly

to consumers and thereby influence legislative and administrative

action in government.
An important test of a ruling or regulation is whether it has a
greater impact on foreign producers. If this is the case, and there
is no apparent social benefit for consumers, the ruling is a nontariff barrier.
Russian
There appears a growing dangerous similarity between Russian
oligarchs and many Indian business houses who have gained
through their proximity to corrupt politicians, a concern
highlighted by IMF former chief economist Raghuram Rajan. India
has the second-largest number of billionaires per trillion dollars of
GDP, after Russia. While Russia has 87 billionaires for the $1.3
trillion of GDP it generates, India has 55 billionaires for the $1.1
trillion of GDP. Germany on the other hand has the same number
of billionaires as India with four times its GDP.
The common perception is that these are software billionaires, a
class whom Rajan welcomed. But IT billionaires are not many in
number, he confirmed. Three factors land, natural resources
and government contracts are the predominant sources of the
wealth of our billionaires. And all of these factors come from the
government, said Mr Rajan, who was in Mumbai on Wednesday
to deliver an address at the foundation day of the Bombay
Chamber of Commerce and Industry.
To many people have gotten rich based on their proximity to the
government, he said: We have extremely efficient private banks
and telecom companies that obtained their start from a
government contract or licence, added Mr Rajan. If Russia is an
oligarchy, how long can we resist calling India one?, he asked.
While in the pre-reforms era, corruption used to be about sale of

permits, reforms have created new sources of rents for the

establishment, he pointed. Land can be expropiated from those
who do not have connection or formal title. Public land can always
be disposed off to favoured parties. Contracts can be assigned to
chosen friends despite a sham of public bidding. In all this, the
public exchequer is defrauded, while the rents are shared
between the politician and corrupt businessman, Mr Rajan
added.
He highlighted how the status quo prevails as every constituency
is tied to the other in a cycle of dependence. The poor need the
savvy politician to help them navigate through rotten public
services. The politicians need the corrupt businessman to provide
the funds that allow him to supply patronage to the poor, who are
numerous enough to assure him re-election, he said. Though
there are many upstanding politicians and businessmen
outnumbering the corrupt, oligarchies do not require many
participants to flourish, he pointed. They only require silence and
complacency among all of us, said Mr Rajan.
He suggested that trade bodies can play a role and apply its
influence to break the nexus of corruption and improve
governance. Underscoring the importance of transparency and
bidding in all government contracts, he called for reforms in landtitling and registration system so that titles are clear. Another way
to reduce concentration of wealth and power and of corruption is
to reduce the reliance on the politician for basic public services by
the poor and improve the social safety net. Many public programs
targeted at the poor could be wound up.
The substantial amounts saved could be directly given to the poor
and in turn would be empowered to command services from the
private sector. This practice is known to be successful in Mexico
and some Latin American countries, he added. In India we have

the capacity to identify the poor, create unique biometric

identifiers for them, get them bank accounts, and make
government transfers into those accounts. Money will give the
poor respect as well as the services they had to beg for in the
past, he concluded.
CANADIAN
Laws and regulations are a consequence of what the government
wants to control, which is a consequence of politics - meaning
what is the government doing, or not doing, to maintain the
confidence of the people and get re-elected.
The Political Environment in this situation is influencing the
Canadian Beef exporters through the new regulations that the
Japanese government has established. These Japanese
regulations (which are a consequence of the Sociocultural
Environment - people in Japan fear Mad Cow) will mean that U.S.
beef producers cannot send beef products to Japan if some of that
beef came from cattle they imported from Canada. Example frozen hamburger patties manufactured in the U.S. for export to
the McDonald's outlets in Japan.
Germany
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