The determinants of the value of US tilapia import – Evidence from a gravity model

Abstract

As the biggest importing and food consuming country in the world, the United States increasingly imported large quantities of tilapia products in the past decade. In 2013, the United States imported 222 thousand tons of tilapia at a value of $0.99 billion, which is 2.48 times higher than 2003. In the United States, tilapia is popular among consumers, and becoming one of the main aquatic consumption goods. However, domestic tilapia production is limited. The tilapia markets in the United States relies mainly on imports from other countries. The main exporters are mainland China, Taiwan, Indonesia, Ecuador, Costa Rica, Honduras, Thailand, Brazil, Panama and El Salvador, accounting for over 97 percent of US’s total demand in 2013. Before 2002, Taiwan was the largest tilapia exporter to the US. After 2003, mainland China dominated US tilapia import market. This thesis summarizes the literature that seeks to explain recent developments in the tilapia market in the United States, and uses the gravity model to investigate determinants of the value of the US’s tilapia imports from its 10 foreign suppliers over the period of 2003 to 2013. The results suggest the value of US tilapia imports are positively affected by GDP of exporters, a stronger US dollar, participation in the Asia Pacific Economic Cooperation (APEC). The distance between exporters and the US market have negative effects on import value. The production cost of tilapia in the exporting countries and US GDP were found to have no effect on import value. Overall, it appears that import value is most sensitive to changes in the distance (elasticity = -0.69), followed by participation in APEC (elasticity = 0.64). The exchange rates, although statistically significant, are not empirically significant. Specifically, the elasticities of import value with respect to exchange is 0.04. For import value to increase 2%, the U.S. dollar would have to strengthen 100%.