### Analysis in Support of Certification that the Rule will not have a Significant Economic Impact on a Substantial Number of Small Entities Proposed Rule French Bean Imports from the Republic of Kenya APHIS

- 2010

- 0101

U.S. Department of Agriculture An imal and Plant Health Inspection Service December 2010

### Summary
This analysis examines impacts for U.S. small entities of a rule that would allow French bean imports from the Republic of Kenya

. Kenya produced an average of about 37,000 metric tons (MT) of French beans per year between 2004 and 2009, of which it exported an average of about 34,000 MT, primarily to the European Union. The EU provides a well

- established market and it is unlikely that there would be a large diversion of French bean exports by Kenya from this market to the United States. To examine potential effects of the rule for U.S. small entities, we model three levels of French bean exports to the United States from Kenya , of increasing magnitude: the amount that Kenya expects to export t o the United States ( 800 MT) , and amounts equal to 5 percent and 10 percent of Kenya’s average annual exports worldwide, 2004

- 2009 (1,750 MT and 3,500 MT). The largest assumed level is equivalent to 1.3 percent of average annual consumption by the United State during this same period. Yearly French bean imports from Kenya of 3,500 MT are estimated to result in a price decline of $12.60 per MT, that is, less than 1 cent per pound in the wholesale price of green beans, and a fall in U.S. production of 1,838 MT . Consumption is estimated to increase by 1,663
MT . Producer welfare c ould decline by $ 2.92 million and consumer welfare c ould increase by $ 3.35 million, yielding an annual net welfare gain of about $ 430,000

. While most U.S. green bean producers are sm all entities, t he annual decrease in producer welfare per small entity for the 3,500 MT import scenario is estimated to be only about $ 66, or about 0. 7 percent of average annual sales by small entities

. The dollar decrease in welfare for most small fresh bean producers would be even smaller, given that the majority planted less than an acre in green beans in 2007, while the average area planted in green beans by small

- entityproducers was 2.4 acres. Also, effects are likely to be smaller than indicated, t o the extent that fresh French bean imports from Kenya would displace fresh bean imports from other countries. Based on this analysis, the rule would not have a significant economic impact on a substantial number of small entities.

### Introduction

Th is a nalysis examines impacts for U.S. small entities of a rule that would allow fresh French bean and runner bean imports from the Republic of Kenya

. 1

As background, we provide a brief overvie w of fresh green bean production and trade by the United States and Kenya . This is followed with an estimate of price and welfare effects of The rule would amend 7 CFR 319.56, and is part of a continuing program to allow the importation of foreign a gricultural products that APHIS has determined are without significant risk of introducing exotic plant pests into the United States . Consignments of beans washed and cut to predetermined size would be accompanied by a phytosanitary certificate of inspect ion issued by Kenya’s national plant protection organization attesting that all APHIS phytosanitary requirements have been met and that the consignment was inspected and found free of quarantine pests. The Regulatory Flexibility Act requires agencies to ev aluate the potential effects of their proposed and final rules on small businesses, small organizations and small governmental jurisdictions. Section 60 3 of the Act requires an agency to prepare a n initial regulatory flexibility analysis ( I RFA) that descr ibes the expected impact of the rule on small entities and any significant alternatives to the proposed rule which accomplish the stated objectives and that minimize any significant economic impact of the proposed rule on small entities . In place of the
I RFA, the head of the agency may certify that a rule will not have a significant economic impact on a substantial number of small entities. This analysis provides the factual basis for certification of this rule.

1 The terms “French bean,” “runner bean,” and green bean” are used in this analysis interchangeably.the rule based on assumed levels of French bean imports from Kenya . We then describe the expected impact of the r ule for small entities. 

### U.S. Fresh Green B ean Production and Trade
As shown in table 1, U.S. fresh bean production and consumption have fluctuated over recent years . The U.S. produced an average of about 262,000 metric tons (MT) of fresh beans
per year, v alued at $ 306 million , between 2004 and 2009 . P roduction for the fresh green bean market occurs in many States. E ight States ( Florida, Georgia , California, New York, Tennessee, North Carolina, Virginia, and Michigan ) accounted for 9 5 percent of total pro duction in 2009. 2 Annual consumption over this same period averaged about 263,000 MT . U.S. imports averaged about 32,000 MT, and exports averaged about 29,000 MT

. Mexico is the largest source of imports ( over 70 percent in 2009 ). Other suppliers include Guatemala ( 24 percent) , Canada (2 percent), China (2 percent), Nicaragua (1 percent) and Peru ( 1 percent ).

2 USDA/NASS, Vegetables 2009 Summary, January 2010, http://usda.mannlib.cornell.edu/usda/current/VegeSumm/VegeSumm

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- 27

- 2010.pdf U.S. green bean exports in 2009 were to Canada (73 percent), Jamaica (10 percent), Venezuela (10 percent), and Mexico (4 percent). Other minor over seas markets include the Dominican Republic, Italy, Poland, Ecuador, Egypt, El Salvador, and France.Table 1

. U.S

. fresh green bean: supply, utilization and price, 2004

- 200 9

Year Production in Metric Tons Consumption in Metric Tons Wholesale Price i n $ per MT Exports in Metric Tons Imports in Metric Tons 2004 261,136 250,546 997 37,164 26,574 2005 249,977 241,948 1,193 35,488 27,459 2006 281,820 282,162 1,102 28,017 28,359 2007 294,929 301,086 1,349 25,668 31,826 2008 262,175 271,577 1,164 26,4 31 35,833 2009 220,539 227,490 1,180 30,948 37,899 7

- Year Average (200 4

- 2009) 261,763 262,469 1,164 30,619 31,325 Sources: Production and price data are from USDA ERS, Vegetables and Melons Yearbook data/#89011/May 20, 2010, http://usda.mannlib.cornell.edu/usda/current/VegeSumm/VegeSumm

- 01

- 27

- 2010.pdf

. Export and import data are from USDA/FAS, Global Agricultural Trade Systems (GATS), http://www.fas.usda.gov/gat s/default.aspx. Consumption is calculated as production + imports

– exports.

Kenya produced an average of about 37,000 MT of French beans per year between 2004 and 2009. 

### Kenya ’s Fresh French Bean Production and Trade

3 Most of the production is for the export market, which averaged more than 34,000 MT over this same time period. 4 Most of Kenya’s French bean exports are to European Union (EU) countries, including the United Kingdom (63 percent of Kenya’s French bean exports), Netherlands (14 percent), Fr ance (12 percent), Belgium (6 percent) and Germany (3 percent). Other minor destinations include Switzerland, United Arab Republic, South Africa, Norway, Italy, Russia, Singapore and Ireland. 5

3 FAO, FAOStat, http://faostat.fao.org/site/567/default.aspx#ancor

. 4 Based on importing country records. Global Trade Atlas, Global Trade Information Services, Inc., November, 2010, http://www.gtis.com/gta/secure/gateway.cfm 5 Global Trade Atl as, Global Trade Information Services, Inc., country e dition, November, 2010. The EU provides a well

- established market and it is unlikely that there would be a large diversion of French bean exports by Kenya from this market to the United States.We estimate the impact of fresh French bean imports from Kenya on U.S. production, consumption, and prices u sing a non

- spatial partial equilibrium model. D ata used are from the Foreign Agricultural Service ’s Global Agricultural Trade Systems ( GATS ) ; USDA ERS Vegetables and Melons Yearbook Data #89011, May 20, 2010; and t he Global Trade Atlas

. 

### Impact of Fresh French Bean Imports

6
The demand and supply elasticities used are

- 0.596 and 0. 75 , respectively

. 7

Table 2 presents the changes we estimate could result from the assumed levels of French bean imports from Kenya . These include annual changes in U.S. consumption, production, wholesale price, consumer welfare , producer welfare, and net welfare

. The maximum level of assumed French bean imports to the United States of 3,500 MT would result in a price decline of $12.35 per MT (or a decline of less than 1 cent per pound) in the wholesale price of green beans As described, Kenya exported on average more than 34,000 MT of French beans per year between 2004 and 2009. We model three levels of French bean im ports from Kenya , of increasing magnitude: (i ) the amount that Kenya expects to export to the United States ( 800 MT); (ii) an amount equal to about 5 percent of Kenya’s average annual exports, 2004

- 2009 (1,750 MT)

. ; and (iii) an amount equal to about 10 percent of Kenya’s average annual exports,
2004

- 2009 (3,500 MT)

. The largest assumed level is equivalent to 1.3 percent of average annual consumption by the United State during this same period.

6 UN/FAO, FAO stat data ( http://faostat.fao.org ) and Global Trade Atlas, Global Trade Information Services, Inc., country e dition, November 2 0 10

. 7 Demand elasticity is from J.E. Epperson and L.E. Lei, A regional analysis of vegetable production with changing demand for raw crops using quadratic programming, Southern Journal of Agricultural Economics, July 1989, pp. 87

- 96, http://ageconsearch.umn.edu/bitstream/30166/1/21010087.pdf ; Lewrene K. Glaser and Gary D. Thompson, Selected paper to be presented at the American Agricultural Economics Association Annual Meeting, Augus t 8

- 11, 1998, Nashville, Tennessee; supply price elasticity is from Benjamin Onyango and Sanjib Bhuyan, A supply response analysis of the fruits and vegetables sector in New Jersey, Department of Agricultural, Food and resource Economics, Rutgers, the Stat e University of New Jersey, New Brunswick, NJ 08901

- 8520, 2001, http://aesop.rutgers.edu/~bhuyan/coop/fvreport2.pdf

.and a fall in U.S. production of 1,840 MT . Consumption is estimated to increase by 1,660 MT

. Producer welfare c ould decline by $ 2.84 million and consumer welfare c ould increase by $ 3.25 million, yielding an annual net welfare gain of about $ 410,000

. Table 2: Estimated i mpact on the U.S. e conomy of fresh French bean i mports from Kenya, for t hree i mport s cenarios Assumed annual French bean imports from Kenya, MT 800 1 1,750 2 3,500 3 Change in U.S. consumption, MT 379 830 1,660 Change in U.S. production, MT

- 421

- 920

- 1,840 Change in the wholesale price of green beans, dollars per MT - $2.82

- $6.28

- $12.35 Change in consumer welfare $742,000 $1,624,000 $3 ,253,000 Change in producer welfare

- $652,000

- $1,425,000

- $2,844,000
Annual net benefit $90,000 $199,000 $410,000
Note: The baseline data used are seven

- year annual averages for production, consumption, prices, exports and imports, as reported in the l ast row of table 1. The demand and supply elasticities used are

- 0.596 and 0.75, respectively (see footnote 7). 1 The amount Kenya expects to export to the United States (800 MT). 2 An amount equal to about 5 percent of Kenya’s total exports (1,750 MT). 3 A n amount equal to about 10 percent of Kenya’s total exports (3,500 MT).
In all three scenarios, consumer welfare gains outweigh producer welfare losses. Even in the third scenario in which we assume Kenya would export 3,500 MT to th e United States , the decline in producer welfare represents less than 1 percent of revenue received from the sale of domestically produced fresh beans

. 8

8 $2.92 million divided by $306.3 million (average cash receipts betwee n 2004 and 2009 for fresh beans) equals 0.95 percent. Source: USDA/ERS, Farm Income, http://www.ers.usda.gov/Data/farmincome/FinfidmuXls.htm

. The price decline in this third scenario is about 1 percent of the average domestic price . The price and welfare effects a re likely to be even smaller than are indicated by the three scenarios, to the extent that fresh French bean imports from Kenya would displace fresh bean imports from other countries.

### Potential Impact on Small Entities
The Small Business Administration (SB A) has established guidelines for determining which firms are to be considered small under the Regulatory Flexibility Act. This rule could affect U.S. producers of fresh green beans (classified under Other Vegetable (except Potato) and Melon Farming, NAIC S 111219) and importers of fresh beans

. Vegetable

- producing establishments are classified as small if their annual receipts are not more than $750,000. 9

As shown in table 3, the impact of potential fresh bean imports on U.S. small

- entity producers as a result of this rule would be small. The annual decrease in producer welfare per small entity is estima ted to be about $ 64, or about 0. 7 percent of average annual sales by small entities, when we assume that 3,500 MT of fresh French beans ( the third scenario shown in table
2 ) would be exported to the United States because of this rule. The dollar decrease in welfare for most small fresh bean producers would be even smaller, given that the majority planted less than an acre in green beans in 2007, while the average area planted in green beans by small

- entity producers was 2.4 acres. According to the 2007 Census of Agriculture (most recent data on farm sizes), there were 15, 654 farms producing fresh beans in the United States. About 76 percent of these farms had less than one acre in fresh beans . Overall, 15, 539 farms ( 99.3 percent) had a total of 37,208 acres in fresh beans (about 35 percent of the total planted area) and are consid ered small, with an average of about 2.4 acres and an average annual income of about $ 9,000 in 2007. The remaining 0.7 percent of the farms planted a total of 68,688 acres planted in green beans ( 65 percent of the planted area). They averaged 597 acres, with an average annual income of about $2.2 million.

9 SBA, Small business s ize s tandards matched to the North American Industry Classification System 200 7 , Effective August 22, 200 8 (www.sba.gov/size/sizetable200 7.html).Table 3 . Estimated i mp act of p otential French bean i mports from Kenya on U.S. s mall e ntities, assuming annual im ports of 3,500 m etric t ons

Total decline in producer welfare 1 $2,844,000 Decrease in welfare incurred by small entities 2 $995,4000 Average decrease per acre, small entities 3 $26.75 Average decrease per small entity 4 $64.00 Average decrease as % of average sales, small entities 5 0.7% 1 From table 2. 2 Change in producer welfare multiplied by 35 percent, the percentage of total acreage planted by producers with annual revenues of not more than $750,000, that is, small entities. We assume that the change in producer welfare would be proportional to acreage share. 3 Decrease in producer welfare for small entities divided by 37,208, the number of acres planted by small entities. 4 Average decrease per acre multiplied by 2.4, the average number of acres per small entity. 5 Average decrease per small entity divided by $9,000, the average annual revenue per small entity.
The rule has no mandatory reporting, recordkeep ing, or other compliance requirements. Any reporting or other requirements would be those normally associated with the regular transactions involved in doing business. Based on this analysis , the rule would not have a significant economic impact on a sub stantial number of small entities.