Fri September 28, 2012
Tomato Wars Ahead? U.S. Dubious On Extending Mexico Trade Deal
Originally published on Sun September 30, 2012 9:09 pm
Talk of a Tomato War is simmering in agricultural circles, after the U.S. Commerce Department issued a report Thursday that recommends ending an agreement on how fresh tomatoes grown in Mexico are sold in the United States. The issue could create an expanding trade conflict; Mexican officials have said they would retaliate to defend the tomato growers.
Produce news source The Packer says the deal "appears to be doomed." The New York Times says that Mexican officials believe tomato farmers in Florida — a swing state — might have the Obama administration's ear this election season, as they complain that Mexican tomatoes have too large a share of the U.S. market.
"We cannot sustain an agreement that is tilted very heavily in favor of the import industry," Reggie Brown, vice president of the Florida Tomato Exchange, tells The Packer.
But before fear of a price hike sends you running out to buy all the fresh tomatoes you can find, two things are worth noting. First, the Commerce ruling is only preliminary. And second, it has recommended ending the tomato agreement before. So there's a chance the agency, as well as U.S. and Mexican growers, are merely staking out strong bargaining positions at this point. The team at NPR's The Salt blog say they're following the story.
And it turns out the story is a convoluted one, because the Commerce Department's stance isn't so direct as to say, "This trade deal is now null and void."
Instead, the agency is recommending (bear with me) the end of the suspension of an investigation into Mexican exporters' "dumping" tomatoes on the U.S. market. That inquiry started in 1996, the same year it was suspended and an agreement on prices that were not "lower than fair market value" was reached.
Since then, the agreement has been slated for the chopping block several times, only to be continued under new terms after the antidumping investigation is suspended anew.
When that has happened in the past, a new minimum price per pound of tomatoes is set, for both the warm and cool seasons. For instance, the 2008 agreement lists a minimum bulk price of just over 17 cents a pound for fresh tomatoes during the summer months, and nearly 22 cents per pound from October to the end of June. Once the terms are agreed upon, dozens of tomato growers in Mexico then sign the agreement.
The Commerce Department must allow public comment on its preliminary ruling; it has until May to reach a final decision. In the meantime, U.S. retailers and exporters of goods to Mexico are hoping that their businesses don't suffer from the fallout of a potential tomato dispute.
"I think the fact that groups like Wal-Mart, (the Food Marketing Institute, the National Restaurant Association) and U.S. Chamber of Commerce have weighed in certainly puts the Department of Commerce on notice that everyone is watching," Lance Jungmeyer, president of the Fresh Produce Association of the Americas, tells The Packer.
Does it surprise you that the tomato is covered under its own trade covenants? Consider that back in 1887, U.S. tomato imports sparked what became a Supreme Court case over whether tariffs on "vegetables" also applied to what is botanically a fruit.
According to the Office of the U.S. Trade Representative, agricultural imports from Mexico to the United States totaled $15.8 billion in 2011, making America's southern neighbor its second-largest supplier. In the same year, Mexico was the third-largest market for U.S. agricultural products, at $18.4 billion.