Protectionism vs. Common Sense as Florida growers push for a trade war with Mexico

Mexican tomatoes at Mexico City produce market
A worker separates tomatoes at a market in Mexico City. The Commerce Department says it might act to end a 16-year-old trade deal governing fresh Mexican tomatoes sold in the U.S.

Election year politics and good old fashioned protectionism is at the heart of a move that could cost thousands of jobs in the United States and Mexico and force consumers to pay 3 to 4 times what they’re paying now for a pound of tomatoes.

Ignoring  warnings that it could ignite a trade war, the Obama administration last week said it planned to change its tomato-trading rules with Mexico, siding with Florida growers who complained that a glut of imports threatened to shut down the U.S. industry.

In a long awaited ruling that various industry groups in Florida had pushed for, the Commerce Department said the U.S. can change the trading rules to benefit domestic growers without violating its obligations under the World Trade Organization and rules of NAFTA.

[pullquote_right] “Mexico will respond! You should ask those who were in the Mexican cross-hairs over the trucking dispute,” Sarukhan said. “When Mexico aims, Mexico hits the target.”[/pullquote_right]

At this point, the ruling is only preliminary, but the Commerce Department has said it plans to scrap the agreement which would allow the federal government to resume an investigation into whether Mexican growers are dumping tomatoes in the United States at below-market prices.

MEXICO RESPONDS

Arturo Sarukhan, the Mexican ambassador to the U.S., said the Mexican government was “extremely disappointed” and suggested that the ruling could lead to retaliation, comparing it to a bitter fight over cross-border trucking that resulted in Mexico putting tariffs on a long list of U.S. exports.

“Mexico will respond! You should ask those who were in the Mexican cross-hairs over the trucking dispute,” Sarukhan said. “When Mexico aims, Mexico hits the target.”

Sarukhan said the Obama administration’s ruling appears to be “dictated by politics, rather than policy.” Mexican growers have accused the Florida growers of pursuing the change during the presidential campaign, seeking to leverage the importance of the state for both Obama and his GOP challenger, former Massachusetts Gov. Mitt Romney. Florida is an important swing state in the upcoming presidential election.

FEAR AND PROTECTIONISM RAMPANT

The preliminary ruling would seem to be a significant victory for the Florida Tomato Exchange which claims to represent a majority of Florida’s growers. In asking the Commerce Department for “help”, they suggested that their industry “could not survive” without government internvention.

[pullquote_right] Factoid

Producing 38 million 25-pound boxes of tomatoes last year, Florida growers had a higher-valued crop than any other state.

According to the U.S. Department of Agriculture, Florida growers accounted for nearly half – or $547 million – of the $1.3 billion fresh tomato industry in 2011. California, with a crop valued at $378 million, ranked second, followed by North Carolina, Virginia, Tennessee, Ohio, New York, New Jersey, South Carolina and Michigan, respectively.[/pullquote_right]To justify this request,  Reggie Brown of Maitland, Fla., executive director of the Florida Tomato Exchange said that in the past 16 years the agreement had been in place, domestic growers had suffered while the size of the Mexican tomato industry in the U.S. has doubled in size and tripled in value.

However, Martin Ley, executive vice president of Del Campo Supreme, a company that grew more than 200 million pounds of tomatoes in Mexico last year saw it a bit differently.

Ley said Florida growers have become “less and less and less relevant in the marketplace” as Mexican growers, unlike their U.S. counterparts, have developed new varieties of tomatoes that are tastier and more popular.

Mexican growers say they also have an advantage with lower labor costs, along with better soil, weather and growing conditions.

“They’re irrelevant because they are not evolving with the industry. The industry has evolved dramatically,” Ley said. “All they have to do is evolve and stop spending money on lawyers in Washington, D.C.”

Ley also warned that no one will win if consumers are forced to pay higher prices.

“Before the consumer pays $5 or $6 a pound for tomatoes, they will go and consume another vegetable. The consumer is going to walk away from the tomato industry. Even if Florida wins, they win nothing because they’re going to destroy the industry.”

At the heart of the dispute is a 16 year old agreement that came after the signing of NAFTA, which eliminated tariffs on imported tomatoes from Mexico and resulted in what some domestic growers claimed was a flood of tomato imports.
Mexican field tomatoes
Mexican Field tomatoes

Under pressure from the Florida growers, the Commerce Department began an investigation into whether Mexican growers were dumping their tomatoes on the U.S. market by selling at below-market prices.

Federal authorities suspended the agreement when Mexican growers agreed to a minimum price, and the so-called “suspension agreement” has remained on the books ever since and been renewed twice, in 2002 and 2008.
Scrapping the agreement now would allow the government to reopen the dumping investigation
SUPPORT AND OPPOSITION FROM POLITICIANS, INDUSTRY AND UNIONS
Members of the Arizona congressional delegation want to keep the rules intact and urged the administration not to rush into anything, particularly before the election.
Florida field tomatoes
Florida field tomatoes. Is it any wonder consumers prefer the imports over these inferior specimens?

The Florida congressional delegation as one would expect, fell into lockstep behind the Florida growers as did workers and officials from states around the country such as North Carolina, South Carolina, Pennsylvania, Virginia, Tennessee and Georgia. It is interesting to note that these states have also been where repressive and Constitutionally suspect laws have been passed against undocumented migrants resulting in mass exodus of these workers leaving crops to rot in the fields.

[pullquote_right]”Instead of changing the trade rules, the U.S. industry needs to be more efficient and make better use of technology to compete” Mexican Growers Association[/pullquote_right]The United Farm Workers Vice President  Armando Elenes said the 1996 agreement had “failed miserably” to address unfair trade practices by Mexican growers, and said that keeping it intact could threaten gains won for thousands of farm workers in recent labor contracts. A typical response to be expected from a union hack.
We don’t expect any immediate action by the Commerce Department which could take up to 270 days to proceed with this ill advised and politically motivated decision. That would put us past the November 6 Presidential election, the winning party, could of course, cause a reversal of the decision.

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