Trade rift with Mexico unsettling for Northwest shippers
by Lora Abcarian | April 01, 2009
Officials from the Pacific Northwest remain in a wait-and-see mode to determine what effect a 20 percent tariff imposed March 11 by the government of Mexico will have upon American exports. Among the commodities affected are pears, cherries, apricots and frozen potatoes.
Jeff Correa, international marketing manager for the Pear Bureau Northwest in Milwaukie, OR, said that the announcement "set off a wave of panic and concern." A pilot program that allowed Mexican truckers to move product along American roadways was curtailed, paving the way for the resulting Mexican tariff.
The program was negotiated as part of the North American Free Trade Agreement, and Mr. Correa said that the program's cessation constitutes a violation of NAFTA. The recently imposed tariff is widely regarded as a retaliatory measure.
"Mexico is our largest trade partner," Mr. Correa said of the country's importance to the region's pear industry.
Historical data compiled by the bureau show that the United States exports approximately $60 million in pears to Mexico annually.
Pears from the Pacific Northwest account for 90 percent of overall export volume. Globally, the region accounts for approximately 95 percent of all pear exports from the United States.
Data from previous shipping seasons indicate that between 50,000 and 60,000 boxes of pears are typically exported to Mexico on a weekly basis during March. Following the announcement, Mr. Correa said that pear movement stopped.
[The week of March 23] "some of the bigger importers started buying but in smaller quantities," he told The Produce News March 31.
He went on to say that the importers are nervous about paying the 20 percent import tariff only to see it dropped by the time product is moved in Mexico. "That's the biggest uncertainty," Mr. Correa noted. "It creates a cautious posture on the part of importers."
President Obama will be traveling to Mexico this month, and Mr. Correa hopes that action will be taken to resolve these issues. The Northwest Horticultural Council, located in Yakima, WA, is urging officials to reach a compromise.
"We're hearing that [the Department of Transportation] and Congress are working on a new program to replace the one canceled in the economic stimulus plan," Mr. Correa said.
Matt Harris, director of trade for the Washington State Potato Commission, said that the tariff would not affect the export of fresh potatoes by the Evergreen State.
Mr. Harris, who was in Washington, DC, at the end of March to discuss a number of trade issues, said that he had a chance to look at the tariff schedule. Fresh potatoes were not included on the list, but frozen potatoes did not fare so well and are subject to the new tariff.
According to Mr. Harris, the value of frozen potatoes exported to Mexico by the United States is $83 million, of which $40 million comes from Washington.
"So you can see there is a significant impact," he told The Produce News. Mr. Harris voiced further concern that Mexico may look to Canada, a country not subject to Mexican tariffs, to fill demand. "It's making our product less competitive in that market," he said of the situation.
The Northwest Horticultural Council indicated that Mexico buys about 1 percent of the cherries produced in the region. This represents approximately $2 million in annual cherry sales.
The council also said that Mexico buys 10 percent of Washington's annual apricot crop.
"The tariff will have a direct impact on [apricot] pricing," said Roger Pepperl, director of marketing for Stemilt Growers based in Wenatchee, WA. "I think we'll be OK."
He said that crop size and demand could affect f.o.b., and he is anticipating greater demand for apricots this season.