The U.S. Department of Commerce, at the behest of U.S. tomato producers, is currently contemplating discontinuing an anti-dumping investigation suspension agreement under which the Mexican tomato industry has been operating since 1996. The Mexican government, on behalf of Mexican producers, has been attempting to re-negotiate the agreement to the satisfaction of all concerned. As of Feb. 5, a tentative agreement was in place that could take effect March 4 (see story on page 1).
In a Jan. 25 The Produce News article titled “FPAA study: Tomato prices could double if punitive tariffs placed on Mexican imports,” it was stated that the Fresh Produce Association of the Americas in Nogales, AZ, which is not a party to the negotiations but whose members are importers and distributors of Mexican-grown tomatoes, announced the results of a tomato-pricing study showing the effects that discontinuance of the suspension agreement and imposition of punitive or restrictive tariffs are likely to have on retail tomato prices in the United States.
Mr. Green said that the “new pricing study finds that American consumers are facing a ‘tomato cliff’ that will result in huge premiums for fresh tomatoes at the supermarket, or else they will be forced to go without fresh tomatoes if the U.S. terminates a trade agreement with Mexico.
If Mexican tomatoes are withdrawn from the U.S. market, hothouse tomatoes-on-the-vine could double in price, and Roma prices could go up more than 200 percent.
The implementation of NAFTA on Jan. 1, 1994 eliminated a U.S. import tariff on Mexican tomatoes. Almost immediately U.S. tomato producers for the winter fresh market accused Mexican producers of dumping tomatoes at low prices and driving domestic producers out of business. The Nov. 1, 1996 agreement suspended an investigation by the Commerce Department that began as a result of a dumping complaint filed by tomato growers in the United States against Mexican producers. A 2008 agreement review established a revised floor price for Mexican tomatoes at $0.172 per pound in the summer and $0.216 per pound in the winter.
According to an Oct. 4, 2012 article titled “U.S. Tomato Dispute with Mexico,” by Ross Korves, published in Truth about Trade & Technology, U.S. growers argue they cannot compete at those prices and wanted the deal terminated, not renegotiated. They believe it no longer is effective in protecting them from unfair competition from Mexico. Termination would allow them to file a new anti-dumping petition for new tariffs.
The Commerce Department instead launched a “changed circumstances” review to judge the level of support in the U.S. tomato industry for the suspension agreement. A final decision on the preliminary decision must be made by May 13, 2013.
According to analysis by the Economic Research Service of USDA, tomato prices in the United States and Mexico this past winter were depressed at $0.30 per pound because of good crops in both countries. Winter freezes in parts of the two countries in the previous two years had resulted in winter tomato prices of $0.80 to $1.00 per pound.
The expansion in greenhouses and other protected facilities in Mexico also reduces weather uncertainties in production. But the suspension agreement would also affect Canadian greenhouse tomato producers because the majority of greenhouse operators also produce tomatoes in Mexico during Canada’s off-season.
Jim DiMenna, president of JemD Farms in Leamington, ON, told The Produce News that Canadian tomato producers hold this issue among the highest on their radar.
“U.S. field producers are attempting to set a higher minimum on Mexican tomato prices, and we’re OK with that,” said Mr. DiMenna. “A fair set minimum may resolve this problem. But to set a barrier or a huge tariff, which would cause prices to double in the U.S., would be a terrible mistake.
“The amount of tomatoes from Mexico that are consumed in the U.S. is huge,” he continued. “Some in the greenhouse industry in Canada may see this as an opportunity, but that mindset has very short vision. We are concerned because we are also growing tomatoes in Mexico, of course. We can alternatively bring them into Canada, but that opens a floodgate of product into Canada that would affect the Canadian market.”
He reiterated that it would be a short vision to block a border.
“Trade embargoes are not healthy in my opinion,” he said. “We need open markets and open borders for trade between our countries, not restricted markets. We all need access. Mexican tomatoes, including those produced in greenhouses, need access to the American market, just like Canada needs access to U.S. markets.”