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FPAA study: Tomato prices could double if punitive tariffs placed on Mexican imports

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, and the Mexican government, on behalf of Mexican producers, has been attempting to re-negotiate the agreement to the satisfaction of all concerned. A comment period, prior to the department making a decision, ends Monday, Jan. 28.

On Thursday, Jan. 24, 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.

According to a Jan. 24 FPAA press release, 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 at the request of a group of Florida growers.

"If Mexican tomatoes are forced to withdraw from the U.S. market, prices for popular varieties such as hothouse tomatoes-on-the-vine would double to nearly $5 a pound from a national average of about $2.50 a pound, and grape tomatoes would rise to nearly $5.50 a pound, according to an economic impact analysis by the Nielsen Perishables Group for the Fresh Produce Association of the Americas."

Roma prices could go up more than 200 percent, according to the study.

In a conference call held the morning of Jan. 24, Lance Jungmeyer, president of the FPAA, said that the study "was brought forth because we are concerned about our ability as U.S. distributors to be able to sell Mexican tomatoes, with the trade dispute that is going on between the United States and Mexico."

Mr. Jungmeyer said that a scenario in which "100 percent of Mexican tomatoes are kept from the marketplace" is "a very real possibility in the case of prohibitive anti-dumping duties" being considered by Commerce.

In an interview following the conference call, Reggie Brown, manager of the Florida Tomato Committee, told The Produce News that he did not refute the study's findings, but he did call them into question. "If I were doing a study and those were the results I wanted, that is the results I'd get," he said. "And that is what they got. You generally get the answers you want when you purchase studies."

More to the point, Mr. Brown stressed that retail price increases are not the issue, rather the issue is whether or not Mexican growers are violating anti-dumping laws — meaning whether they are exporting their tomatoes to the United States at prices below their cost of production.

Signatories to the anti-dumping agreement, representing more than 85 percent of the Mexican growers who export to the United States, are prohibited from selling their tomatoes in the United States below a reference price or "floor price" specified in the suspension agreement, which is approximately 21 cents a pound.

But the issue is not whether that agreement has been violated, Mr. Brown said. Even prices above the reference price could be considered dumping if they are below cost of production.

"It remains to be seen whether the floor price under the current agreement is less than the cost of production in Mexico, since the Mexican industry has not been willing, to my understanding, to bring forth production cost data for Commerce to examine, to test that question," he said.

Asked whether the situation would change if Mexico did submit data demonstrating its production costs were below the reference price, Mr. Brown replied, "That is a question that you would have to ask the Commerce Department. They are the folks that administer the law. We are only asking for fair treatment under the law and for the law to be administered as it is written, protecting domestic industries from dumped product."

Asked what the Florida tomato industry's position would be on that question, he said, "I can't speculate."

Mr. Brown added that he considers it "unfortunate that all phone calls [regarding the suspension agreement dispute] come to Florida, because the issue is a domestic tomato industry issue, not a Florida issue."

He said that petitions to Commerce requesting termination of the suspension agreement are from a national coalition representing 90 percent of domestic producers, and "Florida growers don't represent 90 percent of the domestic tomato industry, we are only part of that process."

It is "obvious from the vigor with which the industry in Mexico has defended the current suspension agreement they obviously believe that they are highly favored by the agreement, since they are the only group in the history of the country that has ever defended their right to stay in a suspension agreement," Mr. Brown said.

"U.S. growers and their workers ... are also operating within trade laws, and we deserve a fair chance to compete in a marketplace where the trade is free and fair," Mr. Brown added. "If, in fact, the Mexican industry is abiding by those trade laws, then so be it. That is about all there is to say in this thing. Ultimately we have to figure out, when the Mexicans come forth with real data, whether they are, in fact, doing what they claim they are doing, and that is producing tomatoes very cheaply. They are certainly selling them very cheaply. The rest of it is just pure rhetoric, hyperbole."

During the press conference, Mr. Jungmeyer noted that "the key time frame we are talking about here is December through May. That is when the United States and Mexico are most in competition for tomatoes," and during that time, "Florida is the major competitor and the major U.S. winter growing region for tomatoes."

Florida's tomato growers "say that they want a free market," Mr. Jungmeyer continued, "but we have also heard them say that they want to start a new anti-dumping investigation. We expect that if the suspension agreement were terminated as the U.S. Department of Commerce is contemplating right now, within a short period of time we would see a new round of anti-dumping investigations ... and we feel that is unfounded."

The hundreds of growers in Mexico who produce tomatoes for export to the United States would not have been able to stay in business for the last 16 years if they had been selling below their cost of production, he added.

Mr. Jungmeyer also cautioned that "if this [suspension agreement] is not renegotiated to the satisfactory of both parties — the Department of Commerce and the Mexican growers — it will put the United States and Mexico on a collision course that would be destructive to trade all around.

"We have seen signals from the Mexican government that they would not take a protectionist action lightly," Mr. Jungmeyer added.