The Commerce Department is expected to decide Tuesday to end the U.S.-Mexico tomato agreement, giving Florida tomato growers a long-sought victory and fueling another potential U.S. trade dispute with its southern neighbor.
The department gave Mexico a 90-day notice in February that the U.S. planned to withdraw from the most recent agreement negotiated between the two countries in 2013 and restart an investigation into allegations by Florida tomato growers that their Mexican counterparts are selling goods below fair market prices.
If the department ends the agreement, the International Trade Commission would cancel a vote scheduled for Thursday as part of a five-year review of the accord. A department determination that Mexican products have been sold below fair market value would result in the ITC investigating whether the imports injured U.S. growers, according to a Commerce Department release in February. Duties would be imposed if the ITC finds financial injury.
Mexican tomatoes are a major agricultural export to the U.S. Jesus Seade, the Mexican Foreign Ministry undersecretary for North America, has raised concerns about the Commerce Department scrapping the agreement.
It is possible a new agreement could be negotiated after the current accord is terminated, but Michael Schadler, executive vice president of the Florida Tomato Exchange, said growers in his state are open to a replacement only as long as “it is adequately structured, but so far that has not happened.”
“Barring a new and much improved suspension agreement, we welcome the resumption of the anti-dumping case because the various suspension agreements over the last 23 years have never worked,” Schadler said in an email.
“We believe the record is clear and that Mexican dumping has caused substantial injury to domestic tomato growers,” Schadler said. “A dumping order on Mexican imports will help protect domestic tomato producers from further damages.”
Florida growers and officials have told Congress and the ITC that their state has suffered the most under the agreement first negotiated by the Clinton administration in 1996. Florida and Mexico’s growing and harvest seasons overlap, putting produce farmers in each country in head-to-head competition. The Florida tomato industry says that competition has cost it $3.4 billion to $6.8 billion per year in lost sales.
Tomato growers in other U.S. regions have different growing seasons that do not put them in competition with Mexican imports. Nogales, Ariz., for example, has become a major packing and distribution area for Mexican produce. Arizona Gov. Doug Ducey and Sen. Martha McSally, both Republicans, have argued for keeping the tomato agreement in place.
The Florida Tomato Exchange and Florida Tomato Committee have said the series of pricing agreements failed to ensure that Mexico did not undercut U.S. growers. The groups unsuccessfully lobbied for provisions in the renegotiated North American Free Trade Agreement (NAFTA) to improve trade enforcement procedures for perishable products such as tomatoes.
The organizations say the Commerce Department’s anti-dumping and subsidy investigation should help curb the flow of Mexican tomatoes into the U.S.
But importers of Mexican tomatoes say Florida and other growers lost sales because Mexico offers a variety of fresh tomatoes that appeal to consumers and commercial users. The U.S. imports $1.2 billion a year in tomatoes, the bulk of them from Mexico. Mexican tomatoes constitute 54 percent of all tomatoes sold in the U.S., according to an Arizona State University study that warned of potential price increases of 40 percent to 85 percent for the four most popular Mexican imports: tomato-on-vine, vine ripe, Roma, and field or beefsteak. The increase would depend on the size of any duties the Commerce Department imposes.
The report was commissioned by the Fresh Produce Association of the Americas, which represents fruit and vegetable importers.
Lance Jungmeyer, the association’s president, said importers and consumers will see tighter supplies of tomatoes and higher prices if Commerce levies anti-dumping and subsidy duties on Mexican tomatoes.
“The X-factor for us is right now is we don’t know what happens on May 8. If duties go in effect, do we see tomato volumes drop because people have already been planning for this,” Jungmeyer said, adding that Mexican farmers may have decided to plant fewer acres with tomatoes because of the possibility of the U.S. ending the pricing agreement.
“There will be a lot of uncertainty and a lot of folks scared about the businesses they’ve built,” Jungmeyer said.