With negotiations between Mexican tomato growers and the U.S. Commerce Department ongoing and apparently seeing some progress, the rhetoric about the consequences of dropping a regulated price floor on imported tomatoes shows no signs of letting up.
Consumers could face sharply higher prices and reduced supplies if the U.S. government terminates a price agreement with Mexican tomato growers and then imposes antidumping duties, according to a new pricing study funded by Mexican tomato interests.
In September, in response to requests from the Florida tomato industry, the Commerce Department announced a tentative plan to terminate a minimum price suspension agreement with Mexican tomato growers that has been in place since 1996.
Since then, a variety of U.S. business, retail and food-producing organizations, including Wal-Mart Stores, National Restaurant Association and Food Marketing Institute, expressed support for retaining the U.S.-Mexico tomato trade pact. The Commerce Department has yet to take final action on terminating the suspension agreement but could do so by spring.
Study shows threat
Adding to the threat of a trade war is a new economic analysis from the Nielsen Perishables Group, paid for by Nogales, Ariz.-based Fresh Produce Association of the Americas, which represents importers of Mexican produce.
The study — at http://savemytomato.com — presents a sobering scenario based on the total or partial withdrawal of Mexican tomatoes from the U.S. market.
The study also looks at the potential market effect if U.S. tomatoes were removed from the market by a weather event at the same time Mexico was excluded.
The study is based, in part, on what happened in a wake of a February 2011 freeze, which greatly reduced Mexican tomato production.
“We found that if Mexican imports are excluded from the U.S. market, retail prices during the December-May timeframe can be expected to rise by 97.9% for hothouse round, 96.9% for hothouse vine, 61.3% for grape tomatoes, 217.2% for roma, and 52.1% for field tomatoes,” Tim Richards, Morrison Chair professor of Agribusiness at Arizona State University, wrote in the report.
A teleconference about the new research Jan. 24 featured several speakers supporting the current tomato agreement, including Lance Jungmeyer, president of the FPAA; Rick Van Schoick, director of the North American Center for Transborder Studies at Arizona State University; Patrick Kilbride, senior director of the Americas for the U.S. Chamber of Commerce; and Jaime Chamberlain, president of JC-Distributing, Nogales.
“The study is brought forth because we are concerned as U.S. distributors about the ability to continue to be able sell Mexican tomatoes with the tomato trade dispute that is going on between the U.S. and Mexico,” Jungmeyer said.
Reggie Brown, executive vice president of the Maitland-based Florida Tomato Exchange, said he can’t imagine a scenario where Mexican tomatoes would be excluded from the U.S.
“If you make wild assumptions, which they do in their study, you get wild results,” Brown said. “Nothing in any of these issues would ever prevent Mexican product from entering the country. The issue is only the product entering the country under a free and fair-traded environment.”
Scaring the public with scarcity or food price spikes is unfortunate, Brown said.
“FPAA has been fairly consistent in taking extreme positions all the way through this issue, including threatening and intimidating the produce industry with trade wars, internationally decreed sanctions, all other kinds of things,” Brown said.
The scenario of Mexican tomatoes disappearing from U.S. grocery shelves is a real possibility, Jungmeyer said, if punitive or prohibitive antidumping measures are applied by the U.S.
Given that outcome, he said consumers could see prices double or more than double September through May.
Noting that the economic model would push prices more than $5 per-pound for some tomato varieties, Jungmeyer said the U.S. diet would suffer at a time when government agencies are urging greater produce consumption.
Jungmeyer told reporters that distributors of Mexican produce are fearful of antidumping duties on Mexican tomatoes.
“We feel (dumping charges) are unfounded. Growers haven’t been selling to the U.S. market for years by selling below the cost of production,” Jungmeyer said.
Jungmeyer said distributors suspect that if the tomato suspension agreement is terminated, as the Department of Commerce is contemplating, a new round anti-dumping investigations would begin shortly thereafter.
“If this is not renegotiated to the satisfaction of both the Department of Commerce and Mexican growers, it will put the United States and Mexico on a collision course that would have disruptions in trade all around,” he said.
Jungmeyer said he was not privy to how close the two sides are to a satisfactory solution or what revised minimum prices levels are being considered.
Kilbride said the U.S. and Mexico can’t let the trade dispute get in the way of their important trade relationship.
Chamberlain said the suspension agreement has been used successfully for 16 years and shouldn’t be abandoned.
In particular, he said potential preliminary antidumping tariffs following the end of the suspension agreement and put in place during a dumping investigation would have a chilling effect on importers. For example, he said the Department of Commerce could initially create a 40% preliminary duty but 10 months later raise it to 50%. That would create cash flow problems for importers because they would have no way to get the extra margin needed to pay the government, Chamberlain said.“It would be impossible to pay,” he said.
A Commerce Department spokesman, speaking on condition of anonymity, said Jan. 24 that agency officials are talking with Mexican growers and exporters on the suspension agreement, with talks taking place in Washington, D.C.
Terence Stewart, managing partner in Stewart and Stewart, Washington, D.C., represents domestic growers seeking a changed-circumstance review with the Department of Commerce.
Stewart said there are three proceedings relating to the tomato dispute.
One process, with no set timeline, is the consultation between Mexican producers who are subject to the suspension agreement and the Commerce Department.
Another process is the changed-circumstances review that the Department of Commerce initiated. That process has a 270-day deadline from when it was initiated in August.
“At the moment, we’re on a schedule where factual submissions have been completed and briefings start next week and the week after,” he said Jan. 23. No date has yet been set for a hearing, he said.
The last part of the process is a sunset review of the suspension agreement, which has seen two postponements by the Department of Commerce, Stewart said.