As some U.S. tomato growers celebrate the Department of Commerce’s decision to begin the process that could terminate the 2019 tomato suspension agreement with Mexico, border trade advocates and importers are sounding the alarm over potential fallout.
Lance Jungmeyer, president of Fresh Produce Association of the Americas, and Garrick Taylor, spokesperson for the Border Trade Alliance, say the move could significantly impact fresh tomato imports, raising prices for American consumers and creating new complications for an already complex cross-border supply chain.
American consumers can anticipate that prices on fresh tomatoes from Mexico will go up when the U.S. exits the agreement, the Border Trade Alliance, an organization of public and private stakeholders that promotes cross-border trade, said in a news release.
“The tomato suspension agreement has provided a reliable structure for trade in fresh tomatoes between the U.S. and Mexico that the trade community has strongly supported,” Border Trade Alliance President Britton Mullen said. “More than 400 businesses have written to the Department of Commerce urging maintenance of the tomato suspension agreement because there are too many jobs and there is too much economic activity connected to the tomato trade to sacrifice them for certain regional agricultural interests’ attempts to tilt the rules of trade in their favor. Withdrawing from the tomato suspension agreement will not only put upward pressure on prices, but it is also inconsistent with [U.S.-Mexico-Canada Agreement] during a time of tremendous upheaval in the North American trade marketplace.”
The Border Trade Alliance said it has advocated for a healthy bilateral trade relationship with Mexico, which is essential to the continued growth of the American economy, while also ensuring consumer access to affordable fresh produce, especially in cold-weather months. Tomato imports alone are responsible for more than 30,000 U.S. jobs and support a supply chain that generates nearly $3 billion in U.S. gross domestic product.
The U.S. is Mexico’s top agricultural trade partner, exporting $18 billion worth of products, which represents about 70% of Mexico’s agri-food imports. The agriculture sector is critical to the overall two-way goods and services trade between the two countries that supports an estimated 5 million U.S. jobs, the release said.
Jungmeyer explained that Mexican growers have 90 days until July 14 to reach a new agreement, after which duties would apply.
The effect on prices will be different over time, Jungmeyer said, and will happen in two stages.
“At first, we would see it go to an open market, and who knows how the market behaves over time,” Jungmeyer said. “As duties accumulate, people don’t have enough money to plant next year’s crops. So, by year two, we see quite a bit less volume, and normally when there’s a decrease in volume, there’s an increase in pricing.”
Jungmeyer said the effect will be felt by growers, importers, retailers and, ultimately, consumers.
“This price has to be passed on,” Jungmeyer said. “It can’t be charged back to the grower or anything. A lot of companies that have year-round contracts are going to be renegotiating those in order to make sure they can fill those contracts. As a result, retailers are going to have to raise prices. Restaurants are going to have to raise prices or adjust menu output, for example, by putting fewer tomatoes on a salad or fewer slices on a sandwich.
“Even so, it still has the effect of reducing the overall sales of that item,” Jungmeyer continued. “That’s just some of the changes we’ll see and consumers will probably see that and start wondering why tomatoes are costing more than they used to.
“It’s really between the Mexican growers and the U.S. Department of Commerce to negotiate, but that’s what we’re counting on happening, Jungmeyer added. “Because I don’t see that America can decide to jack up tomato prices by 30% or 40% or more, and I don’t see the consumers will stand for that.”
Regarding the consumer impact, Taylor said American consumers like fresh produce year-round, and in particular, fresh tomatoes imported from Mexico.
“[It’s] something the American consumer palates like — and they also enjoy year-round access to healthy fruits and vegetables in the produce section of their grocery stores,” Taylor said. “When you limit the availability of fresh tomatoes in the produce section, you’re putting upward pressure on prices. So, as Lance has alluded to, you’re going to see the effects of these policies at the checkout stand.”
Taylor said other representatives have omitted the impact to the consumer in their responses.
“I’ve read what the Florida Tomato Exchange has to say, and a post put out by the International Trade Administration. Nowhere is there a reference to the effect on the American consumer,” Taylor said. “Never mind, as Jungmeyer alluded to earlier, that there are also thousands of jobs that are tied to the import of fresh tomatoes from Mexico, and so there will be a knock-on effect there as well.”
Jungmeyer rebutted a statement from a Florida Tomato Exchange official that said claims of higher consumer prices resulting from the termination are “a false narrative.”
“If there’s a tax on tomatoes — and we should call it a tax — people are going to pay that higher price,” Jungmeyer said.
Taylor summed up the Border Trade Alliance’s thoughts on the tomato suspension agreement.
“I’d like to underline the point we made about the jobs tied to the import of fresh tomatoes from Mexico and the effect on selection and variety for the consumer, never mind that the consumer likes the taste of fresh tomatoes from Mexico,” he said.
“[The Alliance] has been a longtime supporter of the maintenance of the tomato suspension agreement,” Taylor said. “We believe it has provided a reliable, predictable framework for the important pricing of imported tomatoes to this country, and this decision announced [recently] by Commerce is disappointing, to say the least.”
Jungmeyer added one final comment on the Florida Tomato Exchange claim that since the first agreement, Mexican tomato imports have surged nearly 400%, capturing over 70% of the U.S. market, and that during the same period, the U.S. industry’s market share has dropped from 80% to 30%.
“They’re talking about since 1996, and there’s a very important thing that has happened since then,” Jungmeyer said. “Back in 1996, both Florida and Mexico were selling predominantly round field tomatoes. Since that time, Mexico shifted almost exclusively to greenhouse vine-ripened tomatoes, where Florida still sells field-grown mature green tomatoes — and that’s the reason for their loss of market share. So, they’re trying to get protection for what is essentially an obsolete industry. They could adapt.”
Jungmeyer continued, “Our suggestion is, rather than having duties, the government should offer them research and development, help find ways to produce better varieties that the consumer wants, rather than increasing the price for everybody.”
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