Imports threaten Florida-grown fruits and vegetables

Update: U.S. announces review of tomato agreement
The Grower … Aug. 22, 2012

Florida tomato growers are leading an effort to stop what they say are unfair practices by the Mexican tomato industry to flood the market and undercut prices of U.S.-grown tomatoes. They charge that the practice, known as dumping, has caused significant financial harm to American tomato producers.

The amount of imported produce eaten by Americans has steadily increased in the past dozen years. In 2000, about 15 percent of vegetables consumed in the United States came from other countries.  About 42 percent of the fruit sold in this country was imported. Today, nearly half of the fresh fruit and a quarter of the fresh vegetables consumed by Americans come from other countries, according to USDA statistics.

Since 2005, vegetable imports have consistently been growing faster than fruit imports. Tomatoes, especially those from Mexico, are a particular concern for growers in Florida.

Problems began with NAFTA

Sources of imported vegetables to the U.S. by country in 2010. Source: ERS,USDA

Imports began to increase after the signing of the North American Free Trade Agreement in 1994. Mexico’s exports of tomatoes soared, and hundreds of Florida growers went out of business or started growing other crops. By 1996, Florida growers decided it was time to take action. They filed a complaint with the International Trade Commission, charging that the lower tariff on Mexican tomatoes – a result of NAFTA – had resulted in Mexican producers “dumping” their tomatoes into the United States at very low prices.  The complaint resulted in an investigation of whether the Mexican prices were causing harm to American producers.

“You’ve got to prove two things in a dumping case. You’ve got to prove that the industry is being injured, and you’ve got to have evidence that the selling price for the 12 months prior to the time that you filed the case are prices that are considered to be dumped – or selling for less than the cost of producing and shipping the product from the foreign country into the U.S.,” said Reggie Brown, executive vice president of the Florida Tomato Exchange.

While the growers’ complaint was being heard by the International Trade Commission, a preliminary ruling was issued that supported the growers’ assertion that they had been hurt financially.

That October, the U.S. Department of Commerce reached what’s known as a “suspension agreement” with the Mexican growers. The agreement suspended the dumping investigation and  the requirement that Mexican shippers pay a margin-based fee to the U.S. Treasury. That fee would be refunded with interest if later investigations showed the products were not being sold for less than market value.

Times have changed.

Net trade of fresh fruit and vegetables in the U.S. Source: FAS, USDA

“Mexico, Canada and Chile have developed particularly effective supply chains to deliver quality, highly perishable products through windows of market opportunity,” said Dr. Marco A. Palma, an agricultural economist with Texas A&M University. Cheap labor, favorable growing conditions and expanding greenhouse production systems allow Mexico and Canada to stretch their growing season, control quality and protect food safety, Palma said.

Veteran tomato producer Tony DiMare, vice president of DiMare Company, said those improved production systems have allowed Mexico to ship tomatoes almost year-round.  “January through April used to be Mexico’s window. Now that they’ve shifted to greenhouse, it’s pretty much all year,” said DiMare, a member of FFVA’s executive committee and former chairman. “They just migrate to different elevations to allow them to do that. And they are now entering into markets where they hadn’t been a factor.”

Terence Stewart, a Washington, D.C., trade attorney, said Mexican growers have benefited from the suspension agreement.

“It’s no wonder the Mexican producers want to keep the domestic industry trapped in a suspension agreement that is a deal between the Mexicans and the Commerce Department,” said Terence Stewart, a Washington, D.C., trade attorney. “While the domestic industry in the U.S. is rapidly contracting, production of fresh tomatoes in Mexico has expanded rapidly, and exports to the U.S. in 2011 are three times the value from 1996. Why hasn’t the Department of Commerce taken action to redress the problems that are so apparent in the system? It is anyone’s guess,” Stewart said.

To protect the domestic tomato industry, the Florida Tomato Exchange is leading a charge by U.S. growers in petitioning the U.S. Commerce Department and the U.S. International Trade Commission to withdraw the 1996 investigation. Growers say the suspension agreements that ensued were written using outdated information. What’s more, they say, the agreements have not been enforced. If U.S. growers succeed, they will be able to file a new dumping complaint.

“By withdrawing the original petition, we would be able to draw up a new case based on today’s information,” said Reggie Brown, executive vice president of the Florida Tomato Exchange.

Greenhouse tomatoes

The pushback has begun. U.S. growers filed the petition in June. A month later, organizations representing Mexican shippers slammed the U.S. request, saying it would hurt consumers. They and the Mexican government rejected the argument that American growers have a right to withdraw the 1996 complaint.

“The Mexicans have been going to the customers [buyers] and saying the Florida growers are doing this because they have inferior product and Mexico’s greenhouse product is better,” said DiMare. “They’re telling supermarkets and major restaurant chains that Florida is desperate. It’s far from the truth, but that’s the message they are sending to our customers.”

Tomato packers in Nogales, Ariz., told a local television station that the area, which packs millions of pounds of Mexican tomatoes each year, would suffer job losses if those imports dropped off. Lance Jungmeyer, president of the Fresh Produce Association of the Americas, predicted that Mexico would retaliate by hiking fees on U.S. products shipped into Mexico. The packers have contacted the Commerce Department and encouraged their Congressional delegation to resist the Florida-led efforts.

No decision yet by the Commerce Department

Dr. Marco A. Palma, an agricultural economist with Texas A&M University, will share his perspective on trade and other trends in the issues forum, "The Worldwide Economics of Produce" at FFVA 2012, Sept. 19-21 in Naples. Learn more about the convention and register at ffva.com/ffva2012.

The Commerce Department has not made a decision whether to allow the U.S. growers to end the original investigation. “We petitioned Commerce on June 20,” Brown said. “Historically, these kinds of petitions are approved in 30 days. We’re approaching 60 days. It’s not surprising seeing as we’re threatening one of the largest exports in the Mexican economy.”

DiMare said there is uncertainty as to what the Commerce Department will do. “We’ve heard they’re reaching out to the rest of the domestic growers,” he said. “They’ve kind of extended the process… to try to gather their opinion as to whether they are supportive or not of the discontinuation of the suspension agreement. So that’s going to take some time.”

Even if the suspension agreement is ended fairly soon, domestic growers’ problems won’t immediately be solved.

“People would have to adjust immediately,” DiMare said. “And that’s not going to happen because we’re getting in late in the game. We’re getting ready to plant the first acreage in Florida for the fall season. With no weather issues to lower the volume produced, we’re in for a train wreck. We can do all the promotion and marketing in the world and it won’t make a difference. There’s only X amount of demand.”

Trade attorney Stewart is adamant about the decision the Commerce Department should make. “Don’t pretend that facts from 1995-96 create the litmus test of fair trade.  Florida’s farmers have asked for the opportunity to have our government look at the facts today,” he said.

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