We’ve written several pieces on the contretemps between the Mexican tomato growers and their US importers versus the Florida tomato growers:
Pundit’s Mailbag — Florida Versus Mexican Tomatoes: Protectionism Isn’t The Answer
The latest effort to resolve the dispute has come from the Mexicans. The New York Times titled its piece, Mexican Tomato Growers Offer New Trade Deal:
Hoping to stave off a brewing trade war, Mexican tomato growers said on Thursday that they would agree to significant increases in the minimum price at which their products can enter the United States and to establish a system to bolster compliance and enforcement.
Their offers come as the Commerce Department considers whether to end a 16-year-old agreement between the United States and some Mexican growers that American tomato farmers say keeps the price of Mexican tomatoes so low that they can barely compete.
To keep the agreement in place, the Mexican growers have proposed raising the minimum price at which they can sell a pound of tomatoes in the United States by 18 percent to 25 percent, depending on the type of tomato. And they pledged to extend the agreement to all growers in Mexico who export to the United States from the roughly 85 percent who are covered by it now.
Doing that will help increase compliance with the agreement and make enforcement easier, said Martin Ley, a member of the Mexican delegation negotiating with United States trade officials and vice president of Del Campo Supreme, a family business that exported $60 million in tomatoes to the United States and Canada last year.
“This new agreement will keep prices from hitting the floor and will keep the tomatoes that consumers in the U.S. prefer in the marketplace under a framework we can operate in,” Mr. Ley said.
The current agreement sets a floor price of 21.69 cents a pound for winter tomatoes. Under the new terms the Mexicans are offering, the minimum price for winter tomatoes would be 25.68 cents to 27.02 cents a pound, depending on the variety of the tomato.
Mexico has threatened to retaliate if the agreement ends, and more than 370 United States businesses and trade groups have sent letters to the Commerce Department warning of the costs of a trade war. Producers of things as diverse as potatoes and pork remember well the price of the last trade war with Mexico over trucking, when stiff tariffs ate into revenue and profits.
“Last year, the U.S. exported more to Mexico than to Brazil, Russia, India and China combined,” Patrick Kilbride of the United States Chamber of Commerce said at a news conference that businesses held this month to urge the Commerce Department to maintain the agreement.
The Florida tomato growers are not party to the agreement, which is between the Mexican growers and the Commerce Department. Reginald Brown, executive director of the Florida Tomato Exchange, a trade group, said he had not heard anything about the new Mexican proposals beyond what a reporter told him.
“From the grower community, there is no interest at all in sustaining an agreement,” Mr. Brown said on Thursday. “The only people clamoring to sustain it are the people it is supposed to be policing.”
The Mexican growers have long contended that the Obama administration signaled that it was considering ending the agreement to soothe the ruffled feathers of farmers in Florida, a crucial swing state in the presidential election.
The Mexican growers also note that the official presiding over the division of the Commerce Department that is handling the negotiations, Francisco Sanchez, is from Florida. Mr. Sanchez, who is under secretary of commerce for international trade, was one of President Obama’s top fund-raisers in 2008, collecting more than $500,000 from family members and friends.
“We are 100 percent sure that if this proposal is rejected, it cannot be rejected for anything other than political reasons,” Mr. Ley said.
Obviously the Mexicans value stability and guaranteed market access more than holding out for free trade. They may not even mind having higher minimum prices so whatever they can sell in the US is more likely to be profitable.
Whether the Florida growers will go along is questionable. Maybe it is all a negotiating tactic but, also maybe, they know the US laws regarding dumping — which require no proof of government subsidy — are actually in Florida’s favor.
Under US law, Florida would probably win an anti-dumping lawsuit and there are indications that Florida growers would like to go for the “Full Monte” and win a big anti-dumping case against Mexico.
It is difficult to have much to say about any of this. Our inclination would be to say that if a Florida tomato grower wishes to ship his tomatoes to London, Tokyo or Mexico City, he should be able to send them on free open consignment to the agent of his choice.
Consistency demands that we also advocate that a grower of tomatoes in Belgium, Israel or Mexico have the same freedom to sell in New York, Chicago or Seattle.
So this whole battle is simply political.
Inherently, Florida has the edge because they are a domestic industry and we doubt much will happen to disadvantage them before the election.
Long term, though, we have two concerns for our friends in Florida:
First, it is one thing to press what advantages one can get politically. Life is tough, and leveraging such opportunities may well be the smart thing to do. But the path is not sustainable. So if one is going to get the benefit of tariffs or negotiated agreements to restrict competition, one needs to simultaneously use that advantage to prepare for when one loses that political edge.
It is hard to understand why so few — by our count one — Florida tomato growers own physical assets in Mexico. It has been obvious for decades that this is the way the business is going… why would companies not move to keep their customers?
We also wonder why more Florida tomato production has not shifted away from the gas green tomatoes. Indeed, we wrote in these piece — UglyRipe Tomatoes Now Available Year-Round and Pundit’s Mailbag — Ugly Or Ugli? That Is The Question — about how Florida tomato growers turned on Procacci Brothers — one of their own — when they had the gumption to try something innovative with its UglyRipe tomato.
Second, Florida growers should be wary about customer reaction. Customers today are not like they were 20 years ago. Wal-Mart, Ahold, Delhaize — all big customers for Florida tomatoes — also procure globally and probably won’t cotton to the idea that a group of vendors rose up to try to restrict their procurement options.
We wrote a great deal about Jim and Theresa Nolan and their dispute with Ocean Spray. You can read about it all here. To this day, there are many retailers who won’t buy Ocean Spray fresh cranberries because they don’t want to be associated with that kind of behavior.
Perhaps Florida may find it succeeds in blunting competition only at the price of alienating the industry’s very best customers.
You can count on those selling Mexican product to make exactly this argument.
