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Protectionist Stance
Could Do Harm To Trade

Sometimes timing just doesn’t work out. One of the most serious problems facing the industry is an outbreak of protectionism that is threatening to block fresh produce exports.

The US has never honored its NAFTA commitment to allow Mexican trucks and drivers to make cross-border deliveries to US destinations but, at least, the US had appeased the Mexicans by running a teeny pilot program of only 103 trucks and 26 Mexican trucking companies with the goal purportedly being to compare the safety records of Mexican trucks with their US counterparts.

President Obama signed into law, without comment, a bill that blocked all funds from the program. The Mexicans quite rightly went ballistic, as this made clear the US had no intention, ever, of honoring its commitments and letting the Mexican truckers in.

Mexico had already won a unanimous ruling from a board set up under NAFTA to resolve disputes, so it was fully authorized to impose retaliatory tariffs against the US. Having been slapped in the face, it just imposed $2.4 billion worth, including tariffs on almonds (20% tariff), apricots (20%), cherries (20%), Christmas trees (20%), onions (10%), pears (20%), peas (20%), potatoes (20%) and strawberries (20%), among others.

According to the Associated Press, grapes are being treated even more severely:

The only item facing a 45 percent tax is fresh grapes. Some 55 other products will be taxed at 20 percent, and the remaining 33 items at 10 to 15 percent.

This is very bad and could really hurt the domestic industry as Mexico is a substantial market..

Just a few days before this crisis we receive a letter from the California Kiwifruit Commission calling on the President to run a “buy American” campaign on California Kiwifruit:

California Kiwifruit Farmers Seek President Obama’s Help

In today’s unsettling economic times and billion dollar “bail-out” and “buy-out” plans, California’s kiwifruit farmers have a much simpler request for President Obama. Today, in a letter sent to President Obama the California Kiwifruit Commission called on the President to “show his support and exercise strong leadership by asking American consumers and retailers to buy only California-grown kiwifruit.”

“We are asking President Obama to urge American consumers and retailers to buy California-grown kiwifruit,” says T.A. Heckel, a California kiwifruit grower from Fresno County and chairman of the California Kiwifruit Commission. “California kiwifruit farmers are facing tremendous threats due to imports from Italy and other countries. Now, more than ever, we need Americans to choose domestically grown-kiwifruit or we could be forced to lay people off and even go out of business.”

California farmers produced nearly 6 million seven-pound tray equivalents during the 2008 harvest season, which is a normal sized crop, but is well below peak production levels in the early 1990s when the industry produced twice that amount. Over the years, California kiwifruit production has declined and imports have taken over much of the retail shelf space. This year, close to 30 percent of the crop still remains to be sold — a very high number for this late in the season. The Kiwifruit Commission is hopeful that during these tough economic times that retailer buyers and American consumers will understand how important their purchasing choices are in supporting local communities and that they will choose California-grown kiwifruit.

In the letter to the President the Kiwifruit Commission states, “It is important that Americans take action to support the economy by purchasing locally produced goods whenever possible. The reality is that the strength of our national economy is directly connected to the successes of the local community farmers and businesses, and to that end we request that you strongly support the purchase of American goods by consumers.”

“We all know that times are tough for many Americans, and what we are asking is American consumers and retailers to make sure the kiwifruit they purchase are grown in California,” said Chris Zanobini, manager of the California Kiwifruit Commission. “We are going so far as to communicate through the media and other means that consumers ask their retailers for California- grown kiwifruit.”

Zanobini was recently hired to oversee programs of the California Kiwifruit Commission and the group is looking at innovative ways to build sales. For the time being, however, the California kiwifruit industry must rely on the support and goodwill of the buying community to help them move this year’s crop.

“It seems to continue to be a struggle to get California retailers to keep our product on the shelves when they are inundated with imported fruit during the California kiwifruit season, said Heckel. “However, given the economic times, Americans need to stop sending our money oversees and keep it in our local economy. Our hope in contacting President Obama is that he can make people understand how a decision as seemingly insignificant as purchasing kiwifruit grown by California farmers will be a significant step in turning our country’s economic situation around — one California-grown kiwifruit at a time!”

When the release was issued, many thought is was a funny and attention-getting PR stunt, but the events of the week made it come across as downright dangerous.

Certainly we could bring up the Smoot-Hawley Tariff Act, which many economists believe helped deepen the Great Depression and spread it to Europe. Richard Hofstadter, an incisive historian, said that the tariff act constituted “a virtual declaration of economic war on the rest of the world.” Within two years, 25 countries had retaliated and U.S. foreign trade literally collapsed.

In 1929 America had exported $5.24 billion in goods; the total was just $1.6 billion in 1932. Although the Gross Domestic Product dropped during this time, both imports and exports dropped far more.

We understand the California kiwifruit growers are having a tough time. Many people are having a tough time, but if our policies are “beggar thy neighbor” — if our strategy to enrich ourselves is to impoverish others — we can’t possibly turn the economy around.

Even if somehow nobody retaliated and just accepted the President telling everyone to boycott Italian kiwifruit, are we so callous that we don’t care about the Italian kiwifruit growers and US importers? And if Italy has fewer dollars, how are they going to buy Boeing planes and Microsoft software?

Of course, the minute the President decides to tell Americans to “buy American,” leaders of countries all over the world will tell their consumers to do the same — and you can bet they will listen more closely in China than consumers will in the US.

American exports would collapse and whatever gain the California kiwifruit growers would realize would be paid for 10 times over when US apple exports collapse, US grape exports collapse, US citrus exports collapse, etc.

Blaming Italy seems particularly odd. Typically these types of complaints are made against developing countries that have enormous advantages on wage rates, etc. Italy is a relatively high-cost country in the world economy. Why can’t American growers compete effectively?

If the California kiwifruit growers have some specific complaint about dumping or unfair subsidies, they should bring those complaints to the WTO — not ask for an international trade war to be started on their behalf.

Besides all this blaming consumers and retailers is a distraction. Per capita consumption of kiwifruit in the US lags many international markets. If US consumption was brought up to international levels, the Californians simply wouldn’t have enough kiwifruit.

We wish nothing but good for our American kiwifruit producers, but this approach will hurt the produce industry when everyone retaliates, hurt the country when the trade war grows beyond produce and hurt the prospects for economic recovery all around the world. There has to be a better way.

You can read the letter sent to President Obama here. It is a clever publicity baiting letter and we hope you will read it in that vein, not as a guide to US trade policy!

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