Estimates are that nearly one out of two tomatoes eaten in the United States comes from Mexico — a statistic Florida growers would like to change, even at the risk of a trade war.
On Thursday, they got a reason to hope. The U.S. Department of Commerce signaled then that it might be willing to end a 16-year-old agreement between the U.S. and some Mexican growers that has kept the price of Mexican tomatoes relatively low for American consumers. U.S. tomato growers say the price has been so low that they can barely compete.
Within hours of the U.S. action, Mexico threatened to retaliate, claiming that the Obama administration was trying to placate farmers in an all-important swing state. The Mexican government has support from seemingly unlikely U.S. backers: big-box stores like Wal-Mart, which fear they will have to raise their prices, and other commodity producers, who worry that their products will be caught in a trade war.
“It will be very unfortunate if this devolves into a shooting war because this becomes a tit-for-tat and in the end, nobody wins,” said John Keeling, chief executive of the National Potato Council.
As part of a complex arrangement dating to 1996, the U.S. has established a minimum price at which Mexican tomatoes can enter the U.S. market. Over the years, Florida’s tomato sales have dropped as low as $250 million annually, from as much as $500 million, according to Reggie Brown, executive vice president of the Florida Tomato Exchange, which has led the push to rescind the agreement. The state is the country’s largest producer of fresh market tomatoes, followed by California.
In the meantime, Bruno Ferrari, the economy minister of Mexico, said the value of Mexico’s tomato exports to the U.S. had more than tripled to $1.8 billion since the agreement was signed, and the tomato industry there supports 350,000 jobs. Producers of other commodities and big retailers still have stark memories of the high tariffs Mexico slapped on U.S. producers of potatoes, pork and toilet paper — $2.4 billion worth of goods — during a trade fight over trucking that began in 2009 and ended last year.
Ferrari said Mexico was prepared to take all retaliatory measures available under the law. He warned that a final ruling against Mexico could also jeopardize talks over other trade disputes between the two countries.
The Mexicans say they fear that ending the agreement will clear the way for U.S. growers to file formal complaints accusing the Mexicans of unfair trade practices, which they did repeatedly before the agreement.
Thursday’s announcement came as Mexican tomato producers prepared to meet with officials at the Commerce Department on Friday to propose new terms to sweeten the agreement. The growers have said they are willing to accept a higher floor price for their tomatoes, expand the number of growers in the agreement and establish new measures to enforce the deal.
“We’re disappointed. We’re confused. We’re frustrated. We’re angry,” said Martin Ley, vice president of Del Campo Supreme, a family business that exported $60 million in tomatoes to the U.S. and Canada last year. “We don’t understand where this is going and where this is coming from.”
Robert LaRussa, a lawyer who represents Ley and other growers from the state of Sinaloa, Mexico’s largest exporting state, said it was an “insult” for the Commerce Department to make its announcement a day before their meeting. He noted that more than 300 letters had been filed in favor of maintaining the agreement.
The Mexicans argue that they are under attack for producing a better product. They say they have invested heavily in new types of tomatoes, in greenhouses and in sophisticated agricultural techniques to improve productivity and quality.
The Mexicans say Florida tomatoes are picked green and then gassed with ethylene to turn them red, but tomatoes grown in Sinaloa ripen on the vine, which accounts for the explosion in vine-ripened tomatoes sold in U.S. grocery stores.
The risk of hurricanes in Florida makes it harder for growers there to set up greenhouse cultivation, though growers elsewhere do not have that concern.
The Commerce Department will have 40 days after Thursday’s announcement is printed in the Federal Register, probably sometime next week, to make a final decision. The Mexicans — and many others — speculated that Florida’s role in the coming elections may have had something to do with the timing.
“This is a debate being fought out in the context of this presidential election, and Florida is one of those swing states,” said Gary Clyde Hufbauer, a senior fellow at the Peterson Institute for International Economics and a former Treasury Department official. “But we also have a lot of fish to fry with Mexico, a lot of reasons to maintain better relations there.”