The U.S. Department of Commerce (DOC) has indicated that the U.S. will withdraw from a previous agreement with Mexico and resume an antidumping investigation into imports of Mexican fresh tomatoes.
The 2013 Suspension Agreement on Fresh Tomatoes from Mexico sets a price floor for imported Mexican tomatoes. The Tomato Suspension Agreement sets different floor prices for Mexican fresh tomatoes during the summer and winter and also specifies prices for open-field/adapted-environment and controlled-environment production. It also suspends an antidumping investigation that dates back to the mid-1990s. With the written notification, DOC said it intends to withdraw from the 2013 agreement on May 7, 2019.
“We have heard the concerns of the American tomato producing industry and are taking action today to ensure they are protected from unfair trading practices,” Commerce Secretary Wilbur Ross said. “The Trump Administration will continue to use every tool in our toolbox to ensure trade is free, fair and reciprocal.”
The department opened negotiations with Mexico's signatories in January 2018. Despite committed efforts from all sides, significant outstanding issues remained with respect to crafting a revised agreement that would be acceptable to the Mexican signatories and address the concerns of the U.S. domestic industry to the extent possible under U.S. trade law.
In November 2018, the Florida Tomato Exchange (FTE) requested that DOC end the agreement and resume the antidumping investigation of fresh tomatoes from Mexico. DOC said it finds, at this stage, that it is "appropriate to notify the Mexican signatories of our intent to withdraw, terminate the agreement and resume the investigation."
With the end date of the current agreement nearing, a group of lawmakers sent a letter dated Feb. 1 to DOC. "The suspension agreements have not worked, and Mexican tomato exporters have used successive suspension agreements as cover for their continued use of unfair trade practices to gain U.S. market share at the expense of the domestic tomato industry," Sen. Marco Rubio (R., Fla.) and Rep. Ted Yoho (R., Fla.) wrote in the letter, with bipartisan support from 46 Senate and House colleagues.
Mexican tomato companies increased their U.S. market share from 32% to 54% between 1996 and 2017 — the period of time the suspension agreement has been in place — while the market share for U.S. tomato producers declined from 65% to 40% during the same period, according to FTE, which requested the investigation. The congressional letter also cited the market share changes and noted that, since 2002, imports of tomatoes from Mexico have skyrocketed 125% while U.S. production has declined 34%.
“Small family operations have been particularly hard hit, and the production losses reverberate beyond agriculture to deeply impact rural economies and land development patterns,” the letter stated. “The industry will continue to shrink if the status quo is maintained.”
Upon completion of the withdrawal, DOC will continue with its investigation and notify the U.S. International Trade Commission (ITC) of its final determination. If the department continues to find sales made at less than fair value in its final determination, ITC will then complete its own investigation and make a final determination with respect to injury. If both DOC and ITC issue affirmative final determinations, an antidumping duty order will be issued.
American Farm Bureau Federation president Zippy Duvall said, “The renewed antidumping investigation against Mexican fresh tomato imports is a necessary action. Despite a previous accord that banned artificially low prices, Mexican producers have found ways to exploit the agreement and increase their market share.
“Farm Bureau believes in free and fair trade. North American agricultural trade has been an enormous boon for the United States, Mexico and Canada, but the United States must take action when that trade ceases to be fair,” Duvall said.
Mexico's exporter association FPAA (Fresh Produce Association of the Americas) responded to the news with disappointment. “The Tomato Suspension Agreement has brought stability to the U.S. tomato market for over two decades, and it has been updated as the market has evolved,” FPAA president Lance Jungmeyer said. “These updates have resulted in a wide selection of fresh tomatoes for U.S. consumers while complying with U.S. trade laws and adding enforcement mechanisms as the agreement itself has evolved. Despite Florida’s rhetoric, the record has shown that both Mexican growers and U.S. distributors have complied with the rules of the agreement.”
FPAA is hopeful that there’s still time reach a new agreement that serves the interests of U.S. growers of tomatoes as well as importers of Mexican tomatoes. “What is crucial is that the renegotiation is not distorted by the politics of protectionism,” Jungmeyer said.
"The Florida tomato industry seeks to control more than import prices of tomatoes from Mexico sold in the U.S.," Jungmeyer continued. “They are seeking to have second, third and fourth sales covered under the minimum price, including handling and freight charges. This is clearly outside of the scope of the law and is intended to discourage U.S. businesses from selling Mexican tomatoes.”
Jungmeyer suggested that it would be regrettable if this development caused an increase in tomato pricing or a reduction in varieties on supermarket shelves. “American consumers deserve to have free choice and selection of their preferred tomatoes, including vine-ripened tomatoes,” Jungmeyer said.