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Opinion: The failure of the Tomato Suspension Agreement

(Editor's note: After the publication of "Tomato Suspension Agreement bogged down in government showdown" in our All Mexico Section (Jan. 21-Feb. 4) and online, the Florida Tomato Exchange contacted The Produce News to ask for a chance to respond. FTE exchange submitted the following op-ed article.)

The Florida Tomato Exchange has asked the U.S. Department of Commerce to terminate the Tomato Suspension Agreement because negotiations over the last eight months to amend the agreement have not made any substantive progress. This is due to an unwillingness by the Mexican industry to seriously discuss the changes needed to stop dumped Mexican tomatoes from injuring domestic producers.

In short, the current suspension agreement has failed to work as intended, the Mexican industry is using the agreement to shield its unfair trade practices and Mexico’s representatives refuse to accept any meaningful changes in a new agreement. Therefore, the only acceptable course of action available to the American tomato industry is to request an end of the suspension so it can prosecute the original antidumping case as provided under U.S. law, NAFTA and the proposed-USMCA.

The current suspension agreement has been in effect since 2013, and previous suspension agreements were in place from 1996 to 2013. These agreements, which were negotiated between the Commerce Department and the Mexican industry, have been suspending the U.S. government’s antidumping investigation of Mexican tomatoes.

In lieu of fully prosecuting the investigation, the suspension agreements were supposed to protect the U.S. tomato industry from unfair Mexican trade practices, but unfortunately the agreements have not worked.

The structure of the agreements has been difficult to enforce, and loopholes abound. This has allowed the Mexican industry to use the suspension agreement as cover for continued dumping. As a result, Mexican tomato companies increased their U.S. market share to 54 percent from 32 percent between 1996 and 2017, while the market share for U.S. tomato producers declined to 40 percent from 65 during the same period.

The numbers have been especially dire over the last 15 years. Between 2002 and 2017, U.S. tomato production declined by 34 percent to 2.9 billion pounds from 4.4 billion pounds. During that same period, Mexican tomato imports to the U.S. skyrocketed 125 percent to 3.6 billion pounds from 1.6 billion pounds. Since these agreements went into effect, hundreds of U.S. tomato growers have been forced out of business.

This is national in scope, not just Florida

Up until about 10 years ago, this was mainly a Florida vs. Mexico trade dispute focused on the November-to-April tomato market, but it turns out that Florida was actually a canary in the coalmine for the broader U.S. tomato industry.

The incredible expansion of Mexican tomato production over the last decade has made this a national issue, covering all 12 months. Even with the supposed protections of the suspension agreement in place, U.S. summer tomato producers are now feeling the impact of dumped Mexican tomato imports, just as Florida has for the last 20 years during the winter.

Since 2002, Mexican imports have increased 188 percent percent during the May-to-October window, nearly double the rate of increase compared to November to April.

Our Mexican counterparts, however, continue to position this dispute as a complaint by a small group of Florida growers. That is simply not true.

In addition to Florida, the FTE member companies are among the largest tomato growers in California, Georgia, South Carolina, Virginia, New Jersey and Puerto Rico. FTE members produce approximately 50 percent of the fresh-market tomatoes grown in the U.S. More importantly, the FTE has received strong support on this issue from tomato growers across the U.S. who are not FTE members. This includes growers in Michigan, Tennessee, Alabama, Arkansas, Georgia, North Carolina, South Carolina, New Jersey and California. It includes open-field producers and greenhouse operations, as well as growers who harvest mature-green tomatoes and those that harvest vine-ripe tomatoes.

Our alliance is national in scope because all segments of the U.S. tomato industry are feeling the pain caused by the Mexican tomato industry’s unfair trade practices.

It's hard enough for U.S. growers to compete with Mexico due to the extreme disparity in wage rates and regulatory burdens between the two countries.  Mexican government subsidies, unlike anything available to U.S. tomato growers, further tilt the scales in favor of Mexico. With that context in mind, we can’t also allow illegally dumped Mexican tomatoes to continue putting U.S. growers out of business.

Our Mexican counterparts have claimed that any disruption to the status quo will make tomatoes more expensive for consumers. We disagree. In fact, if nothing is done to stop the current trajectory, U.S. producers will continue to go out of business, putting even more price power in the hands of the Mexican industry.  Consumers and restaurants will have fewer options for sourcing locally grown tomatoes, and rural economies in tomato-growing states will be negatively affected by the production loss.

We appreciate the efforts by the Commerce Department to try to negotiate changes that would make a new suspension agreement more effective and enforceable. Unfortunately, the Mexican tomato industry has shown no interest in a new agreement that would actually work as intended. This has left the U.S. tomato industry with no choice but to ask the Commerce Department to terminate the agreement.

Termination is the only course of action that will allow American tomato growers to finally have their day in court to pursue the antidumping case against the Mexican tomato industry.

(Michael Schadler is the executive vice president of the Florida Tomato Exchange)