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Mexican Senator Misinformed on Antidumping Investigation

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In a recent letter to the chairmen and ranking members of the Senate Finance Committee and the House Ways & Means Committee, Mexican Senator Gustavo Madero made some confusing and misleading statements.

  • Senator Madero states that the termination of the Tomato Suspension Agreement was “due to the demands of some Florida farmers and their representatives in Congress.”

In fact, the Tomato Suspension Agreement was terminated only after Mexican growers dragged their feet for nearly 15 months in negotiations for a new agreement with the U.S. Department of Commerce (DOC). Due to this lack of progress, the domestic industry requested that the DOC terminate the agreement.

The termination was supported by a bi-partisan group of 48 lawmakers from 12 states and territories, including Alabama, Arkansas, California, Florida, Georgia, Michigan, New Jersey, North Carolina, Pennsylvania, Puerto Rico, South Carolina and Tennessee.

The U.S. tomato industry was united in its call to terminate the suspension agreement because it failed to protect domestic producers from dumped Mexican tomatoes.

  • Senator Madero makes a veiled threat that this tomato-specific issue could somehow impede Mexico’s ratification of the United States-Mexico-Canada Agreement (USMCA) or cause retaliation against U.S. agricultural exports to Mexico.

This is outrageous. The antidumping case against Mexican tomatoes has nothing to do with NAFTA or the USMCA, which permit Mexican and American industries to use their national antidumping and countervailing duty laws to protect themselves from unfair trade practices.

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There are currently 22 antidumping and countervailing duty cases in place between the U.S. and Mexico (nine against U.S. products and 13 against Mexican products). Neither the U.S. nor Mexico have retaliated against each other in any of these cases. If Mexico were to retaliate over the U.S. enforcing its antidumping law against unfairly traded Mexican tomatoes, Mexico would be violating the rules established by NAFTA, USMCA and international law.

Furthermore, the USMCA has already been passed by the foreign affairs committee in the Mexican Senate and press reports indicate that the Mexican Senate is expected to ratify the agreement soon — even as early as this week.

  • Senator Madero writes that it is “a serious problem” that the U.S. Department of Commerce unilaterally terminated the Tomato Suspension Agreement after 22 years during which “no violation has been discovered.”

Under the terms of the agreement, the DOC was allowed to terminate unilaterally, just as the Mexican growers could have terminated unilaterally. Ultimately, the DOC decided to terminate because it agreed with the domestic industry that the agreement wasn’t working. The agreement’s structure was difficult, if not impossible, to enforce, and numerous loopholes allowed for technical compliance even when the spirit of the agreement was constantly trampled.

The facts demonstrate clearly that the past suspension agreements have not prevented dumped Mexican tomatoes from injuring American tomato producers. Mexican tomato growers have been able to use dumped tomatoes to increase their U.S. market share from 32 to 54 percent during the 22-year history of the suspension agreement, while the market share for U.S. tomato producers decreased from 65 to 40 percent. Over the last 15 years, U.S. tomato production declined by 34 percent from 4.4 billion pounds to 2.9 billion pounds. During that same period, Mexican tomato imports to the U.S. skyrocketed 125 percent from 1.6 billion pounds to 3.6 billion pounds.

Like Chinese steel producers, Mexican tomato producers made a commercial decision to expand capacity and production — fueled by government subsidies — to the point that Mexico produces far more tomatoes than the market demands. As a result, imported tomatoes from Mexico oversupply the U.S. market, suppressing and depressing U.S. producers’ prices, destroying the competitiveness of the U.S. industry, driving U.S. growers out of business, and forcing U.S. farm workers out of work.

  • Senator Madero claims that the DOC “is seeking to replace this agreement with a new one, which will basically stop tomato shipments from Mexico to [the U.S.]”

This is hyperbole to the extreme. Mexico is an important supplier of tomatoes to the United States, and will continue to be so, but any new suspension agreement must prevent the circumvention that occurred under the old agreement. To help with enforcement of any new agreement, the DOC has proposed USDA inspection of samples of each load of tomatoes imported into the United States. Under the DOC proposal, USDA would apply the same quality and condition standards that apply to U.S. tomatoes. This levels the playing field because under past agreements, Mexican tomatoes didn’t have to meet all USDA quality and condition standards.

Unfortunately, Mexican growers have claimed that this is an overreach, attacking the validity of USDA standards and the ability of the USDA to conduct the inspections in a timely manner. The USDA, however, has assured that inspections would be done efficiently, just as they are currently done on all avocados and table grapes from Mexico. If USDA can handle the tremendous volume of avocados and grapes imported from Mexico, they can certainly manage the timely inspection of Mexican tomatoes.

  • Senator Madero points out that the Mexican tomato industry “is responsible for generating 400,000 direct jobs” in Mexico and that “these jobs are filled by a vulnerable sector that would otherwise see immigration as an option.”

It’s unfortunate that Senator Madero is using the vulnerability of workers in Mexico to scaremonger U.S. policymakers into pressuring American farmers. Senator Madero is, however, correct that the workers who pick tomatoes in Mexico are vulnerable — not to lawful enforcement of U.S. trade laws but to unfair Mexican labor practices, as tragically described in the L.A. Times series Product of Mexico. We hope Mr. Madero is also putting his efforts toward increasing the hourly wage and improving the working conditions of those who work in the Mexican tomato industry.

Speaking of jobs: What about the hundreds of American tomato farmers that were forced out of business during the 22-year duration of the old suspension agreement, along with the associated loss of jobs and tax revenue in America’s rural economy? Those jobs and tax dollars have been syphoned to Mexico.

American tomato growers remain open to a new suspension agreement, but they can’t afford another agreement that doesn’t adequately protect against circumvention and loopholes. It’s hard enough to compete with Mexico’s cheap labor and lax regulations; U.S. growers can’t also compete against dumping and Mexican government subsidies.

The DOC’s June 3 draft proposal for a new suspension agreement is a good starting point for negotiations, despite its rejection by the Mexican tomato growers. If the Mexican industry continues to reject the DOC’s good faith efforts to negotiate a new suspension agreement, the American tomato industry will pursue its rights under the U.S. antidumping law and through the International Trade Commission’s investigation.

Source: Florida Tomato Exchange

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