Ammunition for a Trade War Between U.S. and Mexico

The following is an excerpt from an article in:


The New York Times
Friday, September 28, 2012

Ammunition for a Trade War Between U.S. and Mexico

By STEPHANIE STROM and ELISABETH MALKIN

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 United States Department of Commerce signaled then that it might be willing to end a 16-year-old agreement between the United States and some Mexican growers that has kept the price of Mexican tomatoes relatively low for American consumers. American tomato growers say the price has been so low that they can barely compete.

Within hours of the American action, Mexico threatened to retaliate, claiming that the Obama administration was trying to placate farmers in an important swing state. The Mexican government has support from seemingly unlikely backers in the United States: the big box stores like Walmart, 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 United States has established a minimum price at which Mexican tomatoes can enter the American 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 United States 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 United States 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.

In the first year of the trucking fight, potato exports to Mexico fell more than 35 percent and growers lost $64 million in revenue as Mexicans shifted buying to Canada, Mr. Keeling said.

An analysis by an economist at Iowa State suggests that pork producers, who also lost money during the trucking trade fight, would lose about $14 an animal if Mexico imposed similar tariffs on pork now, said Nick Giordano, vice president at the National Pork Producers Council.

For more, visit www.nytimes.com.