CLOSING CASE
cke
Tomato Wars
When the North American Free
themselves to be happy with the
Trade Agreement (NAFTA) went
deal. As it turns out the deal didn't
into effect in December 1992 and
offer much protection for U.S. to-
tariffs on imported tomatoes were
mato growers. In 1992, the year be-
dropped U.S. tomato producers in
fore NAFTA was passed, Mexican
Florida feared that they would lose
producers exported
800 million
business to lower-cost producers in
of tomatoes to the United
Mexico. So they lobbied the gov-
By 2011 they were exporting
ernment to set a minimum floor
2.8 billion pounds of tomatoes, an
price for tomatoes imported from
increase of 3.5-fold. The value of
Mexico. The idea was to stop Mexi-
Mexican tomato exports almost tri-
can producers from cutting prices Tomato farming is an important business glob- pled over the same period to $2 bil-
below the floor to gain share in the ally. Tomatoes originated in the South American lion. In contrast, tomato produce
Andes, near where Peru is today, and were
U.S. market. In 1996 the United used early on by the Aztecs in southern Mexico since NAFTA went into effect.
in Florida has fallen by 41
States and Mexico agreed on a basic as a food.
Florida growers complained that
floor price of 21.69 cents a pound.
they could not compete against low
percent
At the time, both sides declared Source: @Joe Raedi/Getty Images
8.50 x 10.88 in
х
284
o
Part 3
The Global Trade and Investment Brivironment
ght Ticke
Commerce Department pulled back from its initial con-
clusion that the agreement should be scrapped. Instead, in
early 2013 it reached an agreement with Mexican grow-
ers to raise the minimum floor price from 21.69 cents
pound to 31 cents a pound. The new agreement also es-
tablished even higher prices for specialty tomatoes and
tomatoes grown in controlled environments. This was
clearly aimed at Mexican growers, who have invested
billions to grow tomatoes in greenhouses. Florida
tomatoes are largely picked green and treated with gas to
change their color.
Sources: E. Malkin, "Mexico Finds Unlikely Allies in Trade Fight" The
New York Times, December 25, 2012, p. BI; S. Strom, "United States and
Mexico Reach Tomato Deal, Averting a Trade War" The New York
Times, February 3, 2013, J. Margolis. "NAFTA 20 Years After. Florida's
Tomato Growers Struggling." The World, December 1, 2012
wages and lax environmental oversight in Mexico. They
also alleged that Mexican growers were dumping tomatoes
in the U.S. market at below the cost of production, with the
goal of driving U.S. producers out of business. In 2012,
Florida growers petitioned the U.S. Department of Com-
merce to scrap the 1996 minimum price agreement, which
would then free them up to file an antidumping case against
Mexican producers. In September 2012 the Commerce
Department announced a preliminary decision to scrap the
agreement. At first glance, it looked as if the Florida grow-
ers were going to get their way. It soon became apparent,
however, that the situation was more complex than
appeared at first glance. More than 370 business and trade
groups in the United States-from small family-run
importers to meat and vegetable producers and Wal-Mart
Stores--wrote or signed letters to the Commerce Depart-
ment in favor of continuing the 1996 agreement.
Among the letter writers was Kevin Ahern, the CEO of
Ahern Agribusiness in San Diego. His company sells about
$20 million a year in tomato seeds and transplants to
Mexican farmers. In a letter sent to the New York Times,
Ahern noted that "yes, Mexico produces their tomatoes on
average at a lower cost than Florida; that's what we call
competitive advantage." Without the agreement Ahern
claimed that his business would suffer. Another U.S.com
pany, Nature Sweet Ltd., grows cherry and grape tomatoes
under 1.200 acres of greenhouses in Mexico for the
American market. It employs 5,000 people, although all
but 100 work in Mexico. The CEO, Bryant Ambelang, said
that his company couldn't survive without NAFTA. In his
view, Mexican-grown tomatoes were more competitive
because of lower labor costs, good weather, and more than
Case Discussion Questions
1. Was the establishment of a minimum floor price for
tomatoes consistent with the free trade principles
enshrined in NAFTA?
2. Why despite the establishment of a minimum
floor price have imports from Mexico grown over
the years?
Who benefits from the importation of tomatoes
grown in Mexico? Who suffers?
4. Do you think that Mexican producers were dump-
ing tomatoes in the United States?
Was the Commerce Department right to establish
a new minimum floor price, rather than scrap the
treamanandan antidumine suht Who
has problems.
Х
gned by Preflight Ticke
Florida growers petitioned the U.S. Department of Com
merce to scrap the 1996 minimum price agreement, which
pound to 31 cents a pound. The new agreement also es-
would then free them up to file an antidumping case against
tablished even higher prices for specialty tomatoes and
tomatoes grown in controlled environments. This was
Mexican producers. In September 2012 the Commerce clearly aimed at Mexican growers, who have invested
Department announced a preliminary decision to scrap the billions to grow tomatoes in greenhouses. Florida
agreement. At first glance, it looked as if the Horida gnw- tomatoes are largely picked green and treated with gas to
crs were going to get their way. It soon became apparent, change their color
however, that the situation was more complex than
appeared at first glance. More than 370 business and trade
Sources: E. Malkin, "Mexico Finds Linlikely Alles in Trade Right,"The
groups in the United States from small family-run
New York Times. December 25, 2012, p.Bl: S. Strue,"hid States and
Mexico Reach Tomatoes, Airting Trade War" The New York
importers to meat and vegetable producers and Wal-Mart Times, February 3, 2013.1. Magotis, "NAFTA 20 Years After: Florida's
Stores wrote or signed letters to the Commerce Depart- Tomato Growers Strugging." The World Desember 1, 2012
ment in favor of continuing the 19% agreement.
Among the letter writers was Kevin Ahem, the CEO of Case Discussion Questions
Ahem Agribusiness in San Diego. His company sells about
$20 million a year in tomato seeds and transplants to
1. Was the establishment of a minimum flour price for
Mexican farmers. In a letter sent to the New York Times, tomatoes consistent with the free trade principles
Ahern noted that "yes, Mexico produces their tomatoes on
enshrined in NAFTA?
average at a lower cost than Florida; that's what we call
2. Why despite the establishment of a minimum
competitive advantage." Without the agreement Ahem floor price have imports from Mexico grown over
claimed that his business would suffer. Another U.S.com the years!
pany, NatureSweet Ltd. grows cherry and grape tomatoes 3. Who benefits from the importation of tomatoes
under 1.200 acres of greenhouses in Mexico for the
grown in Mexico? Who suffers?
American market. It employs 5.000 people, although all
4. Do you think that Mexican producers were dump-
but 100 work in Mexico. The CEO, Bryant Ambe lang, said
ing tomatoes in the United States?
that his company couldn't survive without NAFTA. In his
view, Mexican-grown tomatoes were more competitive
5. Was the Commerce Department right to establish
because of lower labor conta good weather, and more than
a new minimum floor price, rather than scrap the
agreement and file an antidumping suit? Who
a decade of investment in greenhouse technology. In a sim
would have benefited from an antidumping suit
ilar vein, Scott DeFife, a representative of the US National
against Mexican tomato producers? Who would
Restaurant Association, stated people want tomato-based
have suffered?
dishes all the time you plan over the course of the your
6 What do you think will be the impact of the new
where you are going to get your supply in the winter
higher oor price? Wholenefit from the higher
spring, fall." Without tomatoes from Mexico, a winter
froete in Florida, for example, would send prk shouding Hier price who sufos
up, he said. Paced with potential backlash from US 7. What do you think is the optimal govern
importers, and US producers with interests in Mexico, the policy response here? Explain your we
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