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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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Case Study Outline
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?
3. Who benefits from the importation of tomatoes grown in Mexico? Who suffers?
4. Do you think that Mexican producers were dumping tomatoes in the United States?
5. Was the Commerce Department right to establish a new minimum floor price, rather than scrap
the agreement and file an antidumping suit? Who would have benefited from an antidumping suit
against Mexican tomato producers? Who would have suffered?
6. What do you think will be the impact of the new higher floor price? Who benefits from the
higher floor price? Who suffers?
7. What do you think is the optimal government policy response here? Explain your ...


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