By RICARDO CASTILLO
The countervailing duty the U.S. government slapped on Mexican tomatoes as of Tuesday, May 7, means different things to everyone involved in this agribusiness, politicians included.
Definitely, the new duty came as a big surprise for the Mexican government, where opinions vary from Economy Secretary Graciela Márquez Colin saying “We’ll sell them somewhere else” to President Andrés Manuel López Obrador (AMLO) claiming “it’s all about electoral politics” in the United States, because President Donald Trump is paving the road to look attractive to Florida tomato growers as he seeks reelection next year.
On Tuesday, May 7, the U.S. Department of Commerce formally terminated the 2013 suspension agreement on Mexican tomatoes, meaning all fresh tomatoes from Mexico will now have a 17.5 percent import duty.
“The Department of Commerce remains committed to ensuring that American domestic industries are protected from unfair trade practices,” said Secretary of Commerce Wilbur Ross in the announcement. “We remain optimistic that there will be a negotiated solution.”
Mexico sells one of every two tomatoes consumed in the United States, making a steady supply very important to U.S. wholesalers who distribute to supermarkets.
The Mexican export had received favorable treatment under the North American Free Trade Agreement (NAFTA) and sales had been stable since 1996. except for a minor lull in 2013, when Mexican growers signed the latest now-suspended agreement.
Manuel Cázares, vice-president of the National Tomato Produce System in Mexico, said the notification was unexpected since even as recently as last Tuesday, at the time the Commerce Department slapped on the countervailing duty, his offices had received no notification of the tariffs. But at the border, U.S. Customs was already demanding payment. Notification to the National Tomato Produce System came in later that day.
Cázares has said that the new tax “is an injustice” since the United States has not shown proof that Mexican tomato exporters have committed any regulatory infraction to merit suspending the 2013 agreement.
He went on to point out that the Florida Tomato Produce Association had filed a complaint against Mexico alleging that it was selling at dumping prices.
According to USDA’s Agricultural Marketing Service, a 25-pound carton of vine-ripe tomatoes from Mexico cost between $13 and $14 at the New York terminal market, the same price as 25-pound mature green tomato cartons from Florida on May 7. That was the source of the infraction.
“But that is not the case,” Cázares said on Wednesday, May 8, in a radio interview. “We do not produce (tomatoes) to sell them below their value and lose money, and we have documented that fact (to the U.S. Commerce Department). What happens is that the Florida producers did not budge from their set production practices, while we advanced with more fruit varieties and new technologies. We offer a much better quality than they do and we’ve earned the preference of the U.S. consumer. That’s the only crime we’ve committed, so they claim.”
Tomato buyers saw the duty imposed on all Mexican tomatoes as of May 8. Naturally, in order to pay for the duty, Mexican producers had to hike their prices, which may, in the long run, hurt sales.
Analysts forecast that if an ongoing renegotiation fails, Mexican producers may soon face losses of up to $350 million, with many small- and medium-sized businesses involved in tomato production going under. The countervailing duty, Mexican producers claim, could affect the 1.4 million people working in the agroindustry.
With this new “punishment” duty, Mexico and the United States may be headed toward a new tariff dispute that started when Trump imposed 25 and 10 percent increases on steel and aluminum exports from Mexico, respectively.
Mexican Economy Secretariat authorities, however, insist that. like the steel and aluminum cases, the tomato countervailing duty is “independent” from the already-negotiated U.S.-Mexico-Canada Agreement (USMCA), signed on Nov. 30. They insist that the USMCA will not be affected by the countervailing duty on Mexican tomatoes.
Still, Economy Secretary Márquez said she felt “deceived and worried” that the Commerce Department had gone ahead and nullified the 23-year-old agreement in order to carry on with an antidumping investigation.
Cázares said that his offices were still waiting for the National Tomato Produce System lawyers in Washington to point out what course to follow since the 1996 NAFTA accord is now dead.
“We’re willing to continue negotiations,” Cázares said.
Tomatoes are the third-most-important Mexican agricultural export to the United States, after beer and avocados. It is expected that the hike will also be reflected immediately in U.S. supermarket prices.