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U.S.-Mexico tomato trade war eases

U.S.-Mexico tomato trade war eases

Deal suspends tariffs on tomatoes and implements import restrictions

By Eric Martin and Jonathan Levin

The U.S. reached a deal to suspend tariffs on tomatoes from Mexico and implement import restrictions demanded by Florida growers to protect their industry.

The agreement, which also ends a dumping probe by the Trump administration, is expected to head off calamity for the Mexican tomato export industry, the world’s largest. It’s also likely to avert spikes in prices at U.S. supermarkets and restaurants.

The deal was reached around midnight on Tuesday in Washington, a group of Mexican agriculture industry associations said in a joint statement. It represented the final opportunity to end the dumping probe and allow for 30 days of public comment.

The pact pledges to lift a 17.6% provisional tariff that went into effect in May, will allow Mexican producers to get back money that had already been deposited, sets reference prices on tomato imports, and includes a requirement that organic tomatoes be priced 40% higher than varieties that aren’t. The lack of a deal could have led to even higher duties of 25%.

Making the duties permanent threatened to hit the Mexican agriculture industry, which ships about $2 billion of tomatoes to the U.S. annually, one of its biggest fruit and vegetable exports along with avocados. Florida growers had said the nation was unfairly undercutting American farmers on price, a charge Mexico has denied.

Uneasy Detente

Until this year, the tomato issue had been marked by an uneasy detente. Since 1996, the Commerce Department and Mexican producers have operated under a so-called suspension agreement, which put off any anti-dumping case in exchange for commitments by Mexican producers, including selling above a reference price.

While the agreement has been updated and renewed multiple times since then, President Donald Trump’s administration left the deal altogether in May, levying provisional tariffs and relaunching the dumping probe.

The new pact includes quality inspections of 92% of Mexican tomato trucks at the border, the nation’s growers said. In a separate email, the U.S. Commerce Department said it disputes the Mexican growers’ estimate and expects that 66% of tomato trucks will be inspected. American growers had demanded that all tomatoes be reviewed, which Mexico argued was logistically impossible.

Closing Loopholes

“The draft agreement also closes loopholes from past suspension agreements that permitted sales below the reference prices,” the U.S. Commerce Department said in a statement Wednesday.

The Commerce Department said the new inspection mechanism will head off imports of “poor-condition” tomatoes that it said had “price suppressive effects” for the broader market.

A study released earlier this year by Arizona State University economists -- and commissioned by a trade association representing importers of Mexican tomatoes -- showed how the prices of most varieties of tomatoes would spike if Mexican imports fell by half.

But the magnitude of the increase depended on many variables, including growing-season conditions. Supply is generally much tighter in the North American winter months, when many producers drop out of the market.

The analysis said that a collapse of Mexican trade coupled with, for example, a January cold snap or a bout of disease in Florida, could have made prices of many varieties double.

To contact the reporters on this story:
Eric Martin in Mexico City at emartin21@bloomberg.net;
Jonathan Levin in Miami at jlevin20@bloomberg.net
To contact the editors responsible for this story:
Juan Pablo Spinetto atjspinetto@bloomberg.net
Pratish Narayanan, Reg Gale
© 2019 Bloomberg L.P.
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