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Updated Wednesday, December 26, 2012 at 06:58 AM

Mexico finds U.S. businesses are allies in trade dispute

By ELISABETH MALKIN
The New York Times

As tomato growers in Florida and some other states fight a 16-year-old agreement they contend allows farmers in Mexico to export tomatoes at a price below their costs, the Mexican farmers are finding allies in the United States.

The trade dispute highlights the network of interlocking interests between the countries under the North American Free Trade Agreement. Trade across the Mexican border is now worth more than $1 billion a day.

U.S. producers of corn, soybeans, apples, pork and chicken have increased sales to Mexico greatly over the years as trade barriers have been dismantled. But at the same time, Mexico has become a fast-growing supplier of produce to U.S. supermarkets and restaurants.

Tomatoes lead the list: Exports have doubled and their value has tripled since the mid-1990s, to almost $2 billion.

That has been aided by a complex arrangement dating from 1996 that established a minimum price at which Mexican tomatoes are permitted to enter the U.S. market.

Florida farmers are leading a campaign to persuade the Commerce Department to scrap the accord. They won a victory in September when the department announced a preliminary decision to end it, with a final ruling to come in spring.

But other U.S. interests are lining up in support of continuing the agreement.

For example in Arizona, Richard Fimbres, a member of the Tucson City Council who is usually more concerned with improving city streets than with the minutiae of international trade law, sponsored a resolution asking the Commerce Department to continue the agreement.

Then he wrote to President Obama last month, declaring that "we can't turn our back on the global economy now."

The reason is fresh Mexican tomatoes are big business in Arizona. Much of the $2 billion in business passes through the state, benefiting local importers and distributors.

But the benefits go beyond them. More than 370 businesses and trade groups — from small family-run importers on the Mexico border to Wal-Mart Stores — have written or signed letters to the Commerce Department in favor of continuing the deal.

Kevin Ahern, the chief executive of Ahern Agribusiness in San Diego, was among them. His company sells about $20 million a year in tomato seeds and transplants to Mexican farmers.

"Yes, Mexico produces their tomatoes on average at a lower cost than Florida; that's what we call competitive advantage," Ahern said in an email. Without the agreement to provide "stability to a volatile market, Mexican tomato acreage destined for U.S. markets will decline," he said, and that would damage his business.

While Florida growers contend the accord is hurting their business, the broader trade dynamics are generating business for other companies in the United States.

"A lot of what is produced and harvested in Mexico is put in the ground with U.S. money and intended for U.S. markets," said John McClung, CEO of the Texas International Produce Association. "The garden simply happens to be across the river."

NatureSweet, which is based in San Antonio, grows cherry and grape tomatoes under 1,200 acres of greenhouses in Mexico for the U.S. market. It employs 5,000 people; all but about 100 work in Mexico.

"We couldn't survive without NAFTA," said Bryant Ambelang, the company's chief executive.

Ambelang said Mexican-grown tomatoes were more competitive because of lower labor costs, good weather and more than a decade of investment in greenhouse technology.

"Here we went and signed an agreement called NAFTA, and now we're going to go and wave our finger in one industry where Mexico has superiority?" he said.

McClung said that even though Texas lost much of its commercial fresh tomato industry years ago, "we can do quite nicely importing Mexican tomatoes."

He acknowledged that growers in Florida and elsewhere were "going slowly under." But, he added, "my job is to protect Texas importers."

The complex 1996 trade accord was struck after Florida farmers asked the Commerce Department to impose anti-dumping duties on Mexican tomatoes. Their complaint was suspended after Mexico's largest producers agreed to ship their tomatoes at a minimum price, ensuring they could not sell at prices that might undercut Florida production.

But Edward Beckman, president of Certified Greenhouse Farmers, a trade group for U.S. and Canadian growers, argues that conditions have changed.

The "current playing field is tilted completely against domestic interests, and we need to quickly address the unfair trade that exists," he said in a recent statement.

U.S. supporters of the accord argue it has created a reliable supply and predictable prices.

Consumers have come to expect year-round tomatoes, said Bill Piper, the vice president and general manager of Grant County Foods in Dry Ridge, Ky., a large produce wholesaler and repacker that buys tomatoes from Florida and Mexico.

If it becomes harder to import Mexican tomatoes, he said, "people will have to put up signs: 'We have tomatoes today' or 'we don't have tomatoes today.' "

Scott DeFife, executive vice president at the National Restaurant Association, said that "people want tomato-based dishes all the time. You plan over the course of the year where you are going to get your supply in the winter, the spring, the fall."

Without tomatoes from Mexico, a winter freeze in Florida, for example, would send prices shooting up, he said.

Importers, distributors and retailers said they suspect that if the 1996 deal were canceled, U.S. growers would file a new anti-dumping complaint against Mexican tomatoes. Under that process, the Commerce Department could impose tariffs on Mexican tomatoes if it determined that the Mexicans were selling below their costs.

Even if the department eventually found that the Mexicans were not dumping, a complaint itself would have a chilling effect on trade.

"All these other companies involved in the Mexico supply chain stand to lose a good portion of their business if protectionism is put in place," said Lance Jungmeyer, the president of the Fresh Produce Association of the Americas, a trade association of importers and distributors based in Nogales, Ariz.

Although the Mexican producers have offered changes to the 1996 deal, including raising prices to 31 to 48 percent more than the current price, depending on the season, U.S. growers have not been placated.

Reginald L. Brown, the president of the Florida Tomato Exchange, said the flood of Mexican tomatoes pushed the price so low last winter that the industry could not cover picking and packing costs.

"The U.S. industry has a right to defend itself," Brown said.


ADRIANA ZEHBRAUSKAS / NYT
Employees work on tomato plants in Mexico, which is finding allies in the U.S. as tomato growers in Florida and some other states battle a trade pact they say allows Mexican farmers to export below their costs.




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