If you enjoy the red vine-ripened tomatoes you find at your local grocery, get prepared to potentially pay more. Lots more.
The U.S. Department of Commerce on Tuesday is expected to pull out of the Tomato Suspension Agreement (TSA), a treaty with Mexican tomato growers that’s governed imported tomatoes since 1996. Because more than 70 percent of the fresh tomatoes found in grocery stores across the U.S. come from Mexico, prep yourself for sticker shock.
Originally enacted because the Commerce Department suspected Mexican growers of dumping undervalued tomatoes into the U.S. market, the agreement placed a floor price on Mexican tomatoes and, in return, suspended the dumping investigation undertaken by Commerce. The TSA has been reviewed, updated, and renewed every five years since its inception. But since last year, the Florida Tomato Exchange, a trade organization for Florida tomato growers, has lobbied to terminate the agreement, rather than renew it.
The organization purports that Mexican growers, by virtue of Mexican government subsidies and the low cost of Mexican labor, are able to sell tomatoes for a reduced cost over their U.S. counterparts, and that some growers are still skirting the agreement and taking advantage of loopholes to dump cheap tomatoes into the U.S. market.
In February, Florida’s Republican Senator Marco Rubio and Republican Congressman Ted Yoho sent a letter to Commerce Secretary Wilbur Ross urging him to end the agreement. The bipartisan letter was co-signed by 48 members of Congress from Florida and other tomato-producing states. Ross agreed and set a date of May 7 to terminate the TSA and reopen the investigation of Mexico’s dumping practices. The end of the agreement requires a 17.56 percent duty on all fresh tomatoes imported from Mexico. Negotiations between the two sides have been ongoing, but no new agreement has been reached, so produce importers in the border states will be paying the duty and passing the cost along to customers along the supply chain.
Not only will the duties increase retail prices, but it’s likely that Mexican growers will reduce their overall tomato acreage and move to other crops, cutting the winter tomato supply dramatically. A study by Dr. Timothy Richards, Morrison Chair of Agribusiness at Arizona State University, anticipates that such moves will drive up consumer prices for tomatoes on the vine, vine-ripened tomatoes, romas, and beefsteaks by around 40 percent. And if the Florida winter crop is hit by disease, weather or labor issues, none of which are unusual circumstances, the price for fresh tomatoes could shoot as much as 85 percent higher.
Michael Shadler, executive vice-president of The Florida Tomato Exchange (FTE), disputes those numbers. He says that because the floor price for Mexican tomatoes is ending, the market will determine the price, so shoppers could actually see a decrease. The FTE contends the increase in Mexican tomato imports is a major reason for the loss of small and medium-sized tomato operations across the United States, not just in Florida. The organization isn’t averse to a new agreement, but Shadler says it would have to be structured differently to eliminate the loopholes and provide for better enforcement.
While Florida growers may be celebrating, the same isn’t true in the border states that depend on the Mexican produce industry.
Arizona’s Republican Governor Doug Ducey sent a letter to Ross on April 26, urging him to reconsider pulling out of the agreement. “Arizona’s border communities, primarily Nogales, have served as a principal gateway for fresh produce from Mexico,” Ducey wrote. “The produce industry reports that in Nogales and Santa Cruz County alone, over 100 Arizona-based companies and more than 2,500 jobs are dependent on the flow of Mexican fresh produce, with tomatoes being the single largest commodity. The termination of the Suspension Agreement stands to severely impact the hundreds of companies and thousands of jobs that depend on the growing flow of fresh produce through Arizona’s border.”
According to a 2018 University of Arizona study, the Mexican tomato business has a good-sized effect on the U.S. economy, with an impact of almost $3 billion in GDP and 33,000 jobs.
The Fresh Produce Association of the Americas (FPAA), the trade association for produce importers, packers and transporters, has been fighting the TSA’s demise, alleging that the Florida growers, mostly large agribusiness concerns, are motivated more by control of the industry than by concern for small farmers.
“The truth appears to be that leaders of the Florida Tomato Exchange are on a campaign to portray themselves as the victims to trade while leveraging U.S. trade law to corner the market and drive out competition,” said FPAA’s president Lance Jungmeyer in a news release. “The Tomato Suspension Agreement has brought stability to the U.S. tomato market for over two decades, and it has been updated as the market has evolved. These updates have resulted in a wide selection of fresh tomatoes for U.S. consumers, while complying with U.S. trade laws, and adding enforcement mechanisms as the agreement itself has evolved. Despite Florida’s rhetoric, the record has shown that both Mexican growers and U.S. distributors have complied with the rules of the agreement.”
What happens next? The Commerce Department sent a new proposal to the Mexican growers last Friday and hasn’t yet received a response. Negotiations could continue and a new agreement could be reached at any time, but until another agreement is ratified, produce importers at the border will have to pay the duty, and the U.S. government’s dumping investigation will resume. That should take three to four months, according to Shadler. If Commerce finds evidence of dumping, it can then increase the duty on Mexican imports. If it finds no evidence, any duties paid by the importers will be refunded by the government and the market will operate under free-trade laws.
But even if a new agreement is reached or the government finds no evidence of dumping, the damage done to border towns like Nogales that depend on tomatoes as a big part of their local economies might be hard to undo. And for eaters, higher prices for fresh tomatoes may be the case for seasons to come.