MCALLEN, RGV – Famous fast food restaurants such as Wendy’s, Subway, and Taco Bell all use Mexican tomatoes in their food.
Large retailers such as Wal-Mart, HEB, and Kroger offer them to their customers as well.
According to estimates, one in every two tomatoes consumed in the United States is grown in Mexico. The majority of these are grown in the state of Sinaloa and cross through the Pharr port of entry in the Rio Grande Valley. By value, this trade was worth $532 million in 2017.
The popular red vegetable, a must in salads, salsas, and Italian food, could soon become more expensive after the United States announced that starting May 7, it will withdraw from the 2013 suspension agreement on fresh tomatoes.
This means that the U.S. Department of Commerce will continue with a dumping investigation and that U.S. Customs would take the International Trade Commission’s 1996 preliminary determination when applying a 17.56 percent anti-dumping duty on the importation of tomatoes. By 2017 import numbers, that would mean an additional cost of $93.4 million annually to our region of South Texas.
In a decades long conflict, tomato growers led by the Florida tomato exchange, requested an anti-dumping investigation against Mexican tomatoes in 1996. They argued that Mexican growers were receiving illegal government subsidies. After negotiations with Mexico lead by the AMHPAC (Asociacion Mexicana de Horticultura Protegida AC), the largest association of tomato producers in the country, an agreement was made to protect domestic producers by setting a minimum selling price. It is now the feeling of the American producers that the measure was misused by Mexican growers to capitalize on dumping practices. Mexican tomato growers increased their U.S. market share from 32 to 54 percent between 1996 and 2017. Florida tomato growers have plunged from a peak of more than 250 in the 1980s to 25 today.
Antidumping duties are meant to compensate for the importation of product under its fair value. In this case, the International trade commission preliminary investigation found that, in fact, Mexican tomatoes where being dumped by Mexican growers receiving government subsidies and that an additional 17.56 percent of duty would level the playing field for U.S. tomato producers. With the withdrawal from the agreement, the investigation will now continue, and it could conclude that even higher duties should be assessed.
Antidumping investigations are full of controversy and countries affected usually defend themselves by stating that they are politically motivated. Agricultural subsidies are a major thorn in international trade as almost all countries subsidize their national industries in one way or another, including the United States. Contacts in the industry have stated that if there was government assistance, it was not significant and not happening anymore; the reality, they said to me, is that Mexican tomatoes are just better.
Tomato growing in Mexico has become a major industry that employs thousands of people. It has become very technologically advanced. Equivalent to top manufacturing, growers exert a scientific control to every phase of the growth of the tomato starting with the seed, the right amount of water, specially formulated soil, and the ideal climate for maximum production. Advanced machinery is then used to select only the best and pack the product. Tomato plants in Mexico are huge compared to Florida’s and many are inside greenhouses, which protects the plant and controls climate for year round production; most are also ripened in the vine ensuring the best taste. The combination of these factors produce a vast superior product when compared to Florida tomatoes, which don’t use greenhouses because of local climate, have many issues with pests and disease, and are ripened near the grocery store with ethylene gas. Mexican tomatoes are a clear example of Mexico’s comparative advantage in the industry, the U.S. receives a better product at a lesser cost than what it can produce. This benefits consumers and the economy overall. This, in essence, is the basis of beneficial international trade.
As I toured a local cold storage for a large tomato importer, I was amazed at the degree of care and expertise used to handle imported produce. I quickly learned that top growers in Mexico also operate top facilities, and hire top warehouse operators, managers, and salesmen in the United States. A strong community is located in the McAllen/Pharr area. Customs brokers, carriers, and logistics facilities are also an important part of the tomato supply chain. Many “tomateros” as they are known amongst themselves, meet for carne asada and beers every week as friends. They also get together to support their industry and they last formally met in February 2018 to push for lower overweight fares to transport their trucks full of tomatoes at a lesser cost. They were not successful on that occasion, but their collaboration became stronger.
With the threat of new duties, most of these local companies are now reassessing their investment plans. “It is stopping for now, that is for sure,” an industry contact told me when referring to local United States and Mexico investment. The additional duty could also bankrupt smaller importers that will see a tighter market and cash flow. Less investment means less growth in jobs and higher costs across the supply chain. If the market contracts, it will mean layoffs and idle facilities and equipment. The negotiations continue as AMHPAC, representatives from the largest tomato producers and government officials from Mexico and the United States meet in Washington to try to come to an agreement.
As we have seen with the additional duties on steel and aluminum imports, some companies will benefit from duties on tomatoes and it will make for a great political statement. Don’t be amazed if President Trump appears on TV saying how U.S. tomato growers are now investing more and creating jobs. But, just as with steel and aluminum, those jobs will come at higher prices for consumers and at a higher cost to the U.S. economy. For every new job in Florida, many more in Mexico and the Rio Grande Valley will be lost.
Author’s Note: I would like to thank Magaly Gonzalez, my sister, for helping me edit this article.