Monday, February 04, 2013

Agreement with Mexico about tomato imports

Agriculture Secretary Tom Vilsack on Feb. 2 announced a new agreement with Mexico, under which Mexico's tomato exports must satisfy a minimum price.

In adopting a moderately protectionist policy by mutual agreement, the two countries avoid a trade conflict that could have harmed their commerce more seriously.
"I applaud the good work of Undersecretary Sánchez and the Commerce Department to forge this important agreement to allow our domestic tomato industry to compete on a level playing field. The draft agreement meets the requirements of U.S. antidumping law and provides an effective remedy for our domestic tomato producers, further bolstering agriculture as a bright spot in our nation's economy. Ultimately, the Obama Administration forged an agreement that will restore stability and confidence to the U.S. tomato market and ensure fair trade in fresh tomatoes through increased reference prices, coverage and strengthened enforcement. The United States is one of the world's leading producers of tasty, high-quality tomatoes. Our U.S. fresh and processed tomatoes account for more than $2 billion in cash receipts and support thousands of American jobs in our food industry, shipping, processing and more."
Undersecretary Francisco J. Sánchez
The U.S. Food Policy blog recently discussed how agricultural labor markets in Mexico and the United States are interconnected.  If it is true that agricultural wages in Mexico are rising, it becomes easier for Mexico to agree to a price floor for Mexican tomato exports, addressing multiple problems simultaneously.  In a 2010 article for the Journal of Agricultural and Resource Economics (may be gated), Friedman School graduate student Wendy Johnecheck, Julie Caswell, and I studied the possible impact of hypothetical country-of-origin labeling (COOL) regulations on the U.S.-Mexican trade in tomatoes.

In my class on U.S. food policy, we explore (a) some occasions when import-competing businesses (such as U.S. tomato growers) have convinced the government to put up protective barriers and (b) other occasions when such barriers have been resisted by advocacy coalitions led by import buyers (such as major retail chains) and other U.S. agricultural industries that rely on exports (such as wheat producers).  These U.S. advocacy coalitions are politically important, because, of course, Mexican producer groups have no direct representation in the U.S. Congress.

A former student from this class today pointed out yesterday's New York Times coverage of the new tomato deal, which echoes these points.  In the article, Stephanie Strom explains the advocacy coalitions that make the new policy politically feasible:
The Mexicans enlisted roughly 370 American businesses, including Wal-Mart Stores and meat and vegetable producers, to argue their cause. Those businesses feared a bitter trade war like the one the Mexicans waged over trucking, which imposed stiff tariffs on American goods headed south. 

2 comments:

Anonymous said...

What a deal!! U S tomato growers, Mexican tomato growers, Walmart and the USDA all agree that it is in their interests that the price of all tomatos should increase!!

Did anyone consult with the tomato consumers/eaters??

Parke Wilde said...

Walmart's pressure in this negotiation was to reduce the price of tomatoes (not increase as the question implies).

The reason the agreement should be seen as a compromise for U.S. consumers, rather than a price increase for U.S. consumers, is that the U.S. tomato growers had a plausible threat in their quiver, which could have led to a trade war with even higher consumer prices (the threat was the possibility of re-opening a legal action claiming that Mexico had been "dumping").

Basically, I think this agreement is designed to serve the interests of U.S. tomato consumers/eaters concerned about price.

(The U.S. constituency most left out in this deal is strong local food advocates and deep trade skeptics).