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Tomato suspension agreement: Continued negotiations possible, but path forward remains unclear

The U.S. Department of Commerce announced Feb. 7 that it would withdraw from the 2013 Suspension Agreement on Fresh Tomatoes and resume its investigation into antidumping allegations against Mexico.

The move would become effective May 7, given the 90-day written notice to withdraw required under the agreement.

"We have heard the concerns of the American tomato-producing industry and are taking action today to ensure they are protected from unfair trading practices," said Secretary of Commerce Wilbur Ross. "The Trump administration will continue to use every tool in our toolbox to ensure trade is free, fair and reciprocal."Lance-Jungmeyer-FPAALance Jungmeyer

The Fresh Produce Association of the Americas, which represents U.S. companies involved in importing and distributing fresh produce from Mexico, said it was disappointed by the decision and warns that it could result in higher prices and a reduction in variety for U.S. consumers.

"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," said FPAA President Lance Jungmeyer. "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. American consumers deserve to have free choice and selection of their preferred tomatoes, including vine-ripened tomatoes."Michael-SchadlerMichael Schadler

Michael Schadler, executive director of the Florida Tomato Exchange, applauded the decision by the Commerce Department to withdraw from the agreement, saying, "This was a very good development for us, it's what we have been working toward. We had hoped it would be a more immediate termination than 90 days, but in the scheme of things, we are very satisfied it is moving in the right direction."

He also disputed the assertion that U.S. consumers would see higher prices and lower availability of tomato varieties as a result of the termination of the agreement.

"If there is a termination, an investigation will ensue and if Commerce rules that there is dumping by Mexico, there would be a normal recourse under trade law that would institute a dumping margin to be placed on Mexican tomatoes," said Schadler. "At this point, it's not even clear it would be a huge margin, and any kind of duty placed on Mexican tomatoes would likely be absorbed by the supply chain and consumers would not notice a difference in price."

Schadler added that if the current trajectory of tomato producers in the United States continues and companies continue going out of business, then the Mexican market share will increase. "They will have increased pricing power, which will not be good for U.S. consumers because there will be less competition from domestic tomatoes."

FPAA reiterated the importance for Commerce to continue negotiating with Mexican growers toward a new agreement. "There is still time to reach a new agreement that serves the interests of U.S. growers of tomatoes, as well as importers of Mexican tomatoes," said Jungmeyer, who added that the agreement remains in effect during the 90-day window, and buyers and sellers must continue to follow the rules.

Schadler said he would welcome continued negotiations, but said he believes there are flaws in the structure of the current agreement, along with a lack of enforcement by Commerce, which would have to be addressed before a new agreement could be reached.

"We've seen over the last year that our Mexican counterparts haven't been willing to budge much from the current agreement and are satisfied with the status quo," he said. "We have 22 years of being in a few different suspension agreements, and at this point we have a pretty good idea of what doesn't work. We have to close the loopholes.

"Our group and the domestic tomato industry would like to see what kind of creative thinking the Mexicans and Commerce would agree to that would allow for the floor prices to be accepted and enforced going forward," Schadler continued. "Clearly, we are not trying to cut Mexico out of the market. Mexico has the dominant share of the market and will always be a big part of the tomato industry. All we want is Mexico to abide by fair trade laws. There cannot be dumping."