WASHINGTON -- Rejecting warnings that it could ignite a trade war, the Obama administration on Thursday said it planned to change its tomato-trading rules with Mexico, siding with Florida growers who complained that a glut of imports threatened to shut down the U.S. industry.
In the long-awaited ruling, the Commerce Department said the U.S. can change the trading rules to benefit domestic growers without violating its obligations under the World Trade Organization.
While its ruling is preliminary, the department said it planned to scrap a 1996 agreement, allowing the federal government to resume an investigation into whether Mexican growers are dumping tomatoes in the United States at below-market prices.
Mexican officials say the dispute is important because it could force U.S. consumers to pay three to four times as much for fresh tomatoes and lead to fewer jobs for farm workers on both sides of the border. They said it also will put a strain on relations between the two longtime trading partners and ultimately could lead to declining exports of other products to Mexico.
“We’re stunned – we’re completely stunned,” said Martin Ley, executive vice president of Del Campo Supreme, a company that grew more than 200 million pounds of tomatoes in Mexico last year. “This does not serve the interests of the U.S. consumer.”
Arturo Sarukhan, the Mexican ambassador to the U.S., said the Mexican government was “extremely disappointed” and suggested that the ruling could lead to retaliation, comparing it to a bitter fight over cross-border trucking that resulted in Mexico putting tariffs on a long list of U.S. exports.
“Mexico will respond – you should ask those who were in the Mexican crosshairs over the trucking dispute,” Sarukhan said. “When Mexico aims, Mexico hits the target.”
The ruling is a victory for the Florida Tomato Exchange, which represents a majority of growers in the Sunshine State. On June 22, the Florida growers formally asked the Commerce Department for help, saying the U.S. industry would not survive unless the federal government intervened
With Mexico now accounting for more than 70 percent of the U.S. import market for tomatoes, it has resulted in “a catastrophic collapse” of the domestic industry, said Reggie Brown of Maitland, Fla., executive director of the Florida Tomato Exchange. In the past 16 years, he said, domestic growers have suffered while the size of the Mexican tomato industry in the U.S. has doubled in size and tripled in value.
Brown called the ruling “welcome news,” adding: “It will help reverse the downward spiral the industry has been facing.”
Sarukhan said the Obama administration’s ruling appeared to be “dictated by politics, rather than policy.” Mexican growers had accused the Florida growers of pursuing the change during the presidential campaign, seeking to leverage the importance of the state for both Obama and his GOP challenger, former Massachusetts Gov. Mitt Romney.
After producing 38 million 25-pound boxes of tomatoes last year, Florida growers had a higher-valued crop than any other state. According to the U.S. Department of Agriculture, Florida growers accounted for nearly half – or $547 million – of the $1.3 billion fresh tomato industry in 2011. California, with a crop valued at $378 million, ranked second, followed by North Carolina, Virginia, Tennessee, Ohio, New York, New Jersey, South Carolina and Michigan, respectively.