Weekly Report - 04 October 2012 (WR-12-39)

MEXICO | Seeking to avoid a tomato war. On 2 October Mexico’s economy ministry (SE) issued a statement urging the US to refrain from adopting “protectionist measures” by cancelling a 1996 bilateral agreement on tomato exports. SE’s statement came after the US Department of Commerce (USDOC) announced on 27 September that after conducting an extensive investigation into tomato dumping allegations it was considering cancelling the agreement. The agreement sets a minimum price at which Mexican tomatoes may be sold in the US, but US producers, particularly those in Florida, the US’s largest tomato producing state, have nonetheless complained that the market has been flooded by Mexican tomatoes, putting many of them out of business. It is estimated that nearly half of all tomatoes sold in the US come from Mexico. According to the Florida Tomato Exchange, since the agreement was put in place, its sales have dropped from US$500m a year to US$250m. In contrast official data from the SE show that the value of Mexican tomato exports to the US since 1996 have tripled to US$1.8bn. This situation led US producers to ask the USDOC to launch an investigation. In its statement, the SE warned that Mexico was prepared to “adopt a strong and decisive defence of our commercial interests and of our tomato industry”. The statement added that the cancellation of the agreement would not only harm bilateral commercial relations but also “producers, workers, exporters, importers, traders and consumers on both sides of the border”. In this way the SE was reminding the US that Mexico could choose to adopt retaliatory measures, as it did in 2009 amidst the trucking row between the two countries which saw Mexico impose punitive tariffs on US potatoes, pork and toilet paper, which severely hurt US exporters. The tariffs were only dropped last year after the two countries finally managed to resolve the dispute in July 2011. The trucking row only affected Mexican truckers, which presumably represent a smaller proportion of the working population than the 350,000 people that are estimated to be employed by Mexico’s tomato industry.

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