To Favor a Few Agribusinesses, U.S. NAFTA Objective Would Hurt All Consumers- August 9, 2017

WHY SHOULD I CARE? Companies involved in the trade of perishable agriculture commodities need to be aware that a small group of politically connected, wealthy agribusiness firms from Florida are seeking concessions from the Federal government to effectively subsidize their industry by raising prices, an act that would deprive Americans of affordable fruits and vegetables.  As a part of the NAFTA renegotiation, they want to change antidumping law to manipulate the free market in order to benefit regional, seasonal perishable agriculture industries. If successful, this tactic will result in lawsuits that would raise prices for U.S. consumers, while reducing availability, selection and quality in the supermarket aisle for items such as tomatoes, avocados, bell peppers, watermelons, strawberries and blueberries, just to name a few. In a time of rampant obesity and rising healthcare costs, this anti-market approach would hit Americans in the pocketbooks when they can least afford it.  Pursuing such “trade protection through increased litigation” will also be at the cost of U.S. exporters when similar “seasonal suits” are brought by growers in Canada and Mexico.

THE NEGOTIATING OBJECTIVE: The U.S. introduced a NAFTA negotiating objective on July 17, 2017, to “Seek a separate domestic industry provision for perishable and seasonal products in AD/CVD proceedings.”

THE DANGERS OF SUCH A PROVISION FOR ANYONE IN THE PRODUCE INDUSTRY INVOLVED IN — OR DEPENDING UPON — EITHER IMPORTS OR EXPORTS ARE REAL AND SUBSTANTIAL.

If such a provision comes into effect in any updated version of NAFTA, it will be much easier for U.S. (and Mexican and Canadian) producers of perishable seasonal products to file antidumping proceedings.

If such a provision comes into effect and an antidumping suit is filed, importers from all NAFTA countries can expect that their growers’ ability to grow products and import to them will be seriously disrupted in the short term and perhaps prevented in the long term.  In turn, distributor and broker companies may experience serious disruption in their ability to ensure steady supplies and pricing with their own customers in retail, food service or processing industries.

U.S. FRUIT/VEG EXPORTS AT RISK

U.S. fruit and vegetable exports to Mexico and Canada have grown under NAFTA. For instance, Mexico has become the No. 1 export market for U.S. apples, purchasing more than $250 million in U.S. apples a year. A trade measure that favors regional growers may be applied against U.S. exporters of fresh produce.

STEPS TO CONSIDER

Companies are encouraged to weigh in with Members of their Federal Congressional Delegation to let them know you support fair trade and oppose this measure put forward by wealthy agribusiness firms in Florida looking to subsidize their industry.

Companies are also encouraged to reach out to their customers and their key trade associations to speak out about this issue.

Companies should be mindful of including provisions in both their contracts with growers and with their customers that will excuse their performance in whole or part in the event an antidumping suit, trade safeguard or other trade remedy is filed on any given commodity.  Companies should consult with their legal counsel regarding drafting such provisions.  Companies are also encouraged to discuss the potential ramifications of such a NAFTA provision with their business partners and to plan for any such contingency.

FOR FURTHER REFERENCE

US NAFTA OBJECTIVES: The U.S. introduced its NAFTA negotiating objectives on July 17, 2017. One objective is to “Seek a separate domestic industry provision for perishable and seasonal products in AD/CVD proceedings.” Learn more here.

CONSUMER IMPACT: Any actions to decrease imported supplies will raise consumer prices dramatically. The purpose of a regional, seasonal, perishable tariff would be to limit the supply of imports. A study from AC Nielsen/Perishables Group showed that if Mexican tomato supplies were cut in half in the December through May winter window, it would result in consumer prices rising from an average of $2.16 a pound to $3.31 a pound. In one scenario, which analyzed the possibility of Mexican tomatoes being excluded altogether, Dr. Tim Richards, Morrison Chair professor of Agribusiness at Arizona State University, stated: “We found that if Mexican imports are excluded from the U.S. market, retail prices during the December-May timeframe can be expected to rise by 97.9 percent for hothouse round, 96.9 percent for hothouse vine, 61.3 percent for snacking, 217.2 percent for Roma, and 52.1 percent for field tomatoes.”

THINK TANK PERSPECTIVE: The Peterson Institute, a free-market think tank, has weighed in. Fellow Gary Hufbaur says “this provision would create serious mischief and harm not only US consumers but also other US growers.”