THE TTALK QUOTES
On Global Trade & Investment
Published Three Times a Week By:
The Global Business Dialogue, Inc.
Washington, DC   Tel: 202-463-5074
Email: Comments@gbdinc.org
No. 60 of 2017
FRIDAY, OCTOBER 6, 2017

Click   here for the September 26 quote on Withdrawing from NAFTA 
ABOUT THEM APPLES - PART I, LOVE APPLES

"Here in North Florida, tomato worship is our warm weather religion."

Diane Roberts
July 26, 2009
CONTEXT
Today's quote is from a charming NPR report on tomatoes by Diane Roberts that was published back in July of 2009. In fact, our thought had been to write something today about the other kind of apples, with varieties from Gala to Granny Smith, in a word, the real ones. That's not to say that tomatoes are not real. They are. And there is a real enough connection these days between the two, as the U.S. growers of each stake out different positions in the NAFTA negotiations.

We'll save our discussion of apples until tomorrow. Today it's tomatoes, starting with a little more from that delicious piece by Diane Roberts. In modern French, the word for tomato is la tomate, but the French used to call tomatoes pommes d'amour, apples of love. Discussing the history of these red goddesses of the kitchen, Ms. Roberts wrote:

"When the Spanish brought tomatoes to Europe in the 16th century, people didn't know what to make of them: They might be poisonous. On the other hand, they might be some kind of aphrodisiac like the mandrake root."

Then she brought her readers up to date: 

"Here in North Florida, tomato worship is our warm-weather religion. Fields and farmers markets are piled high with tomatoes in the colors from amethyst to chartreuse, smelling of heaven; we eat them raw with a little rice vinegar, cooked in a tart or simmered in a sauce."
    
All very idyllic. And, we wouldn't challenge a word of it - not visually, not aesthetically, and certainly not gastronomically.

Tomatoes and Trade Policy. When it comes to trade policy, however, there is an old controversy that may or may not ever be resolved, but it will certainly become more prominent in the months ahead. It is not just about tomatoes. Northwest berry growers have similar issues, but the Florida tomato growers are at the top of the vine, so to speak, when it comes to trade in perishable products.

Fearing increased competition from Mexico, they were opposed to NAFTA when it was being debated in Congress back in 1993, and they have not been happy with developments under the agreement since it went into effect in January 1994. An August article on the Stewart and Stewart website sets out the problems as American tomato producers and others see them. The firm also has something to say about how those problems might be solved. Some illustrative passages follow.

The Problem. Stewart and Stewart begin their explanation of the problem this way:

"Producers of perishables and seasonal agricultural products are particularly susceptible to damage from trade surges and various forms of unfair trade practices. If their products are forced to compete with dumped or subsidized product, or if import surges saturate the market either before or during a marketing season, domestic producers are unable to store their product and wait until prices rise to normal levels.

"Likewise, only a brief window - at times just days - exists in which to sell perishable products."

And those aren't the only problems. As the Stewart and Stewart article also points out, U.S. tomato growers often cannot even get the benefit of that famous downward sloping demand curve. They offered this explanation and example:

"The situation of producers of perishable and cyclical products is worsened as a concentrated retail structure in the United States and internal company operating procedures typically result in retailers not changing prices of perishable and cyclical prices at retail to reflect falling prices ... ."

"In January 1996, prices of fresh tomatoes plummeted to as little as $0.04 per pound (from prices that more typically range from $0.25 to 0.40 per pound) at the farm level in the United States due to large volumes of imports from Mexico, while retail prices remained in the $1.00 to $1.80 per pound range." 

The NAFTA Renegotiation. The effort to come to agreement on a revised North American Free Trade Agreement would seem to be moving at a brisk pace. Three of the seven anticipated negotiating rounds have been completed, and the next one, the Fourth Round, is slated to be held next week (October 11-15 in Washington). We don't know whether the negotiators have formally taken up the issue of perishable products or not, but it is a hot topic among the stakeholders. 

More to the point, it is on the list of negotiating objectives that USTR published in July. It comes under the heading of Trade Remedies. The relevant sentence reads: 

"Seek a separate domestic industry provision for perishable and seasonal products in AD/CVD [antidumping and countervailing duty] proceedings."

Further, as those who favor such a provision are quick to point out, this particular U.S. negotiating objective flows directly from the law. That point was made recently by Florida's two senators, Senator Bill Nelson (D) and Senator Marco Rubio (R). In a letter to Ambassador Lighthizer of August 31, they wrote:

"[W]e urge you to formally propose a NAFTA fix that would allow regional growers to use seasonal data for antidumping and countervailing duty (AD/CVD) cases."

Pointing to the relevant law, they argued that: 

"[A]ny agreement expecting fast track authority in Congress needs to meet the negotiating objectives set out in the Bipartisan Congressional Trade Priorities Accountability Act of 2015 (P.L. 114-26), including 'eliminating practices that adversely affect trade in perishable or cyclical products, while improving import relief mechanisms to recognize the unique characteristics of perishable and cyclical agriculture.' 

"Failure to meet these objectives would clearly not meet the standards Congress has set for trade agreements and would threaten the viability of a renegotiated NAFTA."
COMMENT
We shall keep these comments short. We should note first that neither every industry nor every Member of Congress is on board with the U.S. negotiating objective cited above. Not at all. We'll consider that issue more closely in the next entry when we take up the topic of North American apple trade. Apples aside, however, when it comes to North American agriculture, Mexico has a very strong hand to play, as it is the top export market for a range of U.S. commodities, including wheat, pork (by volume), and dairy.

The issues surrounding perishable products are complicated enough, and that complexity is but a small fraction of the complexity that is the full NAFTA renegotiating effort. We, have no idea how the entire exercise will play out, and we readily confess that our principal concern is not with any specific provision but with the whole. One way or another, we hope the negotiators find a way to preserve the principal features of the agreement. 
 
Returning to perishable commodities, we'll conclude with two separate thoughts. It is an open question as to whether USTR will be able to bring home the bacon on this one, that is, to satisfy its own negotiating objective. No country will get all it wants. But the ability to choose from a range of options would seem to increase the likelihood of success, and in that respect the article by Stewart and Stewart is helpful. They offer several ideas, from the changes in AD/CVD law mentioned above, to continent wide marketing orders, to self-initiation of certain cases by the U.S. Government.

Finally, there is politics. Heaven forbid that anyone should act out of political motives in this process, but Florida's place in American politics is worth bearing in mind. It is the third largest U.S. state by population. The first is California with 39 million people. Next is Texas with almost 28 million. And then comes Florida with 20.6 million. Unquestionably, however, Florida is the number one, quintessential swing state. The significance of that would be hard to overstate. Its agricultural sector has just suffered devastating losses from Hurricane Irma, and in 2018 the state will elect a new governor and possibly a new Senator. (His long history and solid approval rating suggest that Senator Nelson, a Democrat, will hold on to his seat, but he will have to defend it.) So, it seems a fair guess that when the Florida delegation clears its throat, the Administration will pay attention.
SOURCES & LINKS
 Tomato Worship takes you to the 2009 NPR report that was the source for today's featured quote.

  The NAFTA Negotiating Objectives as published by the Office of the U.S. Trade Representative on July 17, 2017.

The Problem of Perishables is a link to the Stewart and Stewart article cited above.

From the Florida Senators is a link to the August 31 letter to Ambassador Lighthizer from Florida's two senators, Senator Bill Nelson and Senator Marco Rubio.

TO GET THE TTALK DAILY QUOTE IN YOUR INBOX

Or Other GBD Notices, click below.
©2017 The Global Business Dialogue, Inc.
1717 Pennsylvania Ave., NW, Suite 1025
Washington, DC   20006
Tel: (202) 463-5074
R. K. Morris, Editor
Joanne Thornton, Associate Editor