WASHINGTON -- Rejecting warnings that it could ignite a trade war, the Obama administration 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.
Manatee County growers were pleased Thursday.
"It's a great day for fair trade in the United States," said Bob Spencer, vice president of Palmetto-based West Coast Tomato and council member of the Florida Tomato Exchange. "From the beginning, we wanted to compete on an even playing field. Over the last
15 years, what we've seen is Mexico dumping tomatoes under their cost for production."
In Mexico, reaction was strong. "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.
Manatee tomato growers felt justice was served upon learning the news Thursday.
"This will allow American farmers to survive," Spencer said. "We don't need to be dependent on foreign vegetables."
Mexican producers and exporters rejected three proposals from the U.S. government before agreeing to the existing policy in 2008. Still, the Florida Tomato Exchange felt Mexico never fully complied.
In June, U.S. growers, fed up with the cheap prices of Mexican produce, asked the government to terminate an anti-dumping agreement with Mexico they say was not being enforced.
With a preliminary ruling to terminate the agreement, domestic growers have achieved a fair market.
"Trade will be free and open," said Reggie Brown, executive vice president of the Florida Tomato Exchange. "Mexico will not be able to sell at minimum prices. We're going back to a free trade arena."
Manatee, along with Hillsborough County, produce 40 percent of tomatoes grown in Florida. Manatee is the state's leading tomato-growing county, according to the county's University of Florida Institute of Agricultural Sciences extension office. As of 2010, tomato production in Manatee accounted for 12,000 of 28,000 total acres used for vegetable production.
"This is also a big win for Manatee because a lot of farmers have gone out of business," Spencer said.
U.S. Rep. Kathy Castor, D-Tampa, was also pleased with the news. "Unfair trade and unlawful dumping hurt Florida businesses and tomato farmers," she said in a news release Thursday. "We are grateful that the Obama administration listened and we are on track to preserve jobs and boost the economy for these home-grown products. The benefits will be felt in Ruskin, Hillsborough County, Palmetto, Manatee County and throughout Florida."
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, Brown claims.
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. Jimmy Grainger, an executive with Palmetto-based Taylor & Fulton Packaging and president of the Florida Tomato Exchange, previously said the value of Mexican imports have nearly tripled since 1996.
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.
The tiff is the latest trade spat between the United States and Mexico, partners who joined forces to sign the historic North American Free Trade Agreement nearly 20 years ago. And now the two are among 11 countries pushing to finalize the new Trans-Pacific Partnership, which could become the largest trade pact in U.S. history. Members of the Arizona congressional delegation, reflecting the state's close proximity to Mexico, wanted to keep the rules intact and urged the administration not to rush into anything, particularly before the election. And Wal-Mart had sided with the Mexican growers as well, saying they had provided a predictable and steady supply of tomatoes for the U.S.
But the Florida growers won backing from the Florida congressional delegation and from workers and government officials across the country, including in California, Texas, North Carolina, South Carolina, Pennsylvania, Virginia, Tennessee, Georgia, Ohio and Illinois.
The two sides are sparring over a 16-year-old agreement that came after the signing of NAFTA, which eliminated tariffs on imported tomatoes from Mexico and resulted in a flood of imports. Under pressure from the Florida growers, the Commerce Department began an investigation into whether Mexican growers were dumping their tomatoes on the U.S. market by selling at below-market prices.
-- Herald reporter Nick Williams contributed to this story.