Dispute over Mexican tomato agreement threatens AZ with economic loss, ballooning prices
Arizonans who enjoy tomatoes in their salads and sandwiches might be forced to do without them if the federal government decides to terminate a trade deal with Mexico that keeps tomato prices low.
A new study from Arizona State University estimates that consumers would see prices spike as much as 50%, with Arizona losing up to $3 billion, if the U.S. Department of Commerce decides to impose tariffs on Mexican tomatoes.
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At the heart of the issue is the Tomato Suspension Agreement, passed in 2019 to give U.S. consumers access to tomatoes year-round while still protecting the competitiveness of domestic growers. In June, the Florida Tomato Exchange filed a complaint with the Department of Commerce, urging them to terminate the agreement and accusing Mexican growers of dumping tomatoes into the U.S. market and exploiting loopholes to sell their produce at lower prices.
But eliminating the trade agreement is likely to have devastating consequences for U.S. buyers and, in particular, Arizona and Texas, two states which have built a robust produce industry. Economic activity in the Grand Canyon State would plummet by nearly $3.4 billion and the 22,700 jobs would be lost across the retail, distribution, warehouse and transportation sectors, the ASU study found. That would mean as much as $123.3 million would be forfeited in state taxes and $15.8 million in county taxes would be lost.
The dominance of Mexican tomatoes in the U.S. market means that consumers would face ballooning sticker prices if even just a quarter of the Mexican supply is cut. In that scenario, the price of every tomato variety — Roma, grape, cherry and on the vine — would increase by 13% on average.
“Clearly, even in the most optimistic scenario, tomato prices will rise substantially,” wrote Professor Timothy J. Richards, the chair of ASU’s school of agribusiness who led the study.
In the worst case scenario, in which the trade agreement is eliminated and tariffs lead to Mexican tomatoes being pulled entirely, prices could increase as much as 52%.
Businesses and politicians quickly spoke out against the request from Florida growers.
On Sept. 22, a bipartisan group of 34 members of Congress, including Arizona’s U.S. Sens. Kyrsten Sinema and Mark Kelly, wrote to the Department of Commerce to voice their support for the agreement. The letter disputed the claim from Florida growers that Mexico is engaging in unfair trade practices, pointing to the numerous safeguards in place which have failed to turn up any issues.
“Imports of fresh tomatoes from Mexico are among the most heavily scrutinized U.S. imports of any kind, and the 2019 TSA is working as Commerce intended,” the senators wrote. “Commerce has received responses to over 230 quarterly audit questionnaires and over 7,000 quarterly certifications and conducted three in-depth administrative reviews of some of Mexico’s largest growers. These overlapping oversight mechanisms provide Commerce a granular view into the operation of the 2019 TSA, and it has not found a single violation of the agreement. As of May 2023, USDA has completed 250,000 inspections and found that over 99 percent of shipments comply with the terms of the 2019 TSA.”
The senators warned that implementing tariffs against Mexico — the second-largest provider of food and agricultural products to the U.S. — will likely result in the country taking retaliatory measures or, at the very least, force it to focus on less expensive products to export, leaving U.S. consumers and businesses in the lurch.
In a separate letter, 405 businesses, including 115 organizations based in Arizona, asked the Department of Commerce to preserve the agreement. Among the Arizona representatives were the Arizona Chamber of Commerce and Industry, the Arizona Food Bank Network, the Arizona Restaurant Association and numerous produce and distribution companies in Nogales. The city is the fourth largest port of entry for trade between the U.S. and Mexico, facilitating $21.6 billion in trade last year.
“We rely on the 2019 Agreement to provide us with the financial predictability and economic stability that we need to invest in our U.S. businesses, workers, and communities, as well as to contribute to the economic growth of the cities and states where we operate,” the organizations wrote. “Without the 2019 Agreement, our businesses would suffer tremendously under the weight of market uncertainty, just as we attempt to emerge from the economic upheaval wrought by the COVID-19 pandemic and inflation.”
Lance Jungmeyer, president of the Fresh Produce Association of the Americas, which advocates for increased trade with Mexico, said that eliminating the trade agreement would be the wrong move in a time already marked by skyrocketing inflation.
“If the Administration opts to terminate this agreement, it will cause significant economic damage to countless communities in Arizona, Texas and beyond, while also sending tomato prices skyrocketing for consumers across the country at a time when many American families are already struggling with the rising cost of living,” he said. “It doesn’t have to be this way. The Tomato Suspension Agreement ensures that American consumers, companies and communities have access to fresh, healthy, high-quality tomatoes at an affordable price. The Department of Commerce shouldn’t mess with what’s working.”