February 7, 2019 / 5:56 PM / 11 days ago

U.S. to end tomato trade pact with Mexico, threatening duties

WASHINGTON (Reuters) - The United States will resume an anti-dumping investigation into Mexican tomatoes, the Commerce Department said on Thursday, withdrawing from a 2013 managed trade deal that U.S. growers and lawmakers say has failed.

FILE PHOTO: Tomatoes are pictured at a packaging warehouse in La Piedad in Michoacan state, Mexico, June 12, 2017. Picture taken June 12, 2017. REUTERS/Alan Ortega/File Photo

The move opens a new source of trade friction between the United States and Mexico, Commerce said it was giving the required 90-day notice before terminating the six-year-old agreement not to pursue anti-dumping cases against fresh tomato imports from Mexico.

The action could lead to new duties on Mexican tomatoes, higher consumer prices and possible retaliation at a time when the two countries are still wrangling over U.S. tariffs on Mexican steel and aluminum.

A trade war over tomatoes was averted twice since the 1990s, most recently in 2013 with the current deal to put a price floor on Mexican tomatoes sold in the United States while barring U.S. growers from pursuing anti-dumping charges against Mexican exporters.

Fruit and vegetable growers in the U.S. Southeast had persuaded the Trump administration to seek the ability to impose seasonal anti-dumping duties against Mexican produce, in negotiations to update the North American Free Trade Agreement. But this demand was withdrawn in the final talks over the U.S.-Mexico-Canada trade deal reached last October.

A month later, the Florida Tomato Exchange, which represents growers in the state, had petitioned the Commerce Department to terminate the 2013 tomato pact. It argued that the agreement could not be enforced and contained too many loopholes through which Mexican growers could dump tomatoes in the U.S. market.

The group said at the time that Mexican tomato companies increased their U.S. market share from 32 to 54 percent between 1996 and 2017. The market share for U.S. tomato producers declined from 65 to 40 percent in the same period, the group said.

Commerce Secretary Wilbur Ross said the agency is “taking action today to ensure (U.S. tomato producers) are protected from unfair trading practices.”

Nearly 50 U.S. lawmakers, led by Florida Senator Marco Rubio, wrote to Ross last week asking for quick action. Since 1996, when Washington first agreed to suspend anti-dumping cases, hundreds of U.S. tomato growers have been forced out of business, they said.

“The industry will continue to shrink if the status quo is maintained,” the lawmakers wrote.

The U.S. Commerce Department opened negotiations with the Mexican signatories to revise the agreement in January 2018 but said “despite committed efforts from all sides, significant outstanding issues remained.”

If Commerce finds sales of fresh tomatoes were made at less than fair value and the U.S. International Trade Commission finds significant injury, the administration could ultimately issue an anti-dumping order.

The United States had threatened similar duties against Mexican sugar before reaching a new managed trade agreement limiting Mexican sugar imports in June 2017. But negotiations for quotas on Canadian lumber failed that year, leading to 20 percent U.S. duties on softwood imports from Canada.

Reporting by David Shepardson and David Lawder; Editing by Sonya Hepinstall and Grant McCool

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