Produce importers hit back after US lawmakers and produce growers from the southeastern US said that imports of subsidized Mexican fresh produce are causing harm to domestic industry during the first of two joint virtual hearings held by USDA, the Department of Commerce and the Office of the US Trade Representative (USTR).

In opening remarks, Commerce Secretary Wilbur Ross emphasized the "importance of domestic food production," including the US seasonal and perishable produce industry. He acknowledged that over the past nine years, imports of fresh vegetables from Mexico increased from $2.3 billion in 2010 to $6.9 billion in 2019. Overall ag imports from Mexico nearly tripled over the same period, he added.

"It's imperative that the US government listens to the concerns of our growers," Ross said. "We use every tool available to counter them whenever and wherever they exist." He pointed to the recently updated Mexican tomato suspension agreement - which sets guidelines for pricing and inspection of tomatoes from Mexico in lieu of tariffs - as evidence of the administration's commitment.

The suspension agreement "was a major victory for American tomato farmers and generated $426 million in revenue for Florida tomato farmers in 2019 alone," Ross remarked.

During the hearing, critics of the imports including Sen. Marco Rubio (R-Fla.) urged the Trump administration to "make good" on a promise to investigate the impact of Mexican fresh and seasonal produce. If Commerce were to move forward with an investigation, it could result in duties being applied to fresh and seasonal produce imported from Mexico.

"With a $137 billion economic impact, agriculture is Florida's second-largest industry and first during times of economic downturns like we are currently experiencing due to COVID-19," Florida Agriculture Commissioner Nikki Fried said at the hearing. "For 25 years, NAFTA allowed domestic markets to be flooded with cheap produce from Mexico that has devastated Florida seasonal crop growers' bottom line and ability to compete — and unfortunately, the USMCA failed to provide a remedy."

The Florida Department of Agriculture conducted a study which examined the impact of Mexico's agriculture exports to Florida, and an official from the agency presented the results of that study during the hearing. "One cannot deny the harm being caused when faced with the data," Fried said. "But I implore the members of this hearing committee and the administration to see these figures not only as numbers on a chart, but an attack on American's livelihoods."

Mexican ag subsidies, trade policies slammed as unfair

US-grown blueberries are one of the products being hurt by shipments from Mexico, according to Michael Hill, owner of Florida-based H&A Farms. "There are farmers, every day, that are just stopping, giving up, because they see the train coming down the tracks - and you either get run over you get off," he said on the imports. He added that over the past decade, the value of his blueberries has fallen by about half, attributing the decline to unfair completion from Mexican growers.

Witnesses said a combination of agricultural subsidies by the Mexican government, cheap Mexican labor and other trade-distorting practices have unfairly tilted the tables against US growers. At the hearing, University of Florida economist Zhengfei Guan provided data showing large increases in produce imports from Mexico between 2009 and 2019, and coinciding declines in production seen in Florida for the same products. Florida is especially impacted by the imports as it has a growing season mirroring Mexico's.

Mexican government subsidies have aggravated the surge in imports of cheap produce to the US, Guan testified. "The Mexican government has been subsidizing its fruit and vegetable industry, and it has negatively affected the Florida fruit and vegetable industry," he remarked.

Efforts to secure seasonal produce provisions under the US-Mexico-Canada Agreement (USMCA) were unsuccessful, Rubio stated. "Florida growers deserve an effective, enforceable, and durable solution to the problems NAFTA helped impose," he said. "While the USMCA will not improve their situation, I remain confident that this administration will continue to look for ways to address significant price distortions in the domestic seasonal and perishable produce market caused by a rising tide of unfair import competition."

Unless there is "continued oversight of any Mexican bad actors" in the fresh and seasonal produce industry, Rep. Darren Soto (D-Fla.) warned that "the robust Florida seasonal produce industry will be eliminated forever."

After seasonal produce provisions were excluded from USMCA, Rubio and a slew of other southeastern lawmakers introduced the Defending Domestic Produce Production Act which would make it easier for the Department of Commerce and the US International Trade Commission (USITC) to launch antidumping investigations for Mexican produce. The bill, also introduced in the previous Congress, has yet to advance.

Produce importers reject allegations against Mexico

Responding to the testimony offered at the Thursday hearing, the Fresh Produce Association of the Americas (FPAA) said the lawmakers and growers did not provide evidence to back up their allegations of unfair trade practices by Mexico. "Throughout the August 13 virtual hearing, Southeast Congressmen and growers repeatedly invoked phrases like 'unfair subsidies,' 'unfair trade-distorting practices,' 'national security,' and 'unfair labor,' without providing reasonable evidence or context," FPAA said in a release.

If the US were to invoke Section 301 national security provisions to impose duties as urged by some who testified, "consumers would pay more for strawberries, blueberries, bell peppers, tomatoes, sweet corn and watermelon if tariffs or quotas are put on these items," FPAA argued. Implementing Section 301 duties would likely also "would launch numerous and unending 'tit for tat' trade wars that could imperil more than $40 billion in US agricultural exports to Mexico," the group warned.

FPAA also took issue with several points raised during the hearings related to Mexican ag subsidies and labor. The group said Mexico provides a small fraction of the ag subsidies the US does, citing data from the World Trade Organization (WTO).

Regarding cheaper Mexican labor, the group stressed that USMCA includes new labor provisions that help to further level the playing field and noted the dispute resolution mechanisms available should Mexico fail to faithfully implement those provisions.

A second virtual hearing is scheduled for August 20.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.