The Produce Coalition for NAFTA – formed by leading USA and Canadian fruit and vegetable companies are hoping to modernize NAFTA yet continue to maintain duty-free access for produce within the NAFTA countries.
Steve Barnard, CEO of Mission Produce gave a recent presentation in Mexico City regarding the avocado business in particular. The California-based company has substantial operations in Mexico and Canada – Mexico holds the production and Canada has the distribution part of the business. The company has had a presence in Mexico since 1985. “Today Mexico’s operations represent almost 75% of our supply,” he says, noting that California growers have definitely benefited from Mexico product coming into the country.
Steve Barnard
Per capita, avocado consumption has increased from one pound to seven pounds per person and he says California grower returns have gone from a $0.69/lb. to the farmer to $1.10 in 2016 because of a steady supply. “Mexico is completely off season from California so they compliment each other. Forty-six per cent of the volume coming across the border is controlled by US firms so there’s a heavy investment there by US citizens.”
Huge economic ouput
He also cited a 2016 study from Texas A&M that evaluated economic output and influence of the avocado business, determining it adds $3.5 billion in economic output, $2.2 billion in gross domestic product, $1.2 billion in labor income, $594 million in tax revenue and has sustained nearly 19,000 US jobs. “It’s a substantial business.” Even considering commodities such as corn, Barnard says with the amount of corn, beef and chicken that gets shipped to Mexico from Canada and the US could cause some retaliation.
Anti-dumping duties a concern
Proposals to make it easier to impose anti-dumping duties on produce, for example, threaten the success of the cross-border fruit and vegetable trade and could result in increased tariffs that negatively impact growers in all three countries as well as all consumers. One of the Produce Coalition’s concerns is the instigation of the new rule. “That came about by some growers in the south east and I think the concern of the fresh fruit and veg groups that particularly do business or sell to Mexico is that will be a retaliation, whether by Canada or Mexico.” Getting into a ‘tit for tat’ tax or penalty or tariff could be endless. “Where does it stop? I think we’re putting way too much in jeopardy by going that way,” Barnard says.
Even though Mission Produce hasn’t experienced the issues or concerns regarding dumping with the popularity of the commodity, Barnard says when both parties have to end up in court nobody wins. “The people doing the dumping aren’t making any money either so there’s really no incentive for it. Produce is run by supply and demand – if you have too much and not enough demand you’re down to one variable and that’s price.”
Certain commodities may be more affected
One commodity that may be more at the center of the discussion, he feels, is tomatoes, depending on where they’re grown at the time of year. “But there are lots of factors involved,” he says. “The tomato industry is changing. You’re seeing a more vine ripes, more hothouses, different varieties grown for diff flavor profiles; it’s hard to say who has been hurt or who has benefitted more because the game is changing every year.” Questions surround whether Mexican growers have caused issues or that the industry itself changed and they didn’t and got left behind.
Slow process for improvement
A five-day session discussing the trade barriers was held in Mexico City earlier this month. Barnard thinks discussions will go on for a while. US Congress also has its own timeline. “With the lack of progress we’ve seen so far – I think it’s going to take a while. I think at this time congress probably has enough on its plate for the rest of this year.” It could be some time next year before things could progress to make any headway. “They’re pretty tight-lipped on what sort of progress they have or have not made.”
Every country will have an issue with a particular product or process; Barnard says that’s where they should probably start in order to see their concerns addressed. Whether it’s a matter of fine-tuning the process about getting products across the border or eliminating duplication, “It’s not broken, it just needs a little polish.”