The proposed U.S. Mexico Canada Agreement, the Trump Administration’s renegotiated update of the North American Free Trade Agreement, threatens the future of growers in the Peach State and across the Southeast with heightened market pressure from fruit and vegetable imports from Mexico.
That economic pain would be felt well beyond Georgia’s fruit and vegetable growers, according a new study published by researchers at the University of Georgia’s Department of Agricultural and Applied Economics.
According to the study, titled The Impact of the USMCA on Georgia’s Small Fruit and Vegetable Industries, if the USMCA is approved as currently negotiated, without any recourse for U.S. growers suffering seasonal damage from Mexican government-subsidized production, the state would be on track to lose nearly $1 billion in annual economic output and more than 8,000 jobs unless something occurs to slow the increase in lower-priced Mexican imports of blueberries and vegetables.
A statement on the study released by the La Grange-based Georgia Fruit and Vegetable Growers Association said the economies of rural communities such as Clinch and Echols counties would suffer income losses of more than 40 percent, economic damage on the scale of the Great Depression. The rural communities of Appling, Brooks, Colquitt and Decatur would see a percentage drop in county incomes in the range of 2 percent to 5 percent, equivalent to an economic recession.
‘We Were Hoping That Would Be Fixed…’
GFVGA’s statement called on the Administration and Congress to work together to prevent the negative economic impact forecast in the study, saying “Family fruit and vegetable farms in the Southeast that have operated for generations must have a solution that provides relief from Mexico’s unfair trading practices. Without effective relief, farm operations will be forced to shut down.”
While Trump Administration trade negotiators tried to get dumping protection for U.S. growers (which NAFTA lacked as well) included in USMCA, such provisions were not approved, said GFVGA Executive Director Charles Hall.
“We were hoping that would be fixed,” he said.
Mexico has expanded its import supply over a longer season through a government-subsidized surge in protected growing acres (greenhouses and high tunnels). This policy of subsidies, started by SAGARPA (Mexico’s equivalent to the USDA) in 2009 and known as the Strategic Project for Protected Agriculture, has helped quadruple Mexico’s protected production to more than 100,000 acres and has lengthened the weeks each year when these crops enter the market at the same time as Georgia.
Georgia blueberries hit the market before blueberries grown in Northern states, and Georgia’s climate is well-suited for producing fall vegetables such as tomatoes, peppers, squash, cucumbers and eggplants. Mexico’s expanded market window, during which their lower-priced imports compete directly with Georgia fruits and vegetables, has diminished Georgia’s seasonal advantage, according to the study.
The value of Mexican blueberry shipments to the U.S. went from around $1 million a year in the early 2000s to $220 million in 2017, Hall said.
Subsidies to Mexican producers coupled with their lower labor costs (about one tenth of U.S. labor costs) make the price of Mexican imports often less than half the price U.S. growers were receiving before Mexican imports arrived, according to the study.
The study used economic impact modeling software to estimate the total economic value of Georgia’s blueberry and vegetable industries while also calculating the jobs supported by economic activity, labor income earned, state and local taxes paid plus all other multiplier effects of that money circulating through the state’s economy.
For example, a grower earns money and spends it at the local chemical and fertilizer dealer, the supermarket, the car dealer, a local mall or eating out at restaurants. That spending supports other jobs in the community, and the money those workers earn in turn gets recirculated, creating another round of spending. Each round of spending gets smaller as money leaves the Georgia economy when consumers purchase produce grown outside the state, the study suggests.
‘They Use Some Faulty Analysis…’
Lance Jungmeyer, president the Nogales, Ariz.-based Fresh Produce Association of the Americas, which represents Mexican growers and their U.S.-based importer partners, questioned the methodology and intent of the UGA study.
“They use some faulty analysis,” Jungmeyer said.
He said the UGA study is misleading in comparing Georgia blueberry production to all non-strawberry berry production in Mexico and in comparing 34 Georgia-grown crops to all vegetable and melon production out of Mexico, which includes hundreds of commodities.
Increased market pressure is not solely coming from Mexican imports, Jungmeyer said, noting that tomatoes grown in the Southeast face more and more competition from greenhouse operations in the U.S. and imports from Canadian greenhouse growers too.
“Competition has grown everywhere,” he said.
Jungmeyer added that imports from Mexico add to U.S. food security, citing a freeze a couple of seasons ago that wiped out the majority of Georgia’s blueberry crop.
He said the report appears crafted to lend support the Defending Domestic Produce Act, reintroduced in the U.S. Senate earlier this year by Florida Republican Sen. Marco Rubio.
The bill would make it easier for growers to petition the Department of Commerce and the U.S. International Trade Commission to investigate illegal subsidies and dumping of Mexican fruits and vegetables in the U.S. market.
Current law requires petitioners to demonstrate harm as measured from a nationwide and year-round perspective. This bill would take into account the specific circumstances of seasonal fruit and vegetable producers claiming to be directly harmed by Mexico’s practices in various geographic regions during different seasons.
“It’s a political report, not an academic report,” Jungmeyer said. “It makes easy political points to pick on Mexico.”
‘Put American Farmers And Families First’
The UGA study joins recent warnings out of Florida, the Southeast’s biggest player in the fruit and vegetable market, about USCMA’s feared adverse impact on U.S. growers.
In April, Florida’s Commissioner of Agriculture and Consumer Services Nicole “Nikki” Fried sent a letter to U.S. Trade Representative Ambassador Robert Lighthizer citing concerns about the trade pact’s effect on Florida growers.
In the letter, Fried stated, “Florida fruit and vegetable farmers cannot afford this trend continuing – I urge the Administration to take appropriate action to protect U.S. seasonal growers from unfair foreign imports and trade practices. Without enforceable remedies in place, these unfair practices will continue, further threatening Florida’s farmers, agriculture industry and economy. … I look forward to working with you toward a solution that will put American farmers and families first.”
While President Trump, President Justin Trudeau of Canada and now former Mexican President Enrique Pena Nieto signed USMCA on Nov. 30 at the G20 Summit in Buenos Aires, the agreement requires ratification by all three countries.
Approval in Canada and Mexico does not appear to be in question. At the time of the signing, Trump asked for Congressional approval within six months and has indicated he will consider pulling out of NAFTA if Congress fails to approve it. Under that scenario, trade between the three nations would default to World Trade Organization rules.
“We’re calling on Congress to vote no,” Hall said.
In a related long-simmering trade issue between U.S. and Mexican fresh produce traders, the Department of Commerce on May 7 terminated the 2013 Tomato Suspension Agreement on Fresh Tomatoes from Mexico, adding that negotiations will continue on a possible revised agreement acceptable to the Mexican signatories that also addresses concerns of the U.S. industry, according to a news release.
With the suspension agreement’s termination, Commerce officials said they will continue with their investigation into alleged below-market-price dumping of Mexican tomatoes into the U.S. and begin assessing a 17.56 percent duty on Mexican tomatoes arriving in the U.S.
The Maitland-based Florida Tomato Committee issued a supportive statement on the termination of the tomato suspension agreement: “We are pleased that the Commerce Department has terminated the tomato suspension agreement, which presided over a very difficult five-year period for the U.S. tomato industry. Although the agreement was created with good intentions, it was never effective in protecting American producers from dumped Mexican tomatoes.
“As a result, the U.S. industry has declined significantly over the last five years with many tomato growers across the country going out of business. Negotiations for a new suspension agreement can still continue even as the anti-dumping investigation is resumed this month. The U.S. tomato industry remains open to a new suspension agreement so long as it is structured in a way that eliminates the loopholes of the previous agreement and has strong enforcement mechanisms. If a new agreement cannot be reached, we look forward to the anti-dumping investigation finally running its full course.”
FPAA decried the Commerce Department ruling in a statement on its website, saying “… Mexican growers put several proposals on the table to improve an already-effective agreement. Despite the fact that the agreement has been terminated, our hope is that Commerce continues to work in good faith with the growers in Mexico to negotiate a new agreement that balances concerns of growers in Florida with the need to protect our robust trading relationship.”