Source – Wall Street Journal
Review & Outlook
Date – 11 Feb 2013
Website – online.wsj.com
Why you’ll soon pay more at the grocery.
The Obama Administration resolved a simmering trade tiff with Mexico earlier this month, and tomato lovers can be forgiven for heaving a few rotten specimens at the Commerce Department in response. Americans will pay more to benefit some politically connected Florida growers.
The deal updates a 16-year-old agreement and raises prices on Mexican tomato imports “substantially, in some cases more than double,” as Commerce Under Secretary for International Trade Francisco Sánchez put it, approvingly. The Cato Institute’s Daniel Ikenson estimates that winter tomato prices could rise from 41% to 168%, and summer prices 47% to 176%. Specialty tomatoes, such as grape, cherry or heirloom varieties, will see the biggest increases.
So why would Mexico agree to this, given that its tomato industry employs some 350,000 in some of the poorest parts of the country, while generating $1.8 billion in trade in 2011? Answer: Mr. Sánchez used U.S. trade law as a cudgel. The U.S. and Mexico set a price floor on tomatoes to avoid costly and unpredictable antidumping complaints. Commerce found this arrangement in the public interest on three separate occasions, most recently in 2008. Yet last year after complaints from about 80 U.S. growers, Commerce agreed to review the deal, which sunsets every five years.
U.S. importers, large food retailers and other businesses supported the status quo. But Mr. Sánchez used the threat of antidumping complaints by U.S. growers against Mexican producers to persuade these tomato consumers to stand down and Mexico to roll over. Thus does trade protectionism harm America’s middle class and Mexico’s poor while enriching a wealthy few.