L.A. Times weighs in on Mexican trucks

Packer Managing Editor Fred Wilkinson here.

The Los Angeles Times comes down on the side of free and open trade in an editorial on the case of Mexican trucks and tariffs:

"Thanks to the latest protectionist move by Congress to dodge our free-trade obligations with Mexico, in six to eight weeks, more than 20,000 pounds of California strawberries that ordinarily would be headed south of the border will have nowhere to go. The 80,000 people employed by the industry, however, know exactly where their jobs will be headed -- into thin air. At least that's the worst-case scenario if Congress doesn't find a way to honor the North American Free Trade Agreement and give Mexican trucks permission to travel more than a few miles north of the border, as required by the treaty."

The damage to business in the U.S. and Mexico -- not to mention consumers in Mexico -- outweighs the small political gain from barring Mexican trucks.

The U.S. needs to do a quick U-turn on this rash policy decision.

News from FFI

Compensation for growers won't be easy, but it can't be any harder than the last few weeks. This just slid across the inbox, from Florida Farmers:

GADSDEN TOMATO GROWERS JOIN FLORIDA FARMERS, INC.

TALLAHASSEE, FL – Paul DiMare, Chairman of Florida Farmers, Inc.(FFI) announced today that tomato growers in Gadsden County, FL. have joined FFI. Also Billy Don Grant of Quincy Tomato Co. and Gadsden Tomato Co. and William Maxwell, president of Gadsden Tomato Growers Association have accepted appointment to the Board of Directors of FFI.

“We welcome their affiliation and support. The North Florida Growers have recently suffered severe losses as the result of the inactions of the Food &Drug Administration (FDA). FDA announced in early June that the country was suffering from a Salmonella outbreak caused by tomatoes, almost three weeks later the FDA added cilantro, and various types of hot peppers to the list of suspect produce. Now, it seems that tomatoes may not have been involved in the first place,” DiMare said.

“A number of growers in Southwest Florida have also sustained severe losses as the result of the Salmonella outbreak. Consumer confidence has dropped and as a result of the apparent inability of the federal government to handle the issue in a competent, prompt and fair manner. Sales are down 30 to 40 percent, primarily as a result of slow and inconclusive response by our federal government.”

FFI is an advocacy organization of and for Florida winter vegetable farmers that was established in 1996 as an aggressive response to failed U.S. trade policies, such as NAFTA that have forced over 300 winter vegetable farmers out of business since 1994. Florida winter vegetable farmers provide about 50% of the winter vegetables to American consumers. Mexico is the other primary source.

The Florida winter vegetable is a sensitive and strategic food industry and the protection mechanism in NAFTA has not worked. FFI provides leadership to address critical issues, including:

Legal remedies for dumping of foreign produce

Public awareness of food safety

Passage and implementation of country of origin labeling(COOL)legislation

Progressive action for affordable housing for farm workers

Immigration reform that protects national security and provides for a legal and stable farm workforce.

Environmental, energy and growth management policy for sustaining vegetable farming in Florida

And now added to this list:

Accountability of the federal government for loss and damage suffered as a result of mishandling the Salmonella issue.

Mexican "hot bite" - Redo NAFTA and recession impact on exports

If Clinton or Obama wins, will the U.S. renegotiate NAFTA? Perhaps so. Will the U.S. recession hurt Mexican exporters? Most assuredly. Here is a link to a summary of Mexican press reports from the USDA FAS office in Mexico City. From Hot Bites:

Jack Sweney, the former Vice-president of the American Chamber of Commerce (AmCham), recently said that the agricultural sectors did not make any changes to increase their productivity during the 14 years that NAFTA has been in effect. Beginning this year, the tariff rate quotas (TRQ) were eliminated so Mexico could import yellow corn from the United States with no restrictions. Sweney, who participated in the NAFTA negotiations in 1993, onfirmed that legally Mexico, the United States and Canada can renegotiate the agreement. However, commercially it is not convenient. The three countries recently formed a group to renegotiate NAFTA, and they are confident they can do so as long as a democratic candidate wins the U.S. presidency. Sweney commented that a renegotiation would have to start at the top with each President. “The arguments against the treaty, which have been exposed by the legislators, are the same arguments they used during the negotiation in 1993,” said Welcome to Hot Bites from Mexico, a weekly review of issues of interest to the U.S. agricultural community. The topics covered in this report reflect developments in Mexico that have been garnered during travel around the country, reported in the media, or offered by host country officials and agricultural analysts. Readers should understand that press articles are included in this report to provide insights into the Mexican "mood" facing U.S. agricultural exporters. Significant issues will be expanded upon in subsequent reports from this office. DISCLAIMER: Any press summary contained herein does NOT reflect USDA’s, the U.S. Embassy’s, or another U.S. Government agency’s point of view or official policy. “Th e legislators can review the NAFTA agreement, but I doubt that they will try to renegotiate it,” said Sweney. (Source: El Universal; 03/12/2008).

Members of the Mexican Lower House requested a series of hearings with the Secretaries of Agriculture and Economy, so that they can explain the impact of NAFTA’s full implementation on Mexico’s agricultural sector. Representative Hector Padilla, President of the Agriculture Committee, explained that the hearings may take up to three days in order to define and, hopefully, implement adequate policies to alleviate the problems faced by agricultural workers. He added that during the hearings they will invite state government officials, agricultural workers’ associations and related industry members. (Source: El Sol De Mexico, 3/10/08).

Jaime Yesaki, President of the National Agricultural Council (CNA), said that the economic slow down in the U.S. could impact the Mexican agricultural sector with a reduction in exports to the U.S. and Canada. CNA’s President stated that 85 percent of Mexico’s exports go to the U.S., which is why a change in the economy and incomes of the Americans would impact the Mexican agricultural sector. “With the economic slow down, we will be affected in two ways: with exports and from investment,” said Yesaki. “There would be less investment and less credits; therefore, we have to look for new markets because we depend on the United States too much.” Yesaki said that the impact of the economic slow down will be felt during the middle of the year. (Source: Reforma ; 03/13/2008)

Keep it coming

American Farm Bureau doesn't want to see U.S. agricultural trade to Mexico compromised because of access issues for Mexican trucks in the U.S.

From today's press release from AFBF:

March 10, 2008—American agriculture could lose up to $2 billion per year if the U.S. does not meet its commitments to Mexico under the North American Free Trade Agreement, said American Farm Bureau Federation President Bob Stallman. Speaking today at a press conference with Transportation Secretary Mary Peters, Stallman said if Congress halts or impedes the Transportation Department’s Cross Border Trucking Pilot Program, Mexico’s retaliation could be devastating to U.S. agriculture. Mexico brought a NAFTA case against the United States which found that the United States is not in compliance with their obligations on this issue under the agreement. This case gives Mexico the authority to retaliate if efforts are not taken by the U.S. to comply.“Disruption of the program, which is consistent with U.S. trade obligations under NAFTA, will come at a considerable cost to U.S. agriculture and many other industries,” said Stallman. “Aside from the significant monetary loss, it is estimated that nearly 41,000 U.S. jobs in 17 states could be lost.”Under NAFTA, Mexican motor carriers are allowed to transport international cargo within the U.S In 2007, DOT announced a small demonstration project to begin implementation of the cross-border trucking provisions. Congress is threatening to halt the pilot program, which could lead to retaliation by Mexico.

The American agriculture industry is particularly vulnerable to retaliation given the growth of U.S. farm exports to Mexico and repeated calls from Mexico’s agriculture sector for restrictions on U.S. food products. Under NAFTA, U.S. food and agriculture exports have more than tripled, climbing from an average $3-4 billion per year prior to NAFTA to more than $12 billion in 2007, making Mexico the second largest export market for U.S. agriculture products.
“The U.S. has made significant strides under NAFTA, including increased export opportunities and the creation of thousands of American jobs,” said Stallman. “Further actions by the U.S. to halt our Mexican truck obligations would only hurt ourselves.”

Not so bad

Coincidence or a winning trade agreement? In either case, Mexican growers are apparently pleased with the results of the North American Free Trade Agreement:
This press translation of a Mexican newspaper story was recently featured in a report from the U.S. Department of Agriculture Foreign Agricultural Service in Mexico:

While many agricultural workers are protesting against NAFTA by taking their tractors to the streets, others are taking them to the fields and taking advantage of free trade; specifically, fruit and vegetable producers. Since the beginning of NAFTA, Mexican fruit exports to the United States have grown 177 percent, while vegetable exports have grown 122 percent. Mexico is the world’s main avocado producer, and U.S. imports of Mexican avocados have multiplied 500 times since NAFTA was created. In 2007, 12 percent of all Mexican exports to the United States were avocados, and Mexico has conquered 66percent of the total U.S. market, displacing Chile as the main supplier. Meanwhile, 88 percent of the U.S. tomato market is covered by Mexican exports, which totaled 863,000 MT last year. Manuel Tarriba, President of an agricultural worker’s association in Sinaloa explained that “we as producers
did our homework, and we invested in food safety, plant health, postharvest treatments and state-of-the-art equipment.” Jeffrey Jones, Under Secretary of Agribusiness Development, believes that this sector is also the least “politicized”, which is something that has allowed the industry to do well. (Source: Reforma, 2/2/08)

Rethinking NAFTA or not

I can barely believe that NAFTA is still a lightning rod for public opinion, yet it continues to be so in all three countries. Amid the recent noise of this second Super Tuesday are the presidential campaigns of Barack Obama, Hillary Clinton and John McCain. McCain is the only one among the three who has expressed support for the free trade agreement.

Here is a quick rundown of some news coverage;
Barack Obama takes heat over NAFTA memo, Rezko - Chicago Tribune

But much of the heat didn't come from a shift from chilly Ohio to last-minute campaigning in humid Texas. Instead, it involved a top Obama adviser's recent visit with Canadian officials that included a discussion of the North American Free Trade Agreement, a trade pact that President Bill Clinton considered a signature accomplishment, but one that now has been the subject of calls for renegotiation by both candidates.

Two faces on NAFTA Chicago Tribune

Hillary Clinton is an odd one to accuse someone of being two-faced on this topic. After all, it was during her husband's presidency, and with his support, that the treaty was ratified. As recently as 2004 she made it clear she grasped its value. "I think on balance NAFTA has been good for New York and America," she said, while indicating she had some reservations as well. Now, of course, Clinton insists she never liked it.

Buckeye blues - The Daily Standard

WHEN VOTERS IN OHIO go to the polls today, they will have heard over and over again from Democratic presidential candidates Barack Obama and Hillary Clinton that their state's economic troubles are caused by the North American Free Trade Agreement (NAFTA) and other trade treaties.

But there was fresh evidence last week that NAFTA has had little to do with Ohio's doldrums, its job losses in particular. When the U.S. Air Force awarded a $40 billion contract for 179 new aerial refueling tankers, Ohio wasn't in the running as a site where the aircraft might be built. Instead, they'll be built in Alabama outside Mobile.

Why? The answer is simple: Alabama's business climate is good and Ohio's isn't. When major business projects are looking for the best site, job-hungry Ohio is rarely considered. And NAFTA has little or nothing to do with it.

Surely Obama and Clinton know this. If they don't, their understanding of the economy is lacking. If they do, their attacks on free trade were aimed to please NAFTA-hating union members. In truth, NAFTA is a boon to the Ohio economy. Roughly 55 percent of Ohio's exports go to Canada and Mexico, America's NAFTA partners. That exceeds the national share of exports--35 percent--to those countries.

USDA Ag Outlook Forum - Notables

Here are some other presentations fr on the USDA Ag Outlook Forum that might be worth a look:

Procedural Impediments to Regulation—The Ossification of the Rulemaking Process: Interesting presentation on the barriers to rulemaking that exist in the federal government and possible shortcuts - such as issuing "guidance" - that may be ways around the problem. By Jeffrey S. Lubbers Washington College of Law American University JSL26@aol.com


The Challenge of Increasing Trade: How to Address Linkages and Barriers Drawing lessons from two specific examples —Avocados and Apples: Presentation by David Orden and Everett Peterson: Fascinating presentation drawing comparisons between opening of U.S. market for Mexican avocados and the potential opening of the U.S. market for Chinese apples. I pulled some highlights on apple in the following excerpts:


On apples:
Apple production in China has increased substantially in recent years and now accounts for nearly half of the total global output. Correspondingly, China has highlighted apples (and also pears) as products for which it has sought market access in many of its negotiations with trade partners about agricultural technical barriers. China’s apple exports have skyrocketed as markets have been opened. In the 2004/05, China exported 850,000 metric tons of fresh apples, a nearly five-time increase in the export volume over five years. A large proportion of the increase in Chinese apple exports has gone to Pacific Rim markets. In North America, the importation of Chinese fresh apples from approved orchards and packers in selected provinces has been authorized by Canada since November 2004 but importation of fresh apples remains banned by the United States.
Opportunity: It is not as obvious that there is an economic opportunity for Chinese apples in the U.S. mark et as in the case of Mexican avocadoes. Chinese apples have obtained only about a 3-percent share of Canadian fresh apple consumption. The Chinese apples imported by Canada are mainly sold in the Asian communities at relatively high prices as a somewhat specialty product. In the European Union, Chinese fresh apples account for only about a 1-percent market share. Imported Chinese apples would similarly be likely to enter the U.S. market as a specialty item. This limits the economic gains but also limits the pest risks which increase a larger volume of trade.

On apple science:
Science: Since there has not been a U.S. risk assessment, the scientific evidence is less cohesive at this point in time. One can examine the risk assessments that Canada and other countries have made and the risk-mitigation measures they have imposed. From this, one can describe a prototype or hypothetical systems approach that might be adopted by the U.S. The decision by Canada provides some evidence that a risk assessment can support Chinese apple imports with feasible risk-mitigation requirements. Canada identifies 10 pests of concern and its risk-mitigation implementation is closely coordinated with Chinese sanitary authorities. But a process of pest identification, data collection, risk assessment and analysis of mitigation measures has only progressed to an early stage for the U.S.

On political will:

Political Will: The current political environment does not seem conducive for decisions that open U.S. markets further to imports from China. At the macroeconomic level, there is a large U.S. bilateral trade deficit and arguments are made that the Chinese currency should be revalued. There is concern about industrial competition in general from this lower-wage country. And the safety of products from China, from pet food to pharmaceuticals, has
made front-page international news. In this context, it would be difficult for the two governments to agree to intense efforts to reduce phytosanitary barriers for a new product.
It can be argued that NAFTA was also controversial when negotiated. But once a high-level political decision was made to reach the NAFTA accord it provided an institutional impetus for various bilateral trade issues to be addressed. There is no similar high-level accord currently under discussion between China and the U.S.

Analysis:
Without considering pest risk, it is assumed that Chinese exports to the U.S. would achieve about a 3-percent share of the total U.S. apple consumption and sell at a price above the U.S. market average, similar to the situation for Canada in 2003-2004. This results in small economic gains. Next the outcomes are evaluated with pest risks and related control costs taken into account. The probabilities of U.S. pest outbreaks due to the importation of Chinese fresh apples are not known. Thus, the risk probability levels are estimated that cause the expected change in U.S. welfare due to granting market access to Chinese fresh apples to fall approximately to zero. Higher levels of risk from trade would result in expected welfare losses.
In the case of the assumed lowest costs from pest infestations, an expected frequency of a trade-related pest outbreak of approximately 0.2 per year, or one every five years, leaves U.S. welfare unchanged. For the cases of assumed “average cost” and “high cost,” the expected frequency of an outbreak that leaves U.S. welfare unchanged drops to once in 16.7 and 50 years, respectively.

From the report's conclusions:
There are several general lessons from this case-study evaluation:
• In some instances, calls to reduce technical trade barriers may not be matched by real economic circumstances that would result in trade.
• In other cases, where exporters rightly perceive a real economic opportunity, they face multiple challenges. These challenges should figure into their business calculations and industry strategy.
• An industry seeking market opening needs to send the “A team” into the fray and even then recognize that its fate depends in part on contextual forces beyond their control.
• Appreciation is gained of the complex environment in which regulators operate. This may be no surprise for those with experience, but the point needs to be widely understood. Such understanding will enhance the functioning of the regulatory process.

Wal Mart direct sourcing in Mexico

Grower groups claim that Wal-Mart's direct sourcing campaign in Mexico hasn't met their expectations in this press summary from a USDA FAS report. From the summary/translation:

Selling directly to Wal-Mart was a project that agricultural workers affiliated to the National Agricultural Workers’ Confederation (CNC) began two years ago, but according to them, the program has failed and they are forced to sell once more to the intermediaries, widening the price gap between producers and consumers. According to CNC, producers cannot meet the volume requirements and Wal-Mart delays payments up to eight months, something the average producer cannot handle. Meanwhile, Wal-Mart only commented that they keep a strong strategic relationship with CNC, and confirmed that 96% of its fresh produce supply comes from Mexican growers. (REFORMA, JAN. 29)

Also in the report, continuing accounts of Mexican grower unhappiness with NAFTA.

Rural and worker organizations deemed ‘successful’ the day of mobilizations around the country that culminated with a meeting in the main square of Mexico City (the “Zocalo”). They wrapped up with a pact to press the GOM for an immediate renegotiation of the agricultural chapter of the North America Free Trade Agreement (NAFTA) in defense of food sovereignty and against energy reform. Before thousands of people that arrived at the “Zocalo”, leaders such as Cruz Lopez, of the National Farmers Confederation (CNC); Max Correa, of the Cardenista Rural Union (CCC); Artemio Ortiz, of the National Coordinator of Education Workers (CNTE), and Martin Ortiz, of the Mexican Union of Electricians (SME), pointed out that they will strengthen unity to promote a change in the economic and social policies of the country. According to organizers there were more than 200 thousand demonstrators that arrived to the Zocalo, where they insisted upon the Secretary of Agriculture’s resignation.

TK: Can you imagine 200,000 farmers in Washington, D.C. demanding the resignation of the Agriculture Secretary? Grower unrest in Mexico far transcends the level of farmer discontent in the U.S. at this moment in time. While the U.S. and Mexican sugar industries have proposed an agreement to "manage" the sugar and sweetner markets, some observers worry that could open the door to more tinkering with other aspects of commodity trade with Mexico.

New poll question - Yes, we need a national promotion order for fresh produce

Last week's poll question drew slightly more votes "against" NAFTA than "for" it, relative to the impact on the U.S. fresh produce industry. Check out the results here, for that poll and all previous Fresh Talk poll questions.

As for this week, the Fresh Talk polls asks if the industry would benefit from a national promotion order for fresh produce. I have already voted and cast my vote in the affirmative. Aside from the fact that the "Fruits and Veggies - More Matters" campaign encompasses both fresh and processed fruits and vegetables. it is underfunded. With no mandatory assessment, consumer messaging about fresh produce is woefully inadequate.

True, fresh produce tends to generate favorable press coverage organically owing to its health benefits. But where is the industry directed, attention-grabbing messaging to consumers?

The dilution of industry efforts - even within a commodity category - is remarkable. Why should California, Mexico or Chile run their own separate promotions of hass avocados, for example, as opposed to a unified generic promotion?

Wouldn't buyers prefer dealing with one promotion department rather than several?.

The answer is undoubtedly linked to control of the message, decisions with mandatory assessment dollars and pride in a particular growing region. That reality for avocado promotion is not going away, and in fact, one source tells me the regional promotion focus for avocados may increase in the future.

This, of course, is not unique to the avocado industry.

Promotions for potatoes, onions, apples, grapefruit and countless other fresh commodities argue for the fruit of a particular region or state.

Perhaps that is why so many in the industry have rejected the idea of a mandatory assessment to fund generic promotions of fresh fruits and vegetables. How can you unify marketers of dozens of commodities when there is no unity within a commodity?

Despite — or because of — the history of fragmentation of efforts, I think the industry may benefit from a national promotion order for fresh produce. A promotion order - collecting from both domestically grown and imported produce - would undoubtedly give the industry more clout at the USDA and in the consumer marketplace.

Given the fact that the Produce for Better Health Foundation promotes the “all forms count” message, a fresh-focused effort would not necessarily be redundant. Perhaps the promotion order could specify that mandatory assessments be used for fresh “More Matters” promotions exclusively by the Produce for Better Health Foundation. An even more attractive alternative would be a new “fresh-first" oriented message.

While processed fruit and vegetable marketers pressure to elbow their way into the USDA fruit and vegetable snack program, the industry needs a well funded promotion arm that will make the case for fresh and fresh alone.

The self-interest of the industry to promote fresh produce needs to come to the forefront. In same way Whole Foods has marketed organic produce over what it considers its pedestrian competition, fresh asparagus must count for more than canned asparagus. Fresh pears must count more than canned pears. If consumers don’t believe that, the bloom of off the rose of fresh produce.

California and NAFTA - Myth and Reality

Roberta Cook of UC Davis had this powerpoint presentation from 2005 about "NAFTA at 11" that offers some great insights about factors influencing trade relationships.If you haven't voted in the Fresh Talk NAFTA poll yet, this may swing your vote to the option of "positive impact." She makes these summary points:

Exchange rates and the WTO have influenced California ag much more than NAFTA.
Mexico’s decision to join the GATT in 1986 had a greater impact on reducing trade barriers in the Mexican market.
Prior to joining GATT Mexico had high average tariff rates and major nontariff barriers in the form of licensing restrictions.
Mexico made a decision to “unilaterally disarm” in ’86, partly as an internal strategy for controlling food costs and inflation.
Mexican fruit and veg average tariffs were already reduced from around 50% to a max of 20% prior to NAFTA.
Licensing restrictions were removed on most ag products, including fruit/vegs. This began to open Mexico to US exports prior to NAFTA. (ag licenses: 320 in ’85, 57 in ’90)
The US trade-weighted average tariff rate for Mexican fresh vegetable imports was 7% prior to NAFTA. There were only a few fruits and vegetables facing high ad valorem tariff rates (like 25% on asparagus, 35% on melons.) Grapes were already duty free (big growth in Sonoran grape exports since NAFTA not due to improved market access).
Arguably, the US had the most to gain from improved market access since Mexico had higher average tariffs.

TK: Cook provides her take on myths and realities:

Myths and Realities
Myth:
It is an advantage to be underdeveloped.
Reality:
US ag benefits from:
enormous support in RD&D from govt. institutions such as USDA and from the land grant university system.
enormous public sector investments in transportation and infrastructure of many types, including water storage and distribution.
extensive private sector research targeting specific crop needs.
a transparent and relatively responsive govt.
unimpeded access to the largest consumer market in the world and usually a transportation cost advantage.
Myths and Realities
Myth:
Because fruit and vegetable production is labor-intensive, countries with low wage rates naturally have the advantage.
Reality:
Fruit and vegetable production is capital, technology, management, research, marketing, and infrastructure intensive.
Mexico’s advantage is generally seasonal (climatic advantage) rather than a cost advantage.
Exceptions: crops requiring bunching at harvest – green onions, radishes, asparagus, give Mexico a cost advantage; and avocados.
Myth:
A given wage rate differential is equivalent to the same differential in labor costs.
Ag labor is abundant everywhere in Mexico.
Mexican growers provide few social services to workers.
Reality:
Labor is generally less well trained and efficient, offsetting some of the wage rate advantage.
Certain areas also experience labor shortages.
Labor management can be challenging in Mexico due to social and policy issues.
Common to provide housing and schools.

Myth:
Food safety and pesticide practices are substandard in Mexico.
Reality:
Important to distinguish between domestically-oriented growers and export growers.
Although it depends on the grower/exporter, practices have improved markedly for exporters and many now are third party certified and implementing GAPS.
It is possible to find operations in Mexico with superior food safety controls.

Not down with NAFTA

More rumblings from Mexico about discontent with the NAFTA. From the USDA FAS attache report from Mexico Dec. 3 comes this translation/summation of a news article published in Mexico:


AT LEAST 1.4 MILLION GROWERS UNDER RISK BECAUSE OF NAFTA

According to Cruz Lopez-Aguilar, leader of the National Farmers Confederation (CNC), at least 1.4 million corn and dry bean growers could be out of business due to the trade opening under the North American Free Trade Agreement (NAFTA) in 2008. He added the CNC will continue to push the GOM to exclude corn and dry beans from NAFTA. They will also request the GOM to establish a mechanism to control imports and exports of both commodities, and that the GOM should honor the addendum in the National Agreement in Agriculture. The CNC will insist that small and medium growers receive support from the Competitive Corn and Dry Beans Fund, which will allow them to have monetary support of at least 10 million pesos. Lopez-Aguilar stated that the CNC, along with other farmer organizations, will restart demonstrations to defend corn and dry bean growers. (Source: Excelsior & La Jornada; 11/28/2007)


Another item.....

Contrary to the opinion of the majority of Mexican agricultural worker’s organizations that have pressured the GOM to renegotiate NAFTA’s agricultural chapter, the Mexican General Union of Industrial and Agricultural Workers (UGOCM) declared that renegotiating the trade agreement is not the solution. Instead, they stated that other measures like competitiveness-enhancement programs, credit and production support, and investments should be established by the GOM. Jose Luis Gonzalez, UGOCM Leader, explained there is no need to use political pressure. However, he stated that a real commitment from the authorities should protect and help the agricultural sector. (Source: Rumbo De Mexico, 11/29/2007)


And another.....

NAFTA DOES NOT BENEFIT THE MEXICAN COUNTRYSIDE
NAFTA has not been good for the Mexican rural communities, agreed researchers. Since NAFTA’s implementation in 1994, trade between Mexico and the United States has tripled. However, farmers have not benefited. “NAFTA’s objective was to stop migration to the states and in that sense NAFTA has been not a success,” said Victor Suarez, President of the Rural Producers National Association of the Northern Border College. Suarez stated that 13,000 rural inhabitants migrate to the U.S. every year, and that, since NAFTA’s implementation, almost two million jobs related to agriculture were lost. Mexican agricultural exports are managed by 12 big foreign companies, but Suarez did not mention names. (Source: El Universal; 11/14/2007)

One more......

UNPRODUCTIVE AGRICULTURE, 48 DAYS UNTIL TRADE OPENING
According to the Center of Economic Studies of the Private Sector (CEESP), it’s unlikely the Mexican agricultural sector can elevate its production levels to compete with the United States, and in less than 48 days, the border will completely open. A CEESP study concluded that Mexico has an agricultural sector that does not produce enough to export or to supply the population's growing necessities. Mexico is the 52nd largest country for agricultural growth, which is why public policies are required immediately. (Source: El Financiero; 11/13/2007)

More free trade perspective

As you know, the Fresh Talk poll question this week tries to survey the impact of the NAFTA on the U.S. produce industry. So far, those who believe the impact has had a negative impact are leading in the early voting. Ask the Mexican sugar producer and the Florida tomato grower and you may get one answer. Ask the Northwest apple shipper, Ontario greenhouse operator and the Mexican avocado grower and you may get another. To offer more perspective on this issue, here is a link to a Congressional Research Service report on the impact of free trade agreements on U.S. agriculture. From the "just the facts, ma'am" August 2007 report:

Canada......

Canada is the leading agricultural trading partner of the United States, and accounted for almost 19% of two-way U.S. agricultural trade in 2006. Since the Canada-U.S. Trade Agreement (CUSTA) took effect in 1989, bilateral trade in agricultural and food products has increased more than six times (from an average $4 billion in 1986-1988, to $25.4 billion in 2006). For comparison, during this same period, U.S. two-way agricultural trade with the rest of the world slightly more than doubled. U.S. agricultural exports to Canada increased almost seven times (from an average $1.8 billion in 1986-88 to $11.9 billion in 2006). Imports from Canada rose six times (from an average $2.2 billion in 1986-88 to $13.4 billion in 2006). In 2006, the main U.S. exports to Canada in terms of value were: vegetables — fresh, processed, frozen and dried ($1,732 million), fresh fruit ($1,122 million), breakfast cereals and baked goods ($709 million), food preparations ($495 million), beef and veal ($424 million), fruit juices ($406 million), pet food ($393 million), pork ($365 million), cocoa ($317 million), coffee ($274 million), and confectionery products ($186 million). In 2006, main U.S. imports from Canada were live cattle ($1,032 million), bakery products and snacks ($966 million), beef and veal ($923 million), pork ($889 million), fresh vegetables — primarily greenhouse tomatoes, peppers, and cucumbers ($724 million), chocolate ($690 million), frozen vegetables ($664 million), live hogs ($579 million), rapeseed oil ($424 million), confectionery products ($380 million), wheat ($304 million), food preparations ($278 million), beer ($275 million), and cheese mixes and doughs ($232 million). Under the CUSTA’s agricultural provisions (incorporated into NAFTA in 1994), almost all agricultural products have traded freely between both countries since 1998. Exceptions are those commodities that each country still subjects to tariff-rate quotas ( TRQs). Canada uses TRQs to limit imports from the United States of its import-sensitive commodities (dairy products, margarine, poultry, turkey, and eggs). The United States uses TRQs to restrict imports of Canadian dairy products, peanuts, peanut butter, cotton, sugar and certain sugar-containing products (SCPs). Both countries also retain the option under CUSTA to apply temporary safeguards on bilateral trade in selected fruits, vegetables, and flowers through year-end 2007. Since mid-2003, the discovery of BSE on both sides of the border has significantly affected bilateral trade in live cattle and beef products.


Mexico........


Mexico is the second largest agricultural trading partner of the United States, and accounted for almost 15% of two-way agricultural trade in 2006. Since NAFTA went into effect in 1994, two-way bilateral trade in agricultural and food products has more than tripled (from an average $6 billion in 1991-1993, to $20.3 billion in 2006). For comparison, during this same period, U.S. two-way agricultural trade with the rest of the world nearly doubled. U.S. gricultural exports to Mexico rose by more than three times (from an average $3.5 billion in 1991-93, to $10.9 billion in 2006). In 2006, sales of corn ($1,472 million), soybeans ($906 million), beef and veal ($778 million), food preparations ($483 million), wheat ($418 million), cotton ($412 million), beef variety meats ($388 million), grain sorghum ($323 million), pork ($309 million), soybean meal ($255 million), and decidious fresh fruit ($245 million) accounted for more than one-half of U.S. agricultural exports to Mexico.
Agricultural imports from Mexico have almost quadrupled (from an average $2.5 billion just before NAFTA took effect, to $9.4 billion in 2006). Purchases of fresh vegetables, primarily tomatoes, chili and peppers, cucumbers, squash and onions ($2,573 million); beer ($1,600 million); fresh fruit, primarily avocados, melons, grapes, limes, mangoes, and strawberries ($1,149 million); live cattle ($524 million); confectionery products ($385 million); sugar ($320 million); and baked goods and snacks ($312 million) accounted for almost three-quarters of U.S. agricultural imports from Mexico. Under NAFTA, tariffs and quotas on most traded agricultural products were eliminated in 2003. However, the United States and Mexico still impose border protection on a few products subject to a 15-year transition period to free trade. All such protection will end on December 31, 2007. U.S. agricultural products that then will be eligible to freely enter the Mexican market will be: corn, dry beans, milk powder, sugar, dried onions, chicken leg quarters, and high-fructose corn syrup (HFCS); and under specified tariff lines, processed vegetables, frozen concentrated orange juice (FCOJ), and melons. Products imported into the United States from Mexico that then will be allowed to enter freely will be FCOJ, peanuts, and sugar; and under specified tariff lines cucumbers, asparagus, broccoli, melons, and processed vegetables. All other agricultural products now enter each other’s market freely, except for those that at times have become embroiled in trade disputes. Most of the bilateral disputes that have arisen since 1993 — when tariffs and quotas were eliminated for those agricultural commodities that fell in the 10-year staging category — have affected several U.S. agricultural commodities exported to Mexico (rice, beef, pork, apples, soy oil, and HFCS). At the same time, Mexican farmers and some Mexican commodity groups began pressuring the Mexican government to renegotiate certain NAFTA provisions. Calls for renegotiating NAFTA, particularly those provisions that apply to Mexico’s most sensitive agricultural commodities (dry beans and corn), were an election issue in Mexico’s 2006 presidential race. Though top Mexican officials under the previous presidential administration stated that reopening NAFTA was not possible and would not occur, current President Calderon continues to face heavy public pressure to revisit this position. Separately, sugar that enters from Mexico is the main sensitive product for the United States. The fact that sugar imports from Mexico will be unrestricted beginning in 2008 is already affecting the dynamics of the debate on the future U.S. sugar program as Congress considers the 2007 farm bill.

NAFTA ever after

I asked the question in this week's Fresh Talk poll, "Has NAFTA been good for the U.S. produce industry?" I thought I would troll the Web for a few links about NAFTA, and this link from a left-leaning think tank analyzes the impact of NAFTA on Mexican farmers. Obviously this has not been written by the USDA, but it does point out some of the challenges faced by Mexican grain producers. After discussing massive farm subsidies, the author Laura Carlsen says:

What does this do to the Mexican market? An IATP analysis reveals that in 2001 corn cost an average of $3.41 a bushel to produce in the United States and sold on the international market for $2.28 a bushel. Food First, a California-based policy institute, reports that California rice costs between $700 and $800 an acre to produce but received $650 an acre on the world market and that U.S. wheat is exported at 46% below cost.

There's a name for this—dumping—and it is supposedly prohibited under both NAFTA and World Trade Organization (WTO) rules. According to the above calculations, the over five million tons of U.S. corn sold in Mexico in 2001 carried a dumping margin of 25%. Analyses from past years show dumping margins of over 30%. Dumped U.S. surpluses erode producer prices; the value of Mexican corn dropped 64% between 1985 (when Mexico signed the General Agreement on Tariffs and Trade—GATT) and 1999. They also leave Mexican producers without a market. The United Nations Development Program estimates that worldwide U.S farm subsidies cost poor countries about $50 billion a year in lost agricultural exports.

Mexican farmers cannot and should not be forced to compete with grains sold at less than U.S. production costs. They lack credit, economy of scale, fertilizers, chemical weed and pest controls, farm equipment, and most importantly, significant government supports. As U.S. farm support increases, Mexican government programs have followed International Monetary Fund (IMF) prescriptions and all but disappeared. During the period from 1990 to 1994, Mexican farmers received 33.2% of their yearly income from the government. For 1995 to 2001, that figure had dropped to 13.2%.

In addition to subsidized prices, cheap and ready access to U.S. financing has played a key role in the glut of grain imports to Mexico, which has devastated domestic prices. The Center for the Study of Rural Change in Mexico (CECCAM) reports that an overriding incentive for importers has been financial. U.S. exporters and government export-financing organisms, particularly the Commodity Credit Corporation (CCC), offer low-cost loans to Mexican importers buying U.S. grains. Although rates have decreased in recent years, prevailing credit rates in Mexico in the mid-1990s were over 30%, while the CCC offered between 7-8%. For Mexico-based import companies, the CCC's sweetheart rates were like rain in a drought.

Mexican Agriculture after
14 Years of NAFTA

Importing food, exporting farmers ...

• Every hour, Mexico receives $1.5 million dollars worth of food imports
• In that same one-hour period, 30 farmers leave Mexico for the United States
• 40% of Mexicans' food is imported
• Over 1.5 million rural jobs were lost in 12 years

A dying countryside...

• Agriculture's share of GDP dropped from 10% to 3.4% between 1981 and 2006
• Rural population dropped from 40% to 30% in that period
• 388 municipalities have become ghost towns due to out-migration
• Genetically modified corn has contaminated native strains
• Corn production for ethanol threatens to reduce corn for human consumption and raise consumer prices for Mexico's main staple food
• Arable land is increasingly dedicated to illegal drug production
• Erosion renders useless thousands of acres of productive land a year

New poll - Was NAFTA good or bad for U.S. produce industry?

I'm still scratching my head over the exclusion of white potatoes from the WIC rule. It only makes implementation of the rule harder for WIC participants and retailers. Like John Keeling of the National Potato Council, I wonder how do you define "white potatoes'? What about red-skinned, white flesh potatoes? Or white-skinned, yellow-flesh? Perhaps common sense will prevail in the final rule.

Note there is a new Fresh Talk poll about NAFTA. Perhaps more than that, it may be a poll about how the trade feels about "free trade agreements." One trade analyst with the CATO Institute said that NAFTA is often brought up for abuse in political campaigns, but in fact the agreement was very good for the U.S. and Mexico. In terms of the produce industry, was NAFTA good or bad, foul or fair?

The previous Fresh Talk poll indicated that those participating in the poll were evenly split on the course of action for the Produce Traceability Initiative.

What's the best way for the Produce Traceability Initiative to increase implementation of full chain traceability?

Set an industry wide deadline for implementation	4 (44%)
Recommend that FDA provide guidance/mandate	4 (44%)
No action required: All market forces to influence traceability	1 (11%)
Begin outreach to trade on turnkey solutions	1 (11%)

Is there FDA discrimination by country of orign?

One reader left a note in a previous post and asks if the FDA treats domestic and foreign farms even handedly. He observed that Mexican cantaloupe exporters were hit hard by the FDA.
You can find the "anonymous" comment after the "5 deaths" post and I'll post it here, too:


Why the USA companies with similar contaminated products get the same punishment as the Mexican cantaloupe growers got?Any produce origin discrimination there? Is the USDA/FDA law applied differently for USA grown produce as for foreign grown products?Was going in on here? Has NAFTA agreements also different for this type of treatment for out of the USA produce?


TK: I think the comment brings up a point of sensitivity that many foreign suppliers might voice. Yet at the same time, domestic producers are rightly concerned that there is no way that foreign growers will have the same kind of scrutiny from FDA inspectors that they have to endure and anticipate.

Imports rule

For some years now, fruit and vegetable imports have been accelerating in volume and value, building momentum as a car without brakes hurtles down a mountain road.
The USDA Economic Research Service on Sept. 10 issued a report on fruit and vegetable imports that reinforces that perception, though without the allusion to a car careening out of control. The report can be found at this link.

From the introduction:
Between 1990-92 and 2004-06, annual U.S. imports of fresh fruit and vegetables surged from $2.7 billion to $7.9 billion (nominal dollars throughout the report), with the share of total U.S.
imports for agriculture rising from 11.5 percent to 13.3 percent. U.S. exports of fresh produce also rose but less rapidly. As a result, the United States has increasingly become a net importer of fresh produce (fig. 1). This report examines the evolving structure of U.S. fresh produce trade to provide insights into changes in this rapidly growing area of U.S. agricultural trade in 1990-2006.

Consider these stats from the report:

About fruit:
Meanwhile, import share of overall U.S. fresh fruit consumption greatly expanded. Between 1983-85 and 2003-05, the import share of U.S. fruit consumption increased from 2.3 percent to 15.5 percent for citrus and from 41.2 percent to 53 percent for noncitrus fruit (including bananas). Between 1993-95 and 2003-05, the import share of fruit consumption for the top three fresh fruits consumed by the average American, excluding bananas, also increased: apples (from 6 percent to 7.1 percent), oranges (from 1 percent to 4.2 percent), and grapes (from 38.5 percent to 54.8 percent).

About vegetables:

Although most fresh vegetables consumed by Americans are still domestically produced, imports substantially increased in share of consumption over the last two decades—from 9.3 percent in 1983-85 to 16.3 percent in 2003- 05. Even for vegetables with declining per capita consumption, such as potatoes and head lettuce, the import share of consumption increased over the past two decades—from 3.2 percent to 6.1 percent for potatoes and from 0.5 percent to 1.7 percent for head lettuce. In addition, although per capita consumption of carrots, cabbage, celery, and cauliflower declined after the 1990s, import shares increased. Thus, since the 1990s, the import share of U.S. fresh vegetable consumption has increased almost across the board. In particular, import share has risen for tender warm-season vegetables that enter the United States during the winter and early spring when domestic supplies are limited. Major vegetables in this category include tomatoes (import share rising from 24.2 percent in 1993-95 to 35.2 percent in 2003- 05), peppers (from 17.1 percent to 29.5 percent), and cucumbers (from 38.1 percent to 49.3 percent).

TK: This is a well done report, if slightly bloodless (as all government reports tend to be). The reports cites several factors why imports have increased in importance:
Desire for year round supply
Greater trade within NAFTA
Technological advancements in packaging and the supply chain in general

The growing share of imports should punctuate the need for consumer labeling of country of origin on fresh produce. While consumers may not make buying decisions based on labeling, they should have access to the information.

NAFTA as a teenager

The USDA's Economic Research has released a couple of reports we should note. One is the 39-page PDF Fruit and Tree Nuts Outlook, and can be found at this link. The outlook report extensively reveals freeze damage in California and a wealth of grower and retailer stats.

The other ERS report is even more interesting, and looks at NAFTA at 13.

The 49-page NAFTA report is found here.

Of particular note is a table that shows the relative market share of Mexican and Canadian fresh produce shipments to the U.S. For example, tomatoes from Mexico accounted for 16% of U.S. disappearance from 1991-1993, and 29% from 2003-05. The market share for squash jumped from 19% to 35% in the same time period, and bell peppers grew from 18% share of U.S. disappearance to 40%.


From the report:


A major result of the heightened integration of North America’s fruit and vegetable market is that imports from the NAFTA countries have become more important to U.S. food supply. In 2004, Mexico and Canada supplied about 8 percent of the fresh or frozen fruit available in the United States and 12 percent of the available fresh or frozen vegetables. In 1990, these shares equaled 5 percent and 6 percent, respectively. Changing diets and the development of off-season supplies of fresh produce outside the United States have fostered a shift in U.S. consumption away from processed fruits and vegetables and toward fresh produce. In 2004, fresh produce accounted for 48 percent of U.S. fruit and vegetable supply, up from 44 percent in 1990 (USDA, Economic Research Service, 2006a; USDA, Foreign Agricultural
Service, 2006).


Net imports (i.e., imports minus exports) provide another indicator of the increased reliance on imports to supply U.S. fruit and vegetable consumption (table 3). Prior to NAFTA, net imports from Mexico exceeded 15 percent of U.S. supply for a wide variety of produce—including fresh limes, fresh mangoes, fresh papayas, fresh asparagus, bell peppers, broccoli and cauliflower for processing, fresh cucumbers, squash, and fresh tomatoes. Since NAFTA’s implementation, a number of these commodities—fresh limes, fresh papayas, bell peppers, squash, and fresh tomatoes—have experienced an increase of at least 10 percentage points in this measure. Net imports from Canada now account for a larger portion of U.S. supply of bell peppers, fresh cucumbers, and fresh tomatoes than they did in the early 1990s. Indeed, Canada has become a net exporter to the United States of fresh cucumbers and fresh tomatoes. Again, U.S. tariffs toward Canadian product were small for these commodities prior to CUSTA.


TK: No surprises here, but confirmation that Mexico and Canada are more and more integrated into the U.S. food supply; note also the recent decision by Taylor Fresh Foods to locate a fresh-cut plant in Mexico that will ship product to the U.S.

Free to roam

In perhaps 60 days, selected Mexican trucking companies will have the freedom to drive deeper into the U.S., the Department of Transportation says. But it won't happen without a fight and perhaps further delay.
From the Insurance Journal:

The news that Mexican trucks will be allowed to haul freight deeper into the United States drew an angry reaction Friday from labor leaders, safety advocates and members of Congress. They said Mexico has substandard trucks and low-paid drivers that will threaten national security, cost thousands of jobs and endanger motorists on the northern side of the Mexican border.

TK: The counter from the Bush Administration is that the U.S. inspectors will oversee Mexican trucking companies.

Again from the Insurance Journal:

Access to all U.S. highways was promised by 2000 under the 1993 North American Free Trade Agreement, as was access through Mexico for U.S. carriers. That aspect of NAFTA was stalled by lawsuits and disagreements between the two countries, though Canadian and U.S. trucks travel freely across the northern border. The Bush pilot project will let Mexican truck companies travel from Mexico throughout the United States and back. According to the Transportation Department, U.S. inspectors will inspect every truck and interview drivers to make sure they can read and speak English. They'll examine trucks and check the licenses, insurance and driving records of the Mexican drivers. Inspectors will also verify that the trucking companies are insured by U.S.-licensed firms.
The first Mexican trucks are expected to drive into the United States beyond the border area in about 60 days, the Transportation Department says.

TK: One member of the National Transportation Safety Board worries that the DOT has barely enough inspectors for domestic carriers, much less if the agency divert resources to the border. About 25% of U.S. rigs are taken off the roads after random inspections and the percentage is higher at Texas border crossings. Others are concerned that there will be no way to adequately monitor the time spent behind the wheel for Mexican truckers. Setting aside safety concerns, this rule makes sense for the produce industry, as it figures to take costs out of the system. Congress could put up a detour to this DOT roadmap, though.