Georgia Farmers Say Mexico Is Trading Unfairly; Customs Brokers, Arizona Trade Group Say That's False

During the second of two hearings aimed at satisfying primarily Florida and Georgia farmers frustrated with lost market share to Mexican competitors, officials from the Commerce Department, the U.S. Department of Agriculture and the Office of the U.S. Trade Representative on Aug. 20 heard vastly different views of how Mexican vegetable and fruit producers deserve to be treated (see 2008180034). Blueberry, zucchini, cucumber and bell pepper farmers from Georgia testified again and again that Mexicans can sell these items cheaper than they can, because of much lower labor prices, because of stricter environmental regulations in the U.S., and because Mexican producers have gotten government help to build shade houses, greenhouses and hoop houses.

The fruit and vegetable growers noted that prices are volatile as each week's crop goes to wholesalers or retailers. They rely on higher prices when there isn't as much supply to offset weeks when bumper crops are available. They said Mexico's use of shade houses and greenhouses to extend their traditional field crop seasons has upended that calculus, as the end of certain crops in Mexico now overlaps the beginning of certain crops in the U.S.

Sam Watson, a Georgia state representative and co-owner of Chill C Farms, said that in 2019 he dumped thousands of perfectly good squash because he'd already sent truckloads to the food bank, and hours of calls to buyers were fruitless, because distributors were buying cheaper Mexican squash.

Gerald Long, president of the Georgia Farm Bureau Federation, said, “Mexico has shown very little interest in refraining from exporting fruits and vegetables during our marketing season.”

Dick Minor, of Minor Brothers Farms, told officials during the hearing that Georgia harvests cucumbers in the spring from May to June. “Florida understands when Georgia starts, they need to be finished,” he said, so that Georgia farmers can get high prices as a monopolistic seller for a few weeks. “We plant to accommodate North Carolina,” he said. “Mexico, they have expanded production with no regard” to the Eastern farmers' needs.

Commerce Assistant Secretary for Enforcement Jeffrey Kessler asked Minor if his farm is profitable now that Mexico has moved into his season. He said that while vegetables are just 20% of the farm's business -- he also grows turf grass, corn, cotton and peanuts -- that segment has traditionally been profitable. He grosses $10,000 an acre for cucumbers, and only $1,000 an acre for corn. But, he said, his farm is profitable now primarily because of government payments for the cotton, corn and peanuts.

The Southeastern farmers and their trade groups -- along with a New York farmer and a Michigan farmer -- say that antidumping and countervailing duty laws need to be rewritten so that they don't require a majority of the industry to bring a case, and that the price window to prove harm also needs to change for produce farmers to be able to really take advantage of trade remedies. (The New York farmer competes with Canada; the Michigan farmer, with both Canada and Mexico).

None of the officials holding the hearings have the authority to do that, and bills introduced in Congress that would change the AD/CVD laws to help seasonal growers have gotten no traction. So, if that isn't going to happen, they say, the USTR should open a Section 301 investigation on Mexican fruit and vegetables.

Gary Ward Black, the Georgia agriculture commissioner, said that free trade is “a bit of a misnomer; it’s only free if someone else pays.” He said that farmers who compete with Mexico are the ones paying. He also told the officials that blueberries are most imperiled by Mexican competition, but that with increased customer demand, “many of our growers came out pretty good this spring.”

The officials asked American Farm Bureau Federation President Zippy Duvall to explain why berry and vegetable growers in Arizona and California don't complain about competing with Mexican producers, and he responded that some of those farmers bought operations in Mexico.

Duvall said “we’d love to know what eventually kept [seasonality] off the table” in the NAFTA renegotiations, and said that if the problem of farmers competing with Mexico's cheaper labor and lighter regulations isn't fixed, “and it continues to harm our producers across the country, you’ll see an erosion of farmer support and trust for trade agreements.”

Watson said farmers like him lobbied for years to get a seasonality option in antidumping, and they were overwhelmed by larger growers and distributors. He said he's a fifth-generation farmer, and if trade remedies aren't put into place, he may be the last. In addition to Section 301, he suggested safeguards, tougher food safety requirements on Mexican imports, or exemptions for U.S. growers' labor requirements could all preserve specialty crop farms' profitability.

The last panel of witnesses were all opposed to carving out regional cases under antidumping law, or using Section 301 to punish Mexican exporters.

Farmers for Free Trade Co-Executive Director Brian Kuehl said seasonality is a disguise for protectionism. “We should not be undoing USMCA [agriculture access] successes before the ink is even dry on the agreement,” he said. He said the government should just pay the growers who say they're suffering, rather than put quotas or tariffs on Mexican produce, which would invite retaliation against U.S. pork, fruit or corn exports. Jaime Castaneda, a top official at the National Milk Producers Federation, said that he's been told directly by Mexican officials that if the U.S. “takes any actions that do not go through due process and are not legitimate in their view under USMCA and WTO rules, they will impose retaliatory tariffs on dairy products.”

Jaime Chamberlain, chairman of the Greater Nogales Santa Cruz Port Authority, which includes the Nogales Customs House Brokers Association, said that Arizona port of entry has been the gateway for Mexican fresh produce for a hundred years. He said there are thousands of jobs in Arizona because of Mexican produce exports, and many of the largest Mexican farms are wholly owned subsidiaries of American farms. He said that growers in Florida and Georgia have “failed to make the necessary investments to make their farms more productive.” He said Mexican growers have invested in drip irrigation, and most importantly, the greenhouses and mesh houses that protect crops from weather and pests. They shouldn't be penalized for that, he said.

Rene Romero, who testified on behalf of the San Diego Customs Brokers Association, said the technologies Mexican farms are using were generally imported from the U.S., and that the trade in produce supports tens of thousands of jobs in logistics, law firms and consultants, in addition to those directly importing and doing customs broker work. “I have clients that are growers in the U.S., also importers from Mexico, and by the way, they also export to Mexico,” he said.

All the administration officials said they were struck by the wide divergence in views on whether Mexican exports are unfair. Kessler said, “As officials in this administration, we are always concerned about unfair trade in any form. And you all have given us a lot to think about.”