By MICHELE F. MIHALJEVICH
Indiana Correspondent

WASHINGTON, D.C. — Mexico’s decision to impose tariffs on 36 U.S. agricultural products may have a long-term impact on the industry, the executive vice president of the National Potato Council (NPC) said last week.

Mexico instituted the tariffs on March 19, 2009, in response to the discontinuation of a pilot program by the United States that was designed to meet the country’s North American Free Trade Agreement (NAFTA) obligations, according to the U.S. Chamber of Commerce.

Under NAFTA, trucks from both countries were supposed to be granted full access to roadways in each country, but the U.S. did not give access to Mexican carriers until the pilot program began in 2007. The program granted access to a limited number of Mexican trucks that were required to undergo a rigorous inspection program, the Chamber said. The program ended in March 2009 after Congress terminated its funding.

The tariffs range from 10-45 percent on agricultural products. Included on the list are Christmas trees, onions, lettuce, fresh grapes, peas, potatoes, cherries, strawberries, pears and peanuts. Mexico also imposed tariffs on 53 industrial products, including paper items, toothpastes and coffeepots.

The tariffs are responsible for lost export sales of about $2.5 billion, according to figures from the Chamber.

“Ultimately, this will get fixed,” said John Keeling, also CEO of the NPC. “We cannot afford to be in a trade war with our number-two trading partner in the world. But what will have been lost in U.S. jobs and exports that never will be regained. This is not our most shining hour.”

Growers and producers who don’t export to Mexico could feel the repercussions of a continuing stalemate, he said.

“Look at Christmas trees. If Oregon can’t export its trees to Mexico, then that volume of trees has no home there, so they will find a home here,” he explained. “That will drive prices down.”
According to the 2007 Census of Agriculture, Michigan, Ohio and Indiana rank in the top 11 states in total number of Christmas trees harvested. A similar situation is playing out in the fresh potato market, Keeling said.

“There’s a pile of potatoes out there that’s got to be used up in a year,” he said. “And those potatoes that are now not going to be able to be processed to be shipped to their normal customers in Mexico are going to go on the fresh market, causing a disaster for growers in terms of their returns in the fresh market.”

The number of metric tons of U.S. frozen potato exports to Mexico dropped 49 percent from 2008 to 2009, while Canadian exports to Mexico increased 64 percent over the same period.

“U.S. trucks that were once hauling potato products and grapes across the border aren’t now,” he said. “We’re seeing Canadian fries going across the border rather than American fries.”

The tariff issue has meant $2.2 billion in higher costs for U.S. families and companies and more than 25,000 lost jobs for American workers, said John Murphy, vice president for international affairs for the Chamber.

“For the sake of American workers and farmers, we can’t allow a pattern to emerge in which Washington’s inaction on trade puts jobs at risk,” he said. “We can’t wait and wait and wait on trade. When we stand still, we fall behind.”

From April to December 2009, U.S. exports of frozen processed potatoes to Mexico fell 50 percent in value, while Canadian exports to Mexico rose by a nearly identical amount, Keeling said. Canada will continue to make inroads in the potato market if something isn’t done, he added.

This past year, potatoes were shipped from Canada to Mexico, but next year, potatoes will be grown and processed in Canada and then shipped to Mexico, costing jobs in the United States.
“We’ll see the loss of the other 50 percent of our market share in the next 10 months if something isn’t done,” Keeling said. “This delay is costing us jobs. In a relatively small industry like potatoes, the impacts of these tariffs are causing a direct loss of jobs in the United States and are making an already not perfect economic situation worse.”

Concerns that Mexican trucks could be safety hazards proved unfounded, Murphy said. During the pilot program, there were more than 46,000 border crossings without a single major incident, he said. Each Mexican truck entering the country was required to meet every U.S. safety requirement.

“After 18 months, an independent evaluation panel found that Mexican carriers were as safe as their U.S. counterparts,” Murphy said. “These Mexican rigs that were coming in under the pilot project were probably the most inspected in the world.”