The Obama administration has averted a war.
The United States and Mexico have reached a tentative agreement on cross-border trade in tomatoes, narrowly averting a trade war that threatened to engulf a swath of American businesses.
The agreement, reached late Saturday, raises the minimum sales price for Mexican tomatoes in the United States, aims to strengthen compliance and enforcement, and increases the types of tomatoes governed by the bilateral pact to four from one.
‘The draft agreement raises reference prices substantially, in some cases more than double the current reference price for certain products, and accounts for changes that have occurred in the tomato market since the signing of the original agreement,’ Francisco J. Sánchez, the United States under secretary of commerce for international trade, said in a statement.
What is that “reference price” mentioned in the article?
In this case, it’s price fixing.
Mexican tomato growers can produce a better tomato, transport it into the U.S. market, and sell it to U.S. customers at a substantially cheaper price than American farmers can charge for an inferior tomato.
Not surprisingly,the administration that never lets a good crisis go to waste played politics with the issue.
Again from the New York Times (ibid):
The new agreement covers all fresh and chilled tomatoes, excluding those intended for use in processing like canning and dehydrating, and in juices, sauces and purées.
It raises the basic floor price for winter tomatoes to 31 cents a pound from 21.69 cents — higher than the price the Mexicans were proposing in October — and establishes even higher prices for specialty tomatoes and tomatoes grown in controlled environments. The Mexicans have invested billions in greenhouses to grow tomatoes, while Florida tomatoes are largely picked green and treated with a gas to change their color.
The Mexican and United States governments will both carry out mechanisms to increase enforcement of the new agreement.
The dispute unfolded in the heated politics surrounding the presidential election, with Mexican growers charging that the Commerce Department was courting voters in the important swing state of Florida. Instead, the timing of the negotiations ensured that the government could win those votes and bring the controversy to a conclusion satisfactory to the Mexicans after the election was over.
Price fixing AND vote buying.
Florida growers accused Mexico of dumping product in the U.S. at a price below their production cost, but they failed to prove their allegations. One must wonder about a business plan that includes selling your product at below production costs year after year, since logic tells you that such a practice would drive you to bankruptcy. One musty also wonder why Florida growers didn’t simply accommodate their Mexican counterparts by simply buying all their produce, thus availing themselves of a superior product, at a significantly lower cost than the product they themselves can produce, then selling THAT into the market.
Why it is so difficult for American farmers to compete with farmers faced with the additional cost of transporting their goods thousands of miles into their markets?
This report may give an insight into the challenges faced by American farmers today:
A case study from a blueberry farming operation in Maine shows that providing health insurance benefits under Obamacare would result in a staggering annual increase of more than $184,000. (Download PDF of full case study here.)
Due to the crushing mandates of Obamacare, this farm would face a whopping 203% increase of in the cost of providing health insurance benefits.
The blueberry farm now pays $90,540 a year to provide health insurance for its full-time employees. Under Obamacare, the farm could pay as much as $274,762 to cover both full-time and seasonal part-time employees—an annual increase of $184,222.
The same case study goes on to illustrate the inherent flaw in Obamacare:
However, if the blueberry farm chose to drop health coverage all together, Obamacare would impose a penalty of $76,250 on the business. That’s a 16 percent drop in what the blueberry farm now pays for health insurance.
Since the penalty would be significantly lower than the cost of providing health insurance under Obamacare, the blueberry farm would most likely choose not to offer health insurance at all.
Also, this case study does not account for the administrative costs the farm would incur to manage Obamacare’s eligibility rules, which in the case of seasonal workers would be significant.
‘This case study of a real business in Maine demonstrates how Obamacare will force higher health insurance costs on employers, which will result in fewer jobs for Maine people,’ said Joel Allumbaugh, author of the case study and director of the Center for Health Reform Initiatives at The Maine Heritage Policy Center. ‘It is shameful that politicians in Washington, D.C. did not investigate the devastating effects Obamacare would have on businesses before enacting it.’
It isn’t difficult to figure out that what ills befall blueberry farmers, fall equally on tomato growers.
To be fair, the tomato war drums have been sounding long before Obamacare was implemented, but that only illustrates that the costs of complying with Federal regulations were already killing American farmers. Obamacare is just the coup de grace to the industry.
Nutshell:
Mexican tomato growers can produce, pick, pack, and transport a better quality tomato at prices far below what their American counterparts can produce locally.
American tomato growers, faced with the costs of overwhelming Federal and State regulations and Obamacare, are getting their asses kicked in their own home turf.
The Obama administration parlayed this situation into an unclean quid pro quo between Florida growers and the Obama campaign prior to the election. The possibility of another similarly unclean quid pro quo deal may have been struck with Mexican growers looking to maintain that “reference price” low enough that it wouldn’t completely destroy their profits post election.
Who loses in this situation?
Americans whose access to better tomatoes at a cheaper price has been blocked as a result of the Obama administration’s implementation of what is effectively price fixing.
Is this a hidden tax?
Arguably it is, since the price fixing has been put in place to help growers cope with the cost of Federal regulations.
Blueberries and tomatoes are only two of the many food items impacted negatively
The implementation of Obamacare is just one Federal policy impacting the cost of our food. Everything you put on your table is being impacted. Everything you put on your table has (or will) increase in cost.
Thanks to Obama administration policies, inferior quality, gassed tomatoes are as expensive to U.S. consumers as superior quality vine-ripened ones. Then again, this seems to be par for the course for an administration whose landmark legislative achievement to date, Obamacare, is projected to give us all lower quality health care at a higher price.
The Great Mexican-American Tomato War of 2013 has been averted.
We lost.
